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In February last year, Kraft Heinz made an unexpected and unsolicited $143 billion bid for Unilever. While the bid was subsequently withdrawn, it added further fuel to the debate about whether businesses should pursue positive change strategies (as Unilever continues to do) or focus only on maximising profit (which is how Kraft Heinz’s strategy is often characterised).

In the year since then, quite a lot of new evidence has emerged to shed light on this debate. And almost all of it has reinforced the business case for retailers and manufacturers to embrace positive change strategies – including environmental and social sustainability, product safety, public health and consumer transparency.

Like many good business cases in our industry, this one starts with the consumer. Some Nielsen research from 2015 found that health and wellness benefits (70%), environmentally friendly packaging (53%), social value (56%) and fresh, organic, natural ingredients (69%) are all crucial considerations for Millennials when making purchasing decisions. Last year AT Kearney published a report emphasising that the increasing dominance of Millennials and Generation Z will make positive change the essential core for any brand or retail proposition – in both developed and developing economies. Another piece of Nielsen research published in 2017 emphasised the importance of transparency and “clean labels” in both food and non-food categories.

All of this adds to an already impressive body of evidence that consumers are now much more demanding of corporations – and rightly so. Millennials expect the modern retailer and Consumer Packaged Goods manufacturer to be socially engaged, making a difference to communities, tackling climate change, eliminating exploitative labour practices, promoting healthier lifestyles and cutting food waste.

At the same time, the investor community – long blamed for forcing CEOs to focus on maximising short-term profits – has also started to adopt a markedly different tone. Two influential investors – Larry Fink at Fidelity and Bill McNabb at Vanguard – came out with a very public call earlier this year for all companies to embrace a social purpose. Data from BCG suggest they are not just being altruistic; their 2017 report showed that a company’s performance on environmental and social issues has a statistically significant impact on company valuations and margins. Another recent piece of analysis on B Corps found that these companies, which must pass stringent tests on their commitment to positive change, delivered substantially faster top-line growth.

A year after the Kraft Heinz bid for Unilever, the latter pleased the stock-markets with 2017 organic sales growth of 3.5% p.a., while the former disappointed with organic sales decline of -1% p.a. for the same period. These two companies’ relative performances may continue to fluctuate in the future, but 2017 has undoubtedly strengthened the hard-nosed business case for positive change.

 

The Consumer Goods Forum (CGF) exists to help our members implement positive change, not just as part of their corporate social responsibilities but at the core of their brand and business strategies. Even our largest members know that collaboration is critical to driving lasting positive change. Collaboration across industries, governments and regulatory landscapes holds the key to tackling issues like food waste and forced labour. Bringing corporate and public-sector leaders together can result in firm commitments and strategies for collective action, as well as sharing knowledge and best practices. The Sustainable Retail Summit 2017 and Global Food Safety Conference 2018 were excellent examples of the benefits of this process, resulting in major new announcements, partnerships between governments and organisations like the Global Food Safety Initiative (GFSI), as well as providing effective forums for debating the key issues in the sector.

As a result of all this work, we’re seeing bold commitments from governments. As we mentioned in our blog covering the opening of our new China office, the Chinese government is taking sustainable development very seriously indeed. President Xi highlighted this as a key priority in his recent Report to the 19th Party Congress. Announcements like these demonstrate the value of Public-Private Partnerships, involving joint initiatives across private and public sectors.

Overall, despite the challenges we face, we are very optimistic about the future of the consumer industry’s positive change initiatives. Our members are making bold commitments and are delivering progress against their goals. The CGF plays a very active role in implementation, bringing our members together to drive change on the ground, in communities around the world and across the value chain. We also nurture tomorrow’s leaders of positive change through schemes like the Future Leaders Programme (FLP). Through collaboration, we believe the consumer goods industry can make a real difference.


 

Peter-Freedman--MD-CGF_transp

 

Peter Freedman
Managing Director
The Consumer Goods Forum