More companies that we are speaking with are noting that there is increasing pressure on them to improve their operations along a variety of sustainability metrics. Sometimes, their customers want them to produce a more sustainable product; investors may pressure them to reduce their energy usage, reduce the amount of waste generated, and improve recycled content or reusability; and government regulations might require them to develop a plan for their products’ end of life.
Now that supply chains challenges are easing in many industries, customers have more choices. They don’t have to just select the product that is available; they can and are seeking out more sustainable products.
ESG (environmental, social, governance) commitments
are a big part of this move. ESG is a way that companies attempt to measure the risk and opportunity to a company or investment as it relates to environmental and social issues and how the company plans to manage those risks and opportunities. Accountability via measurable targets is a key element. As more companies have to report the amount of waste they generate and there is transparency on their annual power usage, investors and customers are noticing and increasingly voting their values with their dollars.
Suppliers increasingly need to be aware of who the ESG businesses are in your industry and customer base and how those ESGs might change how they operate or what sort of products they demand. These are not your standard customers and may not even be a large part of the volume (or dollar) sales yet. However, they are driving change and innovation and improvements in markets and industries across the economy.
Innovation is coming from public companies with ESG commitments, especially if their home or core market is sensitive to the issue. For instance, ice cream supplier Unilever (a UK-based company where high energy rates have been a major concern) is worried about two things:
1) retailers turning off freezers (and not ordering ice cream) when they try to cut energy costs
2) that the amount of energy used to power company-owned freezers in bodegas and corner stores (which accounting for 10% of Unilever's greenhouse gas footprint) reflects badly on them now that they have to report it
So Unilever is developing ice cream
and ice cream treats that can withstand storage at 50 degrees Fahrenheit, rather than 32 degrees Fahrenheit. Developments in sugar technologies are allowing them to make progress after a decade of research and development in ice cream formulation. Product releases are still several years away, but it’s an example of innovation to address ESG reporting issues.
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