Sustainability & Marketing Resiliency for CPGs
With disrupted supply chains through the current pandemic, CPG companies start to take advantage of resilient design in order to produce more sustainable and crisis-proof. Although there are still some obstacles, it is a great opportunity for the industry.
Since the pandemic outbreak, meeting short-term needs and maintaining long-term priorities has been a long-term challenge for companies. The global response to COVID-19 has slowed down the day-to-day operations of many companies, but accelerated the development of changes that had already taken place before the outbreak of the pandemic. A fundamental shift in priorities may allow CPG companies to develop marketing flexibility by reaffirming their commitment to sustainable development, which is more important than ever.
Supply Chain Digitisation
Already in March, more than 75% of companies said they had disrupted their supply chains due to the outbreak. Some consumer goods manufacturers and food retailers were unable to keep up with peak demand, while others faced greater challenges. Although the CPG industry has always been slow to adopt digital solutions in the supply chain, this situation can generate a willingness to change, which can lead to adjustments and thus unlock the benefits of sustainability.
To digitise the supply chains, which not only saves costs but also reduces waste and improves energy monitoring is not only in times of COVID-19 a good idea. Nevertheless, this unique situation creates an environment where supply chain transformation can almost be seen as a prerequisite for long-term success, and in this new environment there is an opportunity to activate sustainability that has not been achieved for many years.
After participating in the Sustainability Consortium survey from 2016 to 2018, 77% of more than 1,000 consumer goods companies that had made organisational changes included suppliers – the average score increased by 30%. When external forces promote transparency and use technology to promote transparency, companies can better rethink their supply chains, select knowledgeable partners and expand their footprint.
Resilient Design is Key
In the coming years, resilient design will become increasingly important. This idea is at the core of ESG principles that guide companies towards sustainability. As shocking the impact of COVID-19 was, the short-term changes only give us a glimpse of what the lack of organisational preparedness for systemic risk means for the future. The current health crisis has focused more energy on building resilient organisations that can withstand unexpected failures. The same idea is at the heart of the ESG principles that guide sustainable companies.
S&P for example uses the ESG rating framework to assess the company’s “ESG profile” and “readiness” to respond to environmental, social and governance risks and opportunities. Currently, social factors (including safety management) are the focus of attention. The health crisis has become key to the company’s ability to prioritise and protect the health and safety of employees and care for affected communities.
Consumer Want Worthiness
According to a Nielsen report, consumers are currently prioritizing efficiency of home care products over factors like sustainable ingredients and packaging, as health is a major fact right now in a pandemic. Furthermore, conventionally criticized single-use plastic and other unsustainable packaging are used more often as they provide more security.
But this in fact no turn away from sustainability, but more an spontaneous reaction to a new situation. On the contrary, consumers are experiencing a new level of solidarity and responsibility, as their health concerns affects the world around them.
“This year we see consumers expressing a more direct link between their health and the health of the planet. This tells us consumers’ pro-environmental sentiments are more than idealistic assertions. When it comes to the environment, consumers mean business,” said Corey Chafin, principal at Kearney.
Obstacles to Take
As CPGs start to optimize their supply chain resilience, they confront new challenges of course. Old data systems, less knowledge of managers and other structural obstacles appear. Successful retailers will first address these obstacles first, for example through inventory analytics to understand their own supply chains better. Supply chain managers may need coaching to bring strategic insights to the table, and leadership teams will need to incorporate new data sets and metrics. To understand strengths, weaknesses, and opportunities, especially when it comes to ESG factors, will lay the groundwork for setting effective goals.
Do you have any experience with resilient design or are there current changes at your work towards a more sustainable supply chain? Share your knowledge and leave us a comment below!