IBM: Tech is helping CPGs integrate sustainability into operations

At consumer goods companies, sustainability is becoming more deeply intertwined into overall operations, and digital transformation is helping to put environmentally-focused priorities into action.

Those are among the key takeaways from a new study released Wednesday by IBM and The Consumer Goods Forum.

Titled “Redesigning brand values: Purpose and profit converge in core operations,” the study surveyed 1,800 CPG executives across 23 countries. Key findings include:

Executives increasingly see sustainability and operations are increasingly as part of the same conversation. Three out of five leaders said they are purposefully aligning sustainability and operations goals, as they seek to optimize investments and work to achieve targets.

Ultimately, sustainability can help to boost companies as a whole. 77% of leaders agree that sustainability investments will accelerate business growth. The report notes that executives are increasingly pursuing a "quadruple bottom line": people, planet, profits and purpose.

Sustainability measurement needs improvement. Nearly 75% of leaders say they need to recalibrate how they measure sustainability targets, but many lack the capability to monitor and measure progress in real time. The report says efforts to develop standards will help to create more consistency in reporting across companies. Some engage in greenwashing that includes selectively reporting metrics that cast themselves in the best possible light, while others are more transparent. Siloed data is another challenge in this area.

Companies are tapping technology for sustainability. They are also increasing investments, as tech budgets are expected to rise by 34% in the next three years, according to the report. Technologies that are being deployed include AI, automation and IoT, as well as predictive and prescriptive analytics and AI-powered demand sensing. These technologies are not being used in isolation. The study found that 90% of executives are more likely to deploy medleys of technologies. For instance, one combination cited was analytics, IoT and robotic process automation.

The results reflect how companies are prioritizing sustainability not only in what they send out to the world, but how they make and move goods. Consumers are increasingly taking a more purpose-driven approach to shopping, which means they are more likely to look just as deeply at what is in a product and how it’s made as they do the fit, appearance and taste. That means they are looking to companies to improve traceability of goods, and are seeking out products that employ sustainable packaging, energy-efficient manufacturing processes, and ethical sourcing of materials.

“In today’s world consumers actively seek out brands that reflect their values, making sustainability integration an important differentiator for consumer goods businesses and the retailers they service,” said Luq Niazi, Global Managing Partner for Industries at IBM, in a statement. “Meaningfully embedding sustainability into brand operations can only be achieved through a robust combination of business process, technology, ecosystem partnerships, and C-suite collaboration across manufacturing, technology, operations, supply chain, and sustainability. By embracing this holistic approach, consumer industry executives can help drive sustainable business performance to tap into a larger share of consumer spending.”

As companies weave sustainability more deeply into operations, it is crossing business areas such as design, manufacturing, supply chain logistics and brand strategy, the report states.

Ultimately, consumer goods travel through a network of partners. That means sustainability goals and metrics must not only align across one company’s operations, but the entire ecosystem. To do so, more than half of respondents either have or are establishing environmental impact evaluation programs with partners, the report states.

With climate scientists sounding increasingly louder alarms about the impact of warming, collaboration across teams and the entire network will be key to more deeply embedding sustainability, the report states. Consumer products companies have an important role to play, as they produce more than one-third of greenhouse gas emissions, according to the World Economic Forum.

The report notes that timing happens to be on the side of change. Supply chains are being rebuilt following the pandemic-era swings, so there is an opening to integrate sustainability into operations as new approaches come online. By taking a system-wide approach, leaders can walk through the door together.