The Growing Importance of ESG for Businesses
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The Growing Importance of ESG for Businesses Considering Supplying The Australian Market

Environmental, social and governance (ESG) considerations are rapidly becoming a core pillar of many businesses and are becoming increasingly important for international manufacturers targeting growth in Australia. Through this blog, we will highlight some of the key trends and considerations across both private label (co-manufacturing) supply and branding.

Background

There are 2 major retailers in the Australian market accounting for over 60% of the market, Woolworths (www.woolworths.com.au) and Coles (www.coles.com.au). Operating a variety of different formats, they manage a nationwide supply base and portfolio of stores. With energy wastage, food surplus, and excess packaging, all key concerns that have resonated at a consumer level, the focus is on supporting significant ESG change through supply chain innovation and recognition as Australia’s most sustainable supermarket change.

How are they approaching this?

We split the blog into half here, Private Label (PL) or Own Brand opportunities. This is a major area of focus where retailers are targeting ESG changes to build consumer confidence and demonstrate progress. Significant changes include:

    • Packaging – changes in primary packaging to reduce excess plastic, moving to recyclable materials and eliminating materials that don’t comply with the National Packaging targets (www.apco.org.au).
    • Reducing food waste through donations to food banks or upcycling foods to create new products, such as vegetable chips. Another approach is increasing the range of wonky, or imperfect fruit and vegetables sold through the fresh produce categories, whereby products with blemishes or light defects become accessible to consumers at a discount.


Source: Woolworths

    • Working strategically with suppliers to deliver ESG initiatives across the supply chain, combining expertise and resources to deliver programs such as higher welfare poultry, reduced pesticides in fresh produce, or carbon-neutral beef production.
      Source: Coles
  • Private Label growth is a key objective for both retailers, and as such helping them differentiate through product and the environment is a clear opportunity for growth.

Targeting Branded Growth

  • New brands and innovative products are driving success currently across key categories (health, wellness, healthy snacking, and convenience as examples) clearly influenced by the agility of a start-up and the desire to win fast. Brands that are able to develop products built around the ESG agenda and clearly communicate this to consumers are scaling quickly. The ESG ecosystem is creating an environment for new brands or product solutions that resonate to gain market share rapidly.
  • Focus on food transparency as the next evolution of food traceability to help consumers understand the positive work within your supply chain or product design, connecting with them to inform, educate, and resonate. Through customer-focused marketing messages, differentiate your product from the competition.
  • Lead rather than follow, understanding the importance of packaging and packaging waste. Ensure that packaging is minimised and understand local recycling capabilities as there are differences between international markets.

One point of caution is the risk of greenwashing, and so to build trust and customer loyalty it is essential that all claims are substantiated, especially as the market is already seeing regulatory challenges to protect consumers from claims that are weak or unsubstantiated.

How can you use the ESG focus to support new market access in Australia?

  • Understand the strategies published through the retailers’ annual reports or ESG reporting targeting areas of focus, using the insights to build your product narrative to highlight the benefits your products bring. Some examples of these benefits include being sustainably sourced, recycled, recyclable packaging, healthier choices, or better for you.
  • For those companies targeting branded growth, ensure key customer-facing marketing messages are concise and resonate with the target customers.
  • Understand the competitive landscape and how the competition is focused on the high level of activity in this area.
  • If targeting Private Label supply through strategic co-manufacturing, be clear in how your capabilities help deliver their ESG goals, contribute to change or enable them to communicate progress to investors, stakeholders, and consumers. Remember, international sourcing and access to industry-leading global capability is an important part of retailing and can contribute significant progress within a well-defined and communicated ESG sourcing strategy.

Did you find this blog insightful for your business or organisation? If you’re keen to understand more about growth opportunities in Australian retail and the growing focus on ESG, checkout out our website here or talk to the team via hello@profcg.com.

Are you looking to lead your organisation’s ESG journey? Check out our interview from last year with Juliette Foster in Westminster here, and review our ESG brochure here.