Product, Service & Design Innovation
Report:
Food Companies Gaining Ground on Product Sustainability

Food production dominates fresh water use and is a primary driving force for soil and biodiversity loss – and food demand is on the rise. The good news is that while faced with such challenges and often considered to be lagging on sustainability, the food and beverage industry stands out as most-improved in a 2015 survey.

In the second Pure Strategies review of product sustainability programs, there was an increase of food companies building their efforts and using environmental and social considerations to inform business decisions across the product life cycle. All of the food and beverage companies engaged in product sustainability in the survey have established goals for their product sustainability efforts, up from 82 percent of respondents in 2013. The impact is noticeable as programs are increasing in depth and breadth, with 95 percent of food and beverage firms evaluating and/or integrating sustainability into product decisions, up from 68 percent in 2013. These efforts across the value chain are providing substantially more business value to food and beverage companies.

Achieving value

Employee engagement was the top benefit in this year’s survey and the number of food and beverage companies reporting this benefit went from 44 percent of those surveyed in 2013 to 63 percent in 2015. Increased employee productivity and other efficiencies are typically among the first benefits earned. PepsiCo achieved $375 million in savings since 2010 from its environmental sustainability programs at the same time the company experienced double-digit net revenue and operating profit growth.

Risk reduction is another growing benefit from product sustainability for food companies. Supply chain risk reduction was the second-most achieved benefit for food and beverage firms and grew from 20 percent of companies in 2013 to 58 percent in 2015. The notable challenges in the supply are a source of this increase such as water risks driving a 12 percent drop in Cargill’s 2014 fourth-quarter profits related to drought in beef production regions and a 28 percent drop in Campbell Soup Company’s early 2015 profit for California-produced carrots from drought and erratic rainfall.

Consumer demands are a consistent driver for food and beverage firm investment in product sustainability. Importantly, there was improvement related to this with more than twice as many food and beverage companies reporting increased sales from their product sustainability efforts, from 19 percent in 2013 to 46 percent in 2015. Unilever experienced this with the brands contributing to its sustainability goals, such as Ben & Jerry’s and Lipton, growing twice as fast as others.

Realizing more

Food and beverage companies have made important progress but there is more to do to move ahead. In 2013, 15 percent of them reported a high or very high level of sustainability integration into the concept phase of a product development project, with a jump up to 37 percent in 2015. While this is a noteworthy gain, it falls short of the top-performing companies, at 53 percent in 2015, that are also planning to advance this integration further at all stages of product development. For food and beverage companies to realize more business value from product sustainability efforts, they must embed sustainability into key business functions such as product development, manufacturing, and procurement.

Bringing sustainability into ingredient selection and sourcing decisions is key for food and beverage companies. While this is often done through seeking certified or responsibly produced sources, Mars, Inc. takes an integrated approach to sustainable fish ingredients. The company engages manufacturing, product development, and sourcing to improve its pet food portfolio. This approach in their Asia-Pacific region led to 30 percent less tuna needed through finding efficiencies, reducing waste, and reformulating with different protein sources, along with purchasing responsibly harvested stocks.

Effective solutions such as these embed sustainability targets into business processes with support to empower decisions. Nestlé‘s product and packaging designers are encouraged to think about sustainability from the very beginning of the development process. A combination of assessment tools and guidance help staff optimize environmental hotspots. The company has developed:

• Guidance on category-specific impacts to clarify priorities and performance
• Environmental assessment tools for developers to evaluate their decisions during design

Looking ahead

There are significant challenges to address across the life cycle of food and beverage products — with over one-third of food wasted throughout the value chain, energy use in food processing increasing, and food needs growing by about 60 percent by 2050.

As Kevin Rabinovitch, Global Sustainability Director at Mars, notes, “There are time-sensitive issues in the food supply chain. We need to find solutions across our businesses to make the needed improvements. This goes beyond a single product, which is why we take a portfolio view to our addressing our priorities and we realize important business gains along the way.”

As more companies ramp up their product sustainability efforts to progress on these issues and bring sustainability into product decisions and key functions, the future may be that food and beverage companies move from most-improved to reach the top-performing industry, as they reap ever-deeper benefits from their programs.