The question was simple, yet profound.
We were at a recent conference where a startup pitched creative products that meet the needs of a changing world. The audience was filled with executives and investors with cumulative financial power to fund these changes.
During a conversation about upcycling, the leader of a global commodities beverage giant raised his hand and asked the speaker:
At first some of us were perplexed. He explained that his job is to make the most of their time and money when it comes to environmental, social and governance-related initiatives (ESG).
With more options now available to commodities food and beverage manufacturers to create workstreams and dedicate resources to specific initiatives, how? do What do they choose to green light? How do they know where to start and who to trust? Huh?
The business world is becoming more and more aware of ESG impacts, and the food and beverage industry is at the forefront of industries that can make a positive impact. Many of these companies want to do the right thing, but face unique challenges. They try to avoid greenwashing. They are trying to reduce their carbon footprint. They focus on minimizing food waste, ensuring ethical sourcing, and promoting diversity right down to the farm level.
Their willingness to grow and learn means they are well-prepared for big ESG growth. But there are still complex hurdles to clear as they aim to transform towards his goal line of ESG-related ROI.
ESG makes a big difference, but is it enough?
The good news is that consumer sentiment towards sustainability is positive and ESG-related purchases are on the rise. But there is still a gray area between what customers say they want to live and shop with and what they actually buy. Consider the following survey.
While ESG-related retail growth statistics are important, they suggest that customers don’t always buy sustainable products at rates that support their sentiments.
So why not? 41% of his NielsenIQ respondents said sustainable products were too expensive, and 35% said he had difficulty finding ESG-related products in stores. And perhaps the most obvious statistic may be who they see as responsible for driving change in sustainability products. 46% said brands were responsible, 40% said local governments were responsible, and only 37% said consumers themselves were responsible.
Such disparities in expectations can further confuse executives at FMCG companies trying to maximize their budgets when funding ESG products and initiatives. However, one thing was highlighted by it. Without government regulation to force product changes, the evolution of the ESG field rests on his CPG shoulders.
Framework for Screening Potential ESG Partners
There are no off-the-shelf ESG solutions in the CPG space. The evolution of sustainability within companies and across markets requires a step-by-step approach and a radical introduction of new ways of working.
That’s why it’s imperative to start your ESG product innovation journey today. Commodity brands need to thoroughly scrutinize, substantiate, and compare multiple initiatives to ensure they are making the right choice.
Savitha Chelladurai, Director of ESG & Sustainability at Benson Hill, said CPG leaders should consider five things when evaluating ESG innovators:
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Look for partners as well as suppliers. Find innovators who will work with you to develop programs and products that meet your specific needs.
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Examine richness in ESG: Look for innovators who understand your current situation and goals, and who can help you lead in this area.
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connector: Find innovators who can bring other partners to the negotiating table to co-develop a total solution.
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The big picture of sustainability: Find innovators who understand how sustainability goals impact your entire organization.
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Identify the ones with immediate effect. By partnering with innovators who can implement solutions that work within the context of your current business model, you’ll be able to see immediate benefits while working on long-term investments and infrastructure changes.
Food and beverage companies know they need to redefine their products if we are to have a sustainable future for all of us. But before doing so, ESG innovators need to clearly answer the first key question: Is this the best possible use?