Report Cites Opportunities in Sustainability

SEATTLE — Retailers and suppliers have the potential to collaborate on several areas related to sustainability [1], according to a report from McKinsey & Co. that was released at an industry sustainability conference last month.

The report, called “Looking Around the Corner on Sustainability in Retail and CPG,” by Steven Swartz, partner, McKinsey & Co., was presented at the 2013 Global Sustainability Summit, sponsored by the Food Marketing Institute/Grocery Manufacturers Association Trading Partner Alliance.

The report outlined three “major enablers” of excellence in company’s sustainability initiatives:

1. Understanding the financial benefits of sustainability — Companies need to create an understanding of the long-term materiality of sustainability to the business.

2. Effective goal-setting — Companies need to focus on the few key sustainability areas with qualitative, long-term goals that are material to the business.

3. Performance management and accountability — Sustainability goals can be translated into KPIs (key performance indicators) and cascaded down through the organization.

The report included results from a poll of retailers, CPG companies/food manufacturers, consultants, associations and others. About 21% of respondents were retailers and 23% were CPG companies or food manufacturers. Most worked either in the sustainability/CSR (corporate social responsibility) functions — 44% of respondents — or were senior management (22%).

Among the findings, 48% of respondents said the pressure of short-term earnings performance is at odds with sustainability initiatives. In addition, 44% said that resources made available for sustainability initiatives are insufficient.

“Without understanding of financial value, it is very hard to obtain sufficient resources and long-term commitment to sustainability,” the report concluded.

The report found that the No. 1 reason that participants cited for their inability to capture full value of sustainability was a lack of incentives tied to sustainability performance.

In addition, nearly 40% of respondents said that not enough people are accountable for sustainability at their company.

While 63% of respondents said they use sustainability-related KPIs to track progress, only 15% reported that sustainability KPIs were linked to employee financial compensation.

The report also found opportunities for collaboration on several regulatory/legislative issues, including agricultural labor conditions, animal rights/welfare, and antibiotics in meat.

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