New research finds the sustainability drive propelling innovation, changing the customer dynamic and shifting workplace culture as companies get serious about ESG. To master sustainability, businesses need to work out how to meet and exceed customers’ ever-increasing expectations while proving that sustainability can be profitable.
Language has been slow to keep up with the warnings of climate scientists. The terms ‘climate crisis’ and ‘climate emergency’, for instance, are relative newcomers to mainstream discourse. But they are here now, and the significance is clear: the challenges we face are urgent ones. Delay is no longer an option.
According to new research commissioned by Smurfit Kappa and conducted by Longitude, most companies are taking this shift seriously. About three-quarters (72%) see sustainability practices as a lasting trend, and 83% describe sustainability as an opportunity to exploit.
So sustainability is here to stay. What does that mean for companies? For one thing, it’s rewriting the rules of how to do good business.
Sustainability can be an innovation win/win
Many forward-thinking businesses are using sustainability to their competitive advantage. In about a third of companies, sustainability is driving all R&D (37%) and new product development (33%).
“Sustainability is the mother of all disruption,” says Ioannis Ioannou, Associate Professor of Strategy and Entrepreneurship at London Business School. Businesses have a decisive role to play in harnessing that disruption and effecting change.
They are likely to focus their innovation efforts on packaging and waste reduction, with 68% of businesses citing materials in packaging as their biggest sustainability challenge, followed by collection and recycling (59%). Getting better at this is not just about good PR – some businesses expect it to save them money. Nearly half (46%) say that cost savings from waste-reduction efforts are the most anticipated benefit of their sustainability practices.
“In many cases, sustainability and economic benefits go hand in hand,” says Steven Stoffer, Vice President of Sustainability and Development, Smurfit Kappa.
Mindful consumers expect a helping hand
Consumer expectations of sustainability are fast changing the brand-customer dynamic. Eighty-eight per cent of organisations believe that consumers expect them to have clear sustainability practices, and 78% believe that their customers look to them for guidance in adopting more sustainable practices.
Consumers back this up. The majority (61%) expect the brands they buy from to have clear sustainability practices, and they’re looking to businesses to lead: about a third say retailers should make sure shoppers are informed of sustainability factors at the point of purchase, and a similar proportion put that responsibility on to brands.
Brands must get the message across
Those expectations come from frustration: as far as customers are concerned, businesses are not doing a good job of guiding them towards sustainable products.
In the past six months, 55% of consumers say they have purchased a product specifically because it had reusable or biodegradable packaging, and a similar proportion have paid more for a product or service that was sustainably sourced. But greenwashing and poor communication are confusing the issue – we might be keen to spend our money more consciously, but 69% of us find it hard to know which brands are genuinely sustainable.
Some brands are rising to meet this challenge. Nestlé, for instance, has created its Institute of Packaging Sciences and launched a sustainable packaging venture fund, both dedicated to new food grade packaging materials, new food safe delivery systems, new waste management technologies and waste collection capacity building. “We are using our science knowledge in food and transferring it to packaging design,” says Véronique Cremades-Mathis, Nestlé’s Global Head of Sustainable Packaging.
Sustainability strategies strengthen culture
Millennials and Generation Z, the most sustainability-minded age groups, wield increasing influence in the workplace. So ESG credentials are now a business imperative: if these highly mobile members of the workforce don’t feel like their employers share their values, they will leave for organisations that do.
Businesses recognise this talent risk, and are seeing the benefit of producing sustainability strategies: 77% of organisations report that their sustainability strategy is having a positive impact on employee engagement and retention.
Measurement is the make or break
Sustainability strategies are becoming the norm, but how do businesses prove that those strategies are working and creating value? It comes down to effective measurement, and businesses in the research say they are struggling. Less than half say they can link sustainability to financial performance, and only 18% currently measure sustainability performance against their strategy.
These obstacles are not just an inconvenience for businesses – in some cases, they are derailing their sustainability drives altogether. For 42% of businesses, difficulty quantifying their sustainability performance is the biggest barrier to implementing sustainability practices – a challenge that is compounded by the shifting global sustainability narrative.
“Sustainability is now a phrase that can mean everything and nothing,” says Simon Boas Hoffmeyer, Senior Director, Group Sustainability & Communications at Carlsberg Group. “We need to create a level playing field and a consistent methodology for how we measure the carbon impact across our products.”
Download the full report here