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Consumers are choosing to buy products that fit with a more sustainable lifestyle.
The trend to sustainable consumption gives high performance businesses the opportunity to place sustainability at the heart of their supply chain strategy.
Packaging is a highly visible consumer marketing tool, but it is also a significant cost to the supply chain, accounting for up to 12 percent of the cost of many typical consumer goods.1 This combination creates an ideal opportunity for businesses to drive both brand growth and supply chain cost reduction by moving to a more sustainable approach for packaging strategy.
Consumer goods firms and retailers can use sustainable packaging programs to create value in four main ways:
Reduce supply chain costs by using smaller amounts of less complex packaging, thereby cutting sourcing, production and distribution costs. For instance, Wal-Mart plans to reduce packaging by 5 percent by 2013, with an expected net saving of $3.4 billion. The retailer predicts that if 10 percent of the US retailers cut packaging similarly there would be a net industry saving of $11.0 billion.2
Achieve sustainability targets through significant reductions in raw material consumption, carbon emissions and waste. This is especially relevant at a time when new standards such as the Climate Change Act in the United Kingdom, the Carbon Labeling Standard in Japan and California's AB32 legislation are beginning to impact.
Enable customer intimacy by refocusing brand identities towards sustainability. The affluent and growing LOHAS consumer segment is worth more than $500 billion a year globally. Consumers in other segments also increasingly prefer more sustainable products.3
Create goodwill for key brands with consumers, retailers and wholesalers as well as internally within the business. Accenture research has shown that 64 percent of consumers are prepared to pay a premium for products and services that help reduce carbon emissions.4
The Value of Sustainable PackagingPackaging plays a vital role in the commercial strategies of the consumer goods and retail sectors.
Transit packaging such as pallets and cartons mitigates product damage through the supply chain and enables cost-effective handling. Consumer packaging has a more complex role, additionally supporting brand development on the retailer's shelf, communicating information and making consumer access easier. Examples include portion or gift packs.
Both types of packaging come with both a financial and environmental cost. Put simply, either too little or too much packaging can waste money, send the wrong marketing messages and could potentially impact sales. Firms must know both what they need their packaging to do for them and what their customers expect of their packaging.
The challenge for firms is to find the optimum balance in their packaging strategy among:
Well-designed sustainable packaging programs must create commercial value while simultaneously helping to achieve corporate social responsibility targets, especially the reduction of consumer waste and life cycle carbon emissions from the product.
Value creation in a sustainable packaging initiative stems from collaboration across several areas of the organization and wider supply chain:
Responding to customer feedback, Amazon has teamed with suppliers to design out plastic wrapping across the end-to-end supply chain, substituting with recyclable cardboard boxes.5 The world's largest online retailer expects to see significant benefits, including increased customer satisfaction, a more sustainable corporate profile and a direct boost to the company's bottom line.
The emblematic Coca-Cola contour bottle is central to the brand's "most valuable global brand" status with Business Week. The bottle itself has become progressively lighter, leading to a smaller raw material requirement and carbon footprint.6 Recently, the 500ml bottle for the UK market saw an 8 percent weight reduction. Production of 700 million new bottles a year gives a saving of around 1,400 tonnes of plastic every year.
Consumer Segments: the Growing ‘LOHAS’ Segment
Natural Marketing Institute Definitions
Leveraging Change to Create ValueWe have identified three principal steps required to create business value from sustainable packaging initiatives:
1. Identify the High Potential OpportunitiesHigh performing businesses look across the end-to-end supply chain to identify the cost, service and environmental impacts of their packaging. Opportunities arise where current processes are not consistent along the supply chain, or where packaging designs are not fully aligned to core brand values.
Measuring and calculating the total impact of current packaging practices is key to identifying opportunities. Firms must apply a product lifecycle assessment approach to understand the cost and revenue contribution from packaging across the entire supply chain, considering manufacturing, distribution, consumption and ultimately disposal.
Opportunity identification must therefore be holistic, with high performing organizations partnering collaboratively with their suppliers and customers to consider both the supply side and demand side implications of their packaging specifications and decisions.
2. Select the Most Valuable InitiativesThe packaging opportunities that are identified need to be sized and prioritized.
The returns on sustainable packaging investments are typically maximized through the development of robust business cases that consider three dimensions:
The best opportunities deliver benefits across all three areas.
For example, offering a packaging take-back service as part of its home delivery offering allowed one retailer to provide an enhanced service over its competitors. It was also able to recycle more waste packaging and gain a new revenue stream.
There are four top sustainability considerations that procurement and supply chain executives should take into account when valuing packaging opportunities:
3. Execute EffectivelyExecution is aided by a shift to a sustainable strategy mindset across the organization and the wider supply chain.
By bringing together teams across the business, best-fit compromises can be reached that deemphasize unsustainable behaviors such as unique usage, portion packs, gift and promotional packaging.
By collaborating with customers, with suppliers and with advisory bodies, a focus can be developed on packaging minimization, closed-loop thinking, carbon neutral operations, reusable and biodegradable materials.
Accenture's Sustainable Packaging CapabilitiesAccenture works with its clients to introduce effective and unique sustainable packaging solutions.
To help businesses identify and deploy the best opportunities, we apply our capabilities in process development, customer relationship management and supply chain consulting. Combined with our technology solutions, this enables us to develop integrated solutions that link the organization with the wider supply chain to enable change.
Our ApproachWe add value through a systematic approach that is based on broad experience in the field. Our capabilities allow us to collaborate effectively with our clients, often developing blended teams that integrate across the business and help to achieve change from within.
We help create additional value by deploying projects that are strategic in nature, giving consideration to the end-to-end supply chain processes. This allows us to help clients seek out both progressive solutions and also the disruptive innovations that have helped our clients to challenge current business rules. Fact-based and data-driven methodologies support the deployment of programs that consider value and then optimize across all stages of the supply chain.
Programs that we run for leading consumer goods and retail firms include:
Proven Track RecordAccenture helped a national postal operator in Europe to identify major long-range growth opportunities in a carbon constrained world. We conducted rigorous cross-industry analysis to identify emerging-market trends, changing regulatory environments and emerging technologies. We identified opportunities to develop sustainable postal packaging products and services that provided new profit generation potential and reduced carbon emissions.
In the USA, we helped a large communications firm adapt its packaging procedures across the supply chain. The client was suffering from lagging profitability in the face of strong competition and costs were exceeding targets. Through our approach we helped the client develop models to analyze distribution, product and packaging scenarios before developing key performance indicators for managing future operations. After we helped the client implement the suggestions, it was able to reduce carbon emissions by more than 100,000 tonnes and costs by $33 million over four years. These benefits were achieved through packaging improvements, product substitution and facility relocations.
ContactsIf you would like to learn more about ourSustainable Packaging offerings, contact:
Mark AustinGlobal LeadConsumer Goods and Services Supply Chainmark.email@example.com
Peter LacyHead of Sustainability PracticeEurope, Africa and Latin Americapeter.firstname.lastname@example.org
Seb HoyleManagerSustainable Supply Chainseb.email@example.com
References1 Accenture, Sustainable Packaging in Fulfillment Operations, October 2008, html, extracted October 20082 http://walmartfacts.com/reports/2006/sustainability/environmentSupplyPackaging.html , extracted October 2008, Packaging/story.xhtml?story_id=023001J6FLHN&full_skip=1, extracted November 20083 http://www.researchandmarkets.com/reports/c86981, extracted August 20084 Accenture, End Consumer Survey on Climate Change, October 20075 http://http://www.telegraph.co.uk/earth/greenerliving/3477479/Amazon-to-scrap-plastic-packaging-for-recyclable-cardboard-boxes.html.6 http://images.businessweek.com/ss/08/09/0918_best_brands/2.htm, extracted November 2008
January 16, 2009
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