Why sustainability is important for FMCG firms?

Climate change is happening. It is a global emergency which needs to be tackled immediately at a global level. Major contribution to this climate change is the emissions from the different industries across the world. In order to?contain the effects of climate change it is important for major companies and industries across the nations to put a united front for climate change. In order to tackle the effects of climate change world leaders meet in Paris for the UN Climate change conference(COP21). It was agreed that all nations will make efforts collectively to prevent the global rise in temperature by 1.5-2 degrees Celsius.

India announced that it will achieve its target of net zero emissions by 2070, while China is targeting 2060 for net zero emissions. USA and EU are aiming to achieve this by 2050. ?

Individual nation’s target on achieving net zero emission depends on legal framework defined by that country for companies to operate. Defining a clear parameters for companies for sustainable way of doing business is key!

This article will focus on why FMCG companies should focus on sustainability.

FMCG sector’s supply chain contributes around 25-30% of the total emissions. This is a huge number and efforts in reducing the emissions even by 5-10% will result in tremendous benefits to the environment.

This opens up a huge market for green technology and sustainability initiatives. This market is expected to grow from $17.8 billion in 2022 to $60.7 billion by 2027 at a CAGR of 27.8%. ??IOT and cloud computing are the top technologies while green building and carbon footprint management segment are the top market by application.

There is an emerging demand for green technology in the FMCG industry. 43% pf CPG organization are willing to pay 5% more for sustainability IT products and services.

This shift is made possible because of the 4 major reason:

1.?????Changing consumer preferences:- As per report by Statista, 65% of the consumers in India are now making decision to purchase products of brand, depending on the how sustainably the product was manufactured, raw materials procured etc. Consumers are now paying attention to company’s carbon footprint before buying the products and are ready to pay a premium for it. This shift reinforces the need for companies to shift to sustainable business practices

2.?????Competitive advantage- Shifting to sustainable way to business gives companies a competitive advantage. 55% of the industry growth is generated from products that are marked as sustainable from 2015 to 2019. People are buying more sustainable products than before and are less sensitive to the price of the products.

3.?????Legal Compliance – 65% of sustainability reporting instruments are mandatory in 64 countries

4.?????Investor Preference- ?97% of US & UK investment managers now consider the sustainability levels in a business when making investment decisions. Sustainable investments are becoming increasingly popular due to demand from millennials and impact investors to prefer companies with the sustainability at the core of their vision.

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https://www.businessnewsdaily.com/15087-consumers-want-sustainable-products.html

https://online.hbs.edu/blog/post/sustainable-investing