Mike Barry, former Director of Sustainability at M&S, joined our recent webinar to discuss why measuring the environmental impact of your products is important and which industry trends are set to impact consumer products.
You can watch the webinar on-demand here. In this article we dive into Mike’s wisdom and pull out his predictions of how the industry will change and why.
“The next decade is totally and utterly about product.”
- We are mandating legal change
The governments are now legislating that the entire economy needs to become net zero by 2050; Whether it’s the UK, Japan, South Korea, China (2060) and hopefully soon across the US. As soon as a government mandates net zero, rather than just expecting a Tesco or a Unilever to step forward and do some of it themselves, real systemic change starts to be driven across the economy.
- Investor pressure
In the last 6 months there has been a revolution, awareness of Environmental, Social & Governance (ESG) has increased and for the first time big financial institutions are recognising not just the risk, but the opportunity of investing into the economy’s net zero journey.
The BT pension funds have committed to be net zero by 2035, the Environment Agency Pension Fund by 2030. NatWest, one of the biggest lenders in the UK, is committed to make transparent their Scope 3 emissions from its lending and halve that by 2030. Share Action has looked at the ESG performance of the 75 largest asset owners on the planet, who have tens of trillions of dollars of assets under management, and ranked them from A-E. Over 50% of them got a D or E grading. But they will have to improve as the UK is looking at pension legislation in order to standardise the approach BT has taken voluntarily and apply it across all large occupational pension funds, impacting over £5 billion worth of assets.
In November 2020 it was announced there would be mandatory carbon reporting for all premium UK listed businesses by 2025. So increasingly the pressure is closing in from investors expecting the businesses they invest in to manage their carbon footprint, particularly Scope 3.
- Citizens: Consumerism post-covid
There’s a lot of market research coming out at the moment that consumers want businesses to build back better after the pandemic, and don’t want to go back to exactly how things were – and businesses will need to adapt to meet this new expectation. Of course many people want to have a sense of normality, go out, go on holiday but you can sense something is changing when it comes to how people live their lives.
The scale of consumption is staggering and the footprint it causes is staggering
Mike recalls the scale of consumption that people were driving pre-covid. In 2019 we consumed 130 billion individual pieces of clothing worldwide, Coca-Cola sold 700 billion servings of its drinks and Heinz baked beans made 500 million tins for the UK market alone. Wherever you look the scale of consumption is staggering and the footprint it causes is huge.
Consumers are now actively choosing to participate in the consumer marketplace in a different way. Plant-based diets, electric cars, resale platforms for second hand clothing are all becoming more commonplace.
Previously it was extremely difficult for an organisation to track and trace the millions of products it sold and bought and the supply chains that produced them but now through artificial intelligence, big data, and machine learning we’re able to handle these big datasets effectively and make decisions based on them.
This matrix of policy, finance, consumers and digital tools will drive the next wave of product disruption, all underpinned by big data.
And arguably the wave of change is already here. The British Retail Consortium has just announced that 63 British retailers, despite covid, have committed to become net zero by 2040. Scopes 1&2 are targeted to be net zero by 2035 and Scope 3, which makes up 90% of the footprint, to be net zero by 2040 – hugely ambitious but these retailers know they have to do it. At the heart of this challenge is managing the data flows for the billions of items they sell every year.
The future of product labelling
Product labelling, which has had a rocky journey to now, has come back into the market with force with major brands committing to put carbon labels back on their products in order to help consumers make choices about what they buy. Similarly some supplier companies in the US have started to do the same with raw materials to help inform the choices brands make.
Unilever has committed to put a label on every product in order to hit their net zero 2039 target. Their Clean Futures Programme will take 1 million tonnes per year of oil out of their homecare business and replaced it with different materials by 2030. But this will need to be tracked and checked in terms of their environmental impact. Simply replacing one material with another doesn’t necessarily solve the problem if you don’t understand the impact of said replacement material.
Another example is Amazon who have recently ring fenced part of its European website which groups the 40,000 individual products that have an independent environmental social label (fair trade, organic, etc). In the context of the million of products Amazon sells and the tens of millions of global users this might seem small. But Amazon is trying to change the way consumers use their website and make it easier for them to engage with a better product.
Mike predicts in time platforms like Amazon will require brands on their platform, at least the big ones, to have a net zero goal with a science-based target underneath it. It’s not there yet but this will come.
Mike’s last example was Walmart, who are working to create category level databases across every kind of product they sell. He speculates in 3-5 years time that the bottom 20% in each category won’t get sold. The top 20% may be given more prevalence on Walmart’s website and in their stores.
On the horizon for businesses, what’s coming
When it comes to sustainability it’s an alphabet soup of acronyms. But we’re starting to see some consistency from the EU and UK taxonomy on which ESG issues really matter. For example the GHG Protocol and PAS 2050-2060 are things that your business needs to be supporting, backing and doing, and we’re seeing frameworks such as TCFD and SBTi galvanize around these. This simplification will be great for the industry in encouraging consistency in how we measure and report on sustainability but also make taking the steps to become net zero far more welcoming for the average business.
Food: Adapt or die
The shift from a meat-based to plant-based, to ultimately laboratory grown protein alternatives will require a huge amount of carbon and environmental footprinting to ensure businesses are making the right choices and the right information is given to the end consumer.
The meat industry in particular is going to have to prove that some meat production is demonstrably better than other types. As a result some production lines will have to retire completely but some may continue to prosper if they can prove its environmental impact against an accepted standard. Unless as a brand you can prove factually the environmental impact of your products then it’s highly likely you won’t be able to sell on platforms such as Amazon, Tesco or Walmart in the future.
Consumer behaviour change
Customers are starting to engage more heavily with sustainable consumption, which is brilliant but they will start to demand more transparency, more information, more proof of why they should choose your brand for its sustainability. This will need to go beyond a label on a product. This information will need to be available digitally and communicate the impact they’re making by choosing this product. Robust and reliable data will become king.
What to do next?
It comes down to 3 questions you need to answer:
- Why does your business need to become sustainable?
- What do you need to commit to in order to become more sustainable?
- How do you integrate it into your business?
The why is the mega trends discussed above, the marketplace, investors and policy are all shifting and your business needs to respond and the battleground is product.
What you need is the data and information in order to make these huge decisions in the marketplace and which direction you choose to go with your products.
The how is how you work with your customers, colleagues, suppliers and the rest of the industry in order to drive the change we need.
- Watch the on-demand webinar: Measuring the environmental impact of your products
- Download: The Guide to Science-Based Targets
- Download: Our guide with edie on measuring and reducing Scope 3 emissions
If you would like to know more about how we can help your company conduct life cycle assessment of products and set ambitious science-based targets to achieve your sustainability goals please email firstname.lastname@example.org