special report: responsible sou rein g the business case...

Special Report: Responsible Sou rein g

The business case for responsible sourcing Retailers will find that customer loyalty and profits increase when they source own-brand products responsibly.

By Michal Christine Escobar

^ ^ ^ ^ ^ " ^ ^ ^ ^ ^ hen it comes to running m a business, doing the right

X ^ ^ L / thing and doing the profitable thing aren't always the same.

Fortunately, when it comes to T T sourcing store brand products,

doing the right thing also makes good business sense. After all, a growing consumer base is looking to

spend its money on companies with responsible sourcing commitments. According to Dave Connors, vice president of sales and marketing for Conyers, Ga.-based Pratt Industries Inc., a recent survey from global pulp and paper company Asia Pulp and Paper found that 42 percent of Americans are willing to pay more for sustainable paper or products sold in sustainable packaging. And the younger the consumer, the more likely he or she is to pay for sustainable options.

And this group isn't easily fooled. W i t h easy access to information via the Internet on smartphones and tablets, consumers can easily research a company and its products prior to purchase — whether they're at home or in a store, Connors adds.

Not only are retailers able to charge more for a sustainably sourced product, they're able to use i t to drive brand loyalty.

"Recent surveys have found that shared values are overtaking price as a purchase driver among health-conscious consumers," says Liam Hawry director of industrial design and packaging, Studio One Eleven, the design arm of Chicago-based Berlin Packaging L L C . "Consumers ultimately confer the values they assign these products onto the stores where they find them."

Jean Shieh, marketing manager, Sensient Technologies, Sensient Natural Ingredients, Turlock, Calif., agrees.

"More and more people are becoming global citizens who care about preserving the ecosystem and the human community," she says. "This creates a new ageless generation of consumers who prefer companies wi th community-oriented culture, and these consumers are voicing their preference through social media and community channels."

M i l l e n n i a l , in particular, are "fiercely loyal" to brands that meet their value equation, states Janice Neitzel, CEO and principal of the Sustainable Solutions Group, Chicago. Retailers with private brands should make it a goal to cultivate them as core customers through sustainable sourcing strategies.

A n added benefit to responsible sourcing is brand protection, observes Dan Kelly, vice president of sales, Musco Family Olive Co., Tracy, Calif.

What though, does it really mean to offer sustainably sourced products? In general, it refers to three main components: social and environmental responsibility, as well as animal welfare.

Be socially responsible When it comes to social responsibility, consumers are often most concerned w i t h working conditions for employees harvesting or manufacturing the product, child labor and fair living wages, says Jerry Gilbert, vice president sales, Mother Parkers Tea & Coffee Inc., Mississauga, Ontario.

Other considerations could include availability of health care, education support and even agronomy development, adds Clay Dockery, division vice president of corporate brands, Massimo Zanetti Beverage USA, Suffolk, Va.

Fair trade and direct trade programs, for instance, seek to ensure farmers are paid prices

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http://www.storebrands.info

Special Report: Responsible Sourcing

for their crops that w i l l sustain their livelihood and allow for reinvestment i n community infrastructure such as roadways between mountains and collection centers, points out Susan Lambert, business development manager for Massimo Zanetti Beverage USA.

"For us, the social component is by far the most important," states Francois Bogrand, founder and C E O of Natural Nectar, Huntington, N.Y.

Engage in environmental responsibility Environmental responsibility is well understood by many consumers. For instance, they wonder: "Was the product produced i n a way that harmed the environment?" or "After the product is consumed, how w i l l the waste/packaging impact the environment?," Gilbert says.

Therefore, retailers could benefit by clearly explaining exactly what they or their suppliers are

doing to benefit the environment. For example, they could explain how they are reducing the use of harsh chemicals or properly managing resources such as energy and water, Lambert says.

It could also be beneficial to retailers to explain the history of their store brand suppliers' environmental responsibility initiatives. For instance, Sensient Natural Ingredients has been working for decades w i t h its growers to improve their environmental footprint, Shieh says. Retailers working wi th Sensient to offer organic ingredients could f ind that the supplier's dedication resonates w i t h consumers.

Retailers could also add "quick wins" to packaging such as clear recycling instructions or partnering with local waste management companies on recycling programs to reduce costs and generate revenue, Neitzel says. Retailers that are really intent on being ahead of the curve could even develop commercially compostable packaging.

A n d they should not overlook the importance of reducing food waste.

"Food waste is one of the largest sustainability issues in the world, with billions of dollars lost annually when food and beverages pass their expiration dates," says Jim Clark, market leader — food and beverage packaging, Multisorb Technologies, Buffalo, N.Y

One way retailers could help reduce their contribution to food waste is by using desiccants and oxygen absorbers, which help to inhibit the growth of aerobic spoilage microorganisms in food packaging, Clark says. Such technology extends product shelf life — helping to reduce shrink and waste.

Support animal welfare Animal welfare is also top of mind for a quickly growing group of consumers. One way retailers could ensure proper




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discomfort; pain, injury or disease; and fear and distress;

as well as the freedom to express most normal animal behaviors, Connors says.

Additionally, animal welfare must take into consideration how an animal's natural living environment could be affected by farming or other manufacturing practices.

"When choosing ingredients, we have to make

sure that the production of certain ingredients doesn't jeapordize biodiversity" Bogrand says. "For example, our products which contain palm oil are RSPO (Roundtable on Sustainable Palm Oil) certified. This means palm oil is sustainably harvested to respect the environment of orangutans and other species."

Go local Today, when most consumers think of environmentally friendly, they also think of "local." Local typically is associated w i t h a reduced carbon footprint and tangible benefits to the local economy. However, Connors cautions retailers to think before they throw everything they've got at local initiatives.

"It's a balancing act," he says. "Retailers have to look at the big picture first and examine what tradeoffs you might be making in going local that could actually be worse for the environment."

Bogrand agrees. " I t is also important to think global," he says. "As

we interact in the global economy, we need to source ingredients which help sustain local economies in developing countries. Not only does this provide consumers w i t h more options, but i t helps integrate local communities i n the globalization process."




Communicate clearly Retailers could look to third-party certifications as a way of communicat ing their social responsibility initiatives. Such certifications include areas such as organic, n o n - G M O Project Verified and Fair Trade USA certified. These certifications cover the main two components of responsible sourcing: social and/or environmental, explains Randy Markle , vice president of sales and manufacturing, Natural Nectar. Other major certifications include Rainforest Alliance and the Forest Stewardship Counci l .

For animals, common certifications include American Grassfed Certified beef and Certified Humane meat and cage-free eggs. The Global Animal Partnership is a five-step rating certification that gives producers the option to qualify at different levels, and the Animal Welf are Approved certification is a pasture-based program, Neitzel says.

A newer certification that is rapidly gaining ground is Safe Quality Food (SQF) Ethical Sourcing certification. This certification ensures that food suppliers comply w i t h certain social and environmental requirements i n the food industry, including wage compliance, restrictions on chi ld

labor, occupational health and safety, pol lut ion prevention, air emissions management and wage management, the Arl ington, Va.-based SQF Institute says.

Musco Family Olive Co. recently became the first company to achieve SQF Ethical Sourcing Level 2 certification.

" A l l food manufacturing facilities are required to attain some level of food safety certification, and this same model needs to be applied to responsible sourcing," Kelly says. " I n doing this, the food industry can make major progress on major issues globally and as a whole, versus the current model of voluntary ethical sourcing."

Besides certifications, retailers should look to packaging to communicate their environmental sustainability initiatives. According to Dave Lockwood, vice president of sales for Morganton, N.C.-based Ice River Springs Water Co., packaging is the No. 1 thing consumers look at both at home and in stores. He gives the example of Weis Markets Inc., Sunbury Pa., which uses a significant portion of its bottle labels to explain to consumers the bottles are made from 100 percent recycled PET and why this is beneficial for the environment, SB



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