Consumers want it
Consumer and market preferences are shifting at pace2. Sustainability has risen on the consumer agenda as a key buying criterion. According to our Future Consumer Index3, 84%4 of consumers now consider sustainability important when making purchase decisions; 34%5 of consumers plan on increasing their level or exclusively purchasing sustainable products in the future; while 54%6 of consumers have reduced or stopped buying from organisations they believe have acted inappropriately on environmental or social issues.
At the same time, consumers are demanding external verification that the sustainability promises brands make are genuine. One in five consumers actively validate the claims made on the label or in advertising while 60% of consumers have been put off from buying products because they sense deceptive marketing — so-called greenwashing. As Ray MacSweeney, Associate Partner, Consumer and Retail, EY Parthenon, says: “Procurement teams need to invest in transparency and traceability systems that back-up their brand promise and build trust and confidence among consumers.” Here, technology is likely to play an important role in giving people access to the sustainability information they are looking for.
Concerns about climate change are also helping to reshape consumer behaviour. Gen Zs — defined as people between 10 and 24 years old — already comprise 1.8 billion people and account for 24% of the global population. Climate change tops their list of the most important global challenges, and they are also concerned about a range of other socio-economic sustainability issues. So, as they mature, they will expect the businesses they buy from to have sustainable strategies in place. Gen Zs are employees as well as consumers. As such, they are more likely to seek employers who share their commitment to the principles of global sustainability.
While Gen Zs are an important constituency, there are others — which makes it essential to define exactly what sustainability means to your target customers. As Ray MacSweeney comments: “Sustainability means different things to different people in different age groups, markets and channels. In Brazil, for example, consumers are much more likely to put a premium on initiatives that support ecosystem diversity. For Indian consumers, the key issue is water pollution while Chinese consumers are most concerned about air pollution. In the UK, there is a strong focus on plastics.”
While older consumers associate sustainability with the environment, younger consumers have a more holistic view of sustainability that includes human rights and social development aspects. Clearly, it is essential to take these differences into account when developing your sustainable sourcing strategy. A sustainability strategy can only succeed if it places the consumer at its heart.
Competitors are already doing it
As the global economy comes to terms with the downturn triggered by COVID-19, it would be unwise to ignore these changing consumer demands. If your business doesn’t listen to them, then your competitors certainly will. A growing number of companies are taking bold steps to reinforce trust in their brands by engaging more closely with consumers on the sustainability issues that concern them most. A notable example here is a leading British retailer’s ambitious plan to help 10 million live happier, healthier lives and convert the retailer into a zero-waste business7.
Sustainability creates resilience
One of the most important lessons that the pandemic has taught us is the fundamental importance of supply chain resilience. Last year’s wildfires in California and Australia, the world’s 7th and 11th largest economies respectively, indicate the potentially massive fall-out from a worldwide environmental crisis. Some businesses were caught out by supply chain disruptions without even knowing they had connections to businesses operating in California or Australia.
Sustainable supply chains are more resilient supply chains, which can help offset these risks. They require improved data collection which can enhance risk sensing. They also call for closer partnerships with suppliers, which enable collaborative strategies.
Sustainable supply chains are also driving towards investing in local suppliers, further improving resilience and minimising the threat of disruption while creating shared value in the community and boosting the local economy. Once again, public pressure is driving the community-first trend. For example: the COVID-19 crisis has increased demand for locally sourced products8, with 57% of UK consumers more likely to make future purchases from companies that actively support their communities.
The challenge: converting commitments into progress
A number of organisations have taken positive steps to respond to these pressures by publishing lists of commitments towards implementing sustainable sourcing strategies. The problem is that these organisations have been much slower than expected at converting their commitments into measurable progress. Regulators, investors, NGOs and consumers are demanding greater transparency from organisations when it comes to assessing the business impact and resilience of their supply chains. In practice, however, too many organisations are stuck in the dark ages when it comes to applying the principles of sustainability to this area of their business.