Rise of Carbon Neutral Awareness for CPG Brands
As the effects of climate change impact communities globally, environmental consciousness continues to grow. A 2022 survey conducted by the IBM Institute for Business Value, found that 51% of respondents said that environmental sustainability was more important to them now than it was 12 months ago. Increased environmental education has motivated consumers to interact with greater discernment toward products. According to the University of Oxford, 26% of global greenhouse gas emissions come from food production, so the food and beverage industry is not immune to consumer scrutiny. Moreover, legislation calling for greater corporate transparency is becoming more common. Last year, the U.S. Securities and Exchange Commission (SEC) proposed the standardization of climate-related disclosures to create more reliable and comparable information for investors in the market. Companies will be expected to conduct climate-related scenario analysis to identify potential risks that could financially impact their business. The proposal also includes a disclosure rule about greenhouse gas (GHG) emissions created during business operations. Consequently, a growing number of CPG brands operating in the U.S. are already taking steps to satisfy these external demands. This strategy entails launching carbon-neutral products to offset the carbon emissions created in the supply chain.
Brands Leading the Way
Companies committing to offsetting their carbon footprint label their products as carbon-neutral or regenerative. Commonly, this labeling gets granted when companies purchase carbon offsets or credits that fund environmentally friendly projects. Anheuser-Busch, Neutral Foods, and Conagra are some brands that have launched products with these claims.
Comparatively, Oatly, the dairy-alternative brand, launched climate footprint labels for its line of U.S. oatgurt products. These labels indicate the greenhouse gas emissions (carbon dioxide equivalents referred to as CO2e) per kilogram of packaged food product. This alternative strategy showcases the brand commitment to lowering carbon emissions, while empowering consumers to make more ethical choices. Regardless of the path taken, a proactive approach towards climate-focused efforts will set a strong foundation in a shifting consumer and legislative environment.
Considering the American Consumer
The Global Sustainability Study of 2021 revealed that American consumers fall short when making significant changes to their purchasing behavior or way of living to be more sustainable, than their European counterparts. Furthermore, age plays a role as younger generations of consumers (Gen Z and Millennials) display greater flexibility in editing their behavior than older generations (Gen X and Baby Boomers). Yet, when discussing moderate changes, 55% of U.S. consumers responded positively, meaning there is intent and willingness from Americans overall to live more sustainably. CPGs with corporate agility will be able to evolve alongside the American consumer.
What does this mean for CPG Brands?
Currently, environmental consciousness remains an optional selling point for brands operating in the U.S.; as the impact of climate change becomes more undeniable it may one day become a must-have. American consumers vary in their commitment to sustainability, but a general desire to engage more with environmentally conscious brands exists. Legislative change will help facilitate that engagement as corporations are challenged to consider and disclose their environmental impact. Consequently, retail buyer behavior will evolve to represent those changes; as brands with sustainable practices are prioritized. CPGs should take the current moment to prepare for the needs and regulations that will inevitably come. Analyzing your business model to see where environmental action can be integrated is essential to better position your brand for the evolving U.S. market.