BRIAN KENNY: I’ll bet there’s something you’re wearing that’s 40,000 years old. You heard me right. Look at your feet. That little wearable is thought to have originated in the middle paleolithic period. The earliest versions were made from wraparound leather like moccasins. Within a few thousand years, footwear evolved from basic necessity to must-have accessory that vary depending on social class. The closer one was to nobility, the fancier the shoe no matter the fit. Today, footwear is as much a part of pop culture as it ever was and business is booming. According to Shop Smart Magazine, the average American owns 19 pairs of shoes, which takes a lot of energy and raw materials to make. We toss about 300 million pairs into landfills every year, which is to say, though your time with your shoes may be relatively short, they and their impact on the environment will likely be long after you’re gone. Today on Cold Call, we’ve invited professor Mike Toffel and case protagonist Joey Zwillinger to discuss the case entitled Allbirds: Decarbonizing Fashion. I’m your host, Brian Kenny, and you’re listening to Cold Call on the HBR Presents Network. Mike Toffel is Faculty Chair of the Business and Environment Initiative, and host of Climate Rising Podcast, he’s a fellow podcaster, which has a new season of episodes starting this month. You can find those on, I’m going to guess, Apple and wherever you listen. Mike, is that right?

MIKE TOFFEL: That’s right.

BRIAN KENNY: Thanks for joining us again. This is your second spin on Cold Call. So we’re glad to have you back. Joey Zwillinger is the protagonist in the case. He is a biotech engineer and renewables expert and the co-founder and CEO of Allbirds. Joey, thanks for joining us today.

JOEY ZWILLINGER: Thank you so much. I don’t often get called the protagonist, so this is fun.

BRIAN KENNY: Well, you’re going to have to answer for that today. We’re going to ask you some questions. So we’re looking forward to hearing more about the case. I will admit, I didn’t know a lot about Allbirds before reading the case, but after reading about the story and looking at some of the images, I’m going to go get me a couple a pair of those because they are great looking shoes. I think people will enjoy hearing about how the company came to be and the very distinctive position that you’ve taken in the market. So Mike, let me ask you to get us started here by talking about the central issue of the case and what your cold call might be. I know you haven’t taught this yet, but you can already start to think about what your cold call might be when you step into the classroom.

MIKE TOFFEL: Thanks. So there’s a lot going on in this case. We wrote the case because we were looking for companies to shine a spotlight on that were taking innovative approaches to decarbonizing. It’s an unusual thing to have a footwear company be in a leading position in that area. When we dug in a bit, we found that not only were they taking a leadership position in a sustainability and climate change perspective, but they were also doing things quite differently from traditional footwear companies in terms of their product development approach, their go-to-market distribution approach. So I would open up this conversation by asking students to reflect what is Allbirds doing well and what do they need to do better.

BRIAN KENNY: Okay. Let me ask you how this relates to the kinds of things that you look at as a scholar, how you heard about them and why you decided to write the case?

MIKE TOFFEL: It’s very popular among folks like MBA students. So we see Allbirds in the halls here; if you look down and see what folks are wearing – their marketing and their whole brand value is around these three concepts of design, comfort and natural materials. So I came into this thinking about the natural materials piece. But then it’s a really interesting question to think about how do you sell a product, one of them whose main value drivers is comfort and yet selling it online where people don’t actually try it on. Some really interesting questions, and especially when you think about go-to-market where they sell, again, through their own channels and not through the Foot Lockers of the world, or even on Amazon, I believe. You get a really interesting company. So that’s sort of how I ended up. It really merges my interest in climate and decarbonization and operations management innovation, which is what I teach here at HBS.

BRIAN KENNY: Yeah. It raises so many interesting questions. As a branding person, I was really interested in the whole branding piece of it. But as you say, it raises a ton of other questions. What I think I heard you say is that if I get some Allbirds, I will be cool because I will be dressing in the same fashion and style as our MBA students, so.

MIKE TOFFEL: So sort of dad cool.

BRIAN KENNY: Sort of dad cool. Great. So Mike, tell us, before I turn to Joey, just tell us a little bit about the footwear industry and the impact that has on the environment, because I know it’s significant.

MIKE TOFFEL: Two of the main ways that footwear has an environmental impact, especially when we’re thinking about casual shoes, is there’s a often fossil fuel derived products, so polyester in the soles are fossil fuel derived. For all of those, you have a carbon impact to be considering. Then an alternative when you think about natural materials for footwear, often you’re thinking about leather. While it is a natural material, the tanning of leather, the dying of leather, all of that involves of toxic materials which has water pollution concerns. Then of course there’s the shipping. Products are shipped globally. So that creates a whole another fossil fuel based environmental impact. It’s really on each of these dimensions that Allbirds is trying to develop new uppers without the soft part above the sole, and even new midsole, which is the squishy part under your foot, and they’re trying to create those all out of natural materials and it’s really quite a revolutionary approach.

BRIAN KENNY: The volume, as I teased in the intro, is huge. I was amazed to see that people… I do not own 19 pairs of shoes, but apparently the average person seems to. That’s just an amazing number.

MIKE TOFFEL: Yeah. Well, the costs have come down quite a bit since you started buying shoes, so that helps, and it’s become more of a fashion item than of fundamentals.

BRIAN KENNY: Yeah, for sure. So Joey, let me turn to you and thank you for joining us. You’re in the Bay Area this morning as we’re talking so I appreciate you getting an early jump on the day with us. Let me just ask you simply how you would describe Allbirds and a little bit about what your goal is for the business, you and your partner.

JOEY ZWILLINGER: Tim and I co-founded the business in 2015. When we did that, we had the view that we had a big leadership opportunity around doing things differently. But at our fundamental core, we actually think about ourselves as a material innovation company. The reason we start there is because we know that the vast majority of the impact of carbon pollution and the effects of global warming from consumption is born in the materials that we sourced to make the products that we love. We wanted to focus there. So we really focused… And you called it natural materials, Mike. I want to just expand that a little bit to say naturally derived materials because we’re using things like biotechnology and green chemistry and a whole bunch of other really unique technologies to bring to bear amazing comfort and amazing performance to do this. But at the core, material innovation, we happen to be selling shoes and apparel and we do this in the effort to make better things in a better way. That’s our mission as a company. Let me just unpack at for one minute.


JOEY ZWILLINGER: Better things means we are making the best products in the world. So when you step into a pair of Wool Runners into our running shoes, the Dashers and the Trail shoes, you’re going to feel something unlock in your mind. You’re going to say, “Wow, this is incredible.” When you use it for weeks and weeks, you’re going to say, “This is delivering on the promise. This is amazing product.” There’s nothing in what I just said about being sustainable. The way we unlock that value is through this naturally derived innovation. It’s through sustainability that we unlock incredible comfort and incredible performance. So it’s the mechanism or the means with how we get to make better products. We want to play a role in contributing to the reversal of climate change, and our volume of material and our impact on carbon pollution is going to be small. But I think the leadership opportunity and what that can cascade into consumer products inside the footwear industry, outside of the footwear industry, rippling across lots of different industries can be seen really broad. I think that’s what excites me most about the mission that we’re on.

BRIAN KENNY: Yeah. So often on this show, we talk about firms that are pretty producing products or providing services that have some sustainability benefit to them, but that’s not why they’re doing it. They’re not doing it for the altruism of doing it. They’re doing it because it’s good for their product or their business, and if it differentiates them in some meaningful way, then that’s almost an added benefit. I hear a little bit of that in what you’re saying. Tell us a little bit about the origins of the company and Tim Brown and how you guys together to start the business.

JOEY ZWILLINGER: I think part of why so far in our first five, six years it’s worked is because Tim and I come from quite complimentary backgrounds. Tim was a professional soccer player, actually, before he started Allbirds with me. He had a design background from his undergrad degree and had done some hobby design work on the side while he was a professional athlete, did 10 years as a professional soccer player in a couple different places, but largely in New Zealand, Australia. In fact, he was the vice captain of the New Zealand National Team and went all the way to the World Cup in 2010 in South Africa.


JOEY ZWILLINGER: So really rose to the pinnacle of his career. He was endorsed by all the big sportswear companies. Along the way, it became very clear that the way that the footwear industry in particular marketed itself was around these peak athletes and developing interesting products for the peak athletes. It was less about the innovation for consumers’ comfort and performance and more about utilizing athletes to get the brand out there and get some good marketing awareness. His light bulb started to click when he was really left wanting for something more that was on trend with the casualization of the wardrobe and you’ve seen it in apparel. Athleisure, it was a word that was used maybe five, 10 years ago. Lululemon is a great example of a company that changed the way that we dress forever. That had not really happened in footwear. Part of it was a relic of this wholesale distribution model where companies had to pop off the shelf with their logo on the side of the shoe to compel people to try on the shoes. That was the backdrop of the company and backdrop for that consumer insight that Tim brought to bear. Along the way, I was at a company called Solazyme where we were utilizing biotechnology to engineer microalgae. We would take that microalgae, we would program it to eat low carbon intensity sugars and turn those into high performance products that could replace petroleum and petroleum derivatives. So I ran the chemicals business unit and I was going around the world compelling big brands and some industrial players to take these components and replace petroleum derived components and they were carbon neutral and they were super high performance. What I found was that these brands, they said all the right things. They love sustainability. They were saying it to their consumer. When it came down to buying product, they didn’t actually care. So this Sisyphean effort that I was undergoing where it felt like I was almost just pushing string all the time, trying to convince these people to do what they actually were saying to consumers that they were doing, felt like there was an opportunity to instead of make the component, go downstream and curate these components. Fortunately, at that moment, Tim’s wife and my wife who happened to be best friends from college said, “Hey, this project that Tim’s working on is going well, but he’s kind of struggling on some of the business side, some of the material side.” I was looking for a brand opportunity having not been a sneaker head at all in my life, and some of my friends previously would laugh at the idea that I’m in the fashion industry now, but that was the meeting of two separate paths that came together for material innovation and consumer insights and design to bring something and make something special.

BRIAN KENNY: Yeah. We often see that happen. So the things happen at the juncture of these things. So it’s a great example of just two seemingly disparate disciplines coming together in a way to create something new and some true innovation. I’m wondering about your initial pitches when you went out to get some support for this in the investment community. How did you pitch it and what was the reaction?

JOEY ZWILLINGER: I would say early on the idea of unlocking naturally derived materials to create amazing products, that was in there, but we had to also add a compelling go-to-market strategy and really focus on that. If you think back to 2015, there’s no direct to consumer or vertical retail business in the footwear industry at any kind of of scale. So focusing on an initial product concept like the Wool Runner and unlocking value through a go-to-market strategy was something that was compelling to our seed investors. There was a handful of folks in there, our lead investor at the time and a couple of others, who really saw the very longterm potential of being able to say, “Okay, that might be an interesting 100, 200, $300 million business over time.” But could it be something bigger? To be something much bigger, it had to be a platform that could extend well beyond a single product or a single material innovation. Some people believed in us to be able to do that. when we coupled that together, we compelled some smart people to get on board and that was a very helpful moment to get our first 2 million bucks and be able to really inject into the business and invest into the business what we needed to to get a great start.

BRIAN KENNY: Mike, let me ask you this. As we think about how Allbirds is differentiating themselves in the marketplace, we’re hearing about the innovations that they’re are using in terms of materials. So this is a brand that’s largely built around and premised on sustainability. I’m wondering, as you look at other firms and other products and services out there, are there other examples that you can give that will act as a parallel to this?

MIKE TOFFEL: First of all, it’s interesting to question whether that’s right. I’m not sure how many Allbirds customers actually believe that it’s premised on sustainability. I think a lot of them believe it’s premised on design and premised on comfort, and then sustainability is like a, oh, that’s really cool. I could feel good about this product even more than I physically feel good stepping into the shoes. I think there’s another segment, and maybe Joey could speak to this, who go there because they happen to know about their sustainability play.

JOEY ZWILLINGER: Yeah. I’d say that that’s a great summary, Mike. I think it’s a growing portion that’s coming for sustainability, but it’s still a minority.

MIKE TOFFEL: Yeah. It’s an interesting question about how forward they should be on the sustainability messaging. When you go into an Allbirds store, we have one here in Harvard Square, you can tell if you know what to look for about the sustainability aspects of it. You can see the labels where they are quite innovative and coming up with carbon footprints of each shoe. But it’s not hitting you over the head with come here, we’re a climate forward company. You have to kind of look and you have to ask, “Oh, what’s that number near that shoe?” Then sales will tell you their story, which is super interesting. But it’s not like they’re hanging banners out out saying like, “Come buy the most decarbonized shoe you can buy on the market,” which they could do, but so, far they’ve chosen not to. I think that gets to your question about other examples of brands premised on sustainability. It’s still a bit nichey in some ways. I think folks think of them as upscale brands like Patagonia, where the pricing is 3X competitor pricing sometimes. Or folks like Ben & Jerry’s who’ve long had sort of a sustainability angle to them. Of course, there are large brands like Unilever and HP and Google and Microsoft who are now characterizing themselves as sustainability for a variety of reasons. Unilever is reaching into its supply chain, trying to figure out how to reduce the environmental impact of growing a lot of the food-based products that they sell. Microsoft and Google are buying offsets and trying to make themselves carbon neutral even back to their inception. So there’s a whole variety of ways now that companies are stepping up to the climate challenge. It’s sort of a mix and I think the history of sustainable brands is such that there’s, in some areas, a trade-off between sustainability and other desirable features. I think you and I are old enough to remember the emergence of recycled photocopy paper, which was more likely to jam your photocopier, right? So there really was a trade-off in function and in sustainability attributes. I think folks haven’t lost sight of those early missteps. My sense, but let’s hear it from Joey, my sense is that one needs to go cautiously because you don’t want to imply that you’re going to sacrifice other attributes you really value. Although a lot of people say they’re willing to pay more for sustainable products, a lot more people are willing to say it than actually do it.

BRIAN KENNY: Yeah, yeah. Well, kind of like those firms you were mentioning earlier, Joey, where you were trying to bring your technology to them, and when push came to shove, they weren’t ready to really go down that route and invest in it. I mean, what are you finding with consumers? Do they feel like the sustainability part is the most important thing? Or they just want a really nice shoe that they look good in and they can feel good about?

JOEY ZWILLINGER: I’d say still the vast majority of people are looking for something that makes them feel good, makes them perform well and that they love. I would point to two different groups of companies. There’s a company like you Unilever, which is doing a fantastic job on taking a legacy model and trying to evolve it into a more sustainable company. Then there’s a purpose native company that is starting with a blank canvas and starts with the idea that sustainability is going to be the engine that fuels their growth and that they constrain their innovation process to looking at making great products through R&D that happens to be sustainable and the ripple effect can be much, much broader when you think about that. I’d point to Tesla as a great example. You don’t get into Tesla maybe because it’s sustainable. You get in because it looks awesome and it goes really fast and it performs well and it happens to be much better on the environment when you consider the replacement of particularly if you use green electrons to fuel the car versus petroleum. I would say the same thing applies to the approach that we’ve taken at Allbirds. That purpose native means that we’re liberated to not have legacy baggage and we can just unlock great performance for customers without making any trade-offs. In fact, we make better products as a result of it.

BRIAN KENNY: Does the purpose native philosophy extend up and down the supply chain for you guys? I mean, do you really vet your suppliers in such a way that you can make that claim?

JOEY ZWILLINGER: 100{362bf5cdc35eddfb2532d3c23e83b41deb229c4410d15cb1127c60150cbd4488}. Mike alluded to something that’s really important in terms of making sure that we’re held accountable by everybody, including our consumers, and that’s this innovation we’ve done where we’ve created a tool that can track down to the gram what is the carbon emission for the entire livestock, so from farm to foot and to end of life of that shoe or any product that we make. We actually label that carbon footprint on every single product that we make, either product or packaging. That is inclusive of absolutely everything you can think of. We draw the boundary around our lifecycle of our product very broadly. That is where we’re held accountable. So in order for us to drive that down to zero, which is our objective here, and then beyond that to the extent that we can, we’d like to do that quickly and we’d like to do that with partnership with our suppliers and our supply base and other folks including governments.

MIKE TOFFEL: The interesting thing about this approach of being very expansive in the supply chain, both reverse supply chain and forward supply chain, where it will end up in ultimate disposition once you discard your shoe or recycle it, the interesting thing there is it really does get you to focus if you want to minimize that total number on where you get the biggest bang for the buck. I think there’s been a lot of critique of other types of companies whose sustainability efforts are highly visible, but also highly symbolic. You can have a lot of solar power at your headquarters, but if your products is where the impact is, then that’s really where you ought to be making your investments. That’s a real critical piece of an authenticity play if you’re trying to be a sustainable brand.

BRIAN KENNY: Yeah. Well, let me ask you this, Mike. How sustainable is this business model, I guess would be the question? So sustainability is the great focus for Allbirds, but is this the kind of thing that can be sustained sort of indefinitely given the added investments that you probably have to make in R&D to continue to be authentic in that way?

MIKE TOFFEL: I think what’s really interesting here is to look at the innovation processes that Allbirds has engaged in. So some of the innovation is with their own employees on design and on choices of material, but they’re working hard with existing suppliers who have scale and the technology to create, for example, what they call SweetFoam, which is the substitute for a fossil fuel based product that sits between your foot and the outer sole. That’s the part that gives you cushion. When they did that, they could have tried to create that in a proprietary basis, but in fact, they’re working with their supplier trying to get others to adopt that material as well as a way to drive down its cost, to increase economies of scale. There’s an interesting play like, should we try and do this and keep it proprietary? Or should we try and get this to be spread across our own industry and across other industries? So far in a lot of these dimensions, they’re trying to create scale. Think about the wool side, right? They’re involved in trying to create a certified wool to have grown in a sustainable way. Again, could they have created their own certification scheme or their own standards? Sure. But then they don’t really have scale. You want to have a lot of choice on the supply side so that you can drive them down in experience curve, let them realize some economies of scale, and then you can buy it almost as cheaply or sometimes as cheaply as existing less sustainable materials.

BRIAN KENNY: So Joey, let me ask you about that. Does that feel to you like you guys might be giving away some competitive advantage if you are kind of sharing your platforms and your technologies with others in the field?

JOEY ZWILLINGER: We try to be thoughtful about that. I’ll give another example. Mike points to wool, which I think is a great one, where we’re working literally down to the farm level in New Zealand, working to make regeneratively farmed wool, which gets to carbon negative actually. We’re doing a great job and we’re doing that in partnership with some other brands. That’s one good example where we’re coming down the cost curve and doing something that’s going to benefit others. It’s at the fiber level though, right? That fiber is fairly commoditized. What we do with it downstream of that is thing that’s quite magical, makes it feel comfortable. The other example is around what we’ve done with a product called SweetFoam. Mike called it the squishy stuff underneath your foot in the middle of the shoe. So it’s the midsole we call it in the shoe industry. We knew that the entire industry used Naphtha from petroleum or natural gas to derive this foam called EVA. That was what the whole industry did. There’s 20 billion pairs of shoes sold around the world every year. So there’s a huge impact that EVA is having as a component. It’s probably number one or number two in terms of its ubiquity in the footwear industry from a component perspective. We went down to Brazil and linked up with a biochemicals company that could produce at scale an EVA equivalent, utilizing the waste stream from sugarcane production. When doing that, it became a carbon negative material. Meaning, it actually when you think about the lifecycle of it and you study it, it will suck more carbon out of the atmosphere the manufacturing of this process than it will take to create it. So you keep doing a lot of that and we’re starting to reverse climate change, which is our kind of sustainability ethos here. But the only way to get a biochemical company, which has invested billions of dollars of infrastructure in their equipment, to work with a company like us is we had to opensource that. So we wanted to opensource that to get the entire industry involved in this. Because the volume of the industry is so large, we could compel a large upstream chemicals company to invest many millions of dollars to create this for the industry broadly. Maybe we have a good business deal with that company so that we get advantage treatment, but along the way, the cost comes down. That example that you described, we’re in an environment right now where petroleum costs have been quite significantly up and so EVA costs have gone up from traditional sources. Whereas when you get it from sugarcane, we’re actually paying less. These kinds of impacts when you diversify the streams of inputs that you have on your products could actually be a benefit over time. This is now a financial benefit, it’s an environmental benefit, and it’s a comfort benefit for our customers. That is the win-win that we’re trying to get every single time and it’s been a great boon for our partner down in Brazil, Braskem, great for our company, and there’s dozens of brands that have launched this product, big brands and small brands alike, that have launched green EVA inside of their product. So big win for the industry.

BRIAN KENNY: That’s an awesome example of the kind of innovation that you guys are making happen. I’m wondering how much of your job is about educating others in the industry. It seems like you guys are paving new ground and you’ve got to find a way to bring others along with you to get to the scale that you’re talking about and that’s about teaching at some level.

JOEY ZWILLINGER: Let’s pull that apart. For customers, there’s an educate aspect. The way we think about our customers in terms of the mind share that they’re going to give us is that they’re very, very smart. Consumers are so smart, but they’re very busy and they’re not going to give you more than half a second to think about you because they’re busy with their own stuff. So we have to put sustainability into a digestible format that they can pick up in an instant. That’s our effort with this carbon label. When we say here’s the scorecard, it’s like calories on the back of a label of food. You don’t really know what a calorie is, but if it’s higher, you got to work out again to burn it off if you want to burn it off. If it’s lower, you don’t have to as much. That’s carbon footprint. You get that down to zero or negative, you’re helping. If you get it higher, you’re hurting. So it’s that simple. So on that side, we’re trying to educate in a really good way. From an industry perspective, I would say that our industry comrades know exactly what they should be doing. It’s about the willpower to do it. So how do they disrupt themselves without harming their core business? That innovators dilemma question that they’re facing is a real one when it comes to sustainability and the reckoning is coming. Just this week, I’m reading about deforestation in the Amazon because of the leather production in Brazil. All the big companies in our industry are using this leather and it’s a huge source for leather around the world. What we’re doing instead of that is investing in U.S. innovation to use naturally derived oils that can replace leather in a plant-based alternative. That is 98{362bf5cdc35eddfb2532d3c23e83b41deb229c4410d15cb1127c60150cbd4488} reduction in carbon emissions. Then we have leather and a leather alternative in a toolkit that we can use for sneakers. That’s the way to unlock magic through nature. That’s the way to combat this. So I would say that our industry comrades, they know. They know. But they just need the willpower to disrupt themselves.

BRIAN KENNY: We’re getting close to the end of our time, but I’ve got a couple more questions here that I want to make sure we get to. Mike, let me turn back to you and ask if you think that what Allbirds is doing is in some ways creating a blueprint for others in their industry and maybe others in other industries to follow.

MIKE TOFFEL: I think by focusing primarily on the attributes that customers value and being able to pull that off in a more sustainable way without a huge price premium, that’s really a great business model. It’s very hard. It’s very rare because it’s very hard, right? I mean, another example that I could think of off hand might be like Impossible Foods. Impossible Foods has really opened up the idea of veggie burgers. People don’t even think of Impossible Burger as a veggie burger, which have been around for a long time with lots of tiny companies. But all of a sudden there’s an awful lot of excitement and a lot of popular culture around the Impossible Burger example. That’s because it offers a familiar experience, in some ways better, in some people’s opinion, or at least equivalent with some product attributes that are better. In that case, maybe it’s a health story, maybe it’s an environment story, and it’s at a similar price point. Now, getting there, trying to convert… I think the point that Joey’s making, using the word “native”, which brings to mind the idea of digital native – so you think about Airbnb versus Marriott, a case that we teach in our classrooms, and they’re going after an increasingly similar user base and they have very different capabilities and very different ways to sort of manage data. We have to think about the Allbirds example holistically. It’s not just about design, it’s also about the go-to-market, right? So the fact they control the distribution channel means they’re not having to give 50{362bf5cdc35eddfb2532d3c23e83b41deb229c4410d15cb1127c60150cbd4488} margins to distributors or to retailers. That’s one reason, in my opinion, that they’re able to invest more than competitors, in some cases, because they can still offer a comparable price point and still make a reasonable margin because they control the distribution channel.

BRIAN KENNY: Yeah. Joey, let me ask you. It’s been publicly announced that you guys are going for an IPO. Can you talk a little bit about what that process has been like and where you see it heading?

JOEY ZWILLINGER: It’s been a very positive one. So we went public on November 3rd, maybe. Somewhere around that. The reaction from investors was incredible. I think they understood the systems approach that Mike just outlined. We went so far as to create a sustainability framework that we injected into the IPO and doing things in a better way. When we looked to the capital markets, we saw a void in capital markets for a positive ESG, environmental social governance, in terms of the structure that companies were running. So we wanted to institutionalize our approach to stakeholder growth. Stakeholder growth for us was attenuating the needs of varying stakeholders, not just shareholders. The way we are doing this is through this SPO framework that we put forward and it outlined a really high watermark, such that if other companies replicated what we were doing, we knew that they were authentically sustainable and durable for the long term. When you look at the rating agencies that people rely on today, there’s like half of the S&P 500 reach a top rating there. So there’s clearly something wrong with the way things are being done today. So we wanted to fix that and help play a role in that and the reaction from investors was incredible. I think we actually got to meet a lot more pockets of capital from large institutions that historically hadn’t played in the IPO market because they’re interested in ESG. So there’s this really interesting impact that we’re seeing. I don’t know how it will play out over time, but it seems like the growth in capital up to like 30 or $40 trillion focused on ESG has been a massive rise over the past five years. That’s looking for a home that’s authentically sustainable and durable and has the growth key characteristics that Allbirds has. Now we’re off to the races as a public company and hoping to prove that just like our shoes can be better because they’re sustainable, a company can also perform better and put out better financials because it’s also sustainable.

BRIAN KENNY: That’s awesome. Mike, does this signal sort of a C-change in the way investors are thinking about sustainability and ESG and where they invest?

MIKE TOFFEL: There’s an awful lot of money in ESG right now. As Joey was implying, there’s a lot of rating agencies out there trying to figure out, well, who has superior ESG compared to others? Do you pay a penalty for that? Or do you actually get a premium if you can figure that out? Well, it’s not nascent. It’s been around for a while, but it’s still turbulent. There’s lots of different ways to think about this, lots of different strategies, but an awful lot of growing sums of money that are seeking ESG investments. So when you find companies that actually are trying to hit all the numbers here, right, with both a sustainable product that is very attractive to customers and has a potential huge upside, I mean, that’s I think a really attractive investment and I think that’s where Joey was finding so many pockets of capitals he described.

BRIAN KENNY: Gentlemen, this has been a great conversation. Mike Toffel, thanks for writing the case. Joey Zwillinger, thank you for being here to discuss it with us. I am going to head right over to Harvard Square and find the Allbirds store and check it out. It’s been great talking with you both.

MIKE TOFFEL: Thanks so much.

JOEY ZWILLINGER: Really enjoyed being on the show.

BRIAN KENNY: We’re excited to be celebrating the 100 year anniversary of the Case Method at Harvard Business School. It’s a yearlong celebration alongside our new academic year. If you want more on the history of the Case Method, visit website, Cold Call is a great way to get a taste of the Case Method. After all, each episode features a business case and its faculty author. You might also like our other podcasts, After Hours, Climate Rising, Skydeck and Managing the Future of Work. Find them on apple podcasts or wherever you listen. If you enjoy Cold Call or if you have any suggestions, we want to hear from you. Write a review on Apple Podcasts, or wherever you listen, or email us at [email protected]. Thanks again for joining us. I’m your host, Brian Kenny, and you’ve been listening to Cold Call, an official podcast of Harvard Business School brought to you by the HBR Presents Network.