Study: Sustainability Becoming Mandatory Component of Business Model for Consumer Businesses

Environmental sustainability is not a passing trend; rather, it is a critical business issue that is rapidly becoming a requirement for consumer businesses, according to a recent study conducted by Deloitte Consulting LLP for the Grocery Manufacturers Association (GMA).

"While the issues associated with sustainability -- such as waste management, commodity shortages and energy usage -- are nothing new, the expectations of shareholders, consumers, regulators and other constituencies have changed, pushing sustainability to the top of the agenda for many consumer products companies," said Peter Capozucca, a principal with Deloitte Consulting and co-author of the study. "It is unlike any business issue consumer businesses have encountered in the past. The industry's large environmental footprint and unique dependencies on agricultural inputs, water and packaging make sustainability a critical strategic issue that consumer packaged goods companies must address proactively."

The findings of the study, "Sustainability: Balancing Opportunity and Risk in the Consumer Products Industry," were announced on June 11. According to the study, 85 percent of U.S. consumer business companies have active sustainability initiatives; most common are recycling and energy conservation programs. While retailer requirements (specifically Wal-Mart) have been influential, they have not been the primary driver behind the sustainability movement; more than 60 percent of the companies surveyed said that internal priorities are the primary driver of these efforts, while regulatory compliance and Wal-Mart's packaging initiative are the second most cited drivers. In fact, the study found that consumer packaged goods (CPG) companies are ahead of most retailers in implementing sustainability programs, driven by internal motivations such as cost reduction, regulatory risk mitigation, and concerns over potential shortages of commodity inputs. However, both retailers and CPG companies cited several barriers to comprehensive sustainability efforts, including regulatory uncertainty and unjustifiable returns on investment.

"This study tells us that sustainability is not just about 'going green' -- it involves competing in a different world with constantly evolving issues and expectations," said Stephen Sibert, GMA's senior vice president of industry affairs. "GMA will continue to develop the compendium of retailer practices to foster and enhance collaboration between manufacturers and retailers on sustainability initiatives. Such cooperation is mutually beneficial, and more importantly, helps companies meet consumer demands."

The study found that companies that have been successful in this area are the ones that define sustainability as a top strategic priority and take a structured, methodical approach. Typically, this means that the CEO is directly involved, and that sustainability is treated as a business requirement. These companies also collaborate with a broad group of stakeholders, such as suppliers, leading scientists and academics to innovate sustainable products and packaging; consumers on proper usage and disposal of products and packaging; and NGOs, shareholders, and regulatory bodies to ensure solutions are compliant.

Deloitte & Touche: http://www.deloitte.com/us

GMA: http://www.gmabrands.com

This article originally appeared in the 06/01/2007 issue of Environmental Protection.

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