Sustainability Sparks Retail Sales

Across retail channels, more retailers now strategically seek partnerships with consumer packaged goods (CPG) suppliers that espouse sustainable business practices to gain a competitive advantage in this crowded sector.

Retailers’ and suppliers’ sustainability efforts reflect a voluntary commitment to environmental friendliness and corporate social responsibility. Sustainability programs help retail companies ensure their products protect people and the environment, eco-friendly raw materials, manufacturing practices, modes of transportation, and recyclable or compostable packaging.

Making sustainable business choices can help retail companies stand out and attract the loyalty of increasingly socially conscious shoppers, as the recent studies below suggest.

Consumers desire eco-friendly choices

Consumer attitudes are changing as shoppers acknowledge the long-lasting effects of their consumption patterns on the environment. Gaining access to richer information on products and companies’ practices has made consumers more informed and willing to change their shopping habits.

For instance, consider these recent findings on sustainability in retail:

• 93% of global consumers expect more of the brands they use to support social and environmental issues¹  The Value of Sustainability in Retail Marketing. Retail Industry Leaders Association. 2018.
• 92% of consumers would choose paper-based over plastic-based packaging²  Owens, Beth. Sustainability in Retail: 4 Ways to Make Your Business More Sustainable. VendHQ. April 16, 2019.  Check out these brands that use paper-based packaging: SENZABAMBOO, Paul & Pippa, ARIA.
• 88% of consumers want product packaging to provide more information about sustainability³  Owens, Beth. Sustainability in Retail: 4 Ways to Make Your Business More Sustainable. VendHQ. April 16, 2019.  
• 73% of Millennial consumers are willing to pay more for sustainable brands⁴  Nielsen. Global Millennials: The we, more and now generation. 2016.
• 51% of Millennials check the packaging labels to ensure positive social and environmental impact⁵  Nielsen. Global Millennials: The we, more and now generation. 2016.
• 40% of U.S. consumers purchased one or more products from a socially responsible company in the past six months⁶  The Value of Sustainability in Retail Marketing. Retail Industry Leaders Association. 2018. 
• 30% of U.S. shoppers say they look at product labels for evidence of the company’s commitments⁷  The Value of Sustainability in Retail Marketing. Retail Industry Leaders Association. 2018.  

Experts estimate 68 million American adults base their purchasing decisions on their personal, social and environmental values and say they will spend up to 20% more on environmentally sound products.⁸  The Value of Sustainability in Retail Marketing. Retail Industry Leaders Association. 2018. 

Also, the trend toward sustainability is global in nature, with European consumers leading the way in demanding more from retailers and CPG suppliers. For instance, nine in 10 British consumers want all packaging to be recyclable. More than a third (36%) of Europeans – and 53% of European Millennials – already boycott brands over packaging sustainability concerns. More than two-thirds (68%) of UK shoppers say the environmental impact of a product’s packaging affects their purchase choice, rising to 77% in Germany and 81% in Spain.⁹  In numbers: The growing consumer demand for sustainable packaging. Edie Newsroom. November, 26 2018.

How sustainability impacts the CPG industry

Given the consumer-driven imperative to take sustainability seriously, more retailers now seek suppliers that can help to support their sustainability initiatives and reflect consumers’ expectations. For instance, more retailers now search for suppliers that have attained sustainability certifications, such as Rainforest Alliance Certified, Global Recycle Standard, Fair Trade Certified, and LEED. In addition, many grocery retailers intentionally partner with local suppliers to shorten the supply chain and reduce their carbon footprint.

And studies show retail’s sustainability efforts are paying off. 

Brands and retailers must adapt
for the future of the planet and their businesses¹⁰
In numbers: The growing consumer demand for sustainable packaging. Edie Newsroom. November, 26 2018.

According to research from NYU Stern School of Business, sustainability-marketed products grew nearly six times faster than conventionally marketed products and more than three times faster than the overall CPG market average.¹¹  Kronthal-Sacco, Randi and Tensie Whelan. Sustainable Share Index: Research on IRI Purchasing Data (2013-2018). NYU Stern Center for Sustainable Business. March 11, 2019.

Products marketed as sustainable are driving product and category growth, as they:

• Delivered nearly $114 billion in sales across all categories in 2018, up 29% since 2013, proving there’s momentum for sustainable products
• Accounted for nearly 17% of market share in terms of dollars across all categories, up from 14% in 2013
• Delivered slightly more than half (50.1%) of CPG market growth during the five years ending in 2018 – despite accounting for only 17% of the market, proving sustainable products punch ‘above their weight.’¹²  Kronthal-Sacco, Randi and Tensie Whelan. Sustainable Share Index: Research on IRI Purchasing Data (2013-2018). NYU Stern Center for Sustainable Business. March 11, 2019.

Consumers prove they’re serious about sustainability, as products that enhance environmental sustainability and societal health generated 10% to 15% of revenue for U.S. retailers in 2015.¹³  The Value of Sustainability in Retail Marketing. Retail Industry Leaders Association. 2018. Marketing communications related to sustainability translated into sales growth of 2% for products with sustainability labeling and 5% for products with sustainability marketing programs.¹⁴  The Value of Sustainability in Retail Marketing. Retail Industry Leaders Association. 2018.

Notably, the following types of sustainability-marketed products were most dominant, accounting for more than 18% of their category.

• Dairy: Natural cheese, milk, and yogurt
• Bakery: Fresh bread
• Center store: Crackers and salty snacks
• Beverages: Bottled juices and coffee
• Paper products: Facial tissue and toilet paper¹⁵ Kronthal-Sacco, Randi and Tensie Whelan. Sustainable Share Index: Research on IRI Purchasing Data (2013-2018). NYU Stern Center for Sustainable Business. March 11, 2019.

What sustainable retail looks like

The following leading retailers and brands show what sustainability initiatives look like in retail: 

• Walmart: The retail giant announced plans to reduce the plastic waste in its private label packaging, setting a goal to make all such materials 100% recyclable, reusable or compostable by 2025.¹⁶  McDonald, Samantha. After Turning Around Walmart, Can CEO Doug McMillon Help Other US Corporations? Footwear News. September 23, 2019.  
• Target: The retailer has committed to sourcing 100% of the electricity used in its domestic operations from renewable sources by 2030. In addition, Target will ensure rooftop solar panels are installed at 500 of its locations by 2020 and reduce its supply chain’s carbon footprint.¹⁷  Wright, Beth. Target furthers renewable energy commitment. Just-Style. June 14, 2019.
• Trader Joe’s: To eliminate plastic from its stores, the grocery retailer will no longer offer single-use plastic bags, and will replace clear plastic produce bags and Styrofoam packaging with compostable alternatives.¹⁸  Locker, Melissa. Here’s how Trader Joe’s plans to cut 1M pounds of single-use plastic from its stores. Fast Company. March 11, 2019.
• Nestle, Kellogg and Danone: These CPG suppliers are among 19 companies that have created a coalition, called “One Planet Business for Biodiversity,” to focus on scaling regenerative agriculture practices, boosting cultivated biodiversity, and eliminating deforestation by protecting natural ecosystems.¹⁹  Gelski, Jeff. Nestle, Kellogg among companies forming biodiversity initiative. Food Business News. September 23, 2019.
• Procter & Gamble: Marketing for the ubiquitous Tide brand encourages consumers to save energy, specifically by using half the energy per load of laundry by washing with cold water.²⁰ The Value of Sustainability in Retail Marketing. Retail Industry Leaders Association. 2018.   

The retail landscape continues to shift in response to unrelenting consumer demand for sustainable products. Retailers can show their genuine commitment to environmental change by partnering with CPG suppliers that follow sustainable business practices. When retailers and suppliers collaborate to deliver sustainable products and business practices, consumers feel better about their purchases and businesses are poised to profit.

What steps has your company taken to support sustainability?

Looking for sustainable and eco-friendly products? Source brands in the Sustainability collection on RangeMe.