With the need to shape a more sustainable economy, consumer companies have an important role to play in changing the way we consume. Setting sustainability targets is key to protect the planet whilst still retaining a booming client base. However, with sustainability encompassing so many different issues it is tough to pinpoint what consumers really care about. For some, the protection of natural resources and limiting our impact on the climate is paramount. Others will put the social aspect first and will want to ensure that producers are paid and treated fairly for the work they provide.
For a consumer company to change and embrace a new business model it needs to set clear sustainability goals for its product portfolio and for the business. Once this is done, it is all about implementation. Supply chains tend to be complex and can be responsible for a sizeable number of emissions. Finding better ways to manufacture products and green ways of delivering them will be on the agenda. Being able to track progress, communicating on what is being done and its impact from an environmental or social aspect will be critical.
The global production of food and consumer products emits over a third of global emissions according to the World Economic Forum and uses water resources extensively. The industry has also been guilty of accelerating trends and making cheap products to entice people into buying more. Of course, some of these companies provide work for millions of people in other parts of the world, however not all of them are paying employees a fair wage or giving them a safe work environment.
Consumers are now savvier than ever, and they are keen to buy from businesses who share their values. With so much choice around, shoppers will not only be looking at price and quality; they will also consider sustainability credentials. Depending on what they care about they will be willing to pay more for a similar product if it aligns with their values. There are generational and geographical differences, however, food seems to be at the top of sustainability concerns, followed by clothing.
Several large companies in the food industry have already committed to change. The Creating Share Value Program from Nestlé ensures that millions of farmers and people have a fair and stable agricultural income amongst other initiatives. Danone has also committed to sustainability with ambitious initiatives and targets around inclusive diversity and supporting local communities. They are working towards their B Corp certification and hope to obtain it by 2025. The industry has started to shift its way of thinking and with the help of technology it will become easier to empower small farmers around the world to grow their crops more sustainably, using less water and less land. Over-utilisation of fertilisers, deforestation and pollution of water are all issues that sustainability initiatives are starting to address and that matter to more and more of us.
Fashion has been in the news for all the wrong reasons when it comes to sustainability. From slavery scandals to fast fashion items so cheap they are destined to be thrown away after a few wears, it is fair to say that despite a lot of work by some companies to become greener, the image of the industry is still unsatisfactory. With globalisation and a heightened demand from consumers for more choice at lower prices, fashion companies have adapted and had to find new ways to manufacture ever-growing clothes collections. Outsourcing has meant that ensuring working conditions in factories are fit for purpose has become more complex. The race for getting more choice to consumers at better prices has entailed overproduction and even more waste. Making fashion more affordable has also created an increased demand for cheap synthetic materials such as polyester which require an extensive use of non-renewable energy for its production and is extremely difficult to recycle. With the realisation that a new business model is required, many brands have started to change their approach and concentrate on producing higher quality clothing. Shoppers are now switching from cheap throw-away fashion to more durable garments. We have seen an increase in second hand marketplace apps such as Vinted or Depop which contribute to the circular economy model that has come to the forefront of many agendas. Brands that are willing to take back their own clothes can even make some profit on reselling them on the second-hand market. Renting clothes has also become a more common option with sites like Rent the Runway or retailers like Flannels, Marks and Spencer and John Lewis all offering such schemes. Brands can really capitalise on sustainability if they have a strong action plan and can communicate adequately.
The last few years have also seen the emergence of purpose-led brands that are created with the mission to improve the world. They come to the market with the promise to solve a particular environmental or social issue and ensure that every part of their value creation chain is aligned to it. These brands also strive to deliver the best product or service to attract a wide client base. Brands like Oatly for example have seen a great success since their launch. Not all these companies become mainstream but more and more do.
Millennials and Generation Z are more likely to focus on ESG, they will also become the customer base that has the most spending power over the coming years. There is an incentive for consumer companies to adapt to new market requirements if they want to stay relevant.
At Partner Executive we have a real passion for the consumer industry and enjoy working with great brand names. We understand that it can be difficult to change a business model whilst still producing good financial results for shareholders. That is why getting the right talent on board is so critical when going through change. Shoppers can now clearly see the difference between an honest commitment to sustainability and greenwashing. And so can investors. So do not compromise on values and look at the sustainability journey as a way to create more value.
Please feel free to contact Lilian Lazcano at llazcano@partnerexecutive.co.uk if you have any further thoughts on this topic.
