Food companies are increasingly opting for single-use package products (or sachets) to cater to rising consumer demand. The sachet-culture leads to more waste, says Jenny Davis-Peccoud, partner, Bain & Company, and a leading global expert in sustainability and corporate responsibility in an interview with Fortune India. She urges companies to re-visit their business strategies and collaborate with stakeholders across the value chain to ensure they turn profits while keep their triple bottom line—a measurement of a company’s social responsibility, economic value and its environmental impact—intact. Edited excerpts:
Can corporate social responsibility (CSR) create a sustainable social impact?
Yes. But, CSR for me is not the right focus because that’s something where you do philanthropy alongside of your core business and that can be important but it is definitely not enough. So, I would like to call it sustainability incorporated responsibility, which essentially means that companies must look at the heart of their business and evaluate their business practices. That is where they can have the biggest impact by stripping out carbon emissions, abandoning abusive marketing practices, putting out products in the market that are good for the world, etc.
Globally, only 4% of companies actually achieve their corporate sustainability goals, largely because they still consider it a reputational, not a strategic, issue. How can India do better? Why should companies collaborate across the value chain while setting sustainability goals?
Collaborate, that is the only way to have an impact. A lot of these problems are intractable and the issue is all along the value chain. So, any one actor is not going to be able to make a difference.
Case in point: Unilever is the world’s biggest buyer of palm oil and they buy 1% of the world’s palm oil. Now, if you buy only 1%, you won't be able to influence the market. So, in 2004, Unilever along with other players founded the Roundtable on Sustainable Palm Oil (an industry body for tackling environmental and social issues associated with palm oil production) because that is the only way that you can have an impact and that’s how you raise the standards of the entire industry.
We are going to see more and more of these kinds of collaborations, both across companies, NGOs, and with governments and other stakeholders.
Do you think good corporate governance and triple bottom line delivery go hand in hand?
I don’t think that you can do one without the other. You can’t be focussed on the triple bottom line without good governance because you need it embedded right from the top—in your board, executive management team, and business processes. To focus on the triple bottom line, you need to be able to debate some really difficult trade-offs. You can only do that if you have a functional board and forum to have those debates.
In India, how can companies, especially in the fast-moving consumer goods (FMCG) space, collaborate with farmers to attain higher sustainability goals?
Firstly, they should build more inclusive supply chains. The trick is to get on to the ground and understand real differences because what works for one crop doesn’t work for the other. So, you need to get in and understand each of your value chains. For instance, an American chocolate maker had to spend about eight months to map out each of their value chains—from the start to the end. It is a detailed work to understand all of the different economics and dynamics on the ground.
Why should FMCG companies focus on turning waste to wealth?
Waste seems to be a problem in India where at least 70% of waste is untreated. I have been in a landfill site in India...most of it is packaging from consumer products like drink cans and wrappers and this is not sustainable.
Sample this: One U.S. retail major thought that there is no cost in their business that they can get rid of and haven’t been taken out already. But, when they started looked at it from a sustainability point of view, they found that there is a lot of money they waste in packaging. They realised that they are going to save so much money by revising all the packaging across their stores and they have now committed to zero-waste policy, which is not just great for the environment but also a huge financial benefit to them.
Companies are also doing things in the back-end to not just get rid of waste but also monetising it. Individual companies can review where they are using plastics and where they shouldn’t. The government legislation can help provide the context that encourages them to do that.
How can companies encourage consumers to pay the premium for sustainable products?
The number one barrier companies still state is that consumers won’t pay. But it is not just convincing consumers to pay more. Companies should try to make sustainable irresistible, which doesn’t mean it has to cost more.
What companies are trying to do now is to find ways to embed sustainability in their products such that consumers will buy the product not because it is sustainable but because it is a great product.
Take the example of cold water laundry detergent by an American FMCG giant—it is better for your clothes, better for the environment, less electricity as you don’t have to heat up water, and it doesn’t cost more.
Eventually, companies across the globe are going to head in this direction.
Do you see the e-commerce boom as a threat to the environment?
E-commerce boom can have positive and negative benefits. E-commerce can be more environmentally friendly for certain purchases depending on the nature of retail landscape. If you have got an omni-channel proposition, retailers need to understand when it is better to encourage consumers to go to the store, and when it is better to encourage them to buy online. They can offer incentives to customers in form of vouchers for store picks-ups, depending on the number of goods that they purchase. An e-commerce giant, for instance, gives customers an option to choose between the next-day delivery and standard delivery—the next-day shipping leads to a lot more carbon emission, as companies will be using flights for such overnight delivery. So, those opting for standard delivery get incentives in form of points or cashback.
Do you see the growing trend of single-serve packs in India a threat to sustainability?
That’s a great example where growth could be quite detrimental, because there’s more packaging, per unit. If you create smaller pack sizes, it could potentially mean more waste. Consumer product companies need to start thinking carefully about innovations they can use to meet the demand for smaller packet sizes without creating a landfill. That’s a challenge, both in terms of materials they use and reducing packaging to the very minimum. They also need to work in the back-end to take the responsibility of the waste they are generating.