Sustaining Consumer Appeal
Sustainable products have staying power. Producers are willing to change their ways to account for future needs, and shoppers are paying premium prices to support socially responsible practices. In a 2015 Nielsen global survey, two-thirds of the 30,000 respondents say they're willing to pay more for brands that demonstrate a commitment to social and environmental sustainability.
So retailers are renewing their acquaintance with a growing list of sustainability factors, from organic, local and farm-to-table products to practices mindful of conservation, climate change, human rights, fair trade, fair wages and gender equality.
"From where we start this conversation, it's really a crazy, complex thing," says Courtney Riggle, sustainability project manager for the Agricultural Sustainability Institute at the University of California-Davis. "The transparency of supply chains has become more important, which is really a big change. The nice thing is, technological advances make things possible that were impossible even a few years ago for tracking and managing information."
U. of California-Davis
How much do consumers care about sustainable sourcing, and what's the cost of viable ways to deliver on their concerns?
A working definition of this top-of-mind topic would be a good start. One is found in a federal law, the 1990 Farm Bill. Simply stated, sustainable agriculture satisfies our food and fiber needs while enhancing natural resources, using nonrenewable resources efficiently, keeping farms viable and enhancing quality of life.
Sustainability is "rising in utmost importance," especially among millennial and younger consumers, says Grace Farraj, Nielsen senior vice president of public development and sustainability. When there's a cost to sustainability, Nielsen finds two-thirds of young consumers say they're willing to pay it. "Three out of four consumers under the age of 34 continue to be the most willing to pay more for sustainable offerings," Farraj says.
"In developed markets such as the U.S. and Europe, many consumers consider sustainability a basic cost of entry and business imperative rather than a costly value-add," she says. "Companies want to further understand whether that actually translates into action, into purchases. And it does. Sales of consumer goods from brands with a demonstrated commitment to sustainability grew more than 4 percent globally, while those without grew less than 1 percent."
Retail data back up the polling support for sustainability. Nielsen's "The Sustainability Imperative" report, published in October, measured 2014 sales using electronic point-of-sale systems and field audits. The result: 65 percent of global sales (excluding private label) went to brands with a social or environmental marketing message.
Concern about the planet is not unique to younger generations. Three-quarters of Americans now accept the scientific consensus on climate change, according to the University of Texas Energy Poll.
Farming's potential influence on global warming is significant. Greenhouse gases from agriculture accounted for 9 percent of 2013 U.S. emissions, according to the U.S. Environmental Protection Agency. That's coming from farms alone, not from manufacturing or shipping agricultural products.
Farms will have to grow even more productive to feed the globe's expected 9 billion people in 2050. And they'll face continued challenges over the supply of fresh water and other resources. The United Nations predicts that by 2050, 40 percent of the world population will face water shortages.
As sustainability becomes a matter of best practice, cost is proving less of a burden. Fair trade brought more stability to banana prices; for coffee, price differences came with better quality.
"If you're talking about small farmers, sustainable practice can actually save you money," says Nicole Pasricha, markets transformation manager for the Rainforest Alliance. Formed in 1987 to fight forest clear-cutting in Brazil, the alliance now certifies sustainable harvesting of bananas, coffee, tea, cocoa, cattle and palm oil.
Certified farms often are twice as productive, Pasricha claims. "A lot of the standard is having farmers put in place record-keeping systems so they actually know what is happening year to year," she says. "The better you manage your inputs and your outputs, the better results you'll have in yields and income. This system has to be profitable for farmers. If not, it's just going to break down."
Yet sustainability goes beyond best practices in farming. "Groups grab on to efficiency, which doesn't address the people and the planet as much," Riggle says. "How would you operationalize that if you're a company looking to improve sustainability? The people part is really hard to figure out.
"What percentage of girl children of the world are in schools? That will give you good information on a swath of social issues," Riggle says. "A company might want to make sure the labor force is not being exploited."
Retailers can look at sustainability throughout their supply chain. Walmart policies and guidelines address such food concerns as animal welfare, antibiotics, palm oil harvesting and seafood sourcing, and supplier issues from conflict minerals and manufacturing chemicals to renewable energy and landfill waste.
"The Walmart standard for suppliers is amazing," Riggle says. "Most companies have supplier codes of conduct. Walmart is a big enough push that they can get people to go with them."
Big-box chains give smaller retailers a sustainability road map to follow. "A little company isn't going to be able to make sweeping changes on their own," Riggle suggests, "but they can figure out who the leaders are and try to work with them."
Agribusiness has lined up to support sustainability in crops like palm oil, which is in high demand for non-hydrogenated oils and biofuels. The Roundtable on Sustainable Palm Oil includes Unilever, Cadbury's, Nestlé and Tesco, as well as traders ADM and Cargill.
"Some of these larger companies have been able to push the broader industry toward more sustainable practice, and one of those is Unilever," Riggle says. "They decided for their mayonnaise business to only use cage-free chicken eggs. Then their challenge was [that] there wasn't a supply of cage-free chicken eggs. It took several years for the local industry to meet the demand."
In 2014, 41 percent of Unilever's global egg supply was cage-free for brands like Hellmann's and Ben & Jerry's. Its 2020 goal is to buy all animal-derived ingredients from sustained sources.
"McDonald's has had similar pull on some of their egg products," Riggle says. "They've been a really big push on changing practice." It's set an attainable goal, considering the timeline: In September, the fast-food chain pledged to use only cage-free eggs in its North American restaurants by 2025.
Candy and pet-food maker Mars has set goals to source all of its cocoa and fish from sustainable sources by 2020, and eliminate fossil fuel use and greenhouse gas emissions by 2040.
"Mars has been working for five to 10 years already to have all cocoa sustainable-sourced by 2020," says the Rainforest Alliance's Pasricha. The company was an early Agricultural Sustainability Institute funder, and now buys only from Rainforest Alliance-certified farms for its Dove Dark products in the U.S. and Galaxy bars in the UK.
"They've done a lot of work in the cocoa supply chain," Pasricha says. "They've been contributing all along in trying to figure out, OK, where can we make the biggest difference as this buyer of cocoa? From which country do we buy? Which suppliers do we work with? What investments we need to make as a company to start to change these practices in this industry?"
Finding adequate supplies of a sustainably grown ingredient may be the biggest challenge. Chipotle Mexican Grill stopped serving pork, a staple of Mexican cuisine, at more than one-third of its restaurants in 2015.
The chain's animal welfare auditors determined that a supplier had violated some of the company's animal welfare standards. Because 95 percent of pork is produced conventionally, Chipotle looked abroad for a new supplier, and explained the move on its website.
Retailers can tap into sustainability through industry groups such as the Sustainability Consortium, based at the Arizona State University and the University of Arkansas. Its retail working group identifies relevant sustainability issues, along with key performance indicators on which to base decisions.
Certification organizations such as Rainforest Alliance also work with retailers on supply chain issues. "We really want to help them see what are the risks in their supply chains and where are the areas where they may not be sourcing sustainably," Pasricha says. "We identify remedial ways to help those suppliers get up to par with what the company has defined as their own sustainability policy or from some other external standard that they would like to achieve."
For all of the factors involved in sustainable sourcing, consumers may take a more selective view. While some look for "organic" on a label, others want to see a significant reduction in carbon footprint, or an association with their local community.
"Using multiple communication methods is important," Farraj says. That includes not only third-party validation, but also annual reports, affiliation with a respected nonprofit, employee volunteerism, advertising, or reporting efforts in the community.
Among consumers Nielsen identified as willing to pay more, 69 percent were attracted to fresh, natural or organic ingredients. Environmental consciousness was a factor for 58 percent, and 56 percent cited social commitment.
Simply showing a brand's awareness is a powerful first step. Nielsen's report found 65 percent of global sales went to companies that relied on a marketing strategy alone to commit to social or environmental goals. Another 25 percent reinforced its marketing with specific product claims on its labels.
"By integrating sustainability into their business models and purpose–to whatever degree–companies can both help society and increase goodwill toward their brands," Farraj says.