The three Rs of sustainability reporting for CPGs
- Posted on May 24, 2023
- Estimated reading time 6 minutes
Take a look at the shoes you’re wearing. Are they looking a little scruffy and worn out? Need a new pair? When you head out to the shops or start browsing online, a complex set of decision-making factors come into play.
Psychological, social, cultural and economic factors all influence your purchase. But a new factor has been added: environmental and sustainability considerations. For a growing cohort of consumers, a pair of trainers advertising the lowest carbon footprint, the greatest recyclability or any other green-led advantage will win the sale ahead of competitor brands that lack comparable sustainability benefits.
Brands like Oatly are already printing the CO2 impact of their products directly on the packaging as a marketing tactic. Other brands let consumers scan a QR code or even the product SKU barcode to view easy-to-follow recycling guides for that specific product.
Numbers from The Economist Intelligence Unit and the WWF bear this out: 66% of all consumers – rising to 75% for millennials – say they consider sustainability when making a purchase. According to Accenture, sustainable brands are growing 7.1 times faster than conventional brands.
I could go on and on with the numbers. Needless to say, there are endless surveys and statistics showing that consumer demand for sustainable goods is growing.
I know I’m preaching to the choir; you already know how much consumers value sustainability. Your own research will inform your specific decisions.
The Sisyphean task of sustainability reporting
You can’t do much without data. To make sustainability claims about your products, supply chain or business practices (claims that could increase sales and revenue), you need to be measuring the numbers.
And then there’s regulatory compliance. In the UK for example, you need to comply with measures such as Streamlined Energy and Carbon Reporting (SECR), Climate-Related Financial Disclosure (CRFD) for Net Zero, and Sustainability Disclosure Requirements (SDR). They all require precise and reliable data on carbon emissions, provenance, recyclability and much more.
The problem is data collection. Gathering the many millions of different data streams is an uphill struggle.
Back to the running shoe example: to get that coveted recyclable, recycled, low-CO2 emission trainer to market, the footwear manufacturer needs to know several things. It needs to know the provenance of the materials – where did the raw materials come from? What were the manufacturing emissions? What were the shipping emissions? How can the materials be recycled? And it needs to know comparative data – what were the equivalent emissions of traditional materials? Are they better or worse than the new materials?
Meanwhile, sustainability data reporting (ESG) regulations are getting stricter. Not just the legally required scope 1 and 2 emissions (direct emissions your company and products are responsible for, as laid out by the Greenhouse Gas Protocol) but increasingly of indirect, upstream scope 3 emissions. Scope 3 isn’t yet law in most regions. But it soon will be. This will take the requirements to the next level, requiring consumer goods companies expand and extend their greenhouse gas emissions (GHG) reporting.
To do this, you need access to your suppliers’ data. Organisational silos are a major barrier, both internal silos and external silos between companies in the supply chain.
It’s a test of your supply chain communications. How traceable is that small item seven-levels deep in your supply chain? Can you dig out the data you need from an indirect supplier you’ve potentially never had contact with?
The three Rs: Record, report, reduce
To make ESG easy and improve your sustainability data reporting, quick three Rs guide can help define your strategy and put you in a strong position as consumer expectations change and regulation tightens.
- Record all data in a single system
Back to your worn-out trainers and the search for a new pair. The ideal scenario is that the shoe manufacturer has an Environmental, Social and Governance (ESG) system containing all this data and more. A single version of the truth that lets them answer every question and pull up any data point.
The same goes for any other CPG category. If you want to know the GHG impact of your logistics for one product line? No problem? Need to know which supplier produces the most CO2? It’s all there recorded on your ESG system. Most consumer goods firms have only just started on their journey towards this kind of system.
The services and work you’ll need will have to be tailored to your supply chains and organisational structure. Some software startups offer magical systems to surface your sustainability data. But they only cover specific areas, such as traceability or circularity. This creates yet more data silos and only tackles a fraction of the problem, not the whole. Only a single, customised, end-to-end system will work, a system that can record data from workflow webforms, APIs, batch files, spreadsheet imports and many more.
Data sources could include (but certainly aren’t limited to):
- Energy and fuel consumption/emissions
- Renewable energy usage and carbon offsets
- Supply chain and product life cycle assessment
- Enterprise data from ERP or similar
- Operations data (OT, SCADA, loT)
- Financial, CSR, and regulatory data
Which brings us to the second R…
- Report data accurately and clearly
Reporting. Such as small word, yet it entails so many tasks, challenges, and difficulties. Reporting gets easier when the data is reliable and accurately recorded and extracted. But the other side of this equation is the software – what do your reporting dashboards look like? Are they customisable? Can they serve multiple business units and departments? Do they allow industry and historical comparisons? Are the visualizations good enough to guide decision-making? Is there future modelling and decision-making support?
Time to analyse your reported data, discuss it, and take action to reduce your environmental footprint. Where can improvements be made? What steps can you take to eliminate emissions or fuel consumption? These decisions become easier once the stakeholders can see the vital data presented by a single, cohesive ESG platform. And you can tell your customers exactly what you’ve done to improve your environmental impact, helping boost revenue and wider appeal.
Don’t face that hill alone
This far-reaching and intensive data project – creating a cohesive and complete ESG system for interrogating your environmental impact – can’t be done alone. It covers highly diverse and distributed data sources, a wide-scale, complex problem that falls into the ‘seek external skills help’ category, not the ‘let’s recruit and develop in-house’ category.
You need outside help to ensure you span the key areas of traceability, ESG, and circularity. The system needs to encompass materiality assessments, standards and frameworks, KPI dashboards and visualisations, modelling and decision support, data and analytics, and programme management.
It’s a big problem that needs a big-picture, holistic view to solve. It needs a partnership with an organisation that can help you look across your entire estate and supply chain. Avanade has the vision and depth of capability to take this large-scale approach.
Speak to us, whatever your ESG challenges
We’ve worked with some of the world’s biggest CPGs. We’d love to help you with your sustainability strategy and reporting challenges. Contact us today.
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