How Sustainability Can Boost Sales in the CPG Industry
Sustainability is a key concern for customers, firms, and states. While some may reduce its significance, most agree that action is required.
The CPG industry meets sustainability challenges in manufacturing and transport. As the need for sustainability inclines, many companies turn to "greenwashing." For permanent success, sustainability is vital, not a trend. Ignoring sustainability hurts companies' status as consumers who prefer green brands. The challenge is to reshape supply chains and reduce waste.
Consumer goods produce 60% of greenhouse gases, use 80% of water, and cause 66% of tropical forest loss. This shows why sustainability is vital, not optional.
Importance of Sustainability For CPG Companies
About eighty percent of customers are concerned about the environmental impact of products. Sustainable items are growing faster than regular ones, especially in personal care, where customers prefer natural ingredients and recyclable packaging.
Consumers support brands that demonstrate environmental responsibility. Sustainability reduces waste and energy costs, saving money for better products. It helps CPG companies meet green demand, reduce impact, follow regulations, and build strong branding and customer loyalty. A McKinsey study found that 60% of customers are ready to pay more for sustainable products. Brands that concentrate on sustainability often earn dedicated clients.
Consumers choose sustainable options, giving small businesses an advantage. Additionally, outsourcing can support sustainability. Small businesses can cut costs and waste by hiring experts to improve supply chains.
According to Bloomberg, Changing consumer habits is vital for tackling climate change. According to a 2021 EY survey, 84% of consumers focus on sustainability when shopping, and 43% are willing to pay more for responsible brands. But, 47% find sustainable products too expensive, and only 20% trust companies' sustainability claims, down from 50% two years ago.
Consumers are essential for the net-zero transition. Steve Varley from EY notes that businesses must invest long-term, as sustainable products aren't yet available at the needed scale. Access to sustainability info helps consumers choose local farms or green brands. Adrian Slobin from EY emphasizes the importance of carbon labeling and second-hand markets.
Christina Shim from IBM states, “Without data, sustainability isn't actionable,” and over 80% of CEOs see its investments boosting outcomes in five years. Gabriele Goertz from SAP says tracking emissions helps companies respond to consumer needs. Donna Warton from Microsoft states that customers are vital to achieving a net-zero future. Clear and relevant sustainability messages are crucial for effective engagement.
Bloomberg research shows that sustainability claims like “Made from recycled materials” lead to social media ads. Additionally, sustainability keyword searches are up 37%, with “upcycled fashion” rising 42%, per Lyst. The Changing Markets Foundation found that 60% of claims from brands like H&M and Asos are misleading. H&M's Conscious Collection uses more synthetic materials than its main line. H&M aims for transparency on its environmental impact, but consumer trust is low.
Angela Hultberg from Kearney says consumers expect safe products without extra cost, and 78% want companies to improve sustainability. This “consumer aspiration gap” highlights the disconnect between intentions and actions. Katie Thomas highlights Kraft's recipe change as a strategy simplifying sustainable options. IKEA's move to phase out non-LED light bulbs was risky but turned into a major opportunity. Hultberg warns that sustainability must benefit both the environment and consumers.
According to Harvard,
Many companies misjudge customer interest in sustainable products, resulting in unsold inventory. Basic product features are often more important than sustainability benefits. Customers focus on product performance, with greens valuing sustainability, blues somewhat, and grays not at all. Each group requires a different marketing strategy. Sustainable features can either have no effect (independence), lower performance (dissonance) or improve it (resonance). Marketers should tailor their approaches for green, blue, and gray consumers.
According to CNN, The climate crisis is shifting buying habits in the $500 billion beauty industry, impacting production, packaging, and disposal. Simon Kucher’s 2021 study found that 60% of consumers value sustainability, and 35% will pay more for green products. This shift has led many brands to reduce single-use plastics and be clearer about their ingredients. The British Beauty Council says shoppers find it hard to identify sustainable products due to unclear standards and "greenwashing."?
For example, L’Oreal used 144,430 metric tons of plastic in 2021, with plastic making up 67% of the industry's packaging. L’Oreal targets 50% post-consumer recycled plastic by 2025, and Estee Lauder aims for 25%, but both face challenges. Sephora and Target are starting sustainability programs, but waste issues persist. The beauty industry could benefit from voluntary standards like B Corporation certification. Experts call for stricter regulations; the EU bans 2,495 chemicals in cosmetics, while the US FDA bans only 11. Strong leadership and collective efforts are essential for making real progress in sustainability.
Impact on Supply Chains
CPG companies can make a major distinction in their supply chains by selecting sustainable options that motivate others to do the same. For instance, many firms are using biodegradable and recyclable packaging to aid consumers sustain sustainability. They can cut carbon emissions by using cleaner energy and improving shipping efficiency. A circular economy reuses and recycles materials to reduce waste.
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Additionally, consumers want to know that products are made fair. Companies focusing on ethical sourcing and fair labor build customer trust. By prioritizing these practices, CPG companies enhance their brand and support a healthier planet.
What Do Consumers Want?
Consumers expect CPG companies to make changes in the following areas:
Sustainability for Brands
Forbes says consumers want companies to be green, mainly young customers who care about values. Businesses should reduce their impact and build loyalty through sustainability. Here are some green marketing strategies:
Challenges CPG Companies Face
As sustainability laws tighten, companies must stay informed to avoid penalties.
To overcome these challenges, CPG companies need:
Conclusion
Sustainability is important for the fate of the CPG industry. CPG firms must prioritize sustainability to stay competitive amid customer and regulatory needs. It benefits the planet, builds trust, and attracts loyal customers. With commitment and effective tools, companies can make a significant impact.
Blockchain tools help CPG companies track products, ensuring transparency and building consumer trust. Digital platforms also let companies track their sustainability metrics and work with suppliers.
CPG companies should measure carbon emissions, water use, energy use, and waste to track sustainability. Using real-time data platforms helps track progress, generate reports, and improve practices.