Future of FMCG

Businesses in the FMCG sector are recognising the growing business opportunities arising from embedding sustainability into their practices. Here are some of the top FMCG sustainability trends.

Charlotte Cameron
Sustainability in the FMCG Sector
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Businesses in the FMCG sector are recognising the growing business opportunities arising from embedding sustainability into their practices. This has increased since the pandemic, with studies showing that one in five consumers say they have acquired more sustainable habits since it began. In fact, now $1 in every $5 spent on FMCG comes from an environmentally conscious consumer, according to McKinsey & Company.  

With this in mind, companies in the sector are ramping up their sustainability efforts to keep up with consumer demands and reap the business benefits that come with it.  

Here are some of the top impact areas that FMCG companies are focusing their efforts on: 

1. Sustainable packaging

Opting for sustainable packaging is one of the most impactful ways companies in the sector can reduce their emissions.  

Out of the 6.3 billion tonnes of plastic that has been disposed since we started mass-producing, 4.9 billion tonnes has been sent to landfill or left in nature.  

Studies show that by 2050 there could be more plastics than fish in our oceans, with the main culprit being single-use plastic packaging. As global climate action accelerates and consumers become more conscious of where they invest their money, companies in the FMCG sector are rapidly adopting innovative approaches to packaging.  

Regulation is also having an impact on the industry. The UK Government introduced the Plastic Packaging Tax in April which offers greater financial incentives for businesses to move towards recycled plastics.  This will in turn create greater demand for the material and encourage increased levels of recycling and collection of plastic waste, diverting it away from landfill or incineration.  

When looking at packaging, it’s important FMCG companies use as little material and excess air as possible. Using recycled materials should be prioritised as well as plastic-free alternatives such as paper-based packaging. According to circular economy principles, all plastics should be recycled into new plastics in the first instance.  

Once companies have selected the correct sustainable packaging for their product and have understood how best it should be disposed of, then the rest of the packaging – including labels, lids and tapes – should be selected or designed to suit this end-of-life method. In addition to this, it’s crucial that brands encourage consumers to dispose of their packaging in the correct way which can be done through clear labelling on the packaging itself.  

The Ellen MacArthur Foundation says, “by focusing more efforts on upstream innovation – at the design stage of a product rather than just downstream efforts such as recycling – businesses can prevent waste from ever being created in the first place”. 

Planet Mark member Flexi Hex is a company offering innovative cardboard packaging solutions for goods such as surfboards, wine bottles and cosmetics. Taking the beauty and cosmetics industry for example, currently only 14% of packaging makes it to a recycling plant and only 9% is recycled with the rest heading to landfill. Flexi Hex’s packaging is not only offering a plastic free alternative but where possible uses material made from over 85% recycled and is curbside recyclable, biodegradable and compostable with a water-based PVA adhesive.  

2. Supply chain

The vast majority of an FMCG company’s carbon footprint lies in its supply chain rather than its in-house operations. Studies suggest that over 80% of greenhouse gas emissions in most consumer-goods categories are in supply chains and it accounts for more than 90% of the impact on air, land, water, biodiversity, and geological resources across the sector.  

To meet our global net zero ambition, companies across the sector must focus on the impact of their supply chain. This means identifying critical sustainability issues across the entire supply chain and working to address them while helping suppliers manage their own environmental and social impact.  

True sustainability within a company’s supply chain is not only a focus on its environmental impact, but a holistic approach that considers environmental, social, and economic issues. For example, a company should be asking things like – were the agricultural products grown in a sustainable way, using water appropriately, and on land appropriate for the crop? Are workers being paid fairly and treated ethically? 

The biggest challenge for companies is ensuring visibility when it comes to monitoring sustainable practices in supply chains, with studies showing that when it comes to responsible sourcing of necessary raw materials, just over half of FMCG companies have significant or complete visibility into their own processes, and only about one-fifth have the same visibility into their suppliers’ processes. 

The first step to ensuring sustainability within a supply chain is to measure its impact, as you can’t manage what you don’t measure.  

3. Plant-based alternatives

The FMCG sector, particularly meat and dairy, has experienced rapid growth and disruption with the rise of plant-based alternatives.  

Where once these products occupied limited shelf space and were for a niche customer base, now companies of all sizes, including global conglomerates like McDonalds are investing heavily in these alternatives.  

Studies show that 61% of global greenhouse gas emissions could be reduced through wealthy nations adopting a plant-based lifestyle. As well as considering the environmental impacts, consumers are adopting plant-based alternatives for health reasons as well as animal rights issues. Across the past decade, Britons have reduced their meat consumption by 17%, so FMCG conglomerates globally are adapting their offering to consumer demand.  

Consumer demand for plant-based alternatives has only grown since Covid-19, alongside several other health and wellness categories. This has been furthered by the emergence of the ‘flexitarian’ consumer: an individual who still consumes meat and dairy but aims to reduce this by opting for plant-based substitutes or meat/dairy free meal choices.  

Planet Mark member Beau’s Gelato offers a plant-based alternative that is having less impact on the planet than dairy-based ice creams, while avoiding issues of huge agricultural land use and animal welfare issues associated with dairy production. Their aim is to create gelato that is dairy-free but does not compromise on taste.  

4. Energy efficiency

Another impactful area that companies in the sector are focusing their efforts on is increasing the energy efficiency in their buildings and manufacturing processes. Initiatives such as switching to LED lighting is a low-cost but effective action that companies can take across their offices; however, bigger shifts such as changing to renewable energy sources throughout the production process is lowering companies’ carbon footprints significantly.  

For example, Nescafé are using leftover coffee grounds to generate energy in their factories globally. In addition to this, their brand Cristalp is harnessing the natural heat caused by the source of their mineral water, which emerges from the ground at 25˚C, to provide heat to the bottled water factory and local municipal buildings. ThIS has meant that the factory has been running on 100% renewable energy since October 2014. 

Unilever has also transitioned to clean energy with their UK sites powered off 100% renewable grid electricity, and in their operations worldwide. This means they now buy renewable grid electricity to power all their factories, offices, R&D facilities, data centres, warehouses and distribution centres. In addition to buying 100% renewable grid electricity, Unilever generates their own renewable power on-site through using things like food waste. 

Through implementing simple changes, companies manufacturing FMCG can improve their energy efficiency. Optimising air compressors, becoming more mindful of a factory’s lighting, and proper maintenance of equipment can all make a different to energy management.  

5. Transparency

Considering the efforts to tackle climate change across FMCG, consumers decisions are increasingly made based on companies’ environmental claims. Reducing environmental harm or having a positive impact on the planet is not only a nice-to-have, but now a must-have for competitive businesses. But this can lend itself to brands and companies putting out misleading, exaggerated, or false environmental claims – now commonly referred to as greenwashing.   

Honest and transparent reporting, particularly on packaging, resonates with customers and stakeholders and is a critical aspect of brand loyalty.  

According to Nielson IQ, consumers are seeking transparency around sustainability, processing (for example, if a product is organic or natural) or the ingredients.  

Green Roots, a UK-based wine brand, is committed to embedding sustainability into every business decision they make, from grape to glass. 

Their Operations Manager Alistair Coulthurst said, “We are attempting to tackle greenwashing head on. By putting all our sustainability information (both good and bad!) front and centre, we are giving ourselves nowhere to hide. We will keep having our data verified by Planet Mark and continue working with our contacts within the world of sustainability to constantly interrogate our information ensuring we are up to date with all future changes.”  

Mastering Supply Chain Engagement

Tuesday 9 July 2024, 12:00-1:00 PM

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