The consumer goods industry plays a pivotal role in shaping our sustainable future. With the increasing global focus on Environmental, Social and corporate Governance (ESG); consumer goods companies are recognizing the need to address sustainability challenges. As consumers become more conscious of their purchasing decisions, they are favoring brands that prioritize sustainable practices and ethical sourcing. This shift in consumer behavior has created opportunities for purpose-led brands to emerge and disrupt the market.
The Rise of Purpose-led Brands
A new generation of insurgent companies – referred to as purpose-led brands – have made sustainability a core part of their business models. These brands aim to minimize hidden external costs and offer products, that have fewer negative impacts on the environment. The growth potential of purpose-led brands is evident, with studies showing that these brands experience revenue growth up to 10 times higher than traditional brands.
Moreover, consumer surveys reveal that over 70% of consumers are willing to pay a premium for sustainable products. This demand for sustainability has led to the rapid growth of purpose-led brands, with a significant increase in the number of companies embracing ESG missions. 35% of all new consumer product start-ups now have a clear ESG mission, leading to a tenfold increase since 2005.
The Benefits of Purpose-led Brands
Purpose-led brands not only attract environmentally conscious consumers but also drive growth through various channels. By creating awareness around sustainability issues, these brands generate consumer interest and stimulate demand from retailers. The strong commitment to purpose also helps in attracting high-quality employees, further fueling growth, and attracting investors.
Scaling a purpose-led digital and business transformation poses unique challenges. While maintaining a commitment to purpose is crucial, CSOs often face barriers related to consumers, distribution, supply chain and organizational management. Overcoming these challenges requires a focus on providing a mainstream value proposition at mass-market price points, building sustainable supply chains and maintaining an unwavering sense of purpose.
Circular Commerce: Reducing Waste and Pollution
One of the key pillars of sustainability in the consumer goods industry is circular commerce. Traditionally, the linear model of manufacturing and consumption has led to significant waste and pollution. However, purpose-led brands are adopting circular principles to minimize waste and maximize resource efficiency.
Circular commerce involves designing out waste and pollution, keeping products and materials in circulation and renewing and regenerating natural systems. Predictive Product Lifecycle Management (PLM) plays a crucial role in implementing circularity throughout the product lifecycle. By repairing, reusing, refurbishing or recycling products and packaging; purpose-led brands extend their useful life and reduce waste.
Companies can also leverage digital technologies to optimize demand and inventory planning, thereby reducing waste resulting from contamination and overproduction. These predictive PLM practices not only contribute to environmental sustainability but also improve overall ESG outcomes.
Sustainable Packaging: A Shift Towards Eco-Friendly Solutions
Plastic packaging has been a game-changer for the consumer goods industry, enabling safe transportation and storage of products. However, the poor recyclability of plastic packaging has had detrimental effects on the environment, leading to a global plastic waste crisis. Purpose-led brands are actively seeking sustainable alternatives to plastic packaging.
Rethinking product packaging involves exploring reusable materials like glass, wood or metal and developing biodegradable biopolymers for edible food packaging. To create a more circular packaging lifecycle, purpose-led brands can implement buyback programs, where consumers can return physical packaging for recycling or reuse. This approach not only reduces environmental impacts but also fosters consumer engagement and loyalty.
Digital technology also plays a significant role in reducing packaging waste. By utilizing 3D technologies, purpose-led brands can visualize packaging design, simulate digital twins and improve visual merchandising in virtual storefronts. These innovations contribute to sustainable packaging practices and waste reduction.
Provenance and Traceability: Ethical Sourcing and Supply Chain Transparency
In addition to circularity and sustainable packaging, purpose-led brands prioritize provenance and traceability throughout their supply chains. Ethical sourcing and responsible behavior are essential components of their sustainability strategies. Purpose-led brands strive to ensure that their supply chains adhere to high standards, avoiding practices like child labor and sourcing from blacklisted countries.
Supply chain visibility and traceability are crucial to meet regulatory requirements and consumer expectations. Technologies like blockchain offer a reliable and transparent solution, enabling the recording of information on an immutable distributed ledger. This technology allows all participants in the supply chain, including buyers, sellers, suppliers and logistics partners; to have full visibility into the sourcing, manufacturing and transportation processes.
By leveraging blockchain and other digital solutions, purpose-led brands can track the provenance of raw materials, monitor manufacturing processes and provide consumers with access to information about the journey of the product. This transparency fosters trust and confidence among consumers, reinforcing the brand’s commitment to sustainability.
The Road to Mainstream Success
While purpose-led brands have experienced significant growth, scaling a purpose-aligned business and digital initiative to achieve mainstream success poses unique challenges. Overcoming these challenges requires a combination of factors, including providing a mainstream value proposition at affordable price points, building sustainable supply chains and maintaining a strong sense of purpose.
Consumer and distribution-related barriers often hinder scaling efforts. Purpose-led brands need to understand the needs and preferences of their target consumers, tailor their value propositions accordingly, and effectively communicate their unique selling points. Collaborating with retailers and optimizing distribution channels can also help reach a wider audience.
Furthermore, building sustainable supply chains is crucial for long-term success. Purpose-led brands must work closely with suppliers to ensure ethical sourcing, minimize environmental impact and promote responsible practices throughout the value chain. Implementing robust supply chain management systems and monitoring mechanisms can help maintain transparency and accountability.
Maintaining an unwavering commitment to purpose is essential throughout the scaling process. Purpose-led brands should continuously engage with their employees, consumers and other stakeholders to reinforce their sustainability goals and foster a sense of shared responsibility. By staying true to their purpose, purpose-led brands can overcome challenges and continue to drive sustainable growth.
The consumer goods industry is undergoing a significant transformation as purpose-led brands lead the way towards a more sustainable future. These brands prioritize circular commerce, sustainable packaging and ethical sourcing, recognizing the importance of minimizing environmental impact and hidden costs. By providing mainstream value propositions, building sustainable supply chains and maintaining a strong sense of intent, purpose-led brands are reshaping consumer preferences and driving growth. Embracing sustainability is no longer an option but a necessity for consumer goods companies looking to thrive in the evolving marketplace.
Consultant, SAP Emerging Technologies