The pandemic accelerated changes already in motion.
McKinsey coined “the next normal” to describe the Covid-spurred generational shift in how people live and shop and, most crucially, what they care about. Buyers today are doing their research, and they know exactly what they want from a brand. They’re asking questions: What are the sustainability efforts behind my favourite brands? Is this a fair trade item, and how do I know for sure? If they aren’t up to par, am I willing to go somewhere else? That’s purposeful shopping.
For the last few years, global interest in sustainable commerce has grown. The challenges of the past year and a half, including tragic and memorable news about climate change, have stirred people’s interest in being good citizens, making them realise their individual choices matter to a bigger picture.
Aligning with today’s consumers
Most consumer packaged goods (CPG) companies have already had sustainable goals in place, like recycled packaging and becoming more energy efficient. However, consumers are increasingly calling for brands to get more aggressive about environmental, social and governance issues. And there’s a heightened sense of urgency — sustainability goals set five years ago may no longer be compelling to buyers and stakeholders. Purposeful shopping is now mainstream, and companies are realising an immediate need to accelerate their corporate social responsibility (CSR) goals and environmental, social and governance (ESG) performance. Equally important is the data transparency to prove to stakeholders that these goals are actually being met.
Increasing consumer consciousness means challenges
CPG companies — many of which are multinational — are getting more and more complex. A company must manage developing, sourcing, manufacturing, marketing and distributing dozens of brands and thousands of products reaching tens of thousands of store locations and hundreds of other e-commerce sites and distribution centers. Ecommerce operations are growing, and brands are using direct-to-consumer marketing to appeal to consumers. In the face of all these moving parts and extended supply chain, consumers are increasingly concerned about a brand’s environmental impact.
Purpose-driven shopping is digitally led, with buyers researching products online before making purchases. People are looking things up: How much water went into making these jeans? What human rights concerns exist in the country where they were made?
87% of consumers say companies should integrate environmental concerns in their products, services and operations to a greater extent than in the past –Boston Consulting Group
Many of the top CPG brands are already achieving sustainability success through commitments to make their packaging more recyclable and reduce packaging size and/or waste. Their efforts are pushing boundaries — using creative strategies and setting aggressive goals to transform their business models. Procter & Gamble is among these sustainability trailblazers, having innovatively decreased its water usage in products such as laundry soap and reduced product packaging over the past decade. McCormick also stands out, setting purpose-led goals such as 100% sourcing of ingredients sustainably for its top brands by 2025 and more renewable energy usage across the enterprise.
Do you trust your data?
Keeping up with the digital demands coming from both consumers and retailers presents a staggering data management challenge. Companies may have so much data that it’s impossible to identify what’s important and what is not. Data may be dispersed throughout different systems in inconsistent formats, making it difficult to share. At worst, the data itself might be outdated — or even inaccurate. And CPG companies that are already sustainable may not be getting credit due to poor or incomplete product descriptions, unable to identify which claims matter to retail partners.
Taking a 360° approach to sustainability
To stay relevant, CPGs need to take an integrated approach to sustainability, gathering data intelligently and organising to be more consumer centric. Data must be transparent from end to end, creating visibility the movement of products across the supply chain and traceability into their origins, from source to final sale. Transparency allows constant access to data that is up-to-date, accurate and — most importantly — complete. When data is trustworthy, it provides consumers information that speaks to their evolving interests and concerns, like the environmental impact of products and brands they buy and the retailers who bring them together.
So, how can data transparency help CPG companies take a stand for sustainability?
- Gain insight. For CPGs, product is often the obvious first choice to work toward sustainability goals. But sustainability data spans a whole range of domains, including supplier data, asset data, location data, B2B customer data and more. Taking a multidomain approach allows the CPG brand to understand the connection points between data domains and generate richer analytics for complex ESG measurement. ESG data must be driven by the same level of discipline as would any other key corporate reporting to ensure that data fits the corporate goals KPIs and is reliable for years of measurement.
- Strengthen supply chains. CPGs can enhance supply chain flexibility by better matching supply and demand. Building resilience ensures consistent and timely product delivery and the tools to negotiate more sustainable deals by gaining better insight into supplier and customer networks (for instance, the environmental impact of having something delivered overnight).
- Communicate better. To provide the best possible customer service for retail partners, CPGs need to know what information retailers will need three to six months into the future. Considering the 2021 United Nations Climate Change Conference (COP26) and increased commitment to net zero operations, will more retailers be asking for carbon footprint attributes or emissions information? How can CPGs collect that data? Data transparency gives companies complete information about how a product was manufactured or sourced, including the type of supplier. Greater visibility into supply chains and ensuring that products meet standards, including regulation requirements, contributes to ESG goals.
A competitive edge
As CPG companies continue to transform digitally, the growing importance of sustainability can seem overwhelming. However, it isn’t an either-or situation — enhancing technical process and data management capabilities empowers the organisation to meet key ESG benchmarks. Managing sustainability information across different types of data sets companies up for success in an increasingly competitive market. Both businesses and consumers will have the tools they need to make confident, informed decisions, based on the information that matters to them most.