The new year presents a great opportunity for FMCG (Fast-Moving Consumer Goods) businesses to assess their environmental, social, and governance (ESG) criteria and, more specifically, their carbon-reduction plans. Every leader should ask: Are we on track to deliver? With the Paris Agreement goal of reaching net zero by 2050 on business leaders’ minds, it is time to take stock.
In practice, this means that business leaders, including Chief Procurement Officers (CPOs), should gauge whether they are making a meaningful impact on their carbon footprint and net zero policies.
There is no doubt that the pressure is on. Many FMCG manufacturing businesses have made their ambitious ESG goals public. Apart from the moral obligation to fulfil these promises, there are risks associated with non-compliance. For example, businesses can face fines and reputational damage for neglecting their carbon footprints. This can spill over into other areas, such as recruitment, customer satisfaction, and product innovation, all of which impact profits.
Apart from avoiding these pitfalls, CPOs have the opportunity to refine how precious natural resources are utilised across the businesses they represent and make a genuine difference.
How, then, can CPOs from FMCG businesses ensure that their carbon plans are primed to deliver? Here are some key considerations for transforming the status quo, from James Gaskin, Delivery Director at Barkers.
Understand the current state of affairs
To fully understand whether a carbon reduction strategy is on track to deliver, it is helpful to assess the situation, which can be accomplished in a few steps. First, CPOs can conduct in-depth surveys and interview their key stakeholders to understand how their supply chains are performing. Then, activities within the supply chain should be compared against the goals set out by bodies that support the Paris Agreement, such as the Science Based Targets Initiative (SBTi) and the UN Sustainable Development Goals (SDGs). Next, evaluate supply chain resilience. This can be done by assessing the business’s robustness against carbon regulations. Simultaneously, it is sensible at this stage to check other ESG issues such as child labour, slavery, taxation, fraud, and wages.
Following this process, CPOs can illuminate key risk factors and opportunities, which are key components for reviewing a carbon reduction strategy.
Once the carbon-cutting roadmap is established, it is time to address resource allocation, which can present fresh challenges. For instance, while cutting carbon brings indirect business benefits and savings – linked to delighting customers and meeting regulations – it does not drop direct costs. It can, in fact, spike unit costs. This is evident when FMCG manufacturers use recycled plastic in their sustainable packaging strategies, which can cost more than virgin plastic because of demand. So, to demonstrate return on investment, CPOs must clearly show how their carbon-cutting plans will make the supply chain more resilient and enable savings – albeit indirectly.
There is also the question of which projects in the carbon reduction plan to fund. These projects will span multiple business areas, including packaging, ingredients, materials, commercial operations, transport, and more, each of which should be ranked by its carbon-cutting potential. Then, based on the impact each project promises, a budget is allocated. Gauging this potential and, therefore, budget allocation, however, is highly dependent on an external variable: carbon datasets.
For example, a food or drink manufacturer that needs to choose the most sustainable packaging may compare the merits of glass, recycled plastic, and aluminium cans. Upstream data must inform the choice of the best material, so it’s imperative that this data be accessible.
However, securing this data is very difficult in practice. It must come from suppliers, who contribute significantly to emissions data. Every product or service they offer reflects a path through the value chain and, therefore, carries a carbon footprint. The reality, though, is that not all suppliers have the expertise to extract accurate data based on their carbon activities. Therefore, it’s hard for them to provide it. This means that sustainability teams struggle to forecast, budget, and ultimately achieve carbon reduction plans.
How, then, can FMCG manufacturing CPOs resolve the supplier carbon data puzzle?
Collaborate with colleagues and suppliers
Businesses must prioritise securing accurate data from suppliers. However, leaders first need to understand what information is required and for what purpose. To best determine this, leadership must align. It is crucial to agree on the carbon criteria that suppliers must meet and the information they should provide.
These expectations must integrate with supply chain activities and procurement targets, a step that will help CPOs define criteria. Once it is clear what information and activities the business expects from suppliers, these criteria must be shared with senior leaders to ensure that everyone is on the same page.
Then, with leaders aligned, it is time to partner with the business’s largest external force: suppliers. The spirit should be to help suppliers support carbon reduction goals. However, before this can be achieved, procurement must clearly convey what the business expects. Subsequently, the question becomes: how can you help suppliers to help you? The answer lies in guiding suppliers to improve their own carbon emission performance. To do this, assist them in setting goals. With this in place, it is time to build their expertise. Establish educational training programmes, provide ample resources, and be generous with support.
Next, procurement teams can collaborate with suppliers to achieve the agreed-upon standards. A relationship built on mutual goals increases the likelihood that suppliers will support carbon-cutting efforts. They can then offer the data necessary to refine carbon plans.
For CPOs seeking to reduce the risk of non-compliance and implement effective carbon-cutting programmes, it is crucial to collaborate with suppliers and understand their practices.
Finally, procurement teams can create processes to monitor carbon-cutting performance and data quality. CPOs will benefit from regular audits and supplier self-assessments. Additionally, consider introducing robust data management technology. At this stage, it is prudent to engage third parties to accredit any carbon-cutting success, as this will build credibility and encourage further performance.
Provide value to the broader organisation
When procurement teams and suppliers work harmoniously towards carbon goals, CPOs can drive long-term success. For one thing, it makes the entire supply chain less risky and more robust, thanks to the accurate data required. For procurement, this serves as a platform for further success. For the broader business, there is also a wealth of value to be found—such as winning over investors at lower costs, growing returns, boosting brand reputation, securing customers, and attracting talent. At the end of the day, when Procurement delivers on the sustainability agenda, the entire business wins.
So, as CPOs prepare their carbon reduction plans for 2025, they can add significant value to the business, broader net zero goals, and the planet. At the core of this success is ensuring accurate supplier data. Achieving this requires strong partnerships with suppliers and alignment with fellow leaders to determine carbon reduction needs and expectations. When all is said and done, CPOs who can maintain a robust carbon reduction strategy in 2025 and beyond will be well-positioned to drive positive change.
