It would require a ‘monumental shift’ for sustainability to top the corporate agenda
Issues like plastic pollution, sustainable sourcing and food waste have caught the public imagination. Mission-based brands are gaining share of basket and – while the jury is still out on whether consumers are willing to pay higher prices for sustainable products – it is clear that noise around the topic is increasing.
Concern over the contribution the food system makes to global warming and worries that it will not be fit for purpose to feed the growing global population have prompted regulators to take a more critical look at the sector.
The food industry is responding to these high profile issues. One theme clearly coming through is that industry has accepted a basic tenant of CSR: the need to measure and regularly report progress.
Global commitments: plastics and food waste
Last month, multinational food and beverage companies, governments and NGOs united behind a pledge to “eradicate plastic waste and pollution at the source” and develop circular economy models for plastics.
The New Plastics Economy Global Commitment, led by the Ellen MacArthur Foundation in collaboration with UN Environment, sees businesses agree to publish annual data on their progress to help “drive momentum and ensure transparency”. Signatories have said they will make sure 100% of their plastic packaging is recyclable by 2025.
The corporations who have agreed to the targets collectively represent more than 20% of all plastic packaging produced globally. They include the world’s largest food and beverage brands: Nestlé, PepsiCo, Unilever, The Coca Cola Co., Mars and Danone.
A similar tactic is being employed to tackle food waste. Tesco – which became the first UK retailer to publish food waste data in 2013 – revealed in September that some of its largest suppliers have agreed to publish food waste data.
“We hope every country, major city and company involved in the food supply chain publishes their own food waste data, so that together we can take targeted action to reduce waste. We believe that what gets measured gets managed. Ultimately, the only way to tackle food waste is to understand the challenge - to know where in the supply chain food is wasted,” Tesco CEO Dave Lewis argued.
The number of suppliers agreeing to publish data stood at 89 companies at the last count.
According to Paul Harvey, partner at management consultancy Newton, this is an “important first step”.
Developing and placing resource behind these reporting mechanisms is a significant commitment, Harvey explained. “As with all major changes to reporting, it is difficult to agree the right way of measuring and it can’t be forgotten that the time and effort it takes to determine these numbers isn’t insignificant. Any movement of this gravity requires a number of influential people who are willing to lead from the front and champion it in order for the idea to move forward.
“The next question is how it should evolve to drive the right behaviours – how should reporting be done to create the right transparency?”
Pressure to perform
Harvey believes that reporting sustainability data will place pressure on suppliers to improve their performance. “A potential PR issue has been created for any businesses failing to perform at a satisfactory level. This development certainly puts pressure on those at the bottom end to do more, while giving the front runners the opportunity to publicise their great work,” he told FoodNavigator.
This level of transparency is a necessity for the food industry if it is to keep pace with evolving consumer expectations. To a degree, at least.
“Customers are increasingly expecting more transparency from suppliers and manufacturers, in line with overall sustainability awareness and concern for the environment. However, this is true only to an extent as consumers switch off when the information available is too complex. It’s important to keep the messages straightforward, so that consumers can easily absorb the main themes.”
Sustainability ‘by no means’ top priority
For all the positive PR, you could be forgiven for assuming that sustainability was a top priority in boardroom discussions. This is not necessarily the case, Harvey observed: “Sustainability is definitely edging up the agenda but is by no means at the top.”
Grocery retailers are concentrated on the thorny question of how to grow the top line in the face of weak consumer sentiment and the prospect of food inflation, particularly in markets like the UK as Brexit edges closer. The UK’s Food and Drink Federation’s confidence survey for the third quarter revealed a staggering 98% of food and beverage companies expect input cost inflation next year, with 86% forecasting consumer price rises in 2019.
Retailers are also grappling with a structural shift that has seen sales migrate online, with the emergence of new players such as Amazon.
The British Retail Consortium published its October retail sales monitor overnight, revealing that like-for-like sales flat lined in the month, primarily due to a drop in non-food sales. Food sales continued to advance – but at a slower rate than in the recent past – rising 1.2% on a like-for-like basis. Total sales were up 2.3%, below average growth of 3.5% seen over the past 12 months.
ShawCap analyst Greg Lawless attributed this slowdown to the hangover from a ‘bumper’ summer. “We believe that the UK consumer having experienced the summer with the good weather and the football World Cup, when England outperformed all expectations, has led to a tightening of their belts in early Autumn.”
But BRC chief executive Helen Dickinson stressed the likelihood of choppy waters ahead: "The very real possibility of a no-deal Brexit presents a huge challenge for retailers who must contend with the prospect of higher import prices, and further drops to consumer demand."
In this environment, retailers are focused on delivering products that draw people into store – and this means innovation and value, Harvey suggested.
“The biggest issues for retailers are growing sales, holding off price inflation, NPD, product quality and establishing better value for the customer.”
These concerns overpower longer-term concerns about advancing the sustainability of the sector as a whole - and underscore why collective commitments to action are vital to drive change without placing any one business at a perceived competitive disadvantage.
Harvey concluded: “Realistically, sustainability is at best third or fourth on the list in a handful of retailers and it’s unlikely to creep higher. Clearly, all retailers are commercial businesses, so it would require a monumental shift, such as immense media pressure or government legislation, to cause sustainability to rise further up the agenda.”