While businesses are facing a variety of challenges at present, taking their eye off the ball when it comes to sustainability could be costly, says Kristina Rogers, EY global consumer leader and Jim Doucette, global EY-Parthenon consumer products and retail leader.
As sustainability expectations rise, the UN Sustainable Development Goals (SDGs) provide clear targets, but progress isn’t straightforward.
Some consumer companies might be deprioritising their sustainability goals considering the unprecedented disruption they face from rising prices, increasing consumer austerity and geopolitical shocks.
But to pull back on commitments at this crucial stage would threaten to undermine the progress and momentum that has been made on sustainability in recent years.
Aligning Behind Common Goals
Earlier this year, EY worked with The Consumer Goods Forum (CGF) to understand how the UN SDGs were seen by leaders of CGF members at the halfway point of this journey. In the resulting report, The path to 2030: Delivering a sustainable future , we saw that many leaders are seeking to execute on those goals with clear alignment to their business.
But from our conversations with CEOs, it is clear significant hurdles remain.
Sitting beneath the 17 SDGs are 169 individual targets, each with its own performance metrics. Many are related to national indicators such as demographic, social and economic data, which leaves companies questioning where their impact can be tracked.
Some indicators also lag sustainability priorities that have increased in prominence over the last eight years, such as diversity and inclusion, social justice, plastic pollution, food waste, scope 3 (value chain) emissions and preserving biodiversity.
Although these challenges are integrated into the SDG framework, their visibility is diluted by a host of other social and environmental issues that the goals seek to address.
However, this should not derail efforts to meet the goals. If consumer companies are to ensure that they can support progress in meeting the goals over the next eight years, they need to galvanise their efforts and shift their strategic priorities to align more closely.
From interviews with CEOs from consumer companies, five areas of action were identified to drive clear progress. These include setting consistent standards of measurement, focusing on key material issues, operationalising sustainability into company cultures, developing deeper partnerships and engaging more deeply with consumers.
Ensuring The Most Impactful Areas Of Focus
If the SDGs provide targets to aim for, understanding how and where to prioritise sustainability strategically provides a direction and speed of travel for companies to adopt. But this still fails to address which specific activities will have the greatest impact.
In our interviews with CEOs, they pointed to the dizzying complexity that the SDGs present. Uniting behind all 17 goals shows positive intent, but identifying where and how to move the needle presents a different undertaking.
Consumer companies faced with their own complex reporting requirements and distinct areas of strategic priority risk spreading themselves too thin to make a tangible impact if they seek to act on everything at once.
Instead, they must focus on the key performance indicators (KPIs) most relevant to their business priorities and capabilities. Establishing KPIs in the context of their strategy is important and requires companies to assess them using five distinct criteria:
- Are they measurable, objective and actionable?
- Are they relevant to the sector or subsector a company operates in?
- Are they material and impactful for the business and its stakeholders?
- Are they comparable to enable benchmarking, and sharing, of performance with other companies?
- Are they attainable to demonstrate progress and the ability to meet agreed targets?
This isn’t rocket science in itself, but for consumer companies, the establishment of these KPIs must be intrinsically linked to the lifecycle of their products.
Each stage of the product lifecycle from inception to disposal can have sustainability metrics mapped to it. The relevance and material importance of these indicators will differ from business to business, but there will be commonalities in distinct sectors.
Harnessing Sustainability To Unlock Value
Whichever sustainability goals, strategies and KPIs that consumer companies apply, there remains the recurring question of how those decisions will create value for their business. In a landscape of inflation, uncertainty and disruption, the appetite to invest today to support the achievement of targets almost eight years away may be waning.
But viewing sustainability investment as a cost that needs to be passed on is counterproductive. Instead, companies should look to what will drive their future growth. Brands that espouse sustainable attributes may not command a premium in times of economic uncertainty, but they continue to grow at a pace that consistently outstrips their peers.
Even if investing in sustainability does not bring immediate financial results, not investing in sustainability risks even more. Failure to meet the SDGs will see inequality, poverty and climate change continue to erode the social and environmental landscape. If the prospect of investing in sustainability is unpalatable today, the alternative will be far worse tomorrow.
© 2022 European Supermarket Magazine – your source for the latest A-Brands news. Article by Kristina Rogers, EY global consumer leader and Jim Doucette, global EY-Parthenon consumer products and retail leader. Click subscribe to sign up to ESM: European Supermarket Magazine.