Sustainability takes centre stage in the supply chain

Date : 27 February 2019

Sustainability is now at the heart of many companies’ core messages - and the supply chain is making these commitments a reality.

Doing good really can be good business and, far from being niche, sustainable practices are now a popular way to differentiate from the competition. But, for sustainability to embed itself into companies’ strategies, it must be seen to add material value. 

Assigning metrics is a proven way to increase focus, and our research suggests this is the direction the industry should take. In fact, 71% of respondents to our Supply Chains for Growth survey think corporate sustainability reporting and KPIs will become more integrated within overall business objectives and financial reports.1

What do you think? 

Sustainability goes viral

As awareness of sustainability issues has grown, the need to operate above minimum standards has become a base consumer expectation. The challenge is, consumers no longer accept that environmentally or ethically conscious choices should equate to higher prices.

Another challenge is the that sustainability is a broad and dynamic area, which is easily catalysed by social media campaigns or television shows. This is evidenced by increased awareness of the environmental impact of plastic packaging. 74% of shoppers in our 2018 ShopperVista Category Benchmark Survey said they have become more aware of this in the last 12 months.2

So, the landscape can change quickly, but making ethical decisions can also be complex, confusing and time-consuming. However, the desire to do the right thing is strongly ingrained in most people. 38% of influencer shoppers* say they will always buy environmentally sustainable food and grocery products in the future3, and businesses will need to find ways to make it easier for shoppers to make informed decisions. 

How sustainability displays itself at an operational level will be different business by business. However, in the spectrum of activity, sourcing and packaging will always be two of the highest profile areas.

Sourcing 

Where the goods we buy come from, how they are grown, processed and moved around are all areas of interest for consumers. As a result, they are demanding higher standards but also better, more accessible information.

In the UK, M&S has developed a solution that aims to address this consumer need. An interactive sourcing map, hosted on its website, allows shoppers to view the end-to-end supply chain for a selection of its products. In line with M&S’ “Plan A” strategy, the tool is designed to help shoppers make the most informed decisions about where and how the products they purchase are produced.

How the products we eat are grown is another focus of the sourcing puzzle. JD.com’s collaboration with Mitsubishi Chemical in China provides an innovative solution. The businesses have constructed a plant factory, spanning over 11,000 sq. m in a closed production environment. Using hydroponic technology and solar light sources, the factory can control temperature, humidity and light conditions to maximise the output of crops grown.

For JD.com shoppers, this is a way to source nutritious, safe products, free from disease and less resource intensive. While this is a relatively small-scale initiative, it demonstrates how sustainability is driving innovation, with vertical farming at the cutting edge.

Packaging

The amount of plastic and cardboard packaging used to protect and preserve food and groceries became a very contentious topic in 2018. The development of more sustainable packaging is not new, but the sense of urgency surrounding the topic has certainly focused minds.  

Kellogg’s recently announced its intention to streamline its packaging portfolio, in a move that will create three standard pack sizes across its range. This initiative demonstrates how a consumer benefit – in this case, a simpler portfolio – can also deliver sustainability benefits. 

Doug VanDeVelde, Senior Vice President, Global Breakfast Categories, said “…harmonized cube sizes…will make us more efficient over time. We've also moved to reduce case packs. Reduced case packs will allow us to match brands with velocity, with channels, with customers, and actually help us improve our distribution over time.”

We’re also seeing longer-term, strategic commitments that signpost big shifts in how products will be produced in future. The Kraft Heinz Company committed to using recyclable, reusable or compostable packaging in all of its products around the world by 2025. Kraft Heinz CEO said of the commitment, “Even though we don’t yet have all the answers, we owe it to current and future generations who call this planet ‘home’ to find better packaging solutions and actively progress efforts to improve recycling rates.”

Bringing it all together

A step on from these examples are industry-level initiatives, like the B Corps certification scheme, which looks at sustainability credentials in several areas. 

Certified companies are committed to ensuring that they balance profit and purpose and consider the impact of business decisions on the environment and communities. To be a certified B Corporation, the business must attain the highest levels of verified social and environmental performance, public transparency and legal accountability to balance profit and purpose. 

Business can use initiatives like B Corps as a point of difference. For example, Waitrose has a virtual ‘shelf’ on its website, signposting 50 products manufactured by B Corps-certified businesses.

Conclusions

As consumers increasingly make purchasing decisions based on ethical considerations, businesses must respond. The best initiatives address consumer demand while delivering secondary business benefits.  Leading and being proactive on the difficult issues rather than responding is likely to lead to better, more rounded outcomes that add value over the long-term.

Many initiatives, particularly around the sourcing of goods, will require businesses to make supply chain information available for verification, to consumers or third-party organisations, and this will have implications for data storage, security and visibility. 

As pressure from consumers and competition increases, sustainability will provide both retailers and manufacturers with long-term growth opportunities - a compelling prospect in challenging times.

Sources and notes: 

*Influencer shoppers - will replace ‘baby boomers’ as the generation with the most purchasing power

1 Supply Chains for Growth, IGD Supply Chain Analysis 

2 Category Benchmark Survey, IGD ShopperVista

3 Shoppers of the Future, IGD ShopperVista

 

Chris Irish

Chris Irish

Supply Chain Insight Manager

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