Just about every public company these days publishes an annual corporate social responsibility (CSR) report, laying out in very detailed terms exactly how the company is making the world better as it goes about its daily business of producing and distributing its products. While making a profit and winning market share might still be necessary to keep the lights on, companies now realize the importance of disclosing what impact their activities are having on their communities and the world at large. "Just exactly how sustainable is our supply chain?" is a question that companies now regularly ask themselves.
To answer that question to the satisfaction of their customers and stakeholders, companies of course have to first define what exactly "sustainable" means. What does it mean, for instance, when a company says its products are sustainably sourced?
I posed that question to Craig Gentry, vice president of business development with consumer packaged goods company Unilever, at the recent ISM Conference in Indianapolis.
As he explained, Unilever itself establishes the baseline metrics that determine if any given product is "sustainable" or "renewable," based on open standards that are shared with industry and the community. To put it another way, just as it's up to the individual companies to determine their annual budgets and forecasts, so too does each company establish the terms of its sustainability.
True, Unilever's Sustainable Living Plan is one of the most influential initiatives in the entire CPG arena. But as a major multinational producer of well-known consumer brands, Unilever faces a large obstacle in the marketplace, according to Gentry: the perception that "Big Food" companies are inherently greedy and are damaging, not helping, the environment.
That perception, unfortunately, is based somewhat on reality, acknowledges Kevin Dooley, a professor at Arizona State University and chief scientist of The Sustainability Consortium. Consumer goods account for more than 60% of global greenhouse gas emissions, Dooley notes, and more than 75% of forced and child labor worldwide occur in the supply chains of CPG companies. On top of that, more than 80% of water withdrawals can be linked to consumer goods products. So the idea that mass producing consumer goods often comes at the expense of the planet's overall health has at least a bit of truth to it.
According to a survey of over 1,700 CPG companies conducted by The Sustainability Consortium, over half (54%) of the respondents say they have no visibility into the sustainability efforts of their suppliers, which is terrifying when you consider the global reach of most consumer goods companies. What's more, even those companies making an all-out effort to manage and monitor their external supply chains can only do so much.
Gentry points out, for instance, that Unilever's supply chain has direct control over only 5% of the greenhouse gas footprint of its products. Manufacturing accounts for just 3% and transportation only 2% of the impact, whereas 68% of the total can be attributed to consumer use (particularly in the use of water). When Unilever developed a more sustainable soap product, the company's impact on the environment actually worsened because consumers liked it so much that they took longer showers. So sustainability efforts can sometimes have ripple effects—one step forward, two steps back.
The situation is pretty much the same at Coca-Cola, notes Nicole Smith, Coke's sustainability manager for North America. Nearly 80% of Coke's sustainability impact on water usage can be attributed to the ingredients in its products. Coke has set itself a lofty goal of replenishing 100% of the water it uses by 2020, but that effort is aimed at the water used in the manufacturing process (which accounts for only 1% of its water use), not the water used to grow agricultural ingredients sourced by Coke. And in some countries (such as El Salvador, which I visited last year), Coke and other beverage companies are viewed by local farmers as something less than saviors, as some believe their access to clean water is being usurped by multinational companies.
Monitoring global suppliers to ensure local farmers are paid a fair wage is one of the undeniably positive results of sustainability initiatives, but those farmers rarely if ever read CSR reports, so it's unlikely that they're as impressed by a multinational's sustainability efforts as the companies themselves seem to be. The very meaning of "sustainability" itself is still in the eye of the beholder.
