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Oatly Group Aims To Scale Sustainably

Photo from Leon Seibert

Oatly Group, the Swedish maker of various oat-based drinks and products, priced its IPO last week, racking up a total market cap of over $10 billion.

While the IPO market has been hit with volatility in recent weeks due to investors’ fears of inflationary pressures on growth stocks, Oatly successfully raised $1.4 billion in its U.S. initial public offering due to accelerating demand for its products. The company is also backed by celebrities such as Oprah Winfrey, Natalie Portman, Jay-Z, and former Starbucks CEO Howard Schultz.

Oatly was founded in the 1990s in Malmo, Sweden, to offer consumers vegan alternatives to dairy drinks. Today, it sells oat milk, yogurts, ice creams, spreads, and creams in coffee shops, retail locations, and online across 20 countries. Its largest markets currently are Sweden, the U.K., China, and the United States. 

Photo from Madalyn Cox

Oatly is actively involved in sustainability and creating a next-gen way of life. The Covid-19 pandemic also has accelerated some trends, said its CEO Toni Petersson in a recent interview on Yahoo! Finance. For example, its presence in specialty coffee shops is higher than pre-pandemic.

“This acceleration is about conversion, is about people entering the space,” he said. “We know that 40 percent of our growth is coming from new users … And if you make the proposition of ‘make the best milk that is designed for humans and better for the planet,’ that’s what we are and those (consumers) are the ones we’re capturing here.”

But creating healthy drinks isn’t enough to call oneself a sustainable firm. The entire production chain needs to be part of a sustainability strategy. And since 2014, Oatly’s sustainability work has been focused on four main areas: upgraded society, resource efficiency, super suppliers, and committed coworkers.

“We hope to be a driving force for the necessary transition of the food system,” states Oatly’s Sustainability Report. “We want to minimize our impact on the planet through efficient use of raw materials and resources such as energy and water.”

Within this framework, the company decided to commit to several of the United Nations Sustainable Development Goals. These include zero hunger, good health and wellbeing, gender equality, clean water and sanitation, affordable and clean energy, decent work and economic growth, responsible consumption and production, and climate action.

Despite this commitment, achieving sustainability is not an easy fit, especially for a fast-growing company. When in 2016, Oatly set its target to decrease its total climate impact per liter of the product by 25 percent by 2020, it didn’t realize the exponential growth it was about to experience. Since then, its production increased by 324 percent, and with that ramp-up so too did its overall corporate climate footprint (by 20 percent per liter of product produced).

This was due to several factors, such as oats sourced from other places than before, increased distribution to Asia, which included transport by flight, heavier secondary packaging in the U.S., and a lower share of its energy from renewable sources at the company’s new production sites.

For example, “In 2019, the climate footprint related to energy increased by 137 percent and constituted 12 percent of our total climate footprint – a level we definitely aren’t proud of,” stated its Sustainability Report.

On the other hand, it was able to reduce some of its water consumption. And after identifying other ‘leaks’ in their climate footprint activities, the company committed to working on and resolving those issues in a practical manner. For example, Oatly is building a new production site in Asia so that it can shorten transportation distances and remove the polluting air freight it is now using.

Petersson believes that becoming a public company will help it address many of the issues that are hard to handle as a smaller, but fast-growing private firm.

“With scale, you can actually impact more,” he said. “Your impact can be more positive as you scale. And that is what we are positioning ourselves from when we build a new plant. It’s a new generation of factories and plants where you incorporate sustainability from the very very beginning.”

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