Many of the world’s biggest consumer goods groups are ill-prepared for the severe disruption to their businesses posed by climate change and global water shortages, according to a new study.
While companies have launched or revamped products to appeal to increasingly climate-conscious consumers, very few have made structural changes to prepare themselves for the impact that water scarcity, heat damage and increasingly stringent government regulations will have on business performance, according to CDP.
The non-profit environment and investment research provider examined the world’s largest 16 consumer goods companies to assess their response to the threat of climate change. Its findings are to be published on Monday.
Its report found that Kraft Heinz was the least prepared of the companies. Exposed to high emissions, land-use and water-shortage risks from its meat and dairy products, the US group is in a vulnerable position, yet is a laggard in terms of commitment to energy sustainability, using no renewable sources, according to CDP.
Changes in consumer demands and a growing awareness of business risks have sparked strategic shifts at a handful of companies, however, including Unilever and L’Oréal.
“Leading companies are taking action across their entire value chain and redefining the role of business in society — by engaging with suppliers, innovating their product lines and even working with consumers to drive behaviour change,” said Carole Ferguson, head of investor research at CDP.
“These efforts need to be replicated by others in the sector if they are to justify their role in a society that can no longer be based on fast-paced, rising consumption and linear business models,” she added.
Unilever and L’Oréal have produced a broad range of vegan and organic alternatives and reduced packaging across their portfolios, but CDP found that other groups including Kraft Heinz, beauty group Estée Lauder and Dutch brewer Heineken have made very few such changes.
Michael Mullen, senior vice-president of corporate and government affairs at Kraft Heinz, said in a statement: “We know driving meaningful environmental change is an industry-wide effort and Kraft Heinz is serious about doing its part.
“We’re identifying projects in areas like logistics, packaging and agriculture to further reduce our impact. We look forward to announcing those targets and sharing additional detail in 2020.”
L’Oréal offers suppliers tools to promote sustainable agricultural practices and has replaced virgin materials with 7,294 tonnes of recycled materials. Renewables now account for 51 per cent of energy consumed globally by the company, and 100 per cent of electricity consumed in the US, the report finds.
It also reuses industrial water at every possible opportunity, treating wastewater using a number of technologies. Heineken, whose products contain some of the highest quantities of water of the 16 companies examined, faces serious risks from supply shortages for which it is not prepared for, said CDP. “Water-related issues are not integrated into any of the company’s long-term strategic plans,” it said.
CDP found that the poorest performer in personal care was Estée Lauder. While the company has launched some pilot schemes to replace virgin plastic with recycled content and improve water efficiency, they were only “incremental in impact” said the report.
Meanwhile, only 5 per cent of palm oil used in its products comes from certified sources.
Responding to the report, Estée Lauder said: “We are committed to accelerating our sustainability and citizenship practices across the company and our brands. We plan on continuously updating our targets and transparently communicating our progress.”
Environmental analysts predict further market disruption and warn that if companies do not prepare for them now, they will soon be outstripped by competitors.
“Ongoing activism around plastics and packaging is just the tip of the iceberg, and we expect to see more environmental issues come to the fore as consumers start to question what goes into the products they buy, use and dispose of,” said Ms Ferguson.
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