BrainTrust Query: Will the Sustainability movement be successful in changing the retail business?
By Michael
Richmond, Ph.D., President/CEO, Packaging and Technology Integrated Solutions
Sustainability is a concept whose time has arrived. In fact, it arrived several years ago, although initially in the context of environment, health, and safety (EHS) programs. Most of the leading companies ascribing to the philosophy – those recognized by Corporate Knights (a Canadian media firm) on its list of the Global 100 Most Sustainable Corporations – have been on this path for five-to-10 years. Sustainability demands both a long-range perspective and a long-term commitment.
Sustainability is all about delivering superior business solutions – ones that are economically, socially and ecologically positive. This is the Triple Bottom Line and is key to what sustainability is all about:
- Economic Benefits: Continuing to drive waste and cost out of the value chain, and the desire to avoid further regulatory actions which could constrain innovation.
- Social Responsibility: Proactively addressing issues of worker safety, wellness, and quality of life. It is more and more essential for companies to have a work force that is increasingly productive, stable, and motivated.
- Ecological Improvements: Responding to increasing concern with global warming, resource depletion, energy consumption, water usage and other environmental impacts that could become global crises as the earth’s population mushrooms by an expected 40 percent in the next four decades. The most aggressive companies have also seen the opportunity to gain competitive leverage from these efforts.
The primary proponents for sustainability are representative of the entire packaging value chain, from raw material suppliers (Alcoa, Dow, Alcan, Stora Enso, etc.), to converters, to consumer packaged goods firms (Unilever, Nestle, Dannon, Henkel, etc.), to retailers (Wal-Mart, Albertsons, Target, etc.). Wal-Mart, in particular, has put its suppliers, both product manufacturers and packaging for Wal-Mart brands, under significant pressure to embrace its sustainability goals.
A significant number of consumers are beginning to base buying decisions on sustainability. The Natural Marketing Institute (NMI) characterizes these leading edge consumers as the Lifestyles of Health and Sustainability (LOHAS) group. According to NMI’s web site, LOHAS describes a $228.9 billion U.S. marketplace for goods and services focused on health, the environment, social justice, personal development and sustainable living. Approximately 30 percent of the adults in the U.S., or 50 million people, are currently considered LOHAS Consumers.
Discussions Question: How do you see Sustainability
influencing the retail business in the next three years? How widespread will
adoption be and what will it mean for all the parties involved?
Retailers recognize that sustainability-conscious consumers
are too large a segment to ignore. While they are unlikely to focus specifically
on packaging, these consumers may be swayed when packaging is more consistent
with healthier, more “natural” products. Some of the fastest growing retailers
are switching to more sustainable packaging, led by Wal-Mart and Whole Foods
among others.
Sustainability represents an opportunity for retailers
in two important ways. First is the potential cost savings that can result from
driving waste out of the packaging value chain. Just three of the results that
Wal-Mart has published add up to over $56 million in annual savings:
- Installing “sandwich” balers enabling the recycling
of stretch wrap film – $26 million - Reducing the size of Wal-Mart’s brand of toys – $2.4
million - Installing auxiliary power units to heat/cool truck
cabs and eliminating idling when drivers are resting – $28 million
Second is the potential for a variety of Triple Bottom
Line benefits that can result in a more highly motivated work force and
increased shareholder value.
Take Our Instant Poll
Loading ...
Join the Discussion!
13 Comments on "BrainTrust Query: Will the Sustainability movement be successful in changing the retail business?"
You must be logged in to post a comment.
You must be logged in to post a comment.
Sustainability will not only be a major attribute of a go-to-market strategy, but even retailers like Wal-Mart, that may have been “less sensitive” in the past to the issue, now see it not only as a “good for you” issue, but also a “good for me” issue as they reduce costs like transportation and waste. The interview with Lee Scott in Fortune a few weeks ago is breathtaking in its potential impact to the industry in general if they drive the issue.
Recently, I worked with a major retailer on a seafood program, and while quality specs and presentation were of course top of mind and not compromised, where the issue of sustainability could be supported and incorporated, that was a first choice as a marketing and branding advantage in their mind.
I agree with Charlie. Sustainability is the issue of the near-term future. Like everything else, though, I think sustainability will be driven from the supplier side…in this case, downstream suppliers (especially growers).
The concept of market sustainability, from a marketing perspective, is already here. However, despite all of our lip-service, we are still a non-sustainable society. Our carbon footprints, the green products we purchase and the percentage of recycled products is still a small percentage of our overall purchases. Our economic gluttony demands that we produce products that provide immediate gratification to fill our needs.
Lifestyles, fashions and our economic productivity all go against the sustainability concept, and are the key reasons why we support products that don’t embrace this. This will continue until we can deliver a better product, built around a sustainable concept, for less. Until then, we have to accept a small portion of our GDP as representing sustainable products.
There’s been a lot of talk about retailers in response to this but I think the general public will have a considerable role in determining which way things go. It’s one of the issues on which I think Europeans are well ahead of Americans and cpg manufacturers had better watch out. When people look for fresh products they are also saying that they don’t want a lot of processing or packaging. Unpackaged food may have a shorter shelf life, hence be less sustainable, but producing food that people will buy – and buy more often – is the kind of thing the industry should really be looking at for the medium and longer term. It may be the bigger stores that are least sustainable.
Smart, long-term and forward-thinking companies that are not as concerned about the short term whims of Wall Street will be the ones to engage in sustainable practices first. The sustainability movement can be a cost savings overall, in the long term, as much of it is really about eliminating waste, and therefore does not come at a cost to jobs/economy. Wal-Mart is embracing this approach as it is a great motivator for employees to believe that their employer is truly concerned about the environment, but also because of the potential cost savings ($28 million dollar savings from reducing idling of trucks, just as one example), while also providing a competitive advantage at this point.
It is simply a matter of time before other retailers, industries, and mainstream consumers ultimately catch up with sustainability principles and make them simply the cost of doing business, rather than being a point of differentiation.
Very good and insightful comments! We have been working on a Multiclient Study on Sustainable Packaging, which will be available this fall, and we have found that the triple bottom line (social, economic, ecological) rationale really does work: More and more companies are moving in a positive direction for sustainability and sustainable packaging.
Our research currently shows a strong retail push but we are now seeing package converters and CPGs beginning to develop sustainability programs (and sustainability packaging programs) for their organizations. And, as some of the comments pointed out – they are doing them for the economic reasons. It was also nice to see the respondents recognize sustainability is more than a fad and will be with us for the long term. It kind of makes a person feel good inside!
The way I see it is that sustainable development is a way of living… More than a way of doing business, more than a trendy movement that many players will try to catch on the fly and use as a cosmetic approach to serve their own goals…
Is it time to integrate that into our best practice ways of doing business? I hope that there’s no need for an answer…
Each of us can be and should be a promoter of such a way of living in his own environment. This is not a philanthropic dream and believe me I’m a rational guy.
Sustainability is such a broad concept. Being so broad, it allows everyone to pick and choose their priorities and interpretations. Most retailers certainly favor the economic benefits when those benefits can be proven and captured by the retailers. Few retailers embrace “Social Responsibility,” as outlined by Michael Richmond. The key issue: when sustainability goals clash with economic goals, who wins 99% of the time?
Interest in sustainability strengthens and wanes as interest in alternative energy, conservation, and ecology strengthen and wane. There will always be a core of people who are committed to sustainability. Consumers and companies are likely to have varied levels of commitment to sustainability depending upon their self-interest.
Like most “better for us” concepts, there are two distinct levels at which sustainability will resonate. The first will always be with the “concerned consumer” who will pay (some amount) more to “do the right thing.” The larger, and infinitely more leverageable, opportunity is when sustainability can be linked to some more practically compelling attribute. For example, “plastic bags = higher petroleum usage/prices.” The final frontier is when the sustainable alternative actually performs better (or cheaper) than the alternative(s).