Meeting consumer demand in an ESG world Meeting consumer demand in an ESG world

Despite some worries about increasing Covid-19 case numbers, and with this year’s Black Friday sales in-the-bag, Christmas retail is looking strong as buyers continue to make up for 2020 festive lockdowns.

However, this is all happening against the backdrop of the recent COP26 summit in which global leaders pledged to reduce carbon emissions. There’s also a rising expectation that organisations will lead the way more broadly with Environment, Social and Governance (ESG) agendas.

This presents a growing conundrum for consumer goods companies and retailers. For example, how can you balance strong consumer appetite for ‘more’, with what’s needed across society to reach Net Zero? And how can you take part in the ‘circular economy’ while also having commercial success? 

Enthusiastic consumption may be great for profits, but it can also mean more production emissions, packaging waste, and supply chain miles – including the growth of Quick-commerce. Many businesses are doing everything they can to reduce their carbon footprint, but we can’t forget that the product still has an environmental impact once it leaves them.

This is where helping the consumer understand the role they need to play in the ‘circular economy’ is key – but it needs to be done in a way that doesn’t feel like it’s dictated or preaching. 

One simple thing is to make it clear what can be done to reuse, repair or recycle the products, and to make it really easy for them to do so. If you’ve made the packaging recyclable – assume that the consumer wants to know that information, and how they can do it. I loved a product that I purchased that said in enormous letters on the front, ‘this is recyclable’, as it nudged me to do so. If we have to hunt for a tiny symbol on the back, then it’s not going to nudge behaviour.

Another step can be taken within stores, working with retailers to make it really easy for consumers to make better choices. Can you have energy saving lightbulbs readily available in a prominent position at the supermarket? Can there be specials that help to encourage consumers towards greener choices so that it becomes a purchasing habit over time?

Despite many good intentions, price remains a key driver for many consumers through either necessity or habit. If two items appear similar and one of them is cheaper, it's going to be chosen. However, if the higher-priced product is sourced and made locally, with more recyclable parts, why not make that value proposition clear and upfront, so that those who can afford it can opt in and feel good about it? As more people make that choice, it will create scale so the product ultimately becomes cheaper and affordable to more.

By taking advantage of digital capabilities, consumer manufacturers can better understand consumer behaviours, and adjust ESG activities accordingly. Importantly, these insights also present commercial opportunities.

For example, KPMG worked on a project for a major beverage producer where we used image-recognition technology at a recycling centre to see if the brand’s products could be identified. Taking on a system like this, you can start to measure which regions are embracing recycling, which are not, and target campaigns to drive more recycling. At the same time, it helps to know where products are consumed – not always in the same place as purchased.

Another approach is to digitise the packaging and track the lifecycle to gain more insights. For example, KPMG is working with a consumer goods business on digitising glass bottles so that they can follow the bottle once it leaves their control. If they can understand what happens to that bottle, in terms of whether it is reused or recycled, they can make adjustments for that impact. They could share that insight with the consumer, which strengthens its ESG credentials and hence value in the consumer’s eyes.

While all of this can be good for the environment, a question I’ve had from a number of company leaders is – how can we make what we do on ESG a commercial advantage?

The answer can be easier if you’re a new brand or have a new product with some ESG credentials that you can promote and perhaps charge a higher price for. If you have an existing product that you change to be more ESG-aligned, and that means a higher price, shifting consumer habits can be hard.

Again, it can be a matter of using digital to find the commercial advantages.

For example, if you digitise bottles of drink or beer barrels provided to pubs, you can measure how far the liquid has gone down in the bottle and proactively resupply; or make a marketing push to move oversupply before the use-by date. This can have an improvement on waste, as well as a commercial benefit.

Another approach could be to use digital tools to measure what food in your store is near its use-by. You can automatically put those goods on special, alert nearby consumers digitally about the sale in real time, and help consumers to take advantage of the opportunity. This helps to reduce food waste, pleases the consumer, and again has a commercial ‘plus’ by increasing foot traffic to the store. 

Consumers are in the spirit to shop, but there’s also a role for organisations to lead the ESG agenda.  

As well as managing supply chain challenges, rising inflation, and ever-increasing customer expectations, organisations need to do everything they can within the business to support the health of our planet.

But the good news is that there can also be commercial benefits. Reducing waste, knowing when to resupply, and becoming the consumer choice are just some examples.

Here’s to a happy and healthy holiday season for all of us.