Why does sustainability matter in the CPG industry?

The consumer packaged goods industry has been experiencing exhilarating growth over the past several years. As businesses across industries are navigating the effect of Industry 4.0, CPG brands are relentlessly innovating novel products and services to meet the ever-growing needs of humans. When it comes to sustainability, CPG companies face significant challenges to fulfill short-term needs while maintaining long-term priorities. The industry lacks an adequate framework for sustainability efforts. However, meeting sustainability challenges demands strategies and best practices with a holistic, science-based effort that goes far beyond the environment and makes an optimistic impact on health and wellness as well as economics.

In 2020, the economic turmoil caused by COVID-19 brought uncertainty for CPG companies. It has forced them to consider the need to invest in technologies to keep up with increasingly changing consumers' expectations and being financially prudent in their investment strategy. Shifting towards more sustainable business can help consumer goods businesses to meet customer demand.

Today's consumers want brands to be advanced, innovative and more sustainable that can offer products meaningful to them. According to New York University’s Stern Center for Sustainable Business that reviewed consumers purchasing habits from 2013-2018, products marketed as sustainably packaged experienced 5.6x faster growth than those that were not, across 36 CPG categories. The research revealed that sustainable products are a key driver for product sales and should provide a solid statistical foundation that CPG companies may use in their future strategies. 

The global sustainable packaging market is predicted to garner around US$412.7 billion in 2027, up from US$246.1 billion in 2018.

Sustainability is already starting to gain momentum in the consumer goods industry as more and more companies are working towards implementing sustainability strategies. As noted by PwC, the Consumer Goods Forum, a global network that brings together the CEOs and senior management teams of over 400 retailers, manufacturers and service providers, has established a strategic organization focused on sustainability, the environment and society. Besides, legislators are increasingly putting pressure on companies to contractually enforce their social and environmental standards along the supply chain.

As part of their sustainability initiatives, CPG companies like P&G, Sara Lee, Reckitt Benckiser, Downers Grove, and others look to examine and quantify the behavior of upstream suppliers and downstream consumers. P&G, for instance, has been involved in the development of multiple sustainability-enhancing tools. Its Packaging Sustainability Design Toolkit includes Simplified Initiative Management and Product Launch (SIMPL) process, Sustainable Packaging Coalition (SPC) Design Guidelines, SPC’s COMPASS LCA software and internal white papers. Also, P&G has created a Sustainable Packaging Checklist, which is used to encourage personnel to consider sustainability and total life cycle during the product development or updating process.

Many industry trends show that CPG companies are likely to invest in industry 4.0 technologies in the coming years, given the uncertain economy last year. In this context, they must focus on investing in digital technologies with built-in analytic capabilities that assist them in better understanding their consumers and solving operational problems.