Allbirds
- Allbirds filed its IPO application to the SEC with a significant emphasis on sustainability.
- The company’s sales grew during 2020, but its losses also rose significantly.
- Sustainable products are part of a wider trend directed at reducing guilt about the climate crisis.
- See more stories on Insider’s business page.
On August 31, Allbirds submitted an S-1 filing with the Securities and Exchange Commission for an initial public offering. The move by the footwear and apparel company follows growing interest in sustainable products and investments focused on environmental, social, and governance (ESG) issues.
But the company’s claims regarding sustainability being beneficial for its business growth deserve additional scrutiny, Aja Barber, an author and sustainability consultant, said.
“With every company that reaches this level, I think they really have to question very hard what sustainable growth looks like and what growth is sustainable,” Barber, whose book “Consumed” will be released on October 5, told Insider.
Since its founding in 2015, Allbirds has become popular among Silicon Valley residents. The company expanded beyond its footwear to performance clothing and continued to emphasize sustainability in its business operations, including the creation of a carbon-negative sole made partly from sugarcane. More than 8 million pairs of shoes have been sold by the company, 53% of them to repeat customers in 2020, according to the company’s S-1 filing.
The prevailing message of Allbirds’ IPO is the company wants to do all the major things to be sustainable, while pursuing growth as a business and satisfying investors. Barber said accomplishing all of those goals wasn’t really possible.
“Once you get to the size of Allbirds, people have to double-check your sustainability credentials,” she said. “Until we rethink growth targets, we have to realize when our favorite brands start to grow to a certain size, the sustainability message gets really watered down.”
Growth or reduction?
Allbirds frequently emphasizes sustainability as the core to its business operations and product materials, especially compared with its competitors. The company says its status as a certified public-benefit corporation, also known as a B Corporation, means prioritizing positive outcomes for stockholders but also employees, customers, the community, and the environment. In its S-1 filing, Allbirds aims to help create a framework for other ESG companies through what it calls a Sustainable Public Equity Offering. Getting this designation would involve satisfying “rigorous, objective, and clearly-defined ESG criteria,” it said.
For Allbirds’ to sustain success as a public company, its sales would need to continue to grow to satisfy shareholders, which would contradict the first word in the three R’s of conservation: reduce.
Transparency in some areas but not others
Allbirds has provided detailed information on its materials, even making its SweetFoam sole open source for use by other companies. According to the company, there are several initiatives to publish more information on its labor practices and water usage, as well as to increase transparency about its supply chain. But the company does have final-production facilities in China, Vietnam, and Indonesia, where there is a high risk of labor abuse. The company declined Insider’s request for comment.
Weak financials
Allbirds’ filing said: “The more sustainable we are, the better we believe our products and business will be.” But while the company grew its sales from $193.7 million in 2019 to $219.3 million in 2020, its losses also grew during that period, from $14.5 million in 2019 to $25.9 million in 2020, according to Allbirds’ financial statements.
“We have incurred significant net losses since inception, and anticipate that we will continue to incur losses for the foreseeable future,” the company’s SEC filing said.
Larger problems beyond shoes and stocks
The sustainability consultant Heather Mak said her research on consumer goods showed Allbirds’ emphasis on sustainability was highly disproportional to the priorities of most shoppers.
“The mass majority of people are looking for what fits them well and what looks good on them,” she said. “Even if something was super sustainable and didn’t fit what they were looking for, it’s probably less appealing to people.”
Allbird’s emphasis on sustainability is part of a wider trend of “sustainable” goods being promoted as a solution to the climate crisis, instead a reduction of purchases.
“I feel like people are trying to alleviate guilt for consumption by saying, ‘This is a sustainable product, so you should get it and replace your thing that is already working fine,'” Mak said.
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