Sustainability in Procurement – Consumer Goods Industry

Published on 05 May, 2021

Consumer goods – especially FMCG – is a growing market due to the booming population. Unfortunately, their manufacture, packaging, and disposability are significant contributors to environmental degradation. As consumer awareness of environment protection increases, consumer goods companies now find it imperative to build in sustainability in their value chain and procurement practices. Many companies have already started moving in this direction while others will have to soon follow.

The fast-moving consumer goods (FMCG) industry mainly includes makers of foods, beverages, and personal care products. FMCG remains one of the fastest growing markets worldwide; according to a recent McKinsey report, 1.8 billion people are expected to join the global consuming class by 2025. However, the industry is also accused of being a major polluter, right from its manufacturing processes to its packaging.

With growing consumer awareness about environmental conservation, companies must now not only focus on product and service quality but also achieve sustainability goals. Based on the recent massive change in consumer behavior, any brand that follows sustainable practices and processes can now command a premium. This would be the incentive FMCG companies need to expend more efforts to create a less polluting, eco-friendly supply chain.

Consumer goods companies would need to revamp their entire supply chain, starting from the bottom. Companies would have to rethink raw material options, replacing synthetics with natural materials. They would also have to employ renewable resources and slow down on or stop using non-renewable resources or fossil fuels. The packaging of products would also change. All plastic packaging and non-degradable materials should be replaced with recycled, recyclable, or biodegradable material.

Brands such as Unilever have already started altering their value chain to ensure responsible, sustainable sourcing practices. Unilever has committed to become “carbon-positive” by 2030; it intends to eliminate the use of fossil fuels from operations and generate more renewable energy.

Another FMCG giant, Nestlé, is also moving towards responsible sourcing, doing its bit to save the planet. The company revisited and improved its operating models, implemented sustainable sourcing practices, and ensured these practices are embedded across its supplier ecosystem.

Creating a responsible supply chain requires efforts, starting at the top management level. There are many obstacles that companies face in this attempt:

  • Pricing difference between sustainable and non-sustainable options
  • Commercial-scale availability of chosen options
  • Vendors who can supply these alternatives
  • Steps adopted by competitors to reach this goal of sustainability

Issues in developing a responsible supply chain can be effectively resolved if the company has access to an expert resource that can extract the relevant information about it. Research can uncover insights and details that can help companies understand the complexity of their supply chain and make the necessary changes to bring in sustainability. Research can also provide data on the competition’s moves to embrace environment-friendly practices. Last, research can also highlight the changes taking place in government regulations worldwide, which can affect a company’s supply chain. Hence, if the company acquires timely, accurate data, it can make the right decisions and the required adjustments to build a strong, sustainable supply chain.