Have Your Sustainability Cake and Eat It, Too
Sustainability is a buzzword in the Food & Beverage industry. From big players to start-ups, producers to retailers, everyone wants their piece of the sustainable cake. But what does sustainability mean exactly? And how can companies take advantage of this trend?
Organic, local, fair trade, plastic-free, green, healthy, humane, plant-based… Sustainability credentials are breaking into the market with dizzying speed, and sometimes a lack of clarity. “Sustainable” is a word that is often used, but not always well-understood.
Its original definition was framed by the 1987 Brundtland Report from the World Commission on Environment and Development: “sustainable development is development that meets the needs of the present without compromising the ability of future generations to meet their own needs.”
In a world with finite resources, economic development should take into account environmental and social considerations, or risk a dramatic increase of negative effects. We are already experiencing: climate change, biodiversity loss, air and water pollution, poor labor conditions, inequality, discrimination…
Solutions are being developed across the world by a range of actors including NGOs, the private sector, and public institutions. The United Nations, has taken a leadership role with the release of the Sustainable Development Goals, a set of targets and guidelines to drive international government and corporate action on sustainable development.
However, companies remain key actors for sustainable development, by improving the environmental and social impact of their operations and providing solutions to help consumers live sustainable lifestyles. Corporate Social Responsibility (CSR), the inclusion of sustainability considerations in a company’s operations, is thriving.
The food and beverage sector is at the center of this movement. Consumers increasingly want to know where their food comes from and the work/life conditions of workers involved in making it as well as the impact of their consumption patterns on their health and the environment.
Nielsen coined 2018 “the year of the influential sustainable consumer,” noting that nearly half (48%) of U.S. consumers say they would definitely or probably change their consumption habits to reduce their impact on the environment.
This is not just hot air: consumers spend money on more sustainable products ($128.5 billion in 2018), with a much faster growth rate than conventional products (compound average growth rate since 2014 of 3.5% for sustainable products vs. 1% for conventional). Nielsen expects this trend to keep growing, with US shoppers expected to spend up to $150 billion on sustainable goods by 2021.
Food and beverage companies are meeting this demand with dynamic and innovative approaches. Large corporations have been paving the way for many years, and their leadership is gradually shaping the industry. One example is Walmart: the retailer is working to improve its performance on environmental, social and governance factors, but is also requiring its vendors to improve their own performance, and is building partnerships to help meet this target.
Another example is dairy producer Danone, which launched the Farming for Generations alliance in June this year, an initiative to support the dairy farm industry’s adoption of regenerative agricultural practices to reduce greenhouse gas emissions, protect soil and biodiversity, support animal health and wellbeing, and empower farmers with workable solutions.
Another recent example is the Loop initiative, a collaboration between Terracycle, Krogers and Walgreens to offer leading brand products in reusable packaging. Loop manage the delivery and collection process to ensure effective reuse of the containers. Note that these initiatives are collaborative: faced with new challenges, the industry knows how to invent new models.
A myriad of small-to mid-size businesses are also working to improve their impact and create solutions in the US, for example members of the Sustainable Food Trade Association, and the numerous B Corp ®-certified businesses (B Corp is a label rewarding environmental, social and governance considerations in business).
Industry groups are also taking action. For example, the North American Meat Institute, which represents 95% of red meat processors and 70% of turkey products, unanimously agreed in July 2019 to make the environmental impact of meat and poultry production a noncompetitive issue among members, encouraging the sharing of good practices.
Research shows that the benefits of engaging in a CSR approach are many. Besides better brand recognition and differentiation, a positive business reputation, and customer loyalty, businesses report operational cost savings, improved risk coverage, easier access to capital, and increased talent attraction and retention, especially among younger generations.
The Nielsen study, among other research, shows that consumers are looking for a trustworthy, authentic approach, with which they can relate and engage. In other words, companies should be improving across their operations, with a focus on where their impact matters most (rather than, say, simply replacing their lightbulbs).
This prospect can seem daunting. However, the first step of a well thought-out approach is to identify priorities – understand the company’s current impact on people and the planet, the areas where stakeholders are expecting progress, and the actions the company could take, from low-hanging fruit to more structural changes.
There is no single approach to increasing the sustainability of the food and beverage system. Mazars USA can help you define yours. Contact us for more information.