Even after boldly committing to ambitious Environmental, Social and Governance (ESG) goals at the COP26 climate summit in Glasgow, including their intention to achieve net zero emissions by 2050, most companies fall short in practice. There is a growing gap between where organizations would like to be in the next decades on ESG commitments and where they are now.
In the absence of fundamental change, these companies—including CPGs—face failure when it comes to hitting their bold ESG targets. And they must do it at a time when what we think we know about ESG is changing rapidly: the regulatory landscape is in flux with growing expectations for increased transparency. Soon, companies will face new, heightened disclosure requirements that could have a similar impact to the introduction of Sarbanes-Oxley regulations. They must imminently find ways to move the ESG needle quickly if they are to meet their commitments and live up to government, regulator and consumer expectations.
To keep up with the shifting regulatory regime, CPGs—like all companies—must optimize data and cloud to be more traceable, transparent and efficient. They also need to pivot from a pure risk management approach to one of value creation.
To future-proof the business—and boost confidence during ESG audits—CPGs must build new data, tech and operational muscle that will drive sustainability and help them deliver on their ESG goals.
These are three moves CPGs should make on ESG:
1. Invest but align first
Investing in and harnessing data, cloud and tech to support sustainability goals is a prerequisite for success but delivering these in siloes will duplicate or misalign efforts and impose significant costs. Too many CPGs have broken out their ESG agenda by individual function, instead of looking holistically at the end-to-end process. If each function is addressed separately, the initiatives will not cohere, and larger goals such as designing scaled-up, sustainable business models will remain elusive.
When treated holistically, the results are much different. Embedding sustainability into business processes and systems—across functions—improves operational efficiency, enhances brand reputation, transforms the business faster and improves resilience in an unstable climate.
Our research indicates that these benefits only materialize when cross-functional teams and processes across the organization are aligned and embedded into the organization’s Sustainability DNA, with tech and sustainability strategies fully integrated.
According to Accenture research, companies linking tech and sustainability transformation are more likely to be business leaders, and to engage value chain partners along the sustainability journey.
Companies linking tech and sustainability transformation are 2.5x more likely to be business leaders.1
Companies linking tech and sustainability transformation are more likely—49% vs. 30%—to engage value chain partners along the sustainability journey.1
2. Acknowledge the data iceberg below the surface
CPGs face an enormous measurement and data capture challenge, with most of the relevant information on sustainability hidden beneath the surface. Value chains are highly fragmented and complex, and it’s been very hard for CPGs to gather relevant and granular primary data (e.g., supplier emissions, responsible sourcing practices, product carbon foot printing) from different partners throughout their ecosystems. In fact, 75% of companies do not even have clear, reliable data to measure against their sustainability goals.2
What this means in practice is that many companies are speeding forward thinking the data iceberg ahead is totally visible, when in fact most of its hidden —in the form of unknown data from third parties. New capabilities will also be needed, ones that require systems thinking and new ways of collaborating.
But the companies who overcome this challenge with deeply embedded stakeholder management practices generate over 20% more in profit and have an environmental and societal impact.3
3. Urgently design the right tech foundation
As company leaders try to solve for the first two challenges by aligning efforts across functions and uncovering the vast amount of data they need to analyze, they face a steady bombardment of offerings from cloud service providers. But technology investment without more is not enough: CPGsmust design the right architectural foundation for cloud to extract the full benefits from their ESG platforms.
According to our research, 63% of companies say that measuring ESG data continues to be a big challenge despite making technology advancements.
of companies say that measuring ESG data continues to be a big challenge despite making technology advancements.4
of CEOs are using tech to collect and manage organization-wide ESG data; yet only one-quarter of these say they are managing it at an advanced level because they lack the proper foundation.4
To do so, they must carefully consider their options for what’s needed and understand what would be net new and what would be augmenting existing technology.
Once a CPG company aligns tech and sustainability, ensures it is capturing all the relevant data and builds the right cloud foundation, it’s ready to move forward with the right tech investments.For example, cloud-powered architecture makes use of AI, analytics, and automation to develop live dashboards on ESG metrics (such as Scope 1-3 Emissions) and for smart external compliance reporting. This results in less time required for manual analysis and reporting using existing methods. Ultimately CPGs must collaborate with the right partner to architect the whole journey, one with deep expertise in sustainability, the CPG industry and technology.
But the clock is ticking until regulators require much more information—at a more granular level—so CPGs must act fast to match their ESG actions with their pledges. For the ones who get it right, the upside is huge (not to mention a win for sustainability in general).