1Role of Consumers in the Sustainability Equation
Sustainability can no longer be perceived as the sole responsibility of any one stakeholder in the process of transforming value chains. The question of ‘who leads?’ is critical in the process of market evolution. Is it the role of the business, the consumer or the pressure of external factors that drives change?
With urbanisation and consumerism gaining ground, the growth of organised retail in Tier II and Tier III cities is seeing the emergence of the ‘value buyer’ – the average consumer who now has a variety of offerings to choose from and is often more informed and aware about competing brands and the differences in their products. With wider access to information and social media influence, this consumer plays a crucial role in driving change in the value chain.
2The Value Buyer
In the midst of a clutter of brands catering to this evolving ‘value buyer’, there is an opportunity for companies to create a distinct product image and carve out a point of differentiation for their product. Several multinational companies have long recognised this opportunity, going further in suggesting that their commitments to sustainable sourcing are no longer about product differentiation, but a type insurance for their brand and supply chain.
These dynamics are more pertinent now given the Indian Government’s decision in March 2016, to allow 100 per cent foreign direct investment in multi-brand retail for food products. Differentiation will be seen as a key point of leverage for companies to improve product sales and pave the way for competitive pressures to soar.
Differentiation in India until this point has been focused on quality of the product, price and benefits. Interestingly, markets across the world have shown that it has also become possible, and indeed necessary, to demonstrate product value not just in a traditional sense but also performance on other fronts – sustainability, production processes, environmental footprint and social impacts.
In this regard, multi-national brands like Unilever, IKEA, Kimberly Clarke, and L’Oreal etc. have taken steps to ensure that businesses and supply chains are evolving to address these needs.
Globally, a number of public and private initiatives have also emerged in recent times. The Consumer Goods Forum (CGF), for example, an alliance of 400 companies including retailers, manufacturers and service providers across 70 countries – pledged in 2012 to achieve ‘zero net deforestation’ by 2020.
Out of this commitment, the Tropical Forest Alliance was formed – a global public-private partnership which sees eight governments, 33 civil society organisations and 27 private sector companies partnering to tackle the drivers of deforestation associated with the sourcing of commodities such as palm oil, soy, beef, and paper and pulp. Twelve international banks joined the CGF to form a ‘Soft Commodities Compact’ in 2013 to support the 2020 target for zero net deforestation in supply chains.
The Kitkat Story: What started as an NGO action against Kitkat’s ‘business as usual’ unsustainable practices at the sourcing level – which had drastic impacts on critical tropical forests and biodiversity – resulted in immense consumer backlash against the company on social media. This came as a reality check to many companies about how consumers are no more bound by geographies to voice their opinion and influence demand.
4So Who Leads?
Unilever’s sustainability-linked brands such as Dove, Lifebuoy, Ben & Jerry’s and Comfort, represent half of its growth, and are growing twice as fast as its other brands. A growing number of its leading brands have integrated sustainability into their purpose and into their products’ ingredients and life cycle.
While the notion of responsible consumption evolves in the Indian context, alignment will be needed among producers, brands and retailers to provide access to ‘responsible products’. As this demand is growing, there is still a long way to go. No one player can drive this change in isolation. However in the current context, the larger onus must sit with the supply side. Consumer preferences will evolve, but the speed of change in preferences among this group will not be sufficient to address the most serious environmental and social impacts linked to the production of consumer goods.
FMCG companies can drive change in their supply chains and thus play a crucial role by creating awareness on sustainability among consumers through marketing and other outreach mechanisms. Therefore, the FMCG sector’s efforts are critical in making sustainable products the norm rather than a niche.
Further, the retailer is uniquely placed to be the interface between companies and consumers, and in doing so, can ensure long term benefits to their business.