Understanding Sustainability in FMCG
Let’s start with the basics of sustainability in FMCG. We’ll take a look at what sustainability is and how it shapes consumer awareness and purchasing behavior. Then we’ll consider what companies can do to increase brand perception and loyalty, while measuring the impact of their investments in sustainability.
Definition and Core Principles of Sustainability
Sustainability is the quality or practice of being able to meet current needs without sacrificing the ability to meet future needs. Main principles are minimizing negative environmental impacts (such as by reducing carbon footprint) while conserving energy and natural resources. Additionally, sustainable practices aim to create the smallest amount of waste possible (which can manifest in responsible sourcing and eco-friendly packaging). The fight against climate change is also a frequent pillar.
The Link Between Sustainability and Purchasing Behavior
Consumers are increasingly considering sustainability criteria when deciding what products to buy and this of course impacts purchasing behavior. When people go to the store, they are looking for sustainability in FMCG and are often willing to pay higher prices for products with eco-friendly packaging and responsible sourcing, as well as those which support corporate efforts aimed at reducing carbon footprint.
Consumer Awareness and Ethical Considerations
Consumer awareness of sustainability matters has grown substantially in recent years, with an impact on purchasing behavior. Buyers are increasingly concerned about responsible sourcing (including fair labor practices), and that the products will have a minimal impact on the environment once they reach the end of their life cycle. This last concern is a major driver behind eco-friendly packaging. All in all, the ethical considerations of FMCG increasingly inform purchasing behavior.
Influence on Brand Perception and Loyalty
Sustainability in FMCG can also improve brand perception and loyalty, and is perhaps even necessary to achieve such improvement. Brands that put sustainability at the forefront – such as through eco-friendly packaging, responsible sourcing and reducing carbon footprint – can build a loyal base of customers that value sustainability. This new consumer awareness and potential for new revenue means that sustainability should not be something that companies do only “if it’s in the budget.” Rather, committing to sustainability should be part of business strategy.
Long-Term Market Trends and Consumer Expectations
Sustainability has long-term implications for market trends. Consumer awareness is shifting to sustainability in FMCG and buyers are often willing to pay higher prices for these products. Companies that act to capitalize on this purchasing behavior can build a loyal customer base that will provide a consistent and relatively large revenue stream well into the future. Additionally, sustainability is a priority at the policy level, with new laws and regulations effectively mandating sustainability in FMCG. Given this policy environment, firms that act now will boost brand perception and loyalty while positioning themselves ahead of new regulations.
Key Sustainability Strategies in FMCG
Sustainability in FMCG is especially important because of the high volumes these goods are sold in. Additionally, many FMCGs are food and beverage products, which consumers perceive as being closely linked with sustainability concerns such as reducing carbon footprint or responsible sourcing of agricultural input products.
Eco-Friendly Packaging Solutions
Eco-friendly packaging is a major consideration that informs purchasing behavior. Buyers want to be sure that the materials that hold their products have responsible sourcing and can be disposed of with minimal impact on the environment. This concern is especially acute for plastic packaging, due to consumer awareness that plastic often ends up as litter. As a response, sustainability in FMCG is increasingly fostered via biodegradable, eco-friendly packaging.
Responsible Sourcing and Supply Chain Management
Supply chains and responsible sourcing are perhaps the biggest opportunities for changes toward sustainability in FMCG. Consumer awareness is now trained on responsible sourcing of inputs, because buyers know that inputs impact sustainability in FMCG long before the products reach the store shelves.
Reducing Carbon Footprint and Waste
Reducing carbon footprint and making sure that production minimizes waste are also important to growing brand perception and loyalty. Using renewable energy sources in FMCG preparation, while also optimizing processes to reduce waste, are ways that companies can increase sustainability in FMCG.
Innovation in Product Formulation
Consumers are likewise keen on embracing innovations in product formulations that use less energy or raw materials while reducing carbon footprint. Likewise, buyers also like to see sustainability in FMCG in the form of high-efficiency products that can do more with less, such as high-efficiency (HE) laundry detergent.
Measuring the Impact of Sustainability
When companies take action to boost sustainability, they need to evaluate their efforts using objective criteria. That is where business metrics come in.
Consumer Surveys and Feedback Tools
Companies naturally need to know what consumers are thinking and how that drives purchasing behavior. Firms in the FMCG sector may use technology solutions (such as large-scale consumer data aggregators) to identify trends in purchasing behavior. Likewise, companies may collaborate with retail partners to collect data more directly (such as through surveys in smartphone apps or check-out terminals) to measure consumer awareness and find what drives purchasing behavior.
Sales and Market Share Data
Likewise, companies and market research firms can track sales data to look for trends in purchasing behavior and consumer awareness. Recent data shows an upward trend in consumer preference for sustainability in FMCG, with a study from New York University showing that FMCG products marketed as sustainable accounted for nearly a third of growth in the sector from 2013 to 2023, and market share continues to grow each year.
Life Cycle Analysis and Environmental Metrics
Companies can also perform life cycle analysis (LCA) and look at the environmental metrics of their products to measure sustainability in FMCG. LCA considers every step in a product’s journey – from raw material extraction to disposal — and can seek out possible improvements at every step in the process. Product inputs might be adjusted to boost responsible sourcing or with the goal of reducing carbon footprint. Companies may also switch to eco-friendly packaging so that their products are the source of less pollution or litter.
Third-Party Sustainability Certifications
Certifications from third parties can signal to consumers that a product matches buyer expectations for sustainability in FMCG. Legitimate certifications have a positive impact on brand perception and loyalty, and can also foster consumer awareness of a brand as a responsible actor in the sector.
Challenges and Barriers to Sustainable Purchasing
Sustainability in FMCG is critical but it is not without its difficulties. Let’s take a look at what challenges firms can expect.
Pricing and Affordability
Sustainable FMCG products often have higher prices due to increased labor and compliance costs, plus fewer providers of things like eco-friendly packaging and thus less downward pressure on prices. Since sustainable FMCG products often have an increased price point, some consumers may go elsewhere because they cannot or will not pay the higher prices.
Lack of Clear Standards and Labels
“Sustainable” is not a regulated term, and so practically any brand can claim sustainability in FMCG products. Additionally, not all third-party certifications are rigorous or respected. There are also dozens or hundreds of legitimate standards and labels with different scopes, so it can be hard for a firm to choose the right sustainability certification while also positively affecting brand perception and loyalty.
Consumer Education and Awareness Gaps
In some cases, consumers may not know that sustainable alternatives exist, or may not even believe that they exist (e.g. laundry detergent that does not require hot water). As such, consumers then might not buy these products or not apply sustainability practices when using them (such as by unnecessarily washing their clothes on hot). Companies may need to invest in advertising or awareness campaigns focused on informing consumers about sustainability in FMCG.
Balancing Profitability with Sustainability Goals
A new investment in sustainability represents a shift in existing resources and perhaps also new expenditures. It can be expensive for a company to make this transition, since it means taking company time to establish relationships with new vendors that provide eco-friendly packaging or that follow responsible sourcing practices. The upfront cost can be high and firms understandably need to balance that against their bottom lines.
Why Choose ESR Research to Measure Sustainability’s Impact
Sustainability in FMCG is important but it can be hard to put numbers on. That’s where ESR Research comes in to measure sustainability’s impact for your brand.
Our Expertise in FMCG Market Analysis
ESR Research has more than 30 years of experience in FMCG market analysis and we have worked with companies of all sizes and in numerous markets. No matter what kind of customer you are, our global expertise in sustainability in FMCG will help you get the insights you need.
Customized Research Solutions for Sustainable Strategies
We offer a unique fit tailored to each client based on their needs and use case. At ESR Research, we do more than provide top-level summaries. We delve into our clients’ needs in the sustainability in FMCG space so that we can provide actionable information you need to prepare strategies for success in this area.
Comprehensive Data Collection and Interpretation
At ESR Research, we use the latest methods to collect data on any part of the sustainability in FMCG market – analysis of consumer awareness and purchasing behavior, brand perception and loyalty benchmarks, and more – to give you the insight you need to keep your brand at the top of the FMCG market. Plus, our expert interpretation means that you won’t just get the numbers – you’ll get the analysis you need to turn data into decisions.
Driving Informed Decisions for Long-Term Growth
Brands that leverage sustainability in FMCG will be on a track for growth. When you partner with ESR Research, you’ll be able to identify trends in purchasing behavior and consumer awareness, and you can align your sustainability initiatives with new directions in the market. Look to ESR Research for the data you need to drive long-term profitability in the vital sector of sustainability in FMCG.
Works consulted
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