Perspectives, Trends & News

Sustainability: A watchword for FMCG brands

on Wed Jan 01 2022
  • News

In recent years, sustainability has become a key concern for many organisations. However, amid the ongoing COVID-19 pandemic, the focus has shifted to employee and customer safety and keeping businesses running. This necessitated such things as disposable coffee cups and masks, pushing sustainability far down the priority list. 

As retailers were forced to pivot (i.e. offering deliveries, etc.), consumers desired to embrace environmental and social causes. Consequently, consumers are showing loyalty to brands that align with their values. A sustainability policy is an essential reflection of any company’s business model. 

According to a National Retail Federation study: 

  • 57 per cent of consumers will alter their shopping habits to lessen negative environmental impacts
  • 81 per cent say sustainability influences their purchasing choices
  • 71 per cent state traceability is so important they will pay a premium to brands who provide it

This article details five fundamental changes in the retail industry based on consumers’ changing preferences and expectations.

1. Businesses are moving to a ‘net zero’ target

With increased media coverage, consumers are becoming aware of national ‘net zero’ targets. The Paris Climate Agreement set out the pledge to achieve zero carbon emissions by the year 2050. 

In response to this goal, many businesses are embracing their own ‘net zero’ target. In 2020, notable companies pledged to reduce their carbon emissions drastically. Retailers' goals will help Australia meet its international commitment to achieving this net-zero carbon emissions target, showing dedication to its customers and environment. 

A report by Climate Works analyzed 23 Australian retailers. The report found that 80 per cent of retailers were already undertaking or were committed to lessening their emissions. 

Several retailers are already proving a sustainable future is possible. Some of the nation’s biggest retail chains – including Bunnings and Officeworks - are already implementing “zero emissions” measures.

2. Customers are rejecting single-use plastic products

Customers understand that single-use plastics are very harmful to the environment. As a result, they are primarily in favour of reducing packaging and recycling. Companies are taking steps to eliminate single-use packaging or setting targets as a reflection of this customer preference. 

Many of these either meet or exceed the Australian Packaging Covenant Organisation’s bold promise. The APCO has pledged that by 2025, 100 per cent of packaging produced in Australia will be recyclable, reusable and compostable. 

Even retailers who are renowned for low prices and margins are prioritising sustainability. For instance, in July 2021, Kmart phased out ten own-brand single-use plastic goods. Following its lead, Aldi is phasing out single-use plastic and will reduce plastic packaging by 25 per cent by 2025. 

In finding innovative ways to reduce waste and create new products, many retailers are seeking to participate in a ‘circular economy’. This type of innovation brings virtually endless life to products and services. This is achieved through regeneration, optimisation, sharing, virtualisation and exchange. It also severely limits the waste destined for landfills while stimulating the economy. 

3. Companies are providing traceability and transparent product information

Today, customers are demanding that companies are transparent and goods are ethically made. They also expect companies to provide details on sustainable product choices, source of origin, responsible sourcing certification and a complete cost breakdown of the supply chain. 

In response, the Country Road Group has created an interactive global supplier map. This enables customers to choose a particular factory and learn specific details on how the goods are produced and the supplier’s credentials. Patagonia and Marks & Spencer offer information similar to this. 

In the interest of transparency, blockchain platforms like KPMG Origins are connecting growers, sellers, suppliers and consumers. In a particularly innovative feature, the platform traces every step of a product’s journey. It enables consumers to fully understand the effects on quality while empowering them to follow the product journey for themselves. 

4. Greater awareness of mistreatment within the supply chain

In recent years, the fashion industry has been guilty of serious human rights violations. So, not-for-profit group Pay UP Fashion is actively exposing retailers who, through unethical practices, have committed human rights abuses. They currently track up to 40 global fashion brands and assess their practices against seven supply chain actions. 

They argue that the COVID-19 pandemic has created a crisis for factory and garment workers. And, their findings have proven damaging to major fashion brands in the past. 

5. Customers are willing to shop locally

In many cases, COVID-19 has made the supply chain much shorter for many retail chains. This is partly due to a strong consumer desire to know exactly where they source their food. And, it is also expected that consumers prefer to support local businesses rather than large companies. 

In July 2020, a poll conducted by Roy Morgan found that since the start of the pandemic, more than 50 per cent of Australians prefer Australian made products rather than those manufactured overseas. And, it appears that several major retailers are taking these survey findings seriously. In response, the marketing materials both Coles and Woolworths are producing reflect their policy of sourcing food from Australian sources. 

Final thoughts

As consumers are becoming increasingly socially conscious, sustainability now forms a vital part of their decision-making process. As such, Australian retailers and brands must focus on sustainable practices. And, to ensure that consumers’ expectations are met, they must improve their ability to develop and produce goods in a sustainable way. 

This also enables competitors (regardless of their size) to build trust among their customer base. And, they can demonstrate that they understand consumers’ current and future needs. 

Companies also have a unique opportunity to provide employee incentives that promote sustainability. By encouraging customers to shop locally, small businesses will increase their profit margins. By doing so, employees may earn digital gift cards or other staff rewards. As you can see, sustainability policies are beneficial for companies and consumers alike. 

Are you ready to take your FMCG brand to more sustainable heights? Find out how iGo has helped over 3,000 businesses in increasing brand awareness and boosting customer engagement through promotional campaigns and reward programs.