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Harnessing Sustainable Sourcing for Corporate Resilience

6/5/2024
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Jorge Zuniga Bio
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This year’s Environment Day theme of Land Restoration, Desertification and Drought Resilience outlines the opportunities for companies to accelerate and expand the implementation of sustainable agricultural practices. According to the Euromonitor Voice of the Industry Survey 2024, 54% of global companies plan on investing in sustainable sourcing over the next five years, demonstrating the urgency to address sustainable sourcing to establish corporate resilience.

Precise communication can boost sustainability credentials

Substantiating claims and enhancing consumer education can help communicate sustainability properly.

73% of global companies consider climate action extremely or very important to business resilience, yet only 10% think they’re communicating sustainability in a very efficient way to consumers

Source: Euromonitor’s Voice of the Industry Survey 2024

Consumers are more discerning around their products’ formulations, favouring products with transparent, traceable ingredients and sustainable sourcing – a trend particularly evident in the beauty, health and food sectors.

According to Euromonitor's Sustainability Claims Tracker, "organic" is the most prevalent sustainability claim across 11 industries, trusted by over half of global consumers. This highly resonating claim holds the most relevance in the packaged food sector, where 20% of global consumers actively look for 100% organic labels while shopping for food, and 17% are even willing to pay a premium for such products.

Also, companies are starting to include more specific claims to strengthen and validate their sustainability commitments, thereby promoting transparency in their product sourcing. For example, labels such as USDA Organic and B-Corp add an extra degree of credibility, verifying a product's sustainability credentials according to standardised third-party criteria.Chart showing top 10 sustainable sourcing claimsThough the US leads in organic claims, China's dairy and alternative products sector saw the most significant growth from 2020 to 2022, fuelled by a rural revitalisation programme promoting green agriculture for future food security. Meanwhile, to boost sustainability credentials, competitors in Europe and the US, particularly in the chocolate, coffee, and tea markets, are capitalising on Rainforest Alliance claims. This is further bolstered by the EU's new Deforestation-Free Products regulation, aimed at reducing carbon emissions and biodiversity loss.

Cross-industry opportunities to enhance product sourcing communication

Despite over half of global businesses planning to invest in sustainable sourcing, such claims’ prevalence is still low even in the leading industry, with only a 16% share of the digital shelf. This represents both challenges and opportunities for these industries. For example, coffee and tea take up a significant land mass, and deforestation causes huge ecological issues. One way in which to overcome this is to focus on regenerative agriculture, which will enable land to be more productive for a longer period. One example of this is Nestlé, which has committed to achieving 50% of its key ingredients to be sourced from farmers adopting regenerative practices by 2030.Chart showing prevalance of sustainable sourcingDairy is an extremely high-polluting industry due to methane emissions, demonstrating how targeting these emissions can be one of the most effective ways to slow climate change. For example, Danone is launching a partnership with the Environmental Defense Fund which will focus on improving reporting for agricultural methane emissions, advocating for the prioritisation of agricultural methane solutions and financing models to deploy farmer-friendly solutions. The company is the first to align with the Global Methane Pledge launched at COP26, working with farmers, organisations and governments.

The beauty and personal care industry presents vast opportunities for sustainable sourcing. Ingredients like palm oil, notorious for causing deforestation and impacting carbon emissions and biodiversity, are under heightened scrutiny. With the rising trend towards ingredient-led beauty emphasising transparent sourcing, 58% of industry respondents believe that ethically produced and sustainably sourced products will impact sales in the next five years.

Sustainable sourcing to drive resilience and differentiation

Across all industries, it is necessary to invest in sustainable sourcing to enhance corporate resilience to future risks like supply chain disruptions, fewer raw materials and soaring production prices.

Also, stricter regulation pressing for transparency throughout the supply chain creates a growing need to address scope 3 emissions (indirect emissions like transportation and post-consumption waste) and more specific reporting on product impacts, such as the EU’s crackdown on greenwashing and deforestation.

Complementing this, consumers’ interest in knowing more about their purchases and transparency encourages companies to prove products’ real impact and solutions with substantiated communication and labelling that will facilitate consumers’ sustainable purchases.

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