FMCG environmental sustainability: mounting pressure to improve sourcing and packaging

Heightened consumer pressure for eco-friendly sourcing together with more stringent packaging regulations have put environmental sustainability centre stage for FMCG manufacturers and retailers, says Odgers Interim consumer consultant Zoe Wakeham.

According to a recent report from sustainability NGO WRAP, members of the UK Plastics Pact – major supermarkets, manufacturers and producers who collectively account for two-thirds of all consumer packaging in the UK – cut problematic single-use plastic items by 46% and reduced the amount of packaging on supermarket shelves by 10% in 2018-20. While that is good news for the planet, there is a long way still to go and further progress is urgently needed.

Progress is however being accelerated by the looming introduction of new regulations with cost implications. The Plastic Packaging Tax which comes into effect on 1 April 2022 will apply to any plastic packaging that does not contain at least 30% recycled plastic. It will be charged at a rate of £200 per tonne.

Next year sees the arrival of Extended Producer Responsibility (EPR), described by The Grocer as a “fearsome” scheme that will put in place a single point of compliance affecting brand owners, importers, distributors/wholesalers, online marketplaces or service providers. These companies will be obliged to pay the full net costs of managing their packaging once it becomes waste. 

Such changes in the regulatory landscape are being driven by genuine consumer concerns about the state of the planet. As I pointed out in a piece on environmental sustainability trends published a little over two years ago, customers are becoming more mindful of their purchasing habits, paying attention to the sustainability of the product, the company and its supply chain.

Gen Z or ‘Zoomers’ (those born between 1997-2012) are at the forefront of this evolution in consumer demand. Social media natives, they are heavily influenced by sustainability, brand name and company mission – and are attracted to companies with strong brand narratives around climate change prevention and sustainability.

The COVID-19 pandemic has accelerated consumer behaviour change in this area. According to Deloitte Sustainability and Consumer Behaviour 2021 research, 32% of consumers are highly engaged with adopting a more sustainable lifestyle, and 28% have stopped buying certain products due to ethical or environmental concerns. However, Gen Z are clearly adopting more sustainable behaviours than any other group: 50% reduced how much they buy and 45% stopped purchasing certain brands because of ethical or sustainability concerns. Deloitte rightly concludes that as wealth transfers to younger generations, “sustainability and ethical considerations will need to become the standard and should be transparent throughout the value chain.”

Mindful of this, the giants of FMCG manufacturing are working hard on environmentally friendly packaging solutions. Kellogg’s is trialling paper liners for its boxes of cereal to make its packaging fully recyclable; Unilever has committed to halving its use of virgin plastics by 2025; and brands such as Heinz and Coca-Cola have replaced plastic multipack wrap with paperboard alternatives.

Of course, responsible and demand-led sourcing is every bit as important as packaging. The trend for healthier eating was accelerated by the pandemic in certain groups, with the Food Standards Agency’s Food in a Pandemic report finding that a third (32%) of poll respondents reported eating more healthy main meals – although this was counterbalanced by a third (33%) eating more unhealthy snacks – and there is every indication that the boom in plant based products will continue. Mintel research unearthed a strong belief in the healing power of plants, with half of British people (51%) believing that plant/botanical ingredients can have medicinal benefits, while a quarter (25%) of those aged 21-30 say that the pandemic has made a vegan diet more appealing.

Yet this is a complex issue to navigate given that not all vegan foods are sustainable. High profile farmer and Countryfile presenter Adam Henson made headlines last year when slamming almond milk, soya milk and avocados as “disastrous” for the environment. It’s interesting to note that in recent months there has been a surge in alternatives to avocados in response to concerns about the huge carbon footprint caused by cultivation of the fruit.

There is much for the food industry to ponder in what is a hugely challenging period. Consumer concerns about food quality and sustainability are at an all-time high, yet in an era of strong inflationary pressures value for money will undoubtedly also remain a prime factor in consumer decision making.

For more information, please contact Zoe Wakeham.