1、Consumer Products and Retail How sustainability is fundamentally changing consumer preferences Executive Summary Consumer preferences are strongly impacted by sustainability: Growing concerns about environmental challenges and the need for conservation of natural resources as well as greater expecta
2、tions around societal issues have brought sustainability into the mainstream for consumers and organizations. This extensive research program analyzes the impact of sustainability on consumers purchasing patterns and examines how far organizations have come in understanding and meeting their expecta
3、tions. Our key findings are: A significant majority of consumers (79%) are changing their purchase preferences based on sustainability. This contrasts sharply with the 36% of organizations who believe consumers are willing to make this change in their choices/ preferences based on social or environm
4、ental impact. Such a gap represents a risk of 6% of brands and retailers revenue if unaddressed. Consumers practice sustainability-led behavior in their daily life (eg, minimizing food waste or using energy-efficient appliances), and in their shopping behavior (eg, preferring products with minimal p
5、ackaging). They attribute positive emotions such as feeling “happy” when buying sustainable products, which shows the potential for sustainability to impact customer experience, happiness and loyalty. However, COVID-19 has made the situation more nuanced, with consumers weighing up safety issues aga
6、inst sustainability goals. For example, we are currently seeing a decrease in demand for used or refurbished products as customers prefer avoiding “touch-based” practices. At the same time, however, consumers are still keen to make sustainability work: 65% are willing to purchase alternative non-pla
7、stic products or packaging than plastics in the light of COVID-19. 68% want to increase use of local products they consider it as a perfect blend of “safe” and “sustainable” Moreover, they do not want companies to abandon sustainability goals and practices in these crucial times. If they meet these
8、needs, organizations can benefit significantly: 77% say their sustainability approaches increase customer loyalty and 63% have seen a revenue uptick. There is a significant opportunity to gain market share given this growing action/intention of consumers to switch based on sustainability. However, d
9、espite the mutual value on offer to both, both consumers and organizations show weaknesses in their thinking and approach: Organizations fail to grasp how fundamentally consumer preferences have shifted as a result of sustainability in terms of trust, loyalty, and price expectations. Many consumers
10、are not aware of the environmental or social consequences of many of the common products they purchase and therefore their best intentions go unfulfilled. We highlight four best practices: Empower consumers and employees through awareness, education and choice to to deeply embed sustainability. Posi
11、tion technology at the core of sustainability initiatives to drive value Build in robust sustainability governance Collaborate with the broader ecosystem for a greater impact. 2Consumer Products and Retail How sustainability is fundamentally changing consumer preferences Introduction Climate change
12、and sustainability issues are top of our social and economic agenda. This is clearly reflected in our research into consumer sentiment and opinion: Nearly 80% of consumers want to be able to make a difference in saving the planet for future generations. 77% are concerned about the humane and fair tr
13、eatment of workers. 72% are personally concerned about their environmental footprint. 66% choose to purchase products or services based on their “environmental friendliness.” Clearly, concerns about climate change, pollution, biodiversity loss, resource scarcity, and the wider well-being of society
14、means that consumers are posing hard sustainability questions to consumer products and retail (CPR) organizations. And, these changing behaviors and values regarding environmental friendliness, social responsibility, and economic inclusiveness are translating into a demand for corporate change. As w
15、ell as consumers, governments, public-interest groups, investors, competitors, and employees are also pushing CPR organizations to change their ways of working, cultures, and products. These changes have far-reaching implications for the sector and demand that products, services, operations, and eco
16、systems in which the companies operate are sustainable. To understand where the CPR industry stands today in terms of sustainability, we launched a comprehensive research program, surveying 7,500 consumers and 750 large organizations in this sector. In addition, we conducted one-on- one interviews w
17、ith a range of sustainability leads from large organizations. More details on the research methodology are found at the end of the report. Drawing on that extensive research, our report focuses on: 1. The importance that consumers and organizations place on sustainability and the impact it has on ho
18、w consumers behave and buy 2. How COVID-19 has impacted sustainability and safety preferences 3. The benefits organizations are deriving from sustainability approaches 4. The differences between perception and practice in sustainability 5. The maturity levels of CPR organizations in scaling their su
19、stainability initiatives 6. How organizations can accelerate their sustainability journey. 3 Defining sustainability in CPR The United Nations definition of sustainable development strives to strike a balance between the present and the future: “Sustainable development has been defined as developmen
20、t that meets the needs of the present without compromising the ability of future generations to meet their own needs. For sustainable development to be achieved, it is crucial to harmonize three core elements: economic growth, social inclusion and environmental protection. These elements are interco
21、nnected, and all are crucial for the well-being of individuals and societies.”1 Using this definition as a basis, we assess sustainability in the consumer products and retail industry along three dimensions: environmental, social, and economic (see Figure 1). Figure 1. Sustainability framework for c
22、onsumer products and retail organizations Initiatives focused on conservation of natural resources, reducing carbon and greenhouse gas emissions, responsible end-of-life disposal, etc. Social responsibility Initiatives focused on safe working conditions for the workforce, fair labor policies, and po
23、licies against child labor, gender discrimination and forced labor, etc. Initiatives focused on fair trade and commitments to a wider cause poverty reduction, education, etc. Economic inclusiveness Environmental friendliness Source: Capgemini Research Institute Analysis. 4Consumer Products and Retai
24、l How sustainability is fundamentally changing consumer preferences This framework including planet- and human-friendly operations, processes, products, and services also becomes the basis for how we define sustainability initiatives across the industrys value chain. As Figure 2 shows, we identified
25、 many areas where the industry is pursuing sustainability. These range from sustainable product design and development to broader societal initiatives such as poverty reduction. Figure 2. Sustainability across the CPR value chain Source: Capgemini Research Institute Analysis. SOURCING 3. Responsible
26、 use of natural resources 4. Due diligence of footprint of the raw materials MANUFACTURING 5. Sustainable manufacturing process (implementing maintenance, quality, and production processes to reduce waste and improve recyclability and reuse of materials.) 6. Use of renewable power and focus on energ
27、y effi ciency 7. Waste reduction PRODUCT DESIGN 1. Circular product design (maximum material recycling after product usage, easily taken apart into components, etc.) 2. Product sustainability (products that use less water or natural resources to manufacture) INFORMATION TECHNOLOGY 21. Energy usage i
28、n data centers etc. BEYOND OPERATIONS 22. Wider initiatives for humanity STORE OPERATIONS 13. Reducing waste in-stores 14. Reducing consumables in 15. Use of renewable power and focus on energy effi ciency FULFILLMENT 16. Lower last-mile emissions 17. Extending sustainability to logistics partners 8
29、. Recycled/recyclable/ alternative packaging 9. Refi llable packaging PACKAGING 10. Sustainable warehouse operations (building material, lighting etc.) 11. Lower emissions (route optimization, combining LTL truckloads etc.) 12. Extending sustainability to logistics partners DISTRIBUTION 18. Recycle/
30、upcycle unsold products/used products/packaging 19. Product as a service models CIRCULAR ECONOMY 20. Fair labor policy (worker safety, policy against child labor, policy against forced labor, policy against discrimination, fair prices to labor etc.) LABOR 5 Sustainability is key: Consumers see an em
31、otional connection; organizations see it as a strategic priority Sustainability impacts consumers purchase preferences and makes them happy More than half (52%) of consumers say that they share an emotional connection with products or organizations that they perceive as sustainable. As Figure 3 show
32、s, 64% say that buying sustainable products makes them feel happy about their purchase (and this reaches 72% among 2535 year olds). Sustainability thus makes a difference by touching upon the positive emotional aspects of consumers. “There is definitely a change that has taken place in the world in
33、consumers. Specifically, the younger generations such as GenZ are really starting to take decisions based on sustainability. Millennials are also sustainability oriented, but they still struggle sometimes to act upon that. But I think GenZ is much more likely to actually change their behaviors,” say
34、s Eelco Smit, senior director sustainability at Philips. From the perspective of countries, 70% of consumers from Italy, 71% from Spain, and 66% from UK agree to feeling happy when buying sustainable products as compared to 58% of US consumers. Figure 3. Consumers share an emotional connect with sus
35、tainability 64% 52% 61% 48% 72% 58% 69% 57% 61% 48% 63% 46% 64% 53% 55% 45% Overall 1824 years old 2535 years old 3645 years old 4655 years old 5660 years old 6165 years old 66 years and above Buying sustainable products from organizations makes me feel happy when shopping I feel an emotional connec
36、tion with a product/organization which is sustainable/undertakes sustainability initiatives Percentage of consumers agreeing to statements below Source: Capgemini Research Institute, Sustainability in Consumer Products and Retail Survey, March 2020, N=7,520 consumers. 6Consumer Products and Retail H
37、ow sustainability is fundamentally changing consumer preferences The emotional connection with sustainability is also reflected in purchase preferences. Overall, 79% of consumers are changing purchase preference based on the social responsibility, inclusiveness or environmental impact of their purch
38、ases (see Figure 4). Of those who have changed preferences, the primary motivations are: Wanting to make a difference in saving the planet for future generations (80%) Concerns about fair workforce treatment (77%) Concerns about issues like poverty and hunger (76%). Increasingly, organizations are a
39、lso offering products that directly address consumers sustainability preferences. For instance, P and 53% agreeing that their grocer has recycling initiatives in store and take visible energy conservations measures (e.g. doors in front of fridges, keeping temperature maintained in store by door clos
40、ing, etc.). For instance, US-based Kroger supermarkets is investing in low-carbon refrigerants, LED lights retrofitting, and leak reduction initiatives for refrigerants in its stores to conserve energy and these kinds of initiatives are being noticed and appreciated by consumers.6 Country wise, 58%
41、of French consumers, followed by 49% from UK and 47% from the Netherlands agree that their retailers have stopped using single use plastic bags in stores to carry products, in contrast with only 28% from the US. Overall, 79% of consumers are changing purchase preference based on the social responsib
42、ility, inclusiveness or environmental impact of their purchases. 9 Sustainability is a strategic priority for consumer products and retail organizations Ynte de Vries, program manager for Farm Energy at FrieslandCampina a Dutch multinational dairy cooperative says, “Our member dairy farmers are comm
43、itted to producing milk in the most sustainable way possible. Sustainable business operations are the core of our member dairy farmers work since we started almost 150 years ago. One can say, caring for animals and nature is part of our DNA. More recently, we see a growing interest in sustainability
44、 around us. Customers and consumers realize the importance of the topic and have started asking questions. For larger companies it is now a strategic priority to be able to answer these questions and to start working on these issues in a collective way. This is why you now see consortia of large com
45、panies across the world are coming up with initiatives and/or are taking over initiative from governments. At FrieslandCampina, we have a strong track record of “act and measure”. We have stepped up our game and are used to cooperate with others, even competitors, to solve strategic collective chall
46、enges. We call this “Cooperative Sustainability”, and we believe it is the key to actually achieve results that matter.” Our interviews with over 750 executives in the consumer products and retail industry confirms how important this issue is to organizations: 90% say sustainability is highly import
47、ant for the industry 75% believe that they have a strategy, infrastructure, and resources in place to drive sustainability and circular economy efforts Two thirds (66%) say that sustainability is fully integrated into their business objectives. (see Figure 7). Figure 7. Sustainability is a strategic
48、 priority for consumer products and retail industry 91% 88% 90% 75% 76% 73% 66% 69% 64% Percentage of executives agreeing to statements below Sustainability is highly important for my industry We believe that we have the strategy, infrastructure, and resources to drive sustainability and circular ec
49、onomy initiatives Sustainability is fully integrated into our business objectives Overall CPR industryConsumer products manufacturing Retail Source: Capgemini Research Institute, Sustainability in Consumer Products and Retail Survey, April-May 2020, N=750 consumer products and retail organizations; N=400 consumer products manufacturing organizations; N=350 retail organizations. Our research on digital transformation priorities in the light of COVID-19 outbreak echoes the same views.7 18% of consumer
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