The terminology is still a bit vague…

Trends and challenges of sustainable consumption

• • • • •

Jouko Kuisma CR Navigator J.Kuisma Tallinn, March 24, 2009

• • •

Ethical (vs. unethical?) Responsible (vs. irresponsible?) Sustainable (vs. nonsustainable?) Corporate Social (?) Responsibility (vs. shareholder value?) Corporate Responsibility / Responsible Business (what about stakeholder interests?) Soft values (vs. hard values?) Green values, greening (what is the countercolor?) Fair Trade (vs. unfair trade?)

We would need a neutral expression, free from feelings and political traces:

…so what do we actually want to promote?

Shareholder value = financial performance 4 Stakeholder value = financial performance + non-financial performance

Excellent financial result acquired by responsible means, by meeting stakeholders´ expectations and by protecting sustainable development (and proving it)

What do stakeholders expect from companies? Owners/investors: responsibility that ensures and strengthens financial result, reputation risk management Employees: responsible, motivating leadership Customers: guaranteed control over product safety, environmental and social issues in the supply chain Suppliers: clear instructions on responsibility requirements, long lasting cooperation Media: reliable facts, targets, continuous development NGOs: same as media + opportunities to participate and influence Society: good financial performance, investments, steady employment, taxes, social security payments

MITÄ PIDETÄÄN TÄRKEÄNÄ JA MISTÄ TEHTÄVISTÄ YRITYKSET TÄLLÄ HETKELLÄ HUOLEHTIVAT ASIOIDEN TÄRKEYS Edistää energiansäästötoimenpiteitä

Edistää toiminnallaan sukupuolten rotujen tai uskontojen tasa-arvoa

Which group of stakeholders has the biggest influence? • ”Corporate responsibility” means exceeding legislative requirements • It is difficult to measure the effects of responsibility on competitiveness and financial results • There are clear signs of effects on

- employees´ satisfaction and recruiting - institutional investors´ interests - the company´s influence on the media and society

• A company´s responsibility cannot totally depend on customers´ requirements

2007

Core issues in the food sector development

Pyrkiä ennalta estämään ympäristön saastuminen

(CIES – the Food Business Forum 11/2007) Pyrkiä edistämään toiminnallaan kestävää kehitystä

Ranking 2008

Pyrkiä edistämään toiminnallaan alueellista kehitystä Valvoa alihankkijoittensa työntekijöiden työolosuhteita

Tukea opetusta kouluissa ja yliopistoissa

Tieteellisen tutkimustoiminnan tukeminen

Tukea nuorison harrastustoimintaa jossakin muodossa

Lahjoittaa rahaa hyväntekeväisyyteen Olla vuorovaikutuksessa kansalaisjärjestöjen kanssa

Sponsoroida urheilutapahtumia Sponsoroida taidetta ja kulttuuria

Ranking 2006

Corporate responsibility

1

5

Safety of foodstuffs

2

6

5

Health and nutrition issues

3

1

3

Technology and efficiency in supply chain

4

3

4

9

Economy, consumer demand

5

10

10

Pricing, assortment, concepts, products…

6

2

2

Human resources

7

8

6

Competition issues

8

4

1

Customer loyalty programs, marketing

9

9

8

10

7

7

Trade/supplier relations YRITYKSET HUOLEHTIVAT

Kesko Corporation

Ranking 2007

Characteristics of a responsible company • Responsibility can be recognized in the company philosophy: values, vision, mission, strategy… • Company has clear management principles, systems and instructions guiding responsibility • Top management is committed to responsibility and looks seriously after the employees´ commitment • Non-financial performance is reliably measured and reported in an open, transparent way • Measuring and reporting concentrates on material issues • Development is continuous and goal-oriented • Company interacts closely with major stakeholders

Who can/shall promote sustainable production/consumption? • Producers know exactly their conditions and product specifications • Retailers can ask proof for responsible production and give their own specifications (own-brands) • Governments and their international organizations know how to develop common rules and incentives that lead to sustainable production (but it is not easy!) • NGOs, activists and experts can affect politicians, producers and retailers to improve their activities • Market forces (= consumer decisions) do not necessarily work efficiently enough - activists (”elite”) do not have enough joint buying power - average consumers do not have enough individual buying power - more sustainable products should be cheaper than traditional ones!

What do we want from the governments? • EU and intergovernmental organizations are responsible for ”the rules of the game”– e.g. ILO core conventions determine minimum labour standards • Part of those rules are environmental, social and country-of-origin labeling • Developing countries shall improve their inspection systems on hygiene, product safety, labour conditions and environmental impacts • Reliable authority certificates should be the first step before turning to commercial certification bodies

In most consumer surveys the share of responsibly acting consumers is high or very high

But in everyday reality: In the media, corporate responsibility is handled almost daily. These news are mostly negative. The consumer behaviour should be affected by such news.

• Wal-Mart is the biggest retailer in the world • In Germany, the share of hard discounters is over 35 % of the food market • Discounters are succesful also in Finland • Though a well-known and much discussed brand, the Fair Trade Label sold only for 50 m€ in Finland and for 2 bill.€ globally • Organic food has a very low market share • In almost every retail sector, marketing is mainly special offers and sale campaigns

What does that mean? • The consumers´ main interest is low price, no matter what they say in surveys • ”Poor people need low prices and rich people love low prices” • Most consumers do not care about environmental problems in far away countries, • nor do they show solidarity to workers who get poor salaries or work 60 hours a week • We want low prices! We want low prices! We want low prices! We want low prices!

Do you ever wonder why some prices are so low?

There are two types of low prices • Innovations, advanced technology, energy efficiency, mass scale production, efficient use of raw materials, short distribution chain etc. result in ethical low prices • Going under the critical point in raw material quality, product safety, work safety, labour conditions, workers´ rights, compensation, social security etc. result in unethical low prices • Ethical low prices should be called normal low prices • Unethical low prices should be called too low, unacceptable low prices

Relevant sustainability issues in the everyday family life • Housing - energy efficiency of houses, amount and production method of consumed electricity and heating, household waste…

• Commuting/travelling - commuting, leisure travel, shopping, hobbies…

• Eating - environmental impacts of food production, distribution, storing, preparing, includes social issues, animal rights etc.

• Dressing - labour conditions, workers´ rights, environmental issues (e.g. cotton farming, dyeing, washing etc.)

How could the average consumer be more responsible in his/her purchasing? • It is very difficult for an average consumer to study the social and environmental quality of even the most common products • Impartial, reliable, easy-to-reach and easy-tounderstand information is needed • Consumers could use simple ”guaranteed” labels if there were not too many competing choices • Internet can offer plenty of space for information • Responsibility should rather be part of the brand image that lots of small details to be understood

Breakdown of CO2 emissions in the UK

• • • • • • • •

• • • • • • • •

From corporate level to product level

How could one proceed in labeling?

Companies give out figures of their total performance Customers (some) need information on products The information has to be reliable and neutrally verified Standards and certifications grow in importance (quality, environment, labour conditions, product safety) The contents of the certifications should be cristallized through reliable, well-known symbols/labels Only limited amount of information fits in packaging Only limited amount of information fits in the salesperson´s memory There is plenty of space in the Internet (but can one trust on that information?)

• Retailers want few labels, rather covering the whole world – very difficult! • If numerous labeling schemes cannot be avoided, the EU Commission could act as ”an accreditation body” for all schemes developed in a multistakeholder decision process • Example: ”UTZ Certification is approved of the EU Commission and complies with ILO labour standards” • Environmental labels are proof of best practice, social labels mean complying with minimum requirements • It is not possible to give all information on packaging – just to satisfy the needs of a minority

What labels do we have?

Sustainability schemes without labels

EU Flower, Nordic Swan, Rainforest Alliance Organic food, wine, cotton MSC certified wild fish (farmed fish in 2011) Fair Trade, UTZ (Some companies use ”GMO-free” labels) FSC, PEFC certified timber and wooden furniture Energy efficiency of household appliances Energy efficiency of buildings (in Finland compulsory since 2009 when selling)

• • • • •

GlobalGAP certification (fruit, vegetables and flowers) HACCP product safety certification (mainly food) Social Accountability SA 8000 standard Business Social Compliance Initiative BSCI Ethical Trading Initiative (UK), Fair Labor Foundation, WRAP, Clean Clothes, ICTI (toy industry), coffee, tea and cocoa initiatives, Responsible Care (chemicals), palm oil certification etc.

What is carbon labelling? Carbon labelling on products gives instant information on how green certain items are compared to others.

Lower carbon Tesco

In March 2007, Tesco promised to add the Carbon Label on 70 000 products. So far completed - potatoes - tomatoes - orange juice - detergent - light bulb Altogether 30 products. Some more time is still needed?!

Ekologisen selkärepun MiPS-arvoja Suomen Luonnonsuojeluliiton sivuilta

Construction industry is one of the most advanced sectors in using environmental product declarations (though the use of the products are not included in the life cycle assessment) An environmentally conscious b-to-b buyer can use such information in comparing products. (see e.g. www.ruukki.com and ISO 14025 standard)

Excellent environmental and social responsibility: garments of the Swiss company Switcher: raw material is organic cotton, all suppliers and their audit reports are presented on the website (”Product-DNA”) See www.respectinside.org

Buying simple products such as tomatoes • ”Air freight tomatoes” from the Canary Islands are not acceptable (what about air freight Fair Trade flowers from Kenya and Columbia?) • A big truck (45 tn) full of tomatoes causes about 56 g/kg CO2 from Spain and 26 g/kg from Holland • A similar delivery by a containership from Gdansk, Poland causes around 10 g/kg • In Finland from Närpiö to Vantaa (Kesko central warehouse) around 10 g/kg • Kesko´s distribution to K-food stores about 50 g/kg • A neighbourhood supplier delivering directly to the stores 40-50 g/kg

And what about the CO2-emissions I cause when shopping

Buying simple products such as tomatoes • What about the energy needed in the Finnish greenhouses during the winter months? • What about the fertilizers and pesticides used in Holland? • What about the labour conditions of (illegal) workers in Almeria, southern Spain? • What do we know of agriculture in Poland? • What about the cargo traffic´s impacts on the Baltic Sea? • Could I get high quality GM-tomatoes somewhere?! • Solution: I will eat Finnish carrots (in the summer from my own garden)!

• • • • •

•

A kilo of products delivered to my food store has caused 50-90 g of CO2-emissions When I shop in my neighbourhood store by foot, there are no emissions nor costs When I go shopping by car to my closest hypermarket (5 km from home), CO2-emissions are 1,7 kg and petrol costs 1,20 € If the ”Ideapark” plan (40 km from Helsinki towards Turku) would be realised, my visit would cause 14 kg CO2 and 9 € costs Traveling to the famous Keskinen Village Store (in the average 170 km one way) will cause 54 kg CO2 and cost 31 € (but the products are so cheap there!) Did that transportation of tomatoes really count?!

But can I count the emissions of my leisure travel? Fortunately the airlines and VR (national railways) have emission calculators, and I can also use the VTT studies!

Emissions of air traffic (VTT Lipasto/emissions per unit) Average emissions per kilometer/person, counted for return trips CO g/hkm

Fuel

Fuel

Fuel/ energy

g/hkm g/hkm g/hkm

g/hkm

l/hkm

MJ/hkm

Domestic AT7

0.20 0.0095

Domestic M82

0.33

Europe, average Long distance, average.

Comparing emission calculators

CO2

HC

NOx

0.68

161

51

0.064

2.2

0.11

1.1

223

71

0.089

3.1

0.25

0.092

0.64

163

52

0.065

2.2

0.095

0.015

0.51

108

34

0.043

1.5

Four groups of ethical consumers (in all groups women are in clear majority)

Finnair calculator

HelsinkiRovaniemi

67 kg 98 g/km

HelsinkiParis

153 kg 81 g/km

SAS calculator

VR calculator (flights)

VTT/Lipasto air traffic

- take environmental/ethical issues into account in many ways - highly educated, biggest age group 55-65 years

155 kg 155 kg 223 g/km 223 g/km 274 kg 145 g/km

• Practical decision makers (19 %)

309 kg 163 g/km

• Ecological consumers, restrict consumption (31 %) - highly educated, elderly people - more in northern Finland and in the country

• Ethical by paying more (38 %) - high income, living in the Helsinki capital area

via CPH

HelsinkiBangkok

585 kg 74 g/km

781 kg 81 g/km via CPH

852 kg 108 g/km

• Those trusting in government decisions (43 %) - low income, living in smaller cities

What are Future Shapers like?

FutureView™ -research model divides consumers into five groups

1. They value authenticity in their purchasing

• Future Shapers

2. They are very conscious and very committed to the products,

• Future Makers

3.

They are individualists – they act in their own way, and want the companies to do the same

4.

They are short of time and value everything that saves their time

brands and services that they buy

• Today Consumers • Yesterday Consumers

5. They are socially responsible and ethically conscious as to their product and brand choices

• Yesteryear Consumers

6. They are curious and willing to adopt new ideas 7.

They spread the word for new interesting ideas

37

Future shapers – ideal Fairtrade consumers

Fairtrade is growing fast in Finland • 17 % buy regularly, 49 % every now and then • 75 % find it important to have Fairtrade products in the assortment of their local store • 22 % would change to another store if they could not get Fairtrade products • 58 % feel proud of buying Fairtrade products (35 % of all respondents feel proud, 44 % do not have any special feelings towards Fairtrade)

•

In 2007, the growth in sales was 55 %.

•

The sales in 2007 were 35 million euros, estimate for 2008 is 50 million euros.

•

Market share of Fairtrade bananas was 12 %, of pineapples over 20 %.

M € 40

35 35

•

Biggest growth in 2007: coffee, tea, sugar, wine, citrus fruit

30

•

49 % of consumers would want to buy more Fairtrade products

15

22,5

25 20 13,1 7,5

7,7

2003

2004

10 5 0 2005

2006

2007

Market development in Finland 2003 - 2007

Fairtrade consumers in Finland •

More than four out of five Finns know the Fairtrade labeling system.

•

69% of those who are familiar with the system know that the label guarantees decent compensation to the farmer.

•

Fairtrade sales per capita will be a bit over 10 euros in 2008.

•

Half of the Finns (49 %) would want to buy more.

•

Fairtrade products are mainly bought at neighbourhood stores and supermarkets.

•

17 % of the Finns are ”visionary consumers”, who favour Fairtrade products. (RISC Monitor ) (”Future shapers” will be explained later)

•

60 % of the Finns want to eat well and ALWAYS choose high quality products, even if they were more expensive. (RISC Monitor )

Fairtrade products in Finland 1/2 New Fairtrade certified products are launched in Finland almost every day. There are now over 1000 of them. • Fruit • Coffee (100) • Tea (100) • Cocoa/chocolate • Honey, sugar • Rice, quinoa • Wine, beer

Lähde: Taloustutkimus maaliskuu 2007

Latest consumer survey results Survey by TNS Gallup in September 2008 for Kesko Food Ltd

Fairtrade products in Finland 2/2 • • • • • • •

Müsli, müsli bars, biscuits Fruit juices Ice cream Spices, nuts Cut flowers Cotton (home textiles, clothes) Footballs, cosmetics

• Fairtrade Label is very well-known (87 %). • Over 70 % regard Fairtrade Label as reliable. • Regular buying is rare (7 %), buying ”every now and then” is more typical (37 %). • Women buy more often than men. • Most important reason for buying Fairtrade products is the will to support the producer/farmer. • Fairtrade products are most linked with the features ”ethical” and ”decent compensation to the farmer” • 49 % would want to buy Fairtrade products more often, 62 % of regular buyers. More information is still needed. • 68 % stay loyal to their favourite brands even during recession.

Pirkka Fairtrade roses • Kesko has introduced Fairtrade cut flowers under its Pirkka own brand • The sales started in September 2006 with Kenyan roses (five Fairtrade farms in cooperation) • The ready-packed bunch of 10 stems costs 4,90 euros in the K-food stores • The sales in 9-12/2006 were 350,000 bunches and in 2007 around 1,000,000 bunches (13 % of all cut flowers in Finland, half of Finland´s own rose production) • The Fairtrade premium paid in 2007 to social projects on these farms was 150,000 euros • Mixed bunches (Kenya) and carnations (Columbia) were launched in 2008 – the growth has been 40 %

Kenyan Fairtrade roses – a win-win-win case

Sales of Fairtrade flowers in 2005/2006 (1000´s of stems) Switzerland UK Canada Germany Austria France Australia/New Zealand Japan Total Finland (Kesko)

2005 83,450 17,281 6,698 2,906 1,478

2006 82,595 47,292 15,932 9,475 8,677 1,622 1,359 189 113,535 171,056 (9-12/06) 3,500

2007

10,000