2020 FMCG environmental sustainability trends

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.

For more information please contact Zoe Wakeham and Ali Palmer.

Comments

Chris Lewis at 03/02/2020 15:15 said:

I enjoyed reading this article from Zoe and Ali.
Sustainability in its broadest sense is by far the biggest "trend" we are all seeing today, it is being covered by the media daily and as a result is on the agenda of all; customer, consumer, manufacturer...everyone!
It is playing out with lots of good examples in the FMCG sector, the focus of this article, but equally it plays out in all other sectors too. Having worked in FMCG and also most recently in hospitality, I can report sustainability is high on the agenda for businesses too in hospitality, from a planet earth and also a cost-benefit perspective.
My fear is companies in whatever sector will address the quickest, easiest and cost-neutral (or even better cost saving) issues, but it will need much more of a "push" to drive changes which are currently in the "difficult-to-do" box.

David Pillinger at 04/02/2020 08:51 said:

Ms Palmer and Ms Wakeham are spot on to highlight these trends. The conversation on sustainability needs to be had over and over again to enhance the speed of action.

Ali Palmer at 04/02/2020 10:31 said:

As you rightly say Chris the problem needs to be addressed in a disciplined manner and not just a "quick-fix". It is not going to go away so companies need to take it seriously, we have a responsibility to the next generation!

Jon Jones at 12/02/2020 13:23 said:

Zoe and Ali have done a great job summarising these trends. There are great things happening in FMCG. Eliminating waste is part of what a good manufacturer should have as their DNA - this thinking and the tools that support it needs to extend way beyond traditional boundaries. I share the concern that companies, particularly those with shareholders to keep sweet will shy away from the longer term and more fundamental changes required to create a sustainable future. Certification certainly helps consumers choose with more confidence. Governments need to regulate more and faster to drive FMCG and all sectors to do better.

Jon Jones at 12/02/2020 16:32 said:

Zoe and Ali have done a great job summarising these trends. There are great things happening in FMCG. Eliminating waste is part of what a good manufacturer should have as their DNA - this thinking and the tools that support it needs to extend way beyond traditional boundaries. I share the concern that companies, particularly those with shareholders to keep sweet will shy away from the longer term and more fundamental changes required to create a sustainable future. Certification certainly helps consumers choose with more confidence. Governments need to regulate more and faster to drive FMCG and all sectors to do better.

Chris Mutter at 16/02/2020 13:57 said:

Great article and part of the groundswell of comment on this topic from a multitude of perspectives. Critically the discussion is changing from one of superficial virtue signalling to becoming embedded in corporate and consumer culture. This is largely because the economic rationale for sustainability and renewable energy now makes sense, though a coherent government policy framework to build on the UK's past successes is needed to accelerate the process.

Ali Palmer at 17/02/2020 09:29 said:

Thank you Chris. I think that the Government has realised how important this is and what needs to be done. Progress will take time but it is commitment we need to see - I believe it is coming, albeit slowly!

zoe wakeham at 17/02/2020 09:38 said:

I agree Chris and Jon, the Government certainly needs to be acting on this through better regulation and that in turn will help motivate businesses where it is difficult to make such changes without long and short term benefits.

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