Adapting to sustainability: Insights from the FMCG market

Prashanth Venkatesh begins with the question of sustainability, and says, “For me, individually, it means, being conscious about what I buy, what I use, and how I live.” However, as a marketer and as a business, Venkatesh says, it means two things. First, the world needs economic growth because there are millions of people, and especially in a country like India, we're still poor who need economic growth to beat the poverty cycle. At the same time, it's clear that we have major issues with planetary boundaries. “So, the question is how do you continue to grow and remain sustainable the way you grow,” he says, adding, “Sustainability is a complicated word. Most customers struggle with what the word means.”

Smrithi Ravichandran adds that consumers do have these thoughts in their minds, but they don't know how to translate that and what they should be exactly looking for. They don't know what sustainability really means.  

Venkatesh concurs. He says, “It means different things for different people, depending on where you are in the stage of your life, and where you live. So essentially, what I've learned is that it means different things.”  

Ravichandran adds, “I believe sustainability cannot be driven by one team or one vendor. It is a collective agenda. It is supposed to be the DNA of the organisation and of every individual.”

So, what are the challenges that Venkatesh sees and how does he integrate that into his day-to-day activities.

Adapting sustainability
Venkatesh answers: “I'll just take a step back to 2010. The first time I heard of something called a sustainable living plan was when I joined Unilever. I was from a business school, yet, I looked at the presentation and wondered, what does sustainability plan mean? In a sense, we launched this plan 10 years back and we have just completed a decade of good learning. The question was, can we continue to grow the business, but have a stronger social impact and reduce our environmental footprint?”

As part of the plan, the company set itself 70 different targets. These ranged from how many people can be educated on hand washing, and therefore, have the social impact, to how to reduce carbon emissions to help reduce water consumption.

“We learned a couple of things in the last 10 years. First, businesses that are sustainable tend to grow faster. And that growth is accelerating now. So, if you look at some of our brands, whether it be Red Label, Surf Excel, Lifebuoy, all have a purpose enshrined within them. They tend to grow faster. The second thing we learned was that sustainability is actually good for a business as it brings down costs,” Venkatesh says. “It's simple really. If you make your factories more sustainable, you consume less energy. So, you reduce costs. If you use less packaging in your materials, you reduce costs.”

The third thing the company learned was that sustainability reduces the risks. “If you work with farmers, for instance in procuring tomatoes, and you help them grow their tomatoes more sustainably, it means they are more resilient to any vendor shocks. It's a great talent magnet. We consistently get ranked as one of the best companies to work for in many countries. It is largely because people want to work with us,” he adds.

So, the lesson here is that we need to work with partners. Venkatesh says, “We need to work with customers. We need to work with suppliers. We need to work with governments to have a stronger impact. Sustainability cannot be driven by one person, one small sustainability team sitting in the head office. It needs to be a part of the supply chain, needs to be a part of the R&D, needs to be a part of the market. All of us have to do it together. Because at the end of it, it's also a business challenge.”

Sustainable packaging
One of the common aspects of all FMCG companies is the packaging. What are the key changes that Unilever has undertaken towards this?

In 2001, the company launched the Unilever Compass, which took the learnings from the last 10 years and made it bigger and bolder, and integrated it in its operations. “There is an agenda around reducing our carbon emissions, but importantly, there's an agenda on reducing or improving a plastic footprint. We have four or five very, very clear goals. Our goals are publicly available and we are changing the goals every passing year as we realise we are able to do it,” Venkatesh says.

The number one goal is to reduce the amount of plastic the company uses. “In many ways, plastic is a fantastic material. It's cheap, it's lightweight, it's good for transporting food. But the problem is that it doesn't get collected, and there is too much plastic. So, our ambition is to reduce the amount of virgin plastic which we consume,” he adds.

The second goal is to recycle the plastics the company produces. The third is to use more recycled plastics. “I think we have made a lot of progress there,” Venkatesh says.

The fourth goal is to collect more plastic than they put out because in India there is a value chain where the value allows developers to collect plastic.

“We are figuring out new business models where we can reduce plastic consumption. This could be a refilling station, or a refillable model, which we're continuing to pilot and at the moment, it is working well.”

Ravichandran adds that as an eCommerce company, Flipkart can do quite a bit as well. “This has been a major agenda for us over the last few years. In fact, over the last couple of years, we've been able to eliminate single-use plastics. It was a big effort trying to get the right kinds of materials to eliminate plastic. The other thing that we've been working with companies like Unilever is to get eCommerce-ready packaging instead of using a second box or our company materials over the primary packaging,” Ravichandran says.

What do customers want
The tricky question, however, is what are the customers really looking for? What is it that drives the conversations for your customers, and makes them conscious about their choices?

Venkatesh says in a country like India, because of our own complexity, different people look for different things. For instance, for somebody living in Delhi right now, air pollution is a reality. Therefore, your perception of sustainability or your biggest requirement is different. “I'm in Chennai and we are going through rains, and therefore, we have a different perception of what sustainability could mean,” he explains.

It also varies depending on the stage of life you are in. People who have young children have different expectations of sustainability than, say, older people, or the millennials.

However, Venkatesh believes that there are a few things which are common. First, consumers want products which are good for them. They should be hygienic, and it's great if they are good for the planet. “So, we are seeing that people want cleaner, healthier choices,” he said.

Today, a lot of product discovery is happening online. This is the second big trend. There are a lot of people who are looking for the right options and are prepared to pay for them.

And what about Unilever’s strategy to inform customers about sustainability?

Venkatesh says, “The philosophy or the ethos of the company has been doing well by doing good. That's the way the company was started back in the 1870s-1880s. Today, doing well by doing good also means that you offer more sustainable choices. We have different teams, whether it's R&D, supply chain, marketing, and they are working on this issue in different ways.”

He gives the example of Surf Excel, one of India’s biggest brands. Three years back, the company decided to introduce recycled plastic bottles for Surf Excel Matic. These bottles use 50% recycled plastic and Venkatesh says, customers were open to the idea as long as the quality of the product was not affected. “For the consumers it means they have reduced plastic consumption and carbon emissions. We advertised and talked about it as well,” he adds.

There is often a bit of a behavioural gap when it comes to paying for sustainable products. Is cost a big indirect factor to these products?

Venkatesh says, “There will be a set of consumers who will say, okay, I am ready to pay a premium for this benefit. But the real joy comes in when you know you don't expect them to make a compromise. In a sense, we have what we call a holy trinity. First, we do not compromise on performance of the product, the product must do the job. Second, it needs to be sustainable. The third is the cost.”

And the trends for the foreseeable future?

The pandemic has been a reset for all of us and it has accelerated to the mega trends in my mind — health and hygiene. All of us want to lead healthier, cleaner lifestyles. Tech is another massive trend. Tech and eCommerce have accelerated. The third trend is sustainability. I don't know whether it's a mega trend today, but it is a question of when and not if. I think these three trends are here to stay. And in a way, what this means is that we cannot do this alone. We will need to partner whether startups or large companies, NGOs, civil society, and make an impact and continue to grow. Get people out of poverty while being sustainable.