2020 FMCG environmental sustainability trends
Ali Palmer, Partner and Head of Odgers Interim's Consumer Practice, and Zoe Wakeham, Odgers Interim's Consumer Consultant, look at the 5 key FMCG environmental sustainability trends they expect to play out this year
Customers are increasingly becoming more mindful of their purchasing habits, being attentive to the sustainability of the product, the company, and the supply chain. Gen Z are being identified as a key driver of this evolving consumer demand as the generation has acquired buying power. This key customer base is most influenced by sustainability, brand name, and company mission. Facilitated by social media, there now exists a much closer brand-consumer relationship. It has led to consumers investing more heavily in companies with strong brand narratives around climate change prevention and sustainability. Recent research from the Stern Center for Sustainable Business found that products marketed as sustainable grew 5.6 times faster than those that were not.
The FMCG sector is being affected substantially and is rapidly evolving, pledging a move to more sustainable practices and investments; and rightly so, with the sector responsible for over a third of global greenhouse gas emissions. This year will see the focus on sustainability crescendo as the pressures of the climate emergency lie at the forefront of global politics, driven by consumer demands.
From these evolving consumer behaviours and demands, here are the five key sustainability trends we expect to play out this year in the FMCG sector:
1. Sustainable packaging
Since the headline disclosing that Britain’s biggest supermarkets produce 810,000 tonnes annually of throwaway packaging, there is increasing pressure on the retailers to reduce their environmental impact by cutting plastic use. Tesco has just announced they will be the first UK retailer to remove plastic-wrapped multipacks, predicting this will eliminate 350 tonnes of plastic from the environment, and encouraging brands such as Heinz to do the same. On a wider-scale, a number of supermarkets have been trialling zero waste store transformations with unwrapped fruit and veg offerings and refillable dried goods facilities with the aim of rolling this out across the country.
For products that require packaging, there is increasing noise around material sustainability and debate on the ‘war on plastic’. Coca Cola made their controversial announcement last week at Davos 2020 about their commitment to recyclable plastics, choosing this over investment in alternative bottling options. This comes at a time when CanO Water, water packaged in aluminium cans, has become part of a wider conversation about environmental credentials of different materials. 2020 will see the conversation continue on the most viable, sustainable route to packaging, weighing up the environmental credential of each stage of the product lifecycle from material production through to recyclability.
Aside from recyclable packaging options, there is a growing movement to biodegradable and reusable options. Hellmann’s and Just Eat partnered with Notpla to trial a seaweed-based sachet for on-the-go condiments, receiving highly positive feedback from customers. Likewise, new initiative Loop has taken off in the US, with international expansion plans, to be a delivery and collection service for products in reusable packaging – giving consumers the option to re-purchase the same product in refillable containers. Although this may come at a premium, consumers have shown they are willing to spend more on leaving no trace all-together.
2. Sustainable sourcing
Products across sectors are increasingly being produced with ingredients and materials from more eco-friendly sources. Certified sustainable palm oil in food and cosmetics, UK agriculture with the Red Tractor logo, and higher animal welfare, such as the availability of cage-free eggs and eradicating animal testing, have all become industry best practice. But this year will see increased focus on sourcing alternative supplies for product ingredients and components.
The discussion will begin to revolve around reusing waste. Start-ups using food waste, for example, will continue to gain traction. UK brewer Toast produces beer from unsold loaves of bread supplied by bakeries and unused crusts from sandwich makers, and even better yet for the sustainability narrative, 100% of profits go to Feedback, an environmental charity campaigning to end food waste. Another innovative sourcing initiative is from The Body Shop who has high ambitions to source its plastics through a partnership with ‘Plastics for Change’. They hope to support a group of waste-pickers in India, collecting waste plastic for recycling in what is predicted to be converted into three million shampoo and conditioner bottles. These examples within FMCG show the increasing innovation across the sector to focus on repurposing what has otherwise been discarded.
3. Environmental protection
Consumers are also looking beyond the products being offered by the retailers and at the ways in which the organisation conducts itself to proactively contribute to the climate emergency. Companies place sustainability at the centre of their publicly published CSR reports, showing transparency in their conduct, making them accountable for their actions and showing their investment in sustainability.
Beyond improving business as usual activity, FMCG organisations are making headway in supporting environmental charities. Leading global supermarket Tesco has partnered with WWF to be an active player in improving the global food system. This involvement in the rectification of a system contributing to environmental damage is a clear indicator to consumers of a belief in efficacy and sustainability.
4. Plant based alternatives
The trend for plant-based eating has been prevalent for the past few years, and it’s not showing signs of stopping. The proportion of meat eaters who have reduced or limited the amount of meat they consume has risen from 28% in 2017 to 39% in 2019. The rise of the flexitarian has been reflected in the market with one in four new food products launched in the UK last year being labelled as vegan and with plant based ready-meals overtaking their vegetarian counterpart for the first time.
With the figures showing that vegetarians (including vegans) look set to make up a quarter of British people in 2025, and flexitarians just under half of all UK consumers, brands are reacting to this evolving consumer demand and introducing alternative plant based products. This has not only come from vegan branded food disruptors, but long-standing brands such as ice cream producer Magnum. 2020 will only see this market continue to expand.
Taking this a step further, dairy alternative drink Oatly have announced they will include the climate footprint of the product on the packaging to show customers the environmental impact comparable to the animal alternative. This retail activism is engaging with the rising environmental consumer concern and the mindfulness of direct environmental consequences of purchasing habits. Using packaging as a platform for highlighting a sustainable brand mission is going to be a marketing activity more brands will be taking in the coming year.
5. Energy efficiency
Organisations are investing more in sustainable manufacturing and distributing processes. Primarily we have seen a movement towards sourcing renewable energy. Companies are using renewable energy providers, or in the case of Budweiser, they are partnering with the providers to build the renewable source necessary to power their manufacturing.
We are seeing progress for energy efficiency in other areas as well. Waitrose has committed to a zero carbon fleet of trucks for distribution, using only electric vehicles by 2045, and L’Oreal has made headway in building ‘dry’ factories with closed loop water systems. Sustainability in transport and manufacturing is a slow progression with challenges of technology and production disruption, but there has been increasing momentum in committing to change, setting deadlines, and laying the groundwork. We expect more organisations to announce energy efficiency plans in the next 12 months.
Sustainability is becoming the epicentre of FMCG business strategy. From innovation of the supply chain through to energy efficiency of distribution, the sector will be taking more steps towards reducing environmental damage in the coming year.