Study Weighs Consumer Demand for Sustainability

Sustainability has emerged as a top consumer business priority, one that will require companies to balance growing consumer demand for sustainable products with demands for convenience and reasonable prices. Achieving that balance is not an easy process for retailers and manufacturers, given such barriers as unjustifiable levels of return on investment and regulatory uncertainty,

WHITE SULPHUR SPRINGS, W.Va. — Sustainability has emerged as a top consumer business priority, one that will require companies to balance growing consumer demand for sustainable products with demands for convenience and reasonable prices.

Achieving that balance is not an easy process for retailers and manufacturers, given such barriers as unjustifiable levels of return on investment and regulatory uncertainty, according to a new study — “Sustainability: Balancing Opportunity and Risk in the Consumer Products Industry” — released by the Grocery Manufacturers Association/Food Products Association during the organization's annual Executive Conference here last month. This was the first of three studies GMA/FPA has commissioned on the topic. Deloitte Consulting, New York, conducted the study, which surveyed 26 retailers and manufacturers on their sustainability strategies. As part of the study, a “Compendium of Retailer Practices in Sustainability” also has been compiled, covering strategies, rograms, goals and metrics, among other information.

The study found that with the exception of Wal-Mart, there has been little collaboration between CPG companies and retailers when it comes to sustainability projects. Wal-Mart Stores, Bentonville, Ark., is undeniably at the forefront of sustainability, and is aggressively pursuing collaborative partnerships with its suppliers. Linda Dillman, the company's executive vice president of risk management, benefits and sustainability, detailed a number of examples in a separate presentation during the conference.

Earlier this year, Lee Scott, Wal-Mart's president and chief operating officer, unveiled “Sustainability 360” — a companywide program emphasizing sustainability and extending beyond Wal-Mart's direct environmental footprint to engage employees, suppliers, communities and customers. According to Peter Capozucca, principal, Deloitte Consulting, the study results showed few companies approaching sustainability in such an integrated manner. But that should be the goal, he said.

Ultimately, a sustainability plan needs to be fully integrated into the overall business strategy and vision of a company, and it must be supported by top-level executives, he said, adding that it requires a structured, methodical approach rather than one that is piecemeal.

Wal-Mart's ability to achieve its sustainability goals in partnerships with suppliers is not necessarily because of the company's might, study presenters said. “The issue here isn't Wal-Mart turning around and demanding,” said Nick Handrinos, a Deloitte principal who worked on the study. “The issue here is a broader opportunity to do something which makes sense across a number of dimensions which are very tough to balance.”

A main conclusion of the study is that sustainability is “unlike any business issue consumer businesses have encountered in the past. The industry's large environmental footprint and unique dependencies on agricultural inputs, water and packaging make sustainability a critical strategic issue” that all in food distribution must address, Capozucca said.

So far, overall maturity levels on sustainability projects are low and are evolving across the industry, the study found. According to Capozucca, this slow maturation on sustainability is “not [so much] an indictment of the industry, as it is on how new it is, and how early it is in the life cycle.”

While most companies indicated they are measuring and reporting progress on sustainability, there is little consistency or depth in how sustainability is being measured and reported. Up to 55% of retailers have no formal metrics for their top-priority programs, the study found.

Often at odds with the food industry's goal to stimulate consumption, sustainability carries with it risks to growth as well as opportunities. Capozucca said that one unique factor the industry faces is that “success on the environment is only as good as consumers' behavior that goes with it.”

With 17% of today's consumers said to be “green motivated,” said Handrinos, the industry should be asking what it can do to make consumers guilt-free when they weigh their consumption against a sustainable environment.