Looking for Green Growth
Every company in every industry has a direct reason to care about sustainability; it’s about securing the future.
But food in particular is at the heart of it all. Food is the biggest industry by far employing about a third of the world’s population.
We draw on a big share of the world’s resources including 70% of freshwater.
We shape the landscape and almost every species on the planet is affected by how we farm and fish.
So whenever the world is operating unsustainably we’re amongst the first to know.
Currently, almost half of the world’s soil is losing its fertility.
Some of the best sources of fish, like Newfoundland cod, have been fished to extinction.
And we’re losing an area roughly double the size of Belgium to deforestation each year, which is probably linked to more flooding and drought around the world.
Recently the markets have been sending out a very clear warning.
European wheat prices doubled last year.
Soybeans were up by 30%.
Sugar is up threefold over three years.
Cocoa prices are at a 30 year high.
And oil has been over $100 a barrel.
If we don’t solve the problems of sustainability these and other costs will keep rising higher, but we shouldn’t see this only as a problem.
It’s also one of our greatest ever opportunities.
Europe is facing a low growth economy, with a mountain of debt, a mature market and an ageing population.
We need new strategies for growth.
Innovating in the traditional way won’t be enough but fortunately there are other ways.
General Electric operates across many industries including energy, appliances, aviation and software.
It’s invested 5 billion dollars in green R&D and this has already delivered 70 billion in revenue.
Can our industry achieve returns like this too?
Procter and Gamble certainly thinks so.
It has set itself a global sales target of 20 billion dollars from new environmental products.
Consumers care about sustainability.
We at IGD spoke to 3000 shoppers in France, Germany, the Netherlands, Spain and the UK and over three quarters told us they’re interested in the ethics of food.
We also asked shoppers what encouraged them to try new products.
And in each of the five countries we went to, at least 30% of shoppers mentioned ethical values as one of the reasons to try something for the first time.
And from Havas Media research, 80% of the world’s consumers are willing to reward companies for behaving responsibly and 90% will recommend an ethical brand to a friend.
So ethical values in general and the green agenda in particular, offer us a big opportunity to build trust and consumer loyalty, to energise our employees and to revitalise growth.
But it’s not a simple opportunity.
What are the challenges we face in driving green growth?
What have the industry leaders achieved so far in this area?
And what can we learn from their experiences to guide our future?
These are the questions I want to address today.
I’ll start with the challenges using IGD’s shopper research to make my points -because shopper focused companies get the big wins.
I’ve picked out six big challenges.
The first is financial.
Shoppers don’t expect to pay extra just so that companies can do the right thing.
In our research, we found a growing overlap between value seekers and ethical shoppers.
These are not two separate groups.
The majority of shoppers want value for their values, high ethical standards without a big price tag.
The second challenge is complexity.
- Protecting biodiversity
- Reducing carbon emissions
- Conserving the landscape
- Minimising waste
- Supporting local traditions
- Helping the developing world
These are all part of the sustainability agenda.
And it’s probably impossible for any one company to lead on all these areas at the same time.
Also, only 5% of consumers tell us they’re interested in every ethical issue relating to food
The great majority, over 70% focus on a few areas.
These vary by person and between countries because values arise out of culture and personal experiences.
Animal welfare is big in the UK and the Netherlands.
Supporting local producers is big in France and Germany but also rising in the UK, Spain and Belgium.
Organic has been falling in the UK but rising in France.
And so on. It’s complicated even when we look at neighbouring countries.
Worldwide, it’s even more complicated.
So managing complexity is challenge number two.
The next problem is the unpredictability of it all.
A sudden event can change consumer opinions and the political and media agenda very quickly.
Climate change became a much bigger concern in the US after Hurricane Katrina.
And a TV programme in the UK about the amount of waste caused by European fishing laws caused 650,000 people to sign a petition and a promise by the EU to review its policy.
So companies face a constantly changing media landscape, one where any consumer can voice their opinion where messages are hard to control and bad publicity can spread like a forest fire.
So that’s the third challenge, how to stay ahead of unpredictable events.
The fourth problem is about trust and it’s about scale.
Many recently formed companies have developed brands based on ethical values and used this to drive growth.
Ben and Jerry’s ice cream is a famous example.
Ecover starting of course in Belgium, now sells its ecological detergents in over 30 countries.
Innocent is the UK market leader for smoothie drinks and gives 10% of its profits to charity.
But it’s been more difficult for big companies to convert their ethical achievements into recognition and sales.
That’s because people are more sceptical about big companies and need more evidence.
So the fourth challenge is to prove that large companies as well as small can drive growth through their values.
The fifth challenge is about expectations.
The credit we get for our ethical achievements is usually short lived.
Each new advance quickly becomes the norm and attention moves to a different issue.
In the UK, Fairtrade is now 66 times bigger than ten years ago.
Big brands like Cadbury’s Dairy Milk and Nestlé’s Kit Kat are Fairtrade in the UK.
And yet even though sales increased by 40% last year, shopper interest in the subject has started to dip.
If you, as a shopper, feel the problem’s taken care of, you keep buying Fairtrade, but switch your attention to another issue.
And the sixth and final challenge is the need for transparency.
We’re adjusting to a world of 24 hour news and instant feedback through Twitter, Facebook and Google reviews.
Shoppers are spending more time researching products and companies and starting to photograph barcodes with their phones, opening the door to more information.
But some of this information can be hard to evaluate so shoppers are turning to independent authorities to do this on their behalf.
One website and phone app, called The Good Guide, gives an ethical rating for over 95,000 products.
So now our industry faces a big choice.
Do we provide the data for services like these or do we sit back and let them find other, less accurate, ways to do it?
So shoppers are including ethical judgments more in their shopping decisions.
But they don’t want to pay a lot more for this; they want value for their values.
These values vary from person to person and from country to country.
The issues are complicated and the hot topics change quickly and unpredictably.
Big companies find it difficult to change long held perceptions.
As soon as we solve one problem, the public moves immediately on to another.
And shoppers are turning to independent rating services which are often based on inaccurate data.
So this is not easy!
And you might be wondering if it’s worth all the effort.
But here’s some evidence to encourage you.
We asked our European shoppers to look two years ahead and predict what they expect to spend more on.
And in all five countries, shoppers expect to spend more on all the ethical areas we asked about.
Now this may not come true but it does show people’s aspirations.
They want to make a bigger difference and they want us to help.
Our industry touches billions of shoppers every day.
So we should be at the forefront.
These are the challenges but they can also be opportunities and many companies are making some very impressive progress.
Let me run through a selection.
Tesco has opened the world’s first zero carbon supermarket, running on half the energy of traditional stores.
Wal Mart has improved the efficiency of its distribution fleet in the US by 60% saving 145,000 tonnes of CO2.
Sainsbury’s has begun to use geothermal energy for its stores.
This involves boreholes buried hundreds of metres beneath the ground to capture and keep heat.
Colruyt is one of four companies investing in a North Sea wind farm set to produce enough electricity to supply 230,000 families.
Unilever helped set up the Marine Stewardship Council which now sets standards on sustainable fishing for the world
And all of its palm oil for Europe is now from sustainable sources.
Marks and Spencer has reduced the packaging on its food products by 20%
Diageo now diverts 97% of its waste away from landfill.
A Henkel “Pritt Stick” now contains 90% recycled material.
Carrefour sources over three quarters of its own brand food products from local producers.
Nestlé has trained 170,000 farmers on sustainable techniques.
Heinz has helped its tomato growers to reduce their water usage by half.
Coca Cola has improved its global water efficiency by 13% and set up Community Water Partnerships in 70 countries.
And a Delhaize store in Florida has cut its water use by 92%.
These are just a few of the many great examples from our industry and we’re now getting recognition for it.
The two industry sectors recognised by consumers worldwide as making the fastest progress on sustainability are retail and food manufacturing.
There’s also growing evidence to show a link between working on sustainability and improving profitability.
An organisation called Business in the Community found that companies who consistently manage and measure Corporate Responsibility, outperform their competitors on shareholder returns by up to 10%.
And when Marks and Spencer set out to become the world’s greenest retailer it allocated a budget of 200 million pounds, but to their surprise and delight, the programme has run at a profit.
So there are lots of reasons to feel encouraged and yet we also know there’s so much more to do.
What can we learn from all the work so far and what do we need to keep front of mind as we look to the future?
As Paul Bulcke of Nestlé puts it companies only exist with the permission of society and society is asking more of us than ever before.
Retailers are insisting on higher ethical standards for every product to protect their reputation and to satisfy their shoppers.
And so every company has to be a good corporate citizen and get all the basics right or it faces huge risks.
These are good defensive reasons to follow the green agenda.
But today I’m focusing on a positive reason as a driver of growth.
That means doing the right thing for society, the right thing for our customers and the right thing for shareholders.
Earlier I listed six big challenges.
Let me finish with a five point action plan to drive growth and build value for values drawing lessons from the trailblazers.
Step one – be focused.
Do take a holistic view of sustainability to make sure you don’t improve one area, like packaging waste, at the cost of another like carbon emissions.
But you can’t be the best at everything.
So choose a small number of things that you want to be famous for
Make sure these are things you really believe in and where you can make a big difference.
Find them in the heart and the soul of your company not from a survey or focus group.
Step two - be bold, be brave and be innovative.
Half measures just don’t impress.
And getting there second, earns you very little credit.
The trailblazers are listening to consumers but also showing leadership and helping to form opinions.
To impress a sceptical world, you have to be first, take big steps and show you’ve made some difficult choices.
Be quick to apply the latest science and technology but also be aware of the risks.
And get the whole organisation behind you not just a special project team.
Step three is to communicate with a touch.
If you want to build trust, you have to declare your values and show that you’re living them.
Big companies do have to overcome a barrier of scepticism.
But they have two great advantages the scale to make a massive difference and the skills of their workforce.
Bear in mind though that people respond better to other people rather than to big organisations.
So avoid corporate speak.
Use real people to tell powerful stories about the difference your actions have made and get respected figures to check and endorse you.
Step four - be patient and be consistent.
This is about long term investment in your brands.
Don’t expect a quick and direct financial return.
But over time the benefits will accumulate.
Jamie Oliver is a chef and food campaigner, in the UK and the US.
So when he recently praised McDonalds for using free range eggs, organic milk and locally sourced beef it was picked up by all the major networks in America.
When your biggest critics start paying you compliments, that’s the best marketing ever.
Finally, step five – share and be generous.
The marketing advantage comes from getting there first.
After that, you can share your learnings, help others and make an even bigger difference.
This will earn you more credit.
And you can’t get far in this area by working alone.
You have to work with others.
For instance no single company can solve a local water shortage by acting alone.
The key to delivering value for values, raising efficiency and ethical standards at the same time is teamwork. Teamwork within your companies, teamwork between companies, and teamwork through the supply chain.
If we want our industry to keep growing, we will have to keep finding ways to get more outputs from the same inputs.
Our green future will have to be a smart future and we will only be smart if we have accurate and timely data for our decisions.
The same applies to shoppers.
They need this data to make good decisions too.
And we can only deliver the right data by working together through GS One, ECR and other collaborative bodies.
I can’t promise that my five steps provide a complete solution.
We’re all still learners on this journey.
But I’m certain they will leave you in a very strong position.
You will have new points of difference.
Your brands will be stronger.
Your shoppers will be more loyal.
You will be warmly welcomed when you enter new markets.
Your employees will be highly motivated.
You will find it easier to recruit new high calibre people.
And by helping economies to grow in developing countries, you’re investing in demand for the future.
Collectively, our products will be better differentiated and less like commodities.
And we’ll have shown beyond doubt that big business, as well as small, can be a force for good.
In this era of change, the public is yearning for places to put their trust.
We can be one of them.
We must be one of them.
What I find so exciting is the opportunity we now have to advance our companies by advancing society.
This makes it the best time ever to be a leader in our industry.
We have the means to inspire our people, delight our consumers, contribute to a better world, deliver growth for our shareholders and above all, leave a lasting legacy.