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Supplier Management

The Sustainability Imperative for the Health and Beauty Sector

It shouldn’t be a surprise to anybody that sustainability is a primary concern in today’s society. A focus on sustainability, which refers to meeting the needs of your business today while preserving the natural environment for future generations, while also working to improve your company’s environmental, social, and governance (ESG) performance, is now simply table stakes for any business. For the health and beauty sector, it’s an even bigger priority. For one thing, the customer base for the sector tends to be more focused on environmental stewardship than the average consumer. And for another, because the beauty industry in particular has long been seen as anything but sustainable as a result of its heavy use of packaging, single-use items, and chemical-intensive ingredients. There’s increasing pressure for the industry to clean up its act.

According to a recent NielsenIQ survey, consumers care. 34% of global consumers say they’re more likely to buy from brands with sustainable credentials than they were two years ago. 66% of them believe environmental problems are having an impact on their own health.

But the health and beauty sector has a lot of work to do. It’s suffered a great deal of criticism for decades now for animal testing, yet that still remains prevalent. It’s one of the largest users of containers and packaging in the CPG world. That’s a segment that creates 14.5 million tons of plastic waste per year, of which less than 30% is recycled. Microplastics, a more recent environmental complaint, are used in thousands of cosmetics (glitter, anyone?) and eventually wind up in our oceans. Palm oil is also used in thousands of products and contributes to rainforest destruction and the death of thousands of orangutans each year. And don’t even get me started on water use.

The Business Case for Sustainability

However, cleaning up your act can cost money. As much as you might love the business you’re in, it’s still a business, so spending money usually has to be justified. Fortunately, a lot of work has already been done to help you build the business case for ramping up your sustainability efforts.

At the NYU Stern Center for Sustainable Business, research has shown a number of the benefits from focusing on sustainability are primarily soft savings that aren’t necessarily easily realized in dollars and cents. These include risk mitigation, more positive media, effect on consumer buying decisions, and better recruitment and retention of employees.

  • Risk mitigation. Increasingly, a failure to take environmental concerns into account means you’re taking on a variety of very real business risks, including potential regulatory action and business reputation damage. While it would take an adverse situation for an effect on the bottom line, these kinds of problems can mean big fines or tremendous effects on sales. With health and beauty having a pretty big global manufacturing footprint, it’s easy to see how things could readily go wrong.
  • More positive media. On the other hand, making proactive efforts to improve your sustainability chops can give your business some really glowing publicity. There are countless articles out there about health and beauty brands who are tackling the industry’s wasteful ways, and that can give you some very healthy publicity.
  • Effect on consumer buying decisions. It’s no secret that consumers, especially the younger generations, are more and more willing to make their product choices based at least in part how well a brand’s core values match their own. For Millennials in particular, 71% want brands to be sustainable and ethical. With people of all ages focused on environmental issues, sustainability can be a big selling point for your products.
  • Better recruitment and retention. Similarly, potential employees are looking at businesses’ values as they consider going to work for them. Sustainability can be a big positive factor in getting you the team members you need, and keeping them around for the long haul.

“But hey!” you might be saying, “my bosses want hard justification for sustainability spending.” Well, there’s good news–a few years back, Harvard Business Review had an article that focused more on the quantifiable benefits from working on sustainability. Some of the benefits they called out were increased sales from innovation, product differentiation via sustainability, and reduction of operating costs through resource use reductions.

  • Increased sales from innovation. Incorporating sustainability into your innovation efforts can lead to some big money-maker products. 3M, for example, developed its hydrofluorocarbon-free alternative Novec fire suppression fluids–the first viable alternative to environmentally destructive hydrofluorocarbons–this way. Similarly, Nike created its billion-dollar-plus Flyknit line, which reduced millions of pounds of plastic waste by using recycled polyester.
  • Product differentiation via sustainability. Publicly embracing sustainability as part of a brand identity can pay. Studies show that consumers perceive higher performance from sustainable products, which can allow higher premiums of up to 20%. In addition, general corporate social responsibility practices have been shown to drive up to 20% higher annual sales.
  • Reduction of operating costs through resource use reductions. The very best sustainability efforts pay for themselves. So whether that’s retrofitting to more efficient lighting in your facilities, investing in renewable energy sources, or simply focusing on reductions in your usage of water and energy, real savings can result. In 2013, for example, GE had reduced greenhouse gas emissions by 32% and water use by 45% compared to baselines from five to seven years earlier and saved $300 million in the process.

Areas of Opportunity

As you gear up to focus on sustainability, here are some specific areas to dig into. Remember, it’s not just about what you do, but what everyone in your supply chain does.

Suppliers

  • Ingredients. Are they using sustainably-produced alternatives and minimizing overuse?
  • Chemicals. Are there alternatives to chemical use? If required, are they finding the least harmful ones, and using the least amounts possible?
  • Processes. Is there a constant focus on efficiency and minimizing waste?
  • Packaging. Is all packaging that’s used necessary? Are there ongoing efforts to identify and use the most environmentally friendly alternatives?
  • Utilities. Are there constant efforts being made to be as efficient as possible with water and energy? Are programs in place to steadily reduce usage?

Transport and Shipping

  • Emissions reduction. Are you focused on finding transport companies and shipping modes that minimize fuel usage and greenhouse gas emissions in their fleets?
  • Shortened supply chains. Similarly, are you selecting your upstream partners with a focus on minimizing how far inventory has to travel to get to you?
  • Route optimization. Are you using the latest technologies to make use of the very best routes to minimize miles traveled for moving your suppliers’ inventory and ensure items ship on-time to avoid more environmentally harmful freight?

You

  • Be an example to your suppliers. See that list above? You should be going after all the same things in your own operation.
  • Efficient business processes. Are you using the latest technologies to eliminate the use of paper, to reduce errors and repetitive or manual processes, and to assist your external business partners in doing the same?

It’s not a question of whether you need to make sustainability part of what you do in your health and beauty business anymore. These days, it’s part of the business price of entry for H&B. But remember this: done right, it can benefit not only the environment, but your stakeholders and your business results, too.