Sustainability Branding Can Help with the Shift to a Low-Carbon Economy

The jury is still out on whether or not consumers choose products based on those little eco-labels on the package. Nevertheless, a new report from CDP suggests that businesses can get a jump on the competition by highlighting greenhouse gas reductions as part of their broader sustainable supply chain strategy.

Consumers and supply chain sustainability

Some studies suggest that  sustainability package labeling is not registering with consumers.

However, evidence is growing that a broader brand sustainability strategy can have a measurable impact on consumer choice.

In an interview with Forbes last year, Michael Mapes, CEO of the leading aluminum can manufacturer EXAL Corporation, provided some evidence that at least one important consumer demographic is in fact paying attention to sustainability labeling:

“Sustainability really, really matters to consumers. 51% of millennial consumers state that they check product labels for sustainability claims before buying a product.”

Mapes also outlined the broader trend:

“Furthermore, the data supports that not only are consumers looking for sustainability claims, they are also voting with their wallets. Sustainable products grew at four times the rate of products without a commitment to sustainability.”

And, he underscored studies showing that brands can attract savvy consumers even when their sustainability strategy leads to higher costs: 

“55% of consumers are willing to pay 15% more for sustainable packaging, and Nielsen reports that 66% of all consumers are willing to pay more for sustainable brands.”

His conclusion was definitive: “Consumers are inspecting product labels for sustainability claims and supporting the brands that are sustainability focused–even if it costs them more.”

The power of supply chain sustainability

CDP is a global leader in environmental disclosure and reporting for companies, cities, states and regions. Its network of investors and purchasers accounts for more than $100 trillion.

The organization advocates for supply chain transparency by recognizing companies that push their suppliers to adopt more sustainable practices.

Over the past ten years CDP has included more than 120 “Supplier Engagement” leaders on its roster, including Alphabet, Honda and Samsung.

The new CDP report is titled Cascading Commitments: Driving upstream action through supply chain engagement. It charts the organization’s progress over the past 10 years, and it outlines how brands and other organizations create an impact by emphasizing sustainability in their supply chains.

One measure of progress is the number of leading companies and organizations requesting environmental reporting from their suppliers. When CDP began its supplier engagement effort 10 years ago, only 14 organizations were on its list. As of last year, there were 115.

Together, these 115 companies engaged more than 5,500 of their leading suppliers in environmental reporting.

The new CDP report is based on data culled from this group of suppliers.

Overall, CDP found that leading purchasers now consider sustainability to be a “major factor” in purchasing.

Ten years ago, only 4 percent of the purchasers CDP surveyed were settling on suppliers based on environmental performance. As of last year, that number climbed to 73 percent.

In a press statement, Sonya Bhonsle, Global Head of Supply Chain at CDP, explained:

“We have seen a fundamental shift in expectations around business action on sustainability. Leading purchasers are using disclosure to push positive change down the supply chain, with data playing an increasingly important role in their decision-making.”

Supply chain sustainability and the energy transition

The CDP report makes a clear connection between supply chain engagement and greenhouse gas emissions.

As of last year, suppliers among the companies surveyed reported that they reduced their annual emissions by a total of 633 metric tons of carbon dioxide and achieved an estimated cost savings of $19.3 billion.

Bhonsle notes, however, that that there is plenty of room for improvement:

“With only 57% of suppliers reporting emissions reductions activities, and less than half (47%) with emissions reduction targets in place, the transformation in their customers’ expectations means that those suppliers failing to act sustainably may increasingly see it impact their bottom line.”

The water-energy nexus and plastic, too

Awareness of the connection between energy consumption and water resources has been building, and the CDP report provides some interesting insights in that regard.

According to the report, less than 50 percent of companies in the survey reported “board-level” oversight on water issues, compared to 69% for climate issues.

That finding is concerning, and it suggests that brands are missing opportunities to reduce greenhouse gas emissions through water resource management.

When brands to begin to pay more attention to water resources and the water-energy nexus, the repercussions for fossil fuel stakeholders could be considerable.

In particular, major oil and gas companies are already facing enormous shareholder pressure to report their greenhouse gas emissions and set targets for reduction.

The water-energy nexus adds more fuel to the fire. Here in the U.S., for example, a recent study links oil and gas fracking to unsustainable water use.

As the supply chain engagement movement grows to focus more attention on water resources, oil and gas companies will face more pressure from major purchasers as well as shareholders.

Finally, major purchasers are already on a collision course with oil and gas companies now that renewable energy is competitive.

ExxonMobil and other companies have been betting on petrochemicals as a growth area, but the CDP report suggests that any relief there will be temporary at best, as leading purchasers reduce their use of plastics.

Image credit: Joshua Rawson-Harris/Unsplash