LOOPED IN with Carl Warkentin

Challenging the system - Circular Economy as a solution to CSR & ESG with Kaitlyn Allen

• Carl Warkentin • Season 1 • Episode 2

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The landscape of corporate responsibility is changing, and in this episode, we explore how businesses are navigating the transition from Corporate Social Responsibility (CSR) to Environmental, Social, and Governance (ESG) practices. Join us as we speak with Kaitlyn Allen, a serial impact entrepreneur and sustainability expert, who shares her valuable insights on how these frameworks are evolving and the ways they can enhance corporate accountability.

Kaitlyn discusses the pivotal role of the Paris Agreement, which has shifted the narrative around sustainability from marketing fluff to essential business strategy. She explains how ESG practices address the risks associated with climate change and how companies are now compelled to integrate these metrics into their financial reporting. Delving deeper, we explore the repair economy—an emerging field that seeks to redefine consumer behavior by emphasizing the importance of product longevity and sustainability. Through Kaitlyn's work with Mend It, we learn how businesses can implement repair services as a core offering, aligning profit with purpose.

This episode is a call to action for businesses to think differently about their societal impacts and the importance of viewing sustainability as interdependent with their operations. It’s about not just doing good but being structured to create lasting value for all stakeholders involved. Join us as we uncover the future of corporate responsibility and how companies can thrive by prioritizing sustainable practices. Don't forget to engage with us—leave your feedback, questions, or insights, and let's continue this important conversation together!

Please check out Kaitlyn's sites:
 www.mendit.app

www.menderguild.com

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Carl:

Today I am very excited to have a conversation with Caitlin Allen, a serial impact entrepreneur. Caitlin, welcome to the show, it's nice to have you here.

Kaitlyn:

Thank you, karl, I'm happy to be here.

Carl:

You spent a significant part of your career in CSR, consulting and advising. How was the corporate approach to sustainability and social responsibility, and how did it evolve since you started?

Kaitlyn:

Yeah, absolutely, it's been quite an evolution. When I started in around 2012, 2013, it was still CSR, so Corporate Social Responsibility, and big companies would have CSR advisors or teams. Basically, to you know, and it was different in every company in every industry, but basically to kind of look at, here's what we're doing. Where can we, you know, better evaluate what our social impact is and mitigate those impacts Environmentally? Same thing, so kind of a little bit more of a general approach, I would say. And then, after the Paris Agreement in 2015, you kind of saw this transition to sustainability as being the main term and, of course, climate change became more salient as an issue. So you had a little bit more from the guidance of the Paris Agreement, a little bit more specific focus on carbon emissions or carbon equivalent, of course, and that could, you know, continue to evolve. So what was the CSR report might be renamed the sustainability report.

Kaitlyn:

And then you had these offshoots of specific things like climate, these offshoots of specific things like climate risk reporting specifically, and so you know, as that went on, a lot of people felt that sustainability was I'm speaking from a US perspective, of course that sustainability was political or that it was, you know, because there was opposition to the Paris Agreement, and so the financial folks who were like no wait, these are very real risks that we need to take into account started really using the term ESG environmental, social and governance as ironically now as the kind of a political way to describe the impacts or risks to a company that are not on their balance sheet, that are not reflected in financial statements, and so that's kind of how we got to, from my perspective, the evolution from CSR to sustainability to ESG. But unfortunately, you know, no good deed goes unpunished. They politicize that too, and so you know, it is what it is right now in the United States. But I would say that's kind of the evolution from my perspective as a corporate consultant for the past little over 10 years.

Carl:

Right, right and it's impressive that you've been there for now such a long time already in this field. I remember when I studied, like 15 years ago, and I had a course about corporate social responsibility and I remember a lot of the use cases that we were looking at. It was a lot of times about the CSR reporting and a lot of times about marketing, like even something that the marketing department would finance. It was seen as a marketing cost. We have to do something good, we have to show our customers we do something nice. But I realized back then the core issue was that all these, a lot of these efforts in csr were not part or integrated into the business model of the company, was not part of the core business model. It was just something that some department gets some money out of all the profits in order to do some good and most effectively talks about it. Did you because I was just studying there Did you experience the same in the corporate world and did that change over time?

Kaitlyn:

as a sponsor of something or simply just giving back right Like this is an important cause to our employees, so everyone can donate, or we're going to donate on behalf of our employees. So I remember a long time ago trying to help people differentiate between CSR and philanthropy and saying, well, philanthropy is that kind of giving back right, but corporate social responsibility is about how do we see ourselves as a corporation, what responsibility do we have to society? What responsibility do we have to the communities we live in? So a much more, like you said, in theory, integrated into, like our operations. Right, our operations are causing roads to get torn up, so we're going to go and fix those roads right, like, I think that's CSR, that's not philanthropy. That's, hey, we broke something, we need to fix it. That's our responsibility as a corporation. So that's kind of how I would differentiate it. But, yeah, certainly at the beginning there was a lot of people that kind of conflated the two. But CSR was asking for, I would say, a deeper level of reflection on what are impacts, how do we address them. And then, of course, there's the positives, right Of like, well, let's, yeah, of course we're going to talk about how we fix the roads when we broke them and how we built a hospital in this community or whatever right. And I do think that whatever right, and I do think that over time it did certainly evolve.

Kaitlyn:

I would say in my personal experience or professional experience, I saw the say owner of these things within a company move from a marketing or PR type budget line or reporting line within the company really to legal, and to me that indicated that companies realized well, this is actually, you know, especially after the Paris Agreement, especially after 2015, that there are actual risks here that we need to evaluate, we need to understand, and we don't understand them. So we're going to give them to the lawyers, because we know the lawyers will read it and we know that the lawyers will help us understand. You know legally what our obligations are, because if there are material risks to a company, it is legally required to know and disclose those right. That's part of the law. That's not, you know, an optional exercise.

Kaitlyn:

And so I think once folks started realizing whoa, this isn't just a nice to have program like, we're actually talking about very serious risks to our, you know, to our balance sheet, or risks to our company as a whole in the long term, whether that's from a carbon tax or whether that's from actual physical, you know, sea level rise and all of our facilities are on the Gulf Coast right. Whatever that risk was, that it was actually a recognition that a lot of those ES and G risks are material and therefore reportable to the SEC. Material are and therefore reportable to the SEC. And so that was the shift I saw primarily was like okay, let's make sure that legal is now involved and leading these projects, because we've now crossed the boundary that crossed the border from nice to have into, you know, potentially material reportable risks and then, of course, opportunities on the other side, which was our job is to help them see what the opportunities were, in addition to recognizing and reporting what the material risks were.

Carl:

Right, a big shift happening there. I mean, I'm sure you came across a lot of exciting different kind of companies that you were advising, or sure you came across a lot of exciting different kind of companies that you were advising or that you came across throughout your professional career. Do you have some real good best practice example, like a nice showcase where a company made CSR like a really a core strategy?

Kaitlyn:

Yes, definitely, and it's March 5, 2025 in the United States. So, yes, we saw that and we had a lot of wonderful, very exciting wins, but we're in a very different moment where, unfortunately, a lot of those are just simply being dropped or reversed or oops, nevermind. So it's a bit of a complicated situation right now For a lot of companies. I do think a lot of companies have made the permanent pivot because they do see the opportunities and the future as being different from the current status quo, but unfortunately, I think a lot of the progress is simply being eliminated or ignored based on the political situation in the United States.

Carl:

Beyond the political situation, I'm aware that a lot, a lot is shifting and happening right now in the States. I remember when I was in university, we had examples of companies like Coca-Cola and what they want to do in order to preserve water reservoirs and many of these kind of things that seem amazing, but if you actually look deeper, it was a lot of marketing in the end, and I would just imagine that, independently from the political situation, or like global companies that are not only acting in the States, is there like do you have? Like, if somebody asks you like, hey, which company is doing actually a great job or was really active in the field, is there something you would? Something that pops in your mind immediately?

Kaitlyn:

Is there something that pops in your mind immediately? I hate to name anybody specifically right now, just because, like I said, it's quite dicey here. I do think that there have been really fantastic examples of companies really making the connection. The deeper connection, which is, you know, at the very core of all of this, is helping people shift their mindset from I'm a little corporation in my bubble and I can operate in my bubble to realizing that we're all interdependent, right? And so your example of, like Coca-Cola, working on, you know, securing fresh water supplies that's incredibly important to their operations and their continued sustainability as a company and it can have positive effects for communities, right. So I think that's to me, those are the wins when a company realizes, wow, we don't operate in a vacuum, duh, but you know, it's right, we don't operate in a vacuum. Here are some really cool things that we can do that are going to help strengthen our long term operations as well as have a positive effect on the communities that we're working and living in and operating in. Certainly, yes, there's a lot of examples of that, and I mean just the you know it's kind of the obvious things, but our systems are. How legal documents are filed, you know your company charter, what the stock markets are measuring you on. It's not always reflected, and that's the whole point of ESG broadly is let's make sure we're looking at that full picture and all of the interdependencies right. So I do think there's definitely a lot of great examples out there of how things have you know, of how companies have recognized that interdependence and started to actually invest in preserving, for example, that supply of whatever raw material they need, while supporting the community and while having positive effects. There's lots of examples like that.

Kaitlyn:

But I think the broader, deeper issue is like it's bigger than that, I guess, is what I'm saying and I don't know. The bigger thing is realizing that there is interdependence and the system is not set up to incentivize companies to recognize that interdependence. In fact, it's set up to in a way that actually incentivizes companies to externalize their risks, the ones that don't show up on your financials. So that's actually how the bigger picture, the bigger problem is, is you're incentivized to create externalities right, create externalities right, and so that's to me, the bigger thing, the bigger question of how do we understand and bring those externalities back onto our reporting, back onto our balance sheet, back onto our broader understanding of how our company can operate in the long run, in the long term. That's the bigger question. So to me, I think a lot of companies have done great work with that first rung right Of oh, look at that, if we invest in clean water or supply of sand or whatever input that we need, we can have a positive effect. Those are great, they make sense.

Kaitlyn:

But the bigger issue and that's the issue that I think is getting has unfortunately become politicized is the whole system is about creating externalities and to make a sustainable economic system, a sustainable corporation, a sustainable stock market, you have to be able to bring those externalities back internally. We have to see them from a company perspective and measure them and understand them from a company perspective. Because once you push all the external externalities out out there, who's paying for them? Right? Who's mitigating those risks which put the whole, all markets, at risk, which put all, which put people at risk, which put the planet at risk, right? So that's, I guess, my very long way of answering that. Yes, there's some nice case studies and that's great. But the bigger issue of how do we structure our company charters, how do we structure regulations around reporting, how do we structure, you know our financial statements. Those are much bigger things that we're moving a little bit toward changing. And now you know, probably not especially when we have our kp.

Carl:

We're so kpi driven and all the kpis that we have are financial kpis, right like growth and volume uh in in revenue and profit there. There are certain companies at least in europe, I'm aware of that are also including in all their board meetings certain kpis based on their environmental impact yeah, and that's great because that's showing that's saying you know, and that's great because that's showing that's saying you know this, take responsibility, right?

Kaitlyn:

Because it's not the sense. The system does not incentivize companies to take that responsibility and that's unfortunately the reversal we're seeing is, we were moving toward companies recognizing and taking that responsibility and saying, yeah, we're interdependent and here are the things we're causing. What are the things you're causing? Maybe we can work together to change that. And now we're kind of back at a oh well, this doesn't matter, right?

Carl:

Right, at least from the political view in the US right now. I totally agree with you that the system does not incentivize this more long term sustainable way of doing business. Right, because in the end I totally understand that it is about business and therefore I mean philanthropy is also great, but therefore I love personally pursuing circular economy because it is a business model, it's a way of doing business. I always like to say it's not about how we spend our money, it's about how we make our money that we should be more concerned about and we need to find a way I totally agree with you to change that system because there are these strategy games.

Carl:

One of them was invented at mit and I was playing that strategy game once in a conference where you could really play around with all different kind of impacts, like what energy does you know is being used and and do we eat? Like about on a global scale? Right? What energy resources do we have? Is everybody vegetarian or vegan? The population is it increasing or decreasing? Like you could play around with all of these impact factors. And the interesting thing for me was, even if we manage to somehow get it right, but if we don't and if we go beyond the 1.5 degrees, then actually the GDP in each country is super much going down Because that is the long-term impact, term impact, like you have natural catastrophes etc. So many costs so that the gdp will go down if we ruin our planet.

Carl:

So to say which is, but which is somehow nothing the companies are having on their radar when they think in their like five year terms yeah, I mean that's, you're bringing up another really important factor, which is the short, short term thinking versus long term thinking.

Kaitlyn:

And again it comes back to structures and incentives. Right, executives aren't going to be rewarded for their companies being around in 30 years. They're rewarded for this quarter's results, this year's results, the next three to five years, right, and and that's another issue with you know, sustainability in general is that we're not talking about. You know, yes, this year, next year matters, but we're saying, hey, you know, we're not just interdependent along a horizontal, say, plane of today, right, but also kind of vertically reaching forward into time. And that's again, nothing recognizes that in terms of incentivizing executives. And you know who's rewarded for what executives and incentive, and you know what is who's rewarded for what in your stock price, like that's not reflected in anyone's stock price. So it's again, you know. I just come back to my. My conclusion, from having been in this space a long time, is that the structures and systems themselves, the incentives, the reporting requirements, how we write financial statements, just in general, like accounting, you know that those things must reflect what we're trying to do and we were trying to push things within that system. You can't go that far. Right, you can only go as far as you know everyone else is going right, and so when everyone else is doing net zero, great, we're all going to do net zero. But it can quickly change, I guess is what I'm saying. And so to your point.

Kaitlyn:

I also love circular economy, you know, and that's why I started MendIt was. I was kind of like, well, I guess we can't go that far with companies as they're set up. What would it look like to create a company that's intentionally, say, part of this, a new structure. What would a new structure be? Where all stakeholders in your company are, you align incentives where everyone will benefit if you do your job right, you know, and in circular economy, you know, it's really about a different flow of capital, it's a different way of doing business. That's inherently a different structure.

Kaitlyn:

Right, because you're not just thinking in the take, make, dispose, linear economy. You as a company are really just thinking about how do I get my raw inputs and how do I put a product on the shelves or on the market. You don't have to think about where those things come from or where they go, right, but in a circular model you you're in it's inherently begs the question of where is this thing coming from and where's it going, and can we make that loop closed, right? So it's inherently more holistic and inherently more complex too, and that's why it's a hard space to work in, right, because, again, we're working in a linear economy system where everything's set up for a linear economy and we're trying to create new business models within that system, and so, but to your point, that's why it's really cool to work in circular economy, because you're starting to attack the more of the root causes right, let me let me, before we dive deep into circular economy and your project, let me circle back for me.

Carl:

So we already went through the transformation from csr to esg. You also co-hosted the esg decoder podcast. I think was in very fast. You mentioned one of the leading or the leading esg podcast, uh out there, which is about conversations that explore the complexities, about the risks and opportunities connected to ESG, like environmental, social and governance, and on your website you say that ESG is everything that's not on your balance sheet and you already talked about that as well. You have still to today. The show has a lot of amazing episodes. Can you take us a bit through that process of setting up this podcast and are there some conversations that you have in mind where you think like that they really stick with you?

Kaitlyn:

absolutely, um, yeah. So back when I was running global affairs associates, which was um, our corporate sustainability consulting firm, um, with amanda shea, my business partner, um, she and I found ourselves just always having the same conversation what, what is ESG? Right? And everyone had, you know. People kept, oh, there's no definition. Well, there is, you just are not going to find it. When you just Google and pick the first thing that comes up, right, there weren't very good sources on what is this and who's doing it and what does it actually mean in real life. Resources on what is this and who's doing it and what does it actually mean in real life, there just weren't. And so we were tired of having the same conversation, frankly, and we said we need to start recording these and send them to the clients so you can take a consultation after you listen to this, right. So that's kind of the original gosh. We were just tired of saying the same thing over and over.

Kaitlyn:

But what happened was you know, one we wanted to. We knew there was a big lack of actual, real, not political content about this where you could really go in depth. Like how are you measuring carbon emissions? Why, right. Like, how do you do a climate scenario analysis. Why are we doing this? Like, what are the organizations that are, you know, have a best practice? Or what are our clients actually doing, right? Like so, talking to the lawyer, we have Heidi Johnson from Motorola Solutions who is one of the attorneys that was in charge of reviewing and, you know, vetting the climate report we were writing for them. You know how does she think about it, right?

Kaitlyn:

So, really, kind of getting into the mechanics and the whys and the deeper technicalities and conversations there just wasn't anything like that online. And so when we started it again, we kind of were like, oh, this is kind of fun and we get to talk to our clients and whatever. But within six, less than six months it was the number two podcast in the ESG business category and since then it's gone back and forth between number one and two, according to our podcast team, right, and so I think to me, that said, and to Amanda and I, it said, wow, this, there was really a need for this, like people really were just hungry for learning more and what does it really mean and how does it work in practice. So that was a super fun journey. When we sold Global Affairs Associates to Climco, we also sold ESG Decoded. So since I left, climco and Amanda, we're no longer co-hosts, but I think the current hosts have done a fantastic job of carrying the torch forward and I still really enjoy listening.

Carl:

Wow, what a journey. Do you have the feeling that ESG as a name is sometimes a bit being misused or overly used? I hear it, I hear it all the time. I mean, there was a time, like five years ago or something, where everybody was talking about every startup was trying to somehow say, yeah, we are, you know, esg, invest in our startup and invest our project. And a lot of companies and funds were looking for investing their money in esG projects. So, to say so, out of the blue, everything was ESG.

Kaitlyn:

Yeah, it was extremely frustrating, Extremely irritating. Yeah, you know, I literally, you see it. Basically it's kind of one of those things that anyone, anyone with their own agenda, will. Because it's first of all let me back up, because the term is very broad. We're literally saying E, s and G. There could be a thousand different factors under any of those categories that could affect your business. Right, so it is quite broad, but it's intentionally broad because it's basically, if you were to say, make a list of a million things that could affect your company's value, there would be four categories, right? Financial, environmental, social and governance. Those are all of the fact that it's the four buckets, right, the four categories. So of course, within that there's many, many different things that may be relevant to your company, may not be, et cetera.

Kaitlyn:

But because people have their own agendas, people will just take whatever little sub factor and start saying ESG to mean climate risk, which you which are like, oh, don't use, that is not the term, but unfortunately, you know, it just is what it is. I mean, you had the Republican National Committee in the United States made the most absurd definition I have. I mean, I don't remember it enough to paraphrase, but the most absurd definition you could possibly think of. It just completely had nothing to do with what actually was happening in corporate America so that they could just, you know, shoot arrows at it. When again, it's like this, is literally capitalism trying to save itself. Like this is capitalism trying to say oops, we went too far, we made a mistake. We need to recognize that there are other factors besides what's on our little bare bones financial statement. It is literally an attempt of a system to recognize that it's not properly quantifying risk and yet someone said, oh, that's a bad idea and made their own definition so everyone can shoot it down. So it was extremely frustrating.

Kaitlyn:

Yes, I saw ESG used in a hundred different ways that were completely wrong, and it was very unfortunate, because diversity, equity and inclusion which you know if you look at each one, who's, you know who's against being inclusive to your colleagues and not. You know what I mean. It's weird. They just take whatever term that they think is, you know, threatening, for whatever reason, and make their own definition. And that's actually, I think, probably those symptoms were there and have been there for a while. We saw it with ESG. We'd seen it before with CSR where, for whatever reason, if something is, change is perceived as threatening, or evolution is perceived as threatening, we better get rid of that, even if there's no truth to what we're saying.

Kaitlyn:

So, yeah, long way of saying it, but absolutely, I've seen all of these terms thrown around, completely wrong and for whatever reason. We're at a place in our society where people don't seem to care that they're using the correct terminology Because it just doesn't serve an agenda, which is unfortunate because it just doesn't serve an agenda, which is unfortunate Because there are still so many people trying to do the right thing, trying to evolve our economy in a way that is sustainable for the planet, for people, for corporations, right. But what happens is, when you reject all of the efforts at evolution, it's basically saying, okay, just let's this, this system doesn't work, let's just kill the system instead of trying to work within the system, and so I think, unfortunately, a lot of it's going to backfire and it is backfiring. We're going to see it very soon.

Carl:

Um, uh, yeah, I guess I'll start I'll stop, I'll pause there because you mentioned dey, scott galloway also had a nice way of saying that a lot of times we tend to turn something good and make it extreme and then it's becoming too much and actually you know, uh, contradicting or or not something good into something not so good anymore. Uh, that I just found really interesting when he was talking about the ui. So you, you came this, this natural, you know, you did this natural transformation from csr to to esg, to then circular economy right, and your current project. How does that? How is it a logical next step for you going into circular economy? Where is it? Where's circular economy for you connecting to esg? And how did you end up with mend it?

Kaitlyn:

yeah, well, I, I mean, like I said, I you kind of start realizing you push up against the, the limitations of the system. Right if the system in the end is saying shareholder primacy. Right If the system in the end is saying, well, you know, that was a nice exercise to measure our ES and G risk, but actually we don't want to put that in our financials, we don't actually feel like it's material or we don't want to call it material because then we're going to have to address it. We don't want to call it material because then we're going to have to address it. You start bumping up against the system that the companies operate in. And I like to say, you know, I'm quite spiritual and have read lots of things from different traditions and I believe it's a Zen Buddhist story, you know that says you can't get mad at the tiger for eating you because it's in his nature. It's his nature to be a predator. It's the nature of the beast. So being upset at it makes no sense because it's in his nature. Being upset at it makes no sense because it's in nature and that's kind of what I was finding personally in the system was, well, it's the nature, right? That's how this incentives are set up, it's. You know, there's a lot of amazing, wonderful people inside all of these companies. I love my clients, like, we have absolutely fantastic people that are really trying to evolve the companies that they work for to reflect the extreme interdependence of the 21st century, and yet they bump up against the way the systems and structures are set up, and so, again, it's kind of like the tiger, right, you can't be mad at it, it just is what it is. So that really led to my thinking on what again? What would it look like to build a company where the incentives are different, right? How do you change those incentives? How do you think differently about your stakeholders from the very beginning and make sure that you're aligning that? So that's kind of where my head was when I thought of the Mended idea.

Kaitlyn:

But you know, without going too deep into the story, it was one of those. You know, just as a consumer, right, my grandmother had always mended our clothes and when she passed away I was like, oh, I guess I'll Google it, you know, and had, just, it was ridiculously hard to find someone to just sew on a button, it was just crazy. And so I thought, well, okay, business opportunity right. So the original first product of Mendit was a marketplace connecting, you know, consumers with the small businesses that had already been vetted to that. They could do that Because, like I said, it was strangely hard to find basic mending services like that. And over the years, so that launched. We launched our marketplace pilot in 2021.

Kaitlyn:

But we really quickly realized that scale was never going to happen just from consumers, because the American consumer has really lost that habit, and I mean we proved it in studies. Long story short, you know, it's a bigger issue than little Mendick could solve of getting people to realize that repair matters for sustainability, but also just to incentivize that behavior for sustainability, but also just to incentivize that behavior. And so we quickly, you know, turned thinking in 2022, how could we work with brands? Because brands and retailers, that's where consumers are right. So if brands and retailers can incentivize and offer and subsidize repair, you can help that cultural shift right. Help individuals actually realize, oh well, I guess, if they're paying for it, I'll try it out right? How do we reintroduce that behavior into a culture?

Kaitlyn:

So for many years we were talking to brands and trying to figure out, like, what are the barriers to you offering repair to your customers for their clothing. And we kept hearing you know it's too expensive and it's very complicated, expensive and complicated, and so complicated. Well, easy, just plug into our marketplace. But the expensive piece was really what kept getting people stuck. And so, and sorry, just to give folks a sense of what we're trying to do, um, most folks are aware of Patagonia's repair program, right, so, um, but it's quite a, you know, a large operation. They've got many, many people sewing every day. Um, it takes a long time to get your items back because there's so much demand. So what we were saying is well, hold on, instead of having kind of a centralized operation, we're a network of small businesses all over the US. How could we allow brands or retailers to plug into our network, and one that supports local businesses in the United States, which is wonderful, and B, it's more convenient for the customer and faster turnaround and all of that. But we still couldn't get past the cost thing.

Kaitlyn:

Now, with my background environmental commodities from Climco and we had someone one of our board members is in insurance we were kind of like putting our heads together on what's the financial piece, how do we change the incentives? How do we move capital in a different way, right? Kind of being inspired by environmental commodities and insurance. And effectively what we came up with was this concept of an outsource guarantee, so meaning a brand can offer a repair guarantee on their clothing, but they're going to outsource the risk of that to mend it and the fulfillment of those orders. And so how we do that is basically we do a feasibility study with the brand to determine pricing and then we come up with a very, very low price per garment where the brand effectively pays us when that item is sold very, very low amount per garment. And with that they're transferring the risk that anyone might actually use the repair guarantee and when that happens they do it through our network of vendors or through their own local business, right. So that's kind of the long, long story of how we got here.

Kaitlyn:

But what I would say the key highlights for circular economy is thinking of this as a different structure, right, where the incentives are aligned across the parties, all the stakeholders are aligned and all the stakeholders benefit, right. That's the other key thing, right, you're not saying, oh, like, for example, doordash, not to throw them under the bus or anything, but they're not. Oh, we're going to charge our fees and we're going to take a cut of the restaurant's money. Yeah right, well, you're squeezing the restaurant. What is the point of that? Right, that's terrible.

Kaitlyn:

So we, from the very beginning, said we're not doing that. We have our little fee on top of the order for the B2C marketplace. But the cool thing about our model is, by using this outsource guarantee, we will pay, and we're able to pay the full market cost, up to a cap, of course, but the market price to that local business. So you're not asking the local businesses to sacrifice their top line revenue, right, You're not asking them to accept something lower. So the cool thing is that we've aligned all of that to where you're really structuring a new way of capital flowing in a way that is supportive of all of that, to where you're really structuring a new way of capital flowing in a way that is supportive of all of the stakeholder groups. So, again, just trying to move away from the old structures to a new structure, and that's what we're experimenting with right now.

Carl:

All right. So when I try to summarize it, mended is tackling the repair economy problem. So to say that it's for most brands too complex and too costly. And you say with your platform, with existing infrastructures in the repair services, that you tackle the whole thing with the complexity and you take away the whole pain of the brands to take care of it so they can outsource it to the platform.

Carl:

And since it's still costly, especially with nowadays prices of new products. You try to tackle that one with kind of an insurance that not I as a as a as a user or as a consumer customer pay for it. But it's like that the brand pays this insurance for the consumer in case they want to repair it one day.

Kaitlyn:

Well, the brand. So it's not. It's technically not insurance, it's, but that's a great way to think of it because most people are familiar with that. Technically it's just like a care guarantee, right, or a warranty sort of, on their product, Like we, if it breaks within whatever timeframe that they've chosen, we will fix it right. But they're outsourcing the risk of that to Mendit.

Kaitlyn:

So Mendit now has all of this capital that we've gathered and we pay out of that. We pay the full amount to the mender out of that pool of capital, right? So the brand gets to not worry about the risk. They can even potentially, you know, make money doing this, because, well, I don't want to get too deep into the mechanics of it right now, but they have basically outsourced all of that to Mendit, and then Mendit's platform is not only where the repair actually happens for the consumer, but we're also paying the mender the market rate for their service out of that pool of capital, right. So it is. You can think of it kind of like insurance, but it's really more like a care guarantee or a durability guarantee that they've outsourced, simply outsourced, to our platform.

Carl:

So it's like a B2C2B platform, right, like the brand with a consumer, and then you connect the consumer again with another company, the service company, and you take care of everything. How, how do you convince companies to do that? What is their? I mean, obviously you take care of the organizational issues, right Of setting up a whole repair program. They don't have to do it, they can just do it with you. I'm just thinking also of other companies like apple care. Right, the consumer pays an additional fee in order to have this care program. So, to say, how, how do you convince the brands to pay that themselves, instead of letting the consumer pay it?

Kaitlyn:

yeah, well, um, first of all, I think apparel clothing is very, very different from a $1,000 iPhone or whatever, right? So we're talking about $30 garments, $100 garments, maybe $200, $300 garments. We're not talking about consumer technology products. So I think it's a very different product category about consumer technology products. So I think it's a very different product category. And consumers in the fashion space are drawn to companies like Patagonia, who are going to repair their jacket, right, and so it's a big, big value add for the brand.

Kaitlyn:

We know from a study that Neiman's did that customers who utilize the repair or alteration services that they offer are 73% more likely to make another purchase within 12 months. So we can actually quantify that and say this is how much more money you'll make by offering repair. And there's also diversion from returns, right? So if you're offering when they want to return something, oh, would you like to repair instead, right? You're diverting from returns, and our price for garment is much lower than the price for garment to process a return significantly lower. So it's really there's a lot of upside. In fact, in all of the feasibility studies we've done the majority of scenarios. We've run the cost benefit analysis. The ratio is positive, meaning they are likely to make more money than they spend on the program because of the cost savings and the rewards on the other side of it.

Kaitlyn:

So it's it's really um, uh, you know, based on doing the numbers, it's almost a no brainer um, where where there there can be um. You know, different perspectives on it. So some people that we've talked to are seeing it as kind of more of a brand marketing thing. Others are really see it as a way to compete with Patagonia's of the world, like, say, hey, we're smaller, we know we can't offer what a Neiman's offers or we can't offer what a Patagonia offers, but then when they find out they can, it's really exciting Like, oh, wow, we can now elevate our brand to that level of service.

Kaitlyn:

So, you know, apparel is, you know, cutthroat competitive, right, consumers aren't super loyal in general versus, like an Apple versus Dell sort of thing. So you're really it's two very different things. You're really it's two very different things. Um, and I think that, um, the other reason is, frankly, I don't think consumers would pay um for for that on clothing, because it's such a, you know, price sensitive category, um, and there are so many options, right, whereas the options for phones are, you know, minuscule compared to the amount of clothing.

Kaitlyn:

So that's kind of several of the reasons, but I would say the big reason is when we do a cost-benefit analysis and it's positive.

Carl:

Ooh, yeah, that sounds great. Right, you're right, that's a no-brainer. Then For which kind of garments do you think it makes sense? Like, do you have probably some experience and data on how much an average repair costs? So I just assume a 20-year shirt probably, I don't know labor costs and so on it's probably going to cost me $20 to repair as well. Does that then still make sense? Is it then not making more sense? Or, like what are those are the main reasons why things get broken? Is it then also making more sense to rather invest in higher quality of products, like a $40 t-shirt that I don't have to repair? Like? What is your experience in that?

Kaitlyn:

Yeah well. So again, this kind of comes back to why I think the brands and retailers need to subsidize it. Because if you're just asking a consumer, like we do in our marketplace, hey, it's going to be $40 for you to fix these, you know, whatever holes in your jeans and whatnot, and now they can go on Shein and get three pairs of jeans for $40. Consumers aren't going to make that choice. They're just not the vast majority of them. I might, but it's a typical consumer. So that is, I think, why, inherently, it needs to come from the big companies. And again, this is this is about bigger picture. This is about creating new channels for capital to flow Right in the big picture of fixing these systems that are broken. It's about creating these new channels for capital to flow in a way that creates the new structures. So yes, of course, if I'm an average consumer, I'm going to buy a new shirt instead of repairing. We know that's the case. So that's not where we're focused right. We're focusing on how do we get the brands and retailers to participate in a new flow of capital, and that's kind of really, you know, I have a lot of background in energy. That was kind of the whole discussion for energy transition. The capital now is at the oil and gas companies. That's where the capital is. So you're talking about helping those companies to recognize the risks and opportunities related to energy transition so that they invest in new energies, so that we can. You know, that's the whole thing.

Kaitlyn:

So this is kind of this. I think of it. You know, with that hat on, as all right, the system is broken, unsustainable, cannot keep going in this way. There's a nice new system that looks great like the circular economy. How you make that transition is about how you move capital, and so that's the whole point of this is saying, okay, with this model of an outsource guarantee, you could make it palatable and cost effective for a brand to offer this service, while also channeling money into the repair economy, which is, frankly, small businesses that are all struggling. They're all struggling, right. So how do we make sure that we're making sure that that money is flowing in the right direction to create the new structures and to create the circular economy?

Carl:

right, right. Great point coming coming to the end of our conversation today what, where do you see mended in five years from now like when, when you think of 2030, where would you like Mended in the industry that you are in, like to see?

Kaitlyn:

Yeah, well, I'd really like to see this, I'd really like to see this model. So we're testing this right. So we'd like to do a few more pilots, make sure that our numbers are right. We think that so far they are. In fact, we think that we might have overpriced, like we might even be bringing prices down for the procurement price, which is great for the brands. So we want to test this, but our goal would be to have at least three pilots done this year so that we can get the numbers properly right.

Kaitlyn:

And then, you know, we'd like to have we also have a guild, a vendor guild, in addition to the marketplace, and so ideally, we've spread this to at least 10 brands hopefully more in five years, and that the money that is flowing into the repair economy is really significant enough to make a difference to the repair economy. And our Mender Guild, you know, has 20,000 members around the world and we've really proven my goal is to prove that sustainable and circular business models can work for everyone and create prosperity for everyone. Now, that's a tall order for five years. I realize that we're not working in, you know, we're not just within an existing system. Sure, your startup, it's going to grow. It's going to do this your SaaS product, whatever but we're creating something new, and so I know it's a tall order for five years to say we'll have proven this works and can change the totals, the whole system. But that's what I would like to be on the path to is saying this is actually inherently sustainable.

Carl:

This is why and we've proven that everyone involved can prosper in this model- when I look at in Germany, for example, all the small repair shops, shoe repairs are, you know, fading away. Yes, uh, slowly but surely. And I think I mean that's what your platform is all about, right, like having them on board and giving them actually work by working with the brands on the other side of the platform, which I think is is also from a social aspect uh, really beautiful. Is there still enough, like, are there still enough players out there that you can leverage and put on on your website and on your platform?

Kaitlyn:

yes, yes, there are. There, absolutely are and there's. It's kind of cool. There's almost like a renaissance of these types of businesses happening in the? U at least probably other places as well, where you have a lot of people that just love the craft and they want this to be their full time business. A few people are doing it full time, but it's a struggle, and so I really, yes, I think there are enough. And so I really yes, I think there are enough, and I think that preserving this craft as a career for people, as a business that they can make a living on, is an incredibly important pillar of this mission, because without the repair economy, mend it doesn't work. Without the repair economy, circularity in fashion doesn't work. It just doesn't exist.

Carl:

I love that um always talking about, like everybody's talking about, uh, recycling only when it comes to circular economy, uh, and I'm I'm really determined to to also shed some light on on repair and reuse and and other business models. So that's really beautifully, beautifully said. Thank you, uh caitlin, for for this and for the conversation today. For our listeners, I can only encourage to reach out to ask questions. What this podcast is all about is uh to be also engaging. So when there are people who who this resonates with or further questions, we're happy to do a follow-up, follow-up session together and maybe go into to more detailed questions, because our listeners are investors and and brands and everyone mostly in the textiles industry. So this could be really interesting to our listeners and I'm happy to follow up on this.

Kaitlyn:

Yeah, yeah, I would be happy to join you again. Carl Really enjoyed the conversation. Thank you so much for the opportunity to be here today.