Why selling cornchips is about so much more than taste (May 11, 2011)

David Smith, National VP of Retail Strategy and Sustainability, Sobeys Inc., shared with the Toronto Sustainability Speaker Series (TSSS) his insights gained through years of experience promoting new products and ideas to consumers.

As one of only two national grocery retailers in Canada, with over $15 billion dollars in annual sales, Sobeys’ business strategies and decision making have a significant impact on the Canadian retail marketplace.   Sobeys Inc. has declared its goal “to integrate sustainability into every aspect of our day-to-day business activities”.  The company has a Corporate Social Responsibility Committee, dedicated sustainability “share groups”, and a commitment to integrating sustainability into core business processes.  Sobeys measured its environmental impact baseline in 2008 and has set defined measurable direct operations targets to be met by 2013.  But none of these admirable initiatives were the main focus of Smith’s discussion with the TSSS audience on May 11, 2011.  Instead he shared with TSSS his thoughts on how to effect real change, as an idea moves from ‘fringe’ to mainstream.

Smith shared his belief in the need to move global sustainability forward through collaborative solutions and innovative business processes.  He is on the steering committee of the Consumer Goods Forum, working on initiatives like the Global Packaging Project and is a member of GS1.  His experience, including working on organics at Whole Foods and developing marketing initiatives for a wireless start up at the inception of the WiFi industry, has allowed him to understand the key trends in moving an industry from the stage of early adopters to mainstream.

Organic food products have been in the consumer marketplace for over 25 years, and yet they still represent only 3% of sales.  This statistic is often cited by those looking to discount the significance of organics.  Smith pointed out, however, that the more important statistic is that 50% of consumers buy organics with some frequency.  Clearly, these are no longer ‘fringe’ products, but how do we ensure that they will ever become truly mainstream?  Part of this answer must lie with how grocery retailers choose to drive that change.

While working at Whole Foods, Smith had a meeting with Pepsi Co. because they wanted to get their corn chips into their retail stores.  There was little doubt that from a taste test standpoint, Pepsi was offering a superior product to that which existed already on the store shelves.  However, when Smith explained that he needed to know about the sustainability of all aspects of the chips’ production, the Pepsi executives were stunned; no one had ever asked anything like this of them before.  This meeting happened eight years ago, at a time when sustainability simply wasn’t on the mainstream radar.  And yet, at the last annual meeting of the Consumer Goods Forum, a mainstream organization representing the world’s leading consumer goods retailers and manufacturers, sustainability topics were ¾ of the agenda.  In only eight years, the retail landscape has changed – sustainability in and of itself is now defined as a top issue for major companies and other top issues often include a conscious acknowledgment of sustainability components within them.

Sharing leading sustainabilty practices and green success storiesSmith reminded us of the global sustainability imperative.  If the whole world lived the way Western countries do, we would need 4 Earths.  The per capita environmental footprint of high income countries jumped in the 1960s and is much higher than in low income countries.  As China evolves from an export driven to a consumer driven economy their footprint is growing.  Amongst consumer goods, the food and beverage industry has the highest environmental footprint per dollar spent, with agriculture consuming 70% of fresh water usage and having a major global warming impact through its intense use of nitrogen fertilizer.  It is projected that as population increases, food production may have to increase by up to 50%.  From a supply chain perspective, there is no doubt that sustainability in this sector must be addressed, as externalities (e.g. emissions, water consumption) threaten to become internal costs (as has been seen in other areas such as product safety and employee benefits).

Consumers are increasingly demanding radical transparency; they want the whole story about the products on store shelves.  The food products industry must ask itself whether it wants third parties to make assumptions about them or whether they would rather offer upfront information.  This type of initiative can be incorporated into existing infrastructure, for example by including information on health and sustainability in a product barcode.  While Milton Friedman may be right, that the role of business is business, business in the modern world must acknowledge limits to growth and recognize the reality of externalities as internalities.

Smith explained that using certification to shift an industry is a very long-term proposition and he does’t see it as being able to effect timely meaningful change to address the global sustainability imperative.  None of the current certifications apply to more than 8% of global volume and while we can applaud those that exist, they tend to certify situations that are already in decent shape, drawing attention to companies that are already on the right path, and doing little to impact companies whose transgressions are most worrisome.  Certification and eco-labels are only part of the solution – we must move beyond these types of initiatives.

To create meaningful change, leaders must step forward and create business systems to define sustainability: For retailers, 50-80% of their impact is in the supply chain so we must consider “radical collaboration”, working together in ways we have not seen before.  Examples would include the Global Food Safety Initiative (harmonized five regional standards), Global Social Compliance Program (covers fair labour, ethical sourcing and environment), Global Packaging Project (creating common measure for sustainability), and the Consumer Goods Forum (development of carbon standard and protocol for different product categories).  These types of initiatives offer a yardstick, rather than a gold standard, with data available to all, so that incremental improvement can be seen, measured, shared and celebrated.

Sustainability leaders must emphasize eco-literacy, awareness that what gets measured gets managed, and promotion of quantifiable positive business results so that sustainability can move away from simply being compliance motivated.

To truly effect change, we must move from auditing to capacity building, evolve from proprietary to collaborative, reach beyond inconsistent and simplistic certifications and labels to develop recognized processes and standards.  With inspired leaders, who are committed to radical collaboration and integration of sustainability into all aspects of business strategy and development, all of this is possible.