The one question every CPG brand should ask ESG innovators right now

12 07 2023

Photo: Charday Penn via Getty Images

By Benson Hill via Food Dive • Reposted: July 12, 2023

The question was simple, yet profound. 

We were at a recent conference where startups were pitching creative products to meet the needs of our changing world. The audience was full of executives and investors with the cumulative financial power to fund those changes.

During a conversation about upcycling, a leader from a global CPG beverage powerhouse raised his hand and asked the speaker, “How do you know what you’re doing is the best possible use?”

At first, a few of us were puzzled. Then he explained it was his job to find the best use of their time and money when it came to environmental, social and governance-related initiatives (ESG).

With more options available today for CPG food and beverage manufacturers to create workstreams and dedicate resources to certain initiatives, how do they choose which ones to green light? How do they know where to start or who to trust? And how do they influence authentic action while operating in times of unparalleled scrutiny?

The business world is becoming increasingly more conscious of the impact of ESG, and the food and beverage industry stands at the forefront of industries that can make a positive impact. Many of these companies want to do the right things, but they’re grappling with a unique set of challenges. They strive to avoid greenwashing. They try to reduce their carbon footprint. They focus on minimizing food waste, ensuring ethical sourcing and fostering diversity all the way back to the farm level.

Their willingness to grow and learn means the stage is set for great ESG growth. However, there are still complex hurdles to clear as they sprint from the desire to change to the finish line of ESG-related ROI.

ESG moves the needle, but is it enough?

The good news is positive consumer sentiment toward sustainability and ESG-related purchases have been growing. But there are still gray areas between how customers say they want to live and shop vs. what they actually purchase. Consider this research:

The ESG-related retail growth stats, while significant, suggest customers don’t always buy sustainable products at a rate that backs up how they say they feel.

So why don’t they? Forty-one percent of NielsenIQ respondents said sustainable products are too expensive, while 35% said it’s hard to find ESG-related products at the store. And perhaps the most telling stat may be who they see as responsible for driving sustainability product changes: 46% said brands were responsible, 40% said local government was responsible and only 37% pointed at consumers themselves.

That misalignment of expectations may further confound CPG executives trying to make the best possible use of their budget when funding ESG products and initiatives. But it does bring one thing into relief: Short of government regulation forcing product changes, evolution in the ESG space rests on CPG’s shoulders.

A framework for vetting potential ESG partners

There are no instant ESG solutions in the CPG space. The sustainability evolution inside your company – and in the market as a whole – requires a staged approach and a fundamental adoption of new ways of working. 

That’s why it’s imperative you start your ESG product innovation journey now. Your CPG brand must fully vet, substantiate and compare multiple initiatives to ensure it’s making the right choices.

Savitha Chelladurai, Benson Hill’s Director, ESG & Sustainability, said CPG leaders should think about these five things when evaluating with ESG innovators: 

  • Look for partners – not just suppliers: Find innovators who are willing to develop programs or products together to meet your specific needs.
  • Validate affluency in ESG: Look for innovators who show they understand your current state and goals, and can help you lead in the space.
  • Connectors: Find innovators who can bring other partners to the table to jointly develop holistic solutions.
  • A complete view of sustainability: Find innovators who understand how sustainability goals affect your full organization.
  • Identify quick wins: Partner with innovators who can implement solutions that work within the context of your current business model, allowing you to see immediate impact while working through longer-term investment and infrastructure changes. 

Food and beverage companies know they must redefine their product offerings for all of us to have a sustainable future. But before they can do that, they need ESG innovators to clearly answer the original, crucial question: Is this the best possible use?

To see the original post, follow this link: https://www.fooddive.com/spons/the-one-question-every-cpg-brand-should-ask-esg-innovators-right-now/654485/


Comments : Leave a Comment »
Tags: , , , , , , , , , ,
Categories : Climate Change, corporate social responsibility, ESG, social responsibility

ESG Amidst Inflation: 7 Governance Mechanisms That Drive Value Creation in the Consumer Packaged Goods Industry

8 05 2023

Unilever’s corporate headquarters in Blackfriars, London. Image: Unilever

By Andrew Kaminsky from triplepoundit.com • Reposted: May 8, 2023

Running a profitable business in the consumer packaged goods (CPG) industry isn’t easy – especially when inflation has consumers pinching pennies and hunting for basement bargains. Add that to the list of challenges the CPG industry is facing, which include lingering pandemic hurdles and conflict-zone embargoes that suppliers and manufacturers are obliged to observe.

Meanwhile, companies are under pressure to monitor their risks and impacts on environmental, social and governance (ESG) issues. That means not just finding and monitoring their ESG data, which can be a huge task on its own, but also developing a strategy complete with targets and accountability measures to reduce ESG risks and minimize negative impacts from business activities. 

So, how in the world are business leaders supposed to do all of that? 

The answer lies in the “G” of ESG. Strong corporate governance and commitment from C-suite executives are how organizations can manage today’s business requirements and thrive under the opportunities that this new landscape presents. After all, ESG-focused funds proved resilient even amidst recession fears — attracting $37 billion of net inflows in the fourth quarter of 2022, compared to $200 billion of net withdrawals in the broader market, according to research from Morningstar.

Which governance mechanisms drive ESG strategy?

TriplePundit sat down with Jonathan Gill, global head of sustainability advocacy at Unilever, to gain insight into the governance mechanisms that drive ESG strategy in the CPG industry. The key takeaway? ESG strategy must be integrated into overall business strategy, with the two components working in coordination to drive success across all brands.

1. Integrating ESG into business strategy

If there’s one thing to know about driving a successful ESG strategy, it’s this: ESG strategy has to be integrated into overall business strategy. Without integration, the two objectives will be competing for priority rather than working in tandem.

“Unilever’s purpose is all about making sustainable living commonplace. So that’s kind of the North Star, the way we think about everything,” Gill explained. “It’s been years since we had separate strategies for sustainability and for business. It’s one integrated strategy.”

2. Business structure facilitates ESG performance

For Unilever, this integrated strategy — which it calls the Unilever Compass — is “locked into the governance side of things,” Gill said. “The board oversees it. We have an external advisory council to make sure we’re making the right decisions and choices. It’s locked into our remuneration, but also into our structure.”

In the CPG industry, a parent company will own many different brands. While those brands have different priorities in business and in ESG strategy, the structure and the relationship between the parent company and its brands needs to facilitate ESG progression.

“We’ve got five semi-autonomous business units within Unilever, and each and every one of those business units have sustainable priorities within them,” Gill continued. “That’s agreed by the most senior level, by the executives, so the delivery is really embedded into it.”

3. Ensuring all stakeholders have their voices heard

When it comes to actually developing an ESG strategy and identifying key performance indicators (KPIs), it’s crucial to have a clear understanding of what is important to stakeholders from the beginning and throughout an organization’s ESG journey. 

Whether that’s from investors, customers, employees, brands or the broader community, understanding the expectations of stakeholders will align and drive ESG strategy, Gill said. For example, the company holds bi-weekly sessions with employees and executives and operates 37 “People Data Centers” around the world to keep its finger on the pulse of what customers are looking for — among many other ways in which it engages with stakeholders. 

Organizations that listen to stakeholder voices are better positioned to perform well on the metrics that matter, driving ESG performance and business growth.

unilever brands - corporate governance in the CPG sector
Some of Unilever’s best-selling brands. Image: Unilever

4. Brands develop their own ESG priorities

It can be tempting to delegate to brands what their ESG priorities should be and how they should approach the subject. Parent companies are ultimately responsible for their brands, after all. But it is much better when those companies facilitate that development and allow brands to grow their ESG priorities organically.

“Within the Unilever Compass, the three priorities we have around sustainability are planet, health and wellbeing, and social. Our brands’ purposes generally fall within those three spaces, but we don’t have a formal way to make sure brands are focusing in specific areas,” Gill explained.  “The brands themselves are responsible for identifying what their purpose is and delivering that. It has to be organic, it has to be real, and therefore top-down just wouldn’t work.”

5. Transparent accounting 

When asked about the value of transparent accounting, Gill said, “We think it’s quite an important lever for change to accelerate the transition toward sustainability.”

As global ESG reporting and accounting standards are being hashed out around the globe, transparent accounting is not only important to today’s investors and consumers, but it’s also soon to become a requirement. Businesses that incorporate this practice before legislation is finalized will benefit from the ease of transition to mandatory reporting, as well as from the influx of investor dollars into ESG funds. Having the right technology in place to gather, track and report on ESG data will be essential for businesses in the future.

6. Transparent ESG goals, progress and communication

Transparency in ESG goals, progress and communication is vital for highly visible, consumer-facing companies like Unilever. The company reported regularly on the progress of its 10-year sustainability strategy, the Sustainable Living Plan, from 2010 to 2020. Some of its targets were reached, some were narrowly missed, and others fell well short. Whatever the case, the company was open about its progress and the challenges it faced along the way — and it continues to report on the new Unilever Compass strategy. 

This type of transparency builds trust. Trusted voices in the ESG sphere are exactly what investors and consumers are looking for amidst the tsunami of ESG information being released by companies looking to attract today’s consumers and investors.

7. Accountability measures

Finally, accountability measures must be built into the structure of the organization. Naturally, the market will act as its own accountability measure as investors and consumers pull money from companies that are underperforming and redirect those funds to companies with stronger ESG strategies.

Internally, Unilever ties ESG performance into its executive remuneration scheme. “We have essentially eight metrics, and if you perform well on those, your bonus is higher,” Gill said. “If you’re motivated by money, then obviously you’ll be motivated to deliver on those sustainability goals.”

Not everyone is motivated by money, but it’s a strong measure to incentivize performance and show commitment to ESG strategy.

A look to the future of ESG and governance challenges

One of the biggest challenges facing business executives in all sectors with regards to ESG and corporate governance is the uncertainty of reporting requirements. There are different global reporting standards, all of which are similar but none of which are mandatory — at least not yet. 

“The challenge we’ve got at the moment is there are three big standards — from the International Sustainability Standards Board (ISSB), the U.S. Securities and Exchange Commission (SEC) and the European Union (EU) — and they are big beasts of information that need to be prepared,” Gill explained. “Making them standardized — not necessarily the same, but interoperable — would be very helpful, and we’re very keen to see them being mandatory for all companies above a certain size.” 

The biggest challenge in Gill’s eyes is that with the sense of urgency to enact mandatory reporting and organizations rushing to comply, there are likely to be some errors in reporting, or errors made by assurers on the audit side that could provide the anti-ESG cohort some extra fuel for their fire. In the midst of our climate emergency, the onus is on legislators to not only get the requirements in place quickly, but to make sure it’s done right.

To see the original post, follow this link: https://www.triplepundit.com/story/2023/esg-governance-cpg-industry/773591


Comments : Leave a Comment »
Tags: , , , , , , , , , , , ,
Categories : Climate Change, ESG