Innovation and Sustainability in the Supply Chain of Natura, a Cosmetic Compay

Founded in 1969, Natura is a Brazilian company operating in the cosmetic, toiletry and fragrance industry. The company has used local outsourcing to expand its operations outside Brazil; as of 2011, Natura also had operations in France, Argentina, Chile, Columbia, Mexico and Peru.

Natura has traditionally adopted direct sales as a commercial model, except in France. They have also obtained  much  recognition in Brazil and abroad for their behavior toward the sustainable use of Brazilian biodiversity, having displayed a culture that values its relations and the insertion of sustainability in its business model.

Expansion to regions outside Brazil has inevitably brought with it increased supply chain complexities. This imposes challenges not only in supply chain management, but also in the reduction of the social and environmental impacts of its business model. Natura’s investment in innovation is distributed to science and technology, innovation management and partnerships, product development and marketing, regulatory affairs management, and product safety. In 2010, innovation totaled 2.8% of the company’s net revenues at R$139.7 million.

Since 2005, Natura has tended to operate through open innovation in order to develop new products, processes and tools. Emphasis has been placed on partnerships with science and research centers in Brazil and abroad. This is in keeping with Chesbrough’s (2003; p. 24) assertion that open innovation is a paradigm that assumes that firms should and can use external as well as internal ideas. Natura has also made an effort to take internal ideas to market through external channels beyond the company’s usual operations. One such example of this is found in the company’s efforts to qualify 27 employees in innovation management in 2010. Accredited by the Global Innovation Management Institute, the program sought to train employees in the development of innovation competencies, including matters like technological convergence and sustainability; thus empowering them to bring real value to the company’s SCM efforts.

In 2010, Natura’s supply chain consisted of approximately 5,000 organizations, of which 5% supplied inputs necessary for the company’s production lines. The rest of the suppliers were service providers or providers of biodiversity assets, as well as indirect materials needed for business processes. The company uses satisfaction and loyalty indexes to monitor its suppliers in Brazil, with ratings at 81% in 2010. Its 28% loyalty rate in 2010 consists of overall supplier satisfaction, intention to continue a relationship with Natura, and willingness to recommend the brand to other organizations. Natura’s innovations in SCM have always been undertake with a firm eye on the company’s underlying principle of promoting sustainable use of biodiversity and green technology. This is reflected in the supplier development strategy Natura has adopted in other Latin American countries using outsourced partnerships. This model reduces costs and environmental impacts related to greenhouse gas emissions by shortening transportation distances, while also reinforcing crucial relationship values for Natura, such as partnership and cooperation. Further, it enables Natura to leverage the expertise of local companies with local knowledge and good social and environmental practices. This model, also implemented in Argentina in 2010 with perfume-bottling activities, is projected to see a 70% decrease in greenhouse gas emissions.

Natura has clearly made a concerted effort to align their SCM innovation techniques with their underlying commitment to sustainable use of Brazilian diversity and green technology. The innovations detailed here have proven to be effective to a large degree, but further expansion would only complicate the supply chain further. Can Natura continue to innovate and foster efficient supply chain management using the techniques that have served them well so far while also retaining their focus on sustainable green technology?

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