Food and beverage companies are beginning to realize the importance of sustainability, with a growing number of companies working to advance environmental and social improvement in product ingredients, manufacturing, and packaging through to end-of-life. However, the sector as a whole is lagging behind other industries in taking sustainability action and generating the associated business benefits. What steps can these companies take to join the leaders?
An industry segmentation of 100 global product companies, including 34 food and beverage companies, involved in product sustainability that were surveyed by Pure Strategies revealed that while the food sector is beginning to take key steps, more strategic work is needed for this industry to catch up to the performers in the market, across industries.
Benefits Not Yet Achieved
Leading companies across many sectors are leveraging product sustainability to deliver meaningful environmental and social change and to generate business benefits. In 2011, Heinz took a strategic new approach to its manufacturing to achieve absolute emissions, waste and energy-use reductions, along with money savings and strong employee engagement. The company achieved this through employee-led projects that identified efficiency solutions, such as modifying processing lines that mixed hot and cold water to reduce reheating needs, along with developing a comprehensive conservation and renewable energy effort.
The business value realized by Heinz mirrors the top benefits cited by companies with active product sustainability programs. Manufacturing cost savings leads the list, followed by employee engagement and productivity, according to Pure Strategies’ recent report, The Path to Product Sustainability. However, exceptions aside, the food industry trails other sectors with only 47 percent of the food companies surveyed achieving manufacturing cost savings, compared to 86 percent of the survey’s overall top-performing respondents. Among consumer electronics and home and personal care companies, 88 percent and 78 percent of companies, respectively, reported securing positive results (see graph, above). The food industry’s shortfall in this area extended to all of the benefits studied, including employee engagement, trust and brand enhancement and other potential gains.
Best Practices to Invest In
Luckily, food companies are investing in product sustainability, with no single company in the survey expecting a decrease in budget for this work and nearly 20 percent working with double-digit budget growth in this area this year. How should these resources be invested so the food industry can more fully realize the benefits that others are experiencing?
It begins with charting a focused and relevant direction with meaningful goals. Pure Strategies found that food companies typically have such objectives, with 80 percent of companies surveyed noting product sustainability goals. The Coca-Cola Company, for example, is working toward achieving targets on water, packaging, climate protection, and agriculture, including sustainably sourcing key agricultural ingredients by 2020.
There is more opportunity, however, for food companies to improve in using assessments and other tools to inform product decisions and in integrating sustainability into the product and packaging development process. Two opportunities stood out in the research study: Invest in engaging suppliers and work to integrate sustainability into the development process:
Supplier Engagement
Study respondents across the board ranked supplier engagement as the most valuable assessment and sustainability-oriented innovation approach. The food industry did not report being as active with supplier engagement as other industries and, as a result, is not achieving as much benefit; Ceres found a similar trend in its assessment of general sustainability program attributes. How can food companies ramp up activity and derive more value from supplier engagement?
Once priorities are established through goals, companies need to start sourcing key ingredients sustainably by communicating, collaborating and supporting their suppliers and supply chain. Coca-Cola is working closely with suppliers to advance its programs because it understands and has experienced the value of this approach. Coke’s sustainable sourcing efforts include sharing expectations for agriculture and collecting information from suppliers about actions taken to meet the guidelines in order to identify best practices and encourage their application across the supply chain, to help meet the 2020 goal.
Product Development
The most critical area where food companies need to catch up is in the product and packaging development process. Notably, leading companies in the overall market have begun to or have plans to concentrate product sustainability efforts more fully throughout the development process, especially in the early stages of concept and bench-top/pilot development:
- 29 percent of consumer electronics companies focus on sustainability at the bench-top/pilot phase; this is expected to rise to 83 percent in two years
- Only 21 percent of food companies do this now and 29 percent expect to in two years.
Coke includes sustainability among R&D’s strategic platforms, placing it “front and center” during product development. This means that at each stage gate, management reviews products’ environmental and social attributes, fully integrating their benefits from concept to commercialization.
Moving Forward with Two Key Steps
While the food industry is moving forward, their investments need to be strategic in order to yield the biggest benefits. Adopting the best practices of those who are enjoying the greatest business value can help food companies catch up. The combination of supplier engagement and early integration, the solid goals most food and beverage firms already have, and the intrinsic embrace of product sustainability within this sector can catapult these companies to the top tier of business. Not only will companies realize tangible business benefits, but we’ll all win as more sustainable food is available at our local markets.
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VP of Consulting
Cheryl Baldwin, Ph.D. is a Vice President of Consulting for Pure Strategies, where she partners with corporate clients to develop and execute strategies to improve sustainability performance across food, home and personal care, and cosmetics industries. Cheryl also leads the firms’ global market research to generate new insights to accelerate business transformation.
Published Aug 11, 2014 1am EDT / 10pm PDT / 6am BST / 7am CEST