Sustainable manufacturing and processing, which reduces raw materials waste and minimizes refuse, is more than a passing trend for companies both large and small during this economic recession. As companies using such practices see it, sustainability attracts consumers. But more fundamentally, it is good for a business’s bottom line.
Explore this issueAugust/September 2010
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Large conglomerates like Kraft Foods Inc., Hormel Foods Corp., and Unilever Corp., as well as smaller companies like Sierra Nevada Brewing Company and Kettle Foods Inc., are adopting sustainable practices that range from basic recycling of cardboard and plastic wrap to running their own water treatment facilities or in-house digestion operations that generate electricity. State and federal governments and local utilities are even giving incentives to companies that adopt green practices.
Other drivers of sustainability are competition, consumers, food security, and potentially more stringent reporting practices and laws on energy use. Several food companies also cited Wal-Mart’s requirements for suppliers as playing a big role in sustainability practices; while currently focused on electronics, these requirements are expected to filter down to food businesses.
“Consumers play an important role as a driver of this, but in talking with other food and beverage manufacturers, they see it as a good business model that can turn in better numbers for their shareholders,” said Cheri Chastain, sustainability coordinator at Sierra Nevada Brewing. “Money is the biggest driver.”
Every part of a practice is trying to get to carbon neutral, said Cheryl Baldwin, PhD, vice president of science and standards at Green Seal, a nonprofit organization that provides environmental certification standards to manufacturers. “They are looking at energy-efficient lighting, solar panels, energy conservation, production downtime, renewable energy, and producing energy with waste products … by in-house digestion,” Dr. Baldwin said. “If a company is serious, it can see benefits. And there are better payoffs during an economic recovery.” She pointed to an A.T. Kearny study from May through November 2008 that found that companies committed to sustainability financially outperformed industry averages by 15%.
An April 2009 study by the Grocery Manufacturers Association (GMA) and Deloitte found that some 54% of shoppers actively consider environmental sustainability issues in their buying decisions. “Understanding consumer expectations and shopping behavior are critical to the development of the industry’s overall strategy on environmental sustainability,” said Elliott Penner, GMA Sustainability Task Force leader, when the study was released. Added Scott Bearse, director and retail leader of Deloitte LLP’s Enterprise Sustainability group, “Sustainable product characteristics are emerging as an important brand differentiator, but to capture the potential market value of green shoppers, retailers and manufacturers must do a better job of communicating the sustainable attributes behind the products to show the value of buying green to the shopper.”
Manufacturing Goes Green
Even before the latest recession took hold, environmental sustainability was becoming a mandatory component of the business model followed by consumer businesses of all types, another 2007 report by the GMA and Deloitte found. “While the issues associated with sustainability—such as waste management, commodity shortages, and energy usage—are nothing new, the expectations of shareholders, consumers, regulators, and other constituencies have changed, pushing sustainability to the top of the agenda for many consumer products companies,” said Peter Capozucca, a principal with Deloitte, when the study was released. “It is unlike any business issue consumer businesses have encountered in the past. The industry’s large environmental footprint and unique dependencies on agricultural inputs, water, and packaging make sustainability a critical strategic issue that consumer packaged goods companies must address proactively.”
And, according to Dr. Baldwin, food manufacturers can achieve zero waste by examining all areas of operations. “Look at what is going to a landfill, and look at composting and recycling,” she advised. “Kraft recently announced it has a couple facilities that have reached zero waste. That’s not unique.”