Sustainability is Big Business
With the recent Sustainable Development Goals and the on-going 2015 Paris Climate Conference (Cop21), sustainability is top of the agenda for consumer goods companies. Household names across the world including IKEA, Google, Philips and L’Oreal partnered or sponsored the Paris event. The anticipated outcome of the conference is a new international agreement to keep global warming below 2°C.
Business will have to play a key role in this through increased regulation but also through consumer demands for (not only) sustainable goods and services, but also sustainable practices throughout the entire value chain. Climate change is not just a risk for the energy industry or heavy polluters, but is just as much a concern for consumer goods industries. Despite this, consumers do not tend to place much faith in big business.
Companies and Industries Are Currently Working Very Hard to Make Sure That We Have a Clean Environment in My Country
Source: National Geographic Greendex 2014
There are three basic principles that all companies should consider:
1. Resource Efficiency
Resource efficiency is a win-win scenario. Companies can cut costs, and engage with suppliers and consumers by improving their supply chain. Of all the options available for companies, increasing efficiency should be the first priority.
One example of this was cited in a World Economic Forum report, and involved Walkers Crisps, a PepsiCo company: the study found that the most energy-intensive part of the process of making crisps was in the drying of raw potatoes. These potatoes had been soaked with water by farmers to increase their revenue, due to a price structure based on weight of potatoes. Walkers changed their price structure and based it on volume rather than weight, removing the incentive to soak the potatoes. In addition, Walkers worked with farmers to find new varieties of potato which are drier. The outcome was a win-win scenario. Walkers saved money and also reduced their carbon footprint at the same time.
Recycling can help companies to cut costs and reduce risk – by securing supplies of inputs – and building reputation amongst end consumers. Recycling effectively turns waste into a resource.
A good example of recycling in action is Sony’s SoRPlas. In 2011, Sony developed SoRPlas (Sustainable-Oriented Recycled Plastic), which contains more than 99% recycled materials, and is made with plastic waste generated both within and outside Sony sites. Today SoRPlas is found in a range of Sony products including TVs, cameras, camcorders and binoculars.
Substitution is another area in which companies can look to find cost savings, mitigate risk and improve resource efficiency. Switching a material for an alternative which is more readily available or utilising technology to avoid the need for a specific material can bring reductions in weight, price, and risk and improve a product’s functionality. Electrical goods are a case in point: many technology goods rely on rare earth metals, supplies of which are not always secure, including indium on touch screens and rare earth-based phosphors in flat panel displays. The EU is almost entirely reliant on imports of these high tech metals.
EU Import Dependency of Raw Materials: 2010
Source: European Commission
Note: “Critical raw materials” as defined by the EU. These 14 raw materials include a combination of high-tech metals, bulk metals, as well as industrial minerals: antimony (Sb), beryllium (Be), fluorspar, graphite, germanium (Ge), indium (In), magnesium (Mg), rare earth elements (REEs), tungsten (W), cobalt (Co), tantalum (Ta), platinum group metals (PGMs), niobium (Nb) and gallium (Ga).
A new strategic direction
In addition to these three principles, the push for a sustainable future should also lead to a review of wider strategy. Embracing sustainability at the heart of business can lead to:
- New Avenues for Growth – introducing new products or services that are intrinsically “greener”. For example Ricoh, a provider of managed document services, production printing, office solutions and IT services, has developed a ‘GreenLine’ whereby previously leased printers and copiers are inspected, dismantled, renewed and provided with updated software and replacement components before being sold as remanufactured products under the GreenLine label.
- New Business Models – engaging with the sharing economy is an obvious choice. If a company retains ownership of a product it can control its end-of-life. Products ideally suited to sharing include those that are only used occasionally (eg ski or DIY equipment). Those that might only be used once – DVDs for example – and those that are only needed for a specific time – eg baby equipment or toys.
Number of Infrequently Used Electrical DIY and Gardening Products Stored at Home in Great Britain: 2013
Source: WRAP: Evidence of consumer demand for retailer services on electrical products that offer alternatives to new product purchase
Note: Respondents were asked ‘How many electrical DIY and gardening tools do you have in the house or garden that don’t get used very often i.e. more than once or twice a year?’
Offering a repair, trade-in or second-hand service is also an option. Research by WRAP showed a strong appetite amongst UK consumers for repair and rental services, trade-in and purchasing second-hand goods. Their survey showed that on average, almost two thirds of consumers said they would be likely to use these services if they were delivered by DIY retailers, specialist electrical retailers and manufacturers.
- IKEA ran a successful “Second Hand Campaign” which sold consumers’ used IKEA furniture through an online flea market in 2013. The campaign ran for 8 weeks and sold every item placed on the site. This campaign was the antithesis of a previous promotion – the Unboring campaign – which expounded throwing away the old, in favour of the new.
- Apple runs a trade-in scheme for iPhones. The consumer is offered a price based on the condition of the product which can be used towards the purchase of a new device. The old phones are either re-used or recycled. The scheme aims to boost the sales of devices from Apple stores.
- Repairs of electrical products used to be the preserve of independent stores, but increasingly big-box retailers offer their own services including Carphone Warehouse in the UK and Office Depot in the USA.
I Prefer to Repair Something When It Is Broken Rather than Replace It
Source: National Geographic Greendex 2014
Sustainable to the core
In today’s age, sustainability should be wrapped into everything a business does. With consumers demanding more transparency, and trust an increasingly fragile yet valuable commodity, consumer goods companies cannot afford to transgress. Added to which, the cost-saving and profit-enhancing results of running a sustainable business should speak for themselves.
Read more on sustainability and natural resource risks in our free white paper: Sustainability and the New Normal for Natural Resources