Sustainability Becomes a Part of CPG Bottom Lines

logo_gma.gif It seems this is the season for consumer packaged goods (CPG) studies on sustainability. Complementing the ACNielsen and Natural Marketing Institute study recently reported on 3P, according to a new study released by PricewaterouseCoopers for the Grocery Manufacturers Associtaion (GMA): green is good. Whereas the ACNielsen/NMI study differentiated between “green” and “non-green” consumers, this study focused on consumption in general within the consumer packaged good industry. Increasingly, some of the biggest brand names in the world are implementing sustainable practices into their business, and it’s starting to pay off for them.
In spite of a rocky economic climate, U.S. CPG manufacturers experienced 10.6 percent sales growth this past year and delivered a shareholder return of 7.3 percent. “A particularly exciting finding of this year’s report was the strong effect that sustainability reporting can have on corporate value,” said Lisa Feigen Dugal, the North American consumer packaged goods and retail advisory leader for PricewaterhouseCoopers.

Wandering between the aisles of institutional change and corporate greenwashing
On one hand, most of the companies represented in this market account for some of the largest and most recognized brand names in the world, and in many ways are some of the biggest polluters and consumers of world resources. Change in how these companies run their businesses could amount to significant progress for the green movement. The other hand is that these efforts to change could be nothing more than greenwashing or pandering to a currently popular movement without any real effort to adopt more sustainable practices.
Though, as corporate leaders confront the dilemma of off-setting rising commodity prices while preserving long-term financial growth, many are starting to realize that implementing sustainable practices makes business sense as well.
Tom Forsythe, VP of Corporate Communications for General Mills said, “If you can make the jump from sustainability being a cost contributor to margin growth, that’s the key. If you are using less fuel but moving the same amount of goods, that’s a cost savings.” By reconfiguring the company’s Progresso soup brand cases, General Mills – who brags as being one of the first companies in the country to recycle – was able to remove 2,000 tons of steel from Progresso’s annual steel input.
In addition to Clorox, which has made a lot of news lately with their new eco-friendly GreenWorks product line, many other big brand names have also reaped the success of being greener. According to the study, DuPont, for example, saved more than $3 billion in energy costs between 1994 and 2006 while reducing greenhouse gas emissions by 72 percent. The sale of eco-friendly products also accounted for $5 billion in 2006 revenue.
For beverage companies like Coca-Cola and Pepsi, sustainability efforts have been focused in large part on water conservation, especially in their operations in developing nations. Pepsi, for example, committed to a “positive water balance” in its India facilities, intending to replenish more water than it uses by 2009. And Coca-Cola reduced water use in its India facilities by 34% percent using practices like rainwater harvesting to replenish aquifers. They have also both struck partnerships with several NGOs and non-profits – like the Water Environment Foundation with Coca-Cola and H2O Africa with Pepsi, an organization dedicated to fostering African clean water initiatives. Though these relationships have no doubt been struck with public image in mind, Pepsi’s CEO Indra Noovi also realizes the importance clean water serves both to the company’s business as well as the world around us. She was quoted in the study to say: “Without clean water, none of the other fundamentals leading to a healthy and prosperous life are possible.”
The study also highlighted the importance of accountability in sustainability reporting, which has been a challenge for many companies as they have struggled to define both what sustainability means to them and how they could incorporate those values into their respective businesses. One very tangible way that General Mills can measure the impact of sustainability on the bottom line is through savings related to using less water, less packaging, and less fuel: “If we use less packing per unit of sale on a product, and therefore we have lower input costs, we can see that in the margins and that’s very measurable,” according to Forsythe.
For more info, check out what Sustainable Life Media had to say about the study.

Ashwin is an Associate Editor of Triple Pundit. He recently returned to the Bay Area after living in Argentina, where he wholeheartedly missed the Pacific Ocean. He is a freelance editor and media and marketing consultant.After a brief stint working in the wine world, when not staring blankly at a computer screen, you'll find him working on Anand Confections or at 826 Valencia, where he has been a long-time volunteer.

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