Good for the Planet, Good for Grocers

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Good for the Planet, Good for Grocers

By Lori Zumwinkle - 03/03/2020
Good for the Planet, Good for Grocers
The food production system will need to change to meet a new set of sustainability needs, and grocers can play a key part in this change

Grocers are used to hearing about the importance of their stakeholders. Whether it’s their customers, their employees, their investors, or their partners, today’s leading food businesses are well versed in the requirement to adapt and meet a changing menu of needs and expectations.

But there’s another stakeholder, with needs that are just as important, that grocers should now be treating on equal terms: the planet. Whether it’s playing a part in sustaining the living environment or delivering value to communities beyond the retail transaction, responsibility, sustainability and environmentalism are now core themes of grocery retail.

Don’t be fooled into thinking this is just greenwashing or a feel-good story for corporations to tell themselves. It’s so much more. The impact on the bottom line is real. Accenture’s research shows that greater responsibility correlates with higher financial performance. Brands that show consistently high ESG (economic, social, and governance responsibility) performance outperform the rest in terms of both operating margin and total return to shareholders.

No surprise, then, that the business world has taken notice. A recent survey shows the overwhelming majority of CEOs of companies with more than $1 billion annual revenue says that sustainability will be important to the future success of their businesses. And, in a hugely significant move, the Business Roundtable association of U.S. CEOs has broadened its definition of corporate purpose to include delivering value to customers, employees, suppliers and communities (as well as to shareholders).

Responsibility, sustainability and environmentalism are now core themes of grocery retail.

Rethinking the what, where, why and how of food

What does this era of responsible food retail mean in practice? On a macro scale, the food production system will need to change to meet a new set of sustainability needs. Faced with natural economic pressures, that system is already struggling to keep pace with consumption. A reinvention is therefore needed across the value chain to manage and overcome food scarcity, adapt to changes in climate and feed a growing (and more urban) global population.

Product design will need to get more creative, using different, more sustainable materials to create food. Structurally, the parts of the system currently managed vertically will need to improve efficiency, with many converting to platform business models. All stages of the value chain will need rethinking as a technologically fueled step change occurs in the economics of small-scale growing methods.

The way grocers work with their partners will be critical to this. For example, the German global supermarket chain Lidl has 10 standards it expects its partners (and their partners) to comply with to keep its business. These range from a ban on discrimination to environmental protections.

It all points to a very different, more resilient, more sustainable, more localized, more responsive – and, yes, more responsible – model of food production.

Delivering trust, demonstrating transparency

On a micro scale, grocers must adapt to new consumer needs and expectations. Price is still highly determinative of purchasing decisions, of course. But people are now much more educated about what they buy and more willing to act on their social, political and environmental beliefs. This is now a critical factor in building and maintaining consumer trust.

Accenture research shows large majorities who say, for instance, that they’d like to reduce waste in their grocery purchases, recycle unwanted items, and get clearer labeling about the sustainable and ethical credentials of what they buy. And almost half of consumers say that they’re more likely to do their shopping with retailers that address wider social issues through their business practices and working conditions.

Grocers and their suppliers are responding. For example, U.S. grocer Giant Eagle has committed to eliminating single-use plastics by 2025. Sushi supplier SnowFox is partnering with nonprofit FishChoice to ensure that its seafood meets sustainability commitments. And Ahold Delhaize is implementing more effective replenishment systems and plans to provide customers with more information on product sourcing and production.

Emerging technology is also offering grocers new solutions. Digital platforms and distributed ledgers, for instance, promise a revolution in product transparency. This kind of near-real-time granular traceability of the global food journey from source to consumption could be vital if, as predicted, transparency becomes a central non-price purchase trigger in future.

A holistic approach to responsibility

In the end, responsible retail is about designing every aspect of the business – strategies, products, services, experiences, relationships – around responsible initiatives. These initiatives must be genuine and address all stakeholders, the planet among them. They should look to align values and build trust with consumers while empowering employees to thrive as individuals. They should also look to cultivate mutually profitable relationships with partners and investors while helping a grocer act as a responsible steward of finite natural resources. It’s about delivering a sustainable future, not just for a grocery business, but for the whole planet.

About the Author

Lori Zumwinkle

Lori Zumwinkle

Lori Zumwinkle is a managing director and North America retail lead at global management consulting and professional services firm Read More