A business case for sustainability in the Fast Moving Consumer Good industries

Darwin

Diego Horcajada, December 2017

I would like to project us 10 to 15 years in the future, thinking about a short list of the latest social, economic and technology trends: (1) interconnectedness, (2) feedback culture, (3) standard methods and metrics, (4) product traceability and (5) the block chain. I will use these five trends and their interrelated nature to defend the business case for sustainability in the Fast Moving Consumer Good (FMCG) sectors.

  1. Interconnectedness: a New York based research company, eMarketer, forecasted in April 2017 that worldwide internet users will reach 53.6% of the global population by 2021, meaning 90 base points growth VS 2016 figures. Smart Insights indicates Facebook users grew from 1.59 billion in April 2016 to 1.87 billion in January 2017.

We would not be very wrong if we predict that by the end of the next decade close to 70% of the global population will have access to the Internet. We can state with a high degree of certainty that nearly all the world’s consumers will be connected to the web.

  1. Feedback culture: nowadays very few people would book a hotel or restaurant without first having paid a visit to a reviews provider such as TripAdvisor or Yelp. Feedback and review have become today a must have for any business, and it is rapidly evolving from a mono-directional to a bi-directional capability (from provider to user/customer and vice-versa), some examples are Airbnb, Uber and EBay.

We can imagine that more and more FMCG businesses will be receiving and giving feedback from their consumers. Feedback (comments and reviews) are public and visible to other consumers around the world, as the people and businesses become more and more interconnected.

  1. Standardizing methods and metrics: the European commission is currently finalizing several pilots for Product Environmental Footprint (PEF) evaluation methods to standardize and align the way companies measure and report on the environmental impact of their products. This should address the fact that half of European consumers find it difficult to differentiate between environmental friendly products and other products, and still only about half of them actually trust the environmental performance claims from producers.

This kind of initiative will become more relevant and will have global reach in the coming years. Harmonized labels will be more common by the end of the next decade. Consumers around the world will rely on very similar, if not the same, environmental and social footprint labels for the products they consume.

  1. Product traceability: according to ecovia intellingence, increasing consumer demand for transparency is leading to the development of new certifications schemes and analytical tools for the food sector.

A good example of an organization pursuing this objective for the clothing industry is the Global Organic Textile Standard (GOTS), whose mission is “the development, implementation, verification, protection and promotion of the (GOTS). This standard stipulates requirements throughout the supply chain for both ecology and labour conditions in textile and apparel-manufacturing using organically produced raw materials. Organic production is based on a system of farming that maintains and replenishes soil fertility without the use of toxic, persistent pesticides and fertilizers. In addition, organic production relies on adequate animal husbandry and excludes genetic modification.

  1. Block chain is rapidly becoming more and more relevant for business, and soon customers, to facilitate trust across the supply chains, contract management, audits, certifications and the end-to-end traceability of finished goods as well as all their components (packaging and raw materials). The block chain will bring together the above four trends to provide consumers with transparent information, empowering them to make more conscious and sustainable purchasing decisions.

If we take these five trends and project ourselves to the year 2030, it is not difficult to imagine the following scenario:

The relation between consumers and business goes beyond a simple transaction or product delivery; trust is the cornerstone of any lasting business-consumer relationship. A much larger number of consumers have become aware of their power (through purchasing decisions) to influence business sustainability practices. Consumer awareness of the environmental and social footprints of fast-moving goods will shake the pillars of brand loyalty and therefore the marketing strategies. All consumer goods sold in a retail environment (e-commerce and/or brick and mortar stores) will need to have end-to-end supply chain traceability as well as environmental and social footprint metrics, any product without them will have hard time to attract consumers.

And here is therefore the business case for sustainability of FMCG: the choice between adapting to become environmentally and socially sustainable, or become part of the history books.

Many thanks for your interest.

Diego Horcajada

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