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    Features

    The Roadmap To Meet Demand For Transparency & Sustainability

    Product labeling and third-party certifications offer companies new opportunities to build trust with millennials and discerning consumers.

    The Roadmap To Meet Demand For Transparency & Sustainability
    Consumers continue to demand more from the brands they buy.
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    Alan Rownan, Ethical Labels Analyst, Euromonitor International05.02.16
    Transparency and sustainability, although at first glance seem independent of each other, have become irrevocably intertwined conceptually as corporate social responsibility (CSR) continues to evolve as an essential discipline in the food industry.

    There has been great focus placed on providing consumers with relevant information pertaining to all stages of the supply chain. Companies and manufacturers are taking steps to provide this data through various methods, from the more traditional labeling on physical products to smart label technology that allows potential consumers to access detailed ingredient information electronically via the Internet.

    Demanding Consumers
    While many attribute the increased yearning for supply chain knowledge to the powerful millennial demographic, the demand for detailed information about the source and production of food is a goal that to some degree traverses all consumer groups.

    Nevertheless, millennials are playing a key role. They want more than just a physical purchase—they want to know where the product originated, how it was produced, what degree of processing was involved and whether the packaging is from sustainable/renewable resources. Self-certified and third-party transparency initiatives are rising to meet this demand, with companies eager to adapt supply chains to reflect the ethical considerations of consumers.

    As companies investigate the varied approaches to sustainable supply chain modification, contending notions of what constitutes sustainable production adds an air of ambiguity that finds itself conflicting with demand for transparency.

    The 1987 UN Brundtland Commission sought to solidify a broad stroke definition of sustainability as “the ability to meet the needs of the present generation without compromising the ability of future generations to meet their needs.” However, lacking any practical guidelines, the commission failed to highlight a viable pathway for food players. The arduous task of interpreting, predicting and responding to consumer concerns has become a central component of modern CSR policy, a discipline in itself that has prospered on the coattails of skeptical consumers.

    This demand for transparency has reached fever pitch in recent years, fueled by curious millennials and the ease with which information flows across social networks, and into political chambers—most notably in the form of debate about GMOs and palm oil sustainability.

    The GMO Debate
    The willingness companies are showing to accept the risk of trying to pre-empt legislation is somewhat unprecedented. There is little benefit to be had from advertising legal supply chain compliance to consumers, but advertising the voluntary steps taken beyond what’s required is likely to enhance brand image with ethically conscious consumers.

    Campbell Soup, General Mills, Mars and other key players have all made their play in the GMO debate in the U.S. in recent months, announcing intent to voluntarily label genetically engineered ingredients on their products. This comes on the back of overwhelming public support for GMO food labeling. As legislation is battled out in Congress, these companies have decided to take matters into their own hands while they still have leverage in proceedings.

    The debate isn’t simply about GMO labeling. Companies that have removed GMOs from their products are also eager to market these commitments to consumers.

    Euromonitor International’s preliminary ethical labels findings show that non-GMO packaged food in 2015 was worth $4.88 billion and $258 million in soft and hot drinks in the U.S. alone. The leading brand to advertise GMO-free in the U.S. in 2015 was KIND bars with brand sales of $547 million. Industry heavyweights are also exploring this route, with Unilever’s I Can’t Believe It’s Not Butter! generating sales of $262 million. Coca-Cola is also running with this trend in non-alcoholic drinks, with its Odwalla juice and Honest Tea brands both keen to display their non-GMO status and boasting 2015 value sales of $121 million and $54 million, respectively. All of these brands are directly targeting savvy millennials.

    Several high-profile public surveys in the U.S., most notably one conducted by the New York Times, have shown that over 90% of the U.S. public is in favor of GMO labeling. A lack of hard science to support the claims that GMOs produce negative health effects appears to no longer be the issue. As the debate parameters shift from science to transparency, consumers feel that the “right to know” should outweigh any counterarguments from food companies.

    The Palm Oil Debate
    In a similar thread to transparency, a sustainability debate that has garnered substantial coverage, especially in Western Europe, surrounds the sourcing of palm oil, predominantly from Indonesia and Malaysia. A leading cause of deforestation, manufacturers have been under increasing pressure to source palm oil sustainably, a difficult task considering the complexity of the supply chain and role of smallholder farmers in the region that are heavily reliant on the commodity. 

    The spotlight on palm oil has shifted attention away from more traditionally vulnerable commodities such as coffee, tea, sugar and cocoa. The sustainable production of these commodities has long been supported by well-established third-party certifiers such as Fair Trade and the Rainforest Alliance. The current focus on palm oil is a lesson to companies that sustainable sourcing isn’t confined to a specific commodity or category.

    In the U.K., several leading brands have looked to stay ahead of the curve and have already advertised their ongoing commitment to sustainable palm oil, while others are eager to stress that they use no palm oil in their products in the form of physical labeling on the product.

    For many companies, palm oil commitments have remained confined to annual CSR reports, but, as the issue continues to grow in prominence, particularly in Western European countries like France, which is looking to impose a hefty tax on the import of products containing palm oil, it’s conceivable that sustainable and “no palm oil” labels will appear more frequently on product packaging.

    Already, some major players have mobilized to counteract any public backlash pertaining to palm oil—with several leading bakery brands, such as Harrys bread and Pain Jacquet, already stating a commitment to “no palm oil” on product packaging.

    As the palm oil tax looms in France, companies will look to adopt alternatives or strive to soften the proposed legislation toward targeting cheaper uncertified palm oil. This issue is one to watch, as manufacturers continue to commit to flagship sustainability initiatives such as the Roundtable for Sustainable Palm Oil (RSPO) in a continued effort to alleviate growing consumer concerns. “No palm oil” and “sustainable palm oil” (i.e., excluding RSPO) labels were worth approximately €1.43 billion in packaged food in France in 2015.

    Dispelling Mistrust
    As traditionally renewable resources such as fish and forests struggle to replenish at the same rate they are disappearing, governments, companies and non-governmental organizations (NGOs) are all encouraged to play their part in meeting the sustainable development goals set forth at the UN Climate Change Conference in Paris in 2015.

    The trend is clear: consumers will continue to call for increased transparency and greater sustainability. For product developers, there will be opportunities for product-label evolution, clean-label adaptation, third-party commodity certification and even smart label technology that can answer the pertinent questions and dispel mistrust between companies and consumers.

    Expect more companies to take the lead. If the GMO gamble by Campbell Soup, General Mills, Mars and others pays off, there will be willingness among other players to voluntarily drive the legislative framework of the food industry in untraditional directions.

    Others will gamble on staying silent and following legal protocol, which could be considered the safe option, but incurs the risk of losing any chance of building a strong relationship with wary millennials.

    For more insight, contact alan.rownan@euromonitor.com; or visit http://blog.euromonitor.com.
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