Responsible Consumption: New Business Opportunities and Cases of Russian Companies

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Responsible Consumption: New Business Opportunities and Cases of Russian Companies RESPONSIBLE CONSUMPTION: NEW BUSINESS OPPORTUNITIES AND CASES OF RUSSIAN COMPANIES SKOLKOVO Institute for Emerging Market Studies Sustainable Business Centre This report has been published with the support of Unilever, a co-founder and partner of the Sustainable Business Centre of the Institute for Emerging Market Studies (SKOLKOVO IEMS), Moscow School of Management SKOLKOVO. ACKNOWLEDGMENTS Unilever is a leading global manufacturer of consumer goods, with products sold in more than 190 countries. Unilever employs about 169,000 people worldwide, with a turnover of EUR 52.7 billion in 2016. Unilever has four production sites in Russia, based in St. Petersburg, Tula, Omsk, and Yekaterinburg. In 2017, the company celebrated its 25th anniversary in Russia. The report was prepared by a team of Sustainable Business Centre of the Institute for Emerging Market Studies (SKOLKOVO IEMS): Natalia ZAITSEVA, Project Manager, Head of the Sustainable Business Centre PROJECT TEAM Anastasia BELOSTOTSKAYA, Analyst, Sustainable Business Centre Alina CHURIKOVA, Researcher, Sustainable Business Centre Yulia FETISOVA, Researcher, Sustainable Business Centre Angie GAREEVA, Researcher, Sustainable Business Centre Kamila NOVAK, Senior Analyst, Sustainable Business Centre Yulia POLONSKAYA, Researcher, Sustainable Business Centre Agata POSTNOVA, Researcher, Sustainable Business Centre Olga SEDINKINA, Researcher, Sustainable Business Centre Svetlana BEDIRKHANOVA, layout designer The project team is also very grateful to: Alexey KALININ, Director of the Institute for Emerging Market Studies of the Moscow School of Management SKOLKOVO, for his intellectual mentoring and support throughout the entire project; and the Chair of Strategic Marketing of the Moscow School of Management SKOLKOVO for professional insights and expert comments provided in the course of the report’s preparation. No part of this publication may be reproduced or translated into any language in any form and/or by any means, including by photocopying, recording, or using any means of information storage and retrieval. This publication presents generalised information and, as such, may only be used as a general guide. The views presented in the report do not reflect the views of the Moscow School of Management SKOLKOVO and/or any companies mentioned in the report. RESPONSIBLE CONSUMPTION: NEW BUSINESS OPPORTUNITIES AND CASES OF RUSSIAN COMPANIES Dear colleagues! We are pleased to present this report titled Responsible Consumption: New Business Opportunities and Cases of Russian Companies, prepared by Sustainable Business Centre of the Moscow School of Management SKOLKOVO. This is the second report in a series of analytical publications by the Moscow School of Management SKOLKOVO analysing the challenges and opportunities faced by businesses in the context of the spreading concept of sustainable development, both globally and in Russia. The report focuses on the phenomenon of responsible consumption and the emergence of a new type of for sustainable products, which means that new consumer who approaches the selection of goods and Dear colleagues! business opportunities are emerging. services in a more conscious, environmentally and socially responsible manner. We believe that this trend On behalf of Unilever, as a partner, I am pleased to this process. The market offers an excessive variety of I am confident that this study will be of interest to is significantly impacting the business landscape, present the second report of the Sustainable Business products and services. Legislative initiatives intended entrepreneurs and heads of companies working on including new, rapidly growing market niches. Centre SKOLKOVO IEMS. The report addresses a very to create infrastructure for processing consumer waste business growth strategies and strategic marketing, important issue that is becoming more pressing every are at the centre of discussions. Buyers are becoming looking for new markets and market niches, and Personally, I find this study interesting for two reasons. year—responsible consumption and the opportunities more aware of products’ composition and showing analysing trends in changing consumer preferences, as Every year I strive to lead a healthier lifestyle, consume it offers to companies, especially in Russia. more interest in their origin. Society’s priorities are well as the associated opportunities and risks. more rationally, and adhere to greater principles of changing, and therefore, I am confident that if more social cooperation and support. In my opinion, this At Unilever, responsible consumption has always been companies in Russia adopt values such as those We hope that this report will not only give readers is the natural choice for every person in the modern an integral part of the product life cycle. The Unilever described in this report, responsible consumption will an insight into the phenomenon of responsible world. Notably, responsible consumption is gradually Sustainable Living Plan pursues business growth soon become common practice and will no longer be consumption, but will also inspire them to come up transforming from a choice of values into one of the that ensures positive social impact while reducing our underestimated by businesses. with new business ideas. The study will also benefit most significant market opportunities for the next environmental footprint. Over the last six years, we participants of SKOLKOVO educational programmes decade. Economic viability is the primary driver of have made great progress, especially in our greatest I would like to thank the Sustainable Business Centre, since it complements the database of applied research this trend and the sustainable development concept in areas of influence. Nevertheless, reduction of the SKOLKOVO IEMS for its work and hope you will and management tools, developed on the basis of general. environmental footprint at the consumer product use discover many new things as you read the report. Russian business practices. stage remains a challenge. Secondly, the Moscow School of Management J. V. Raman We are very grateful to Unilever — our long-time SKOLKOVO is a business school driven by the This is why we are committed to the principles of a Unilever President in Russia, Ukraine, and Belarus partner and co-founder of the Sustainable Business entrepreneurial spirit. We are convinced that circular economy, which we apply in our production Centre — for its cooperation and support in promoting entrepreneurs can change the world for the better. processes. This approach benefits both business sustainable business development in Russia. In support of this thesis, the authors of the report and the environment because efficient use of raw cite entrepreneurial success stories to illustrate the and other materials cuts costs and reduces waste responsible consumption trend. We are accustomed to while creating new opportunities for customers and seeing remarkable success stories of large international consumers. Following this principle, in January 2017 Yours respectfully, companies doing business in sustainable manner. we announced our intention to switch to 100% This report, however, focuses on the other end of the biodegradable or recyclable plastic packaging by J. V. Raman spectrum: small and medium-sized Russian businesses, Yours respectfully, 2025. Unilever President in Russia, Ukraine, including social entrepreneurs and companies run and Belarus by the Moscow School of Management SKOLKOVO Andrei SHARONOV Consumer behaviour is an important element of the alumni and partners. As pioneers in their niches, they President of the Moscow School circular economy, making the loop “close” in the have shown that Russia already has a growing demand of Management SKOLKOVO right way. And Russia plays an important role in CONTENTS 79 CERTIFIED FOODS 84 LAVKALAVKA 87 AGRIVOLGA 08 EXECUTIVE SUMMARY 90 SAFA 93 NATURAL COSMETICS 12 INTRODUCTION 97 NATURA SIBERICA 100 MI&KO 103 SUSTAINABLE FASHION 16 CHAPTER 1. RESPONSIBLE CONSUMPTION AS A NEW 108 TVOE BUSINESS OPPORTUNITY 111 CHARITY SHOP 114 SUSTAINABLE TRANSPORT 18 CONTEXT FOR THE EMERGENCE AND DEVELOPMENT OF RESPONSIBLE CONSUMPTION 119 ANYTIME 7 26 APPROACHES TO ASSESSING RESPONSIBLE 122 INVATAXI CONSUMPTION AND CONSUMER SEGMENTATION 125 SUSTAINABLE TOURISM 32 RESPONSIBLE CONSUMPTION AS AN OPPORTUNITY 129 ETHNOMIR FOR DIFFERENTIATION IN THE MARKET 132 ABSOLUTE SIBERIA 48 135 PURPOSE-DRIVEN CONSUMPTION CHAPTER 2. DEVELOPMENT OF RESPONSIBLE 140 COCCO BELLO CONSUMPTION IN RUSSIA 143 NAIVNO? OCHEN 49 PREREQUISITES AND SPECIFICS OF RESPONSIBLE 146 3.2. CASES OF RUSSIAN COMPANIES TARGETING RESPONSIBLE CONSUMPTION DEVELOPMENT IN RUSSIA BUSINESSES AND END USERS 53 FACTORS RESTRAINING THE DEVELOPMENT OF RESPONSIBLE CONSUMPTION IN RUSSIA 147 DEVELOPMENT OF SPECIALISED RETAIL AS A NICHE MARKET, BASED ON A CASE OF 4FRESH 57 ANALYSIS OF СASES OF RUSSIAN COMPANIES 150 DEVELOPMENT OF WASTE RECYCLING AS A NICHE MARKET, BASED ON A CASE OF SPHERE OF ECOLOGY CHAPTER 3. NICHE ANALYSIS AND CASES OF RUSSIAN 153 DEVELOPMENT OF ECO-FRIENDLY PRINTING AS A NICHE COMPANIES MARKET, BASED ON A CASE OF POLYGRAPH MEDIA GROUP 156 DEVELOPMENT OF RESPONSIBLE PACKAGING AS A NICHE MARKET, BASED ON A CASE OF OPTICOM 68 3.1. NICHE ANALYSIS AND CASES OF COMPANIES TARGETING END-USERS 159 DEVELOPMENT OF GREEN LOGISTICS AS 69 SPORTS AND HEALTHY LIFESTYLE A NICHE MARKET, BASED ON A CASE OF PICKPOINT 73 YOGA PRACTIKA 76 I LOVE RUNNING 164 REFERENCES EXECUTIVE SUMMARY oday, there is growing concern in the all over the
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