Sustainability in the CPG industry as a driver for digitalization and economical growth
In 2015, the United Nations member states agreed to embrace the 2030 Agenda for Sustainable Development. This declaration provides a shared blueprint for peace and prosperity for people and the planet, now and into the future. At its heart are 17 Sustainable Development Goals (SDGs), which are an urgent call for action by all developed and developing countries to work together in a global partnership. That same year the Paris Agreement was signed during the fifteenth meeting of the Conference of the Parties (COP15) to keep the rise in the global average temperature under 2ºC and ideally to 1.5ºC above preindustrial levels. Unfortunately, progress overall has been slow. Most countries have not achieved their Paris Agreement targets. What’s more, a dire report issued earlier this year warns of increasingly extreme heat waves, droughts, and flooding, as well as a key temperature limit being broken in just over a decade.
During COP26 in November 2021, SAP together with 778 small, midsize, and large businesses representing US$2.7 trillion in annual revenue and employing 10 million people, called upon G20 leaders to take action to limit the average global temperature rise to 1.5°C.
SAP CEO Christian Klein announced the following three key priorities where SAP, thanks to its wide customer base and comprehensive portfolio of core and specific solutions, can contribute the most:
- Reduce and measure emissions
- Protect our natural habitats
- Cooperate on a global scale
For many years, SAP® technology has been driving the digitalization of companies around the world. However, it is clear that technology alone is not enough to conquer the environmental crisis we are experiencing. We must also all work together to reinvent the global economy and how companies cooperate within it, adapt industrial operations, reform our food system, and do much more.
The consumer products industry is one of the most affected by these environmental issues and perhaps the one that can provide the biggest impact. Consumers are very aware of this and are already pushing the changes they want to see in their preferred brands by altering their purchasing behavior and choosing more sustainable alternatives.
Embracing sustainability is a winning strategy for today’s consumer products company. Consider how early adopters are prevailing over competitors and winning the eco-conscious market segment by offering green alternatives. A similar trend emerged during the experience economy when agile companies had the foresight to act early and define new standards in the consumer experience.
As always, some companies try to “ride the wave” after lagging behind the frontrunners and failing to make the proper investments to deliver results on time. This phenomenon is called “greenwashing” – a marketing ploy seen in PR campaigns that aim to give a company an environmentally friendly and responsible public image, without a sufficient basis for it. Clearly, timing and transparency are critical for brand reputation when sustainability comes into play.
Being able to offer transparency while increasing visibility into a series of sustainable innovations can also be a powerful strategy. This is especially true when brand reputation is as important as the product itself in the eye of the consumer, which is often the case in the CPG industry. In fact, the financial data of companies makes it clear that those who invest in sustainability and promote their role in fighting the climate problem achieve higher returns and increase shareholder value. These positive results may not only be due to increased revenue; they may also stem from past investments that increase resource utilization efficiency, enable supply chain collaboration, minimize industrial wastes and their disposal costs, or develop a cheaper and faster R&D process. Those metrics build up shareholder value and also provide a sustainable impact (either directly or indirectly). This delivers a double benefit to the company: the economic advantage of cost savings or added revenue, as well as improvements in sustainability KPIs, which in turn generate additional revenue.
SAP’s digital core and sustainability solutions can break down those high-level goals into a set of precise actions. Our customers can take advantage of the solutions they already own and start to build their sustainability strategy on their existing infrastructure. The first step in achieving “sustainability maturity” is to monitor sustainability KPIs. Most of the information needed to do so is very probably already available, but the knowledge of how the SAP solutions work together might not be. After implementing the monitoring phase, the next step is adapting the existing business processes and company strategy – reactively at first, then proactively later – to make an impact on the monitored KPIs. The final stage is achieving the ability to capitalize on the investment made and actions taken to generate new revenue streams and sustainable business models.
SAP can help you climb this sustainability maturity structure by providing state-of-the-art solutions together with expertise delivered through our service offerings. A sustainability advisor can assess the actual situation and help you plan the required actions to move to the next level. Specific strategies can be designed to cover key innovations for the CPG industry, such as circular economy, plastic reduction, or responsible design, by taking advantage of the synergies between the digital core, standard processes, and specific sustainability solutions.
Generally, SAP services play a fundamental role in achieving sustainability maturity. They provide both the technical expertise to smoothly integrate SAP solutions in your landscape and the business and functional knowledge to fully exploit the standard features of our digital core and sustainability management solutions. By so doing, they can help you achieve your planned goals while reducing complexity, increasing reuse, and adhering to standard practices.
Sources and more info on SDG and COP26: