Environmental legislation and climate changes could eat up as much as 47 percent of packaged-goods companies’ profits by 2018 if they don’t adopt long-term sustainability measures, according to a new report released by A.T. Kearney.
The report, “Rattling Supply Chains: The Effect of Environmental Trends on Input Costs to the Fast-Moving Consumer Goods Industry,” addresses long-term profitability of the packaged goods industry. The findings are based on “future analysis” of how much certain commodities will go up, including oil, cereal, soy and palm oil, and how they will fare under certain environmental, governmental policy and climate situations. The term used to describe these hypothetical scenarios is “ecoflation.”
We found this report and article interesting, because it fits right in line with what Dirxion can do for a publishing company by taking their publications digital. The report delivers some startling numbers:
Companies can expect a reduction of anywhere from 13 to 31 percent in earnings by 2013, and from 19 to 47 percent in 2018, if adequate sustainability measures are not taken. Assuming commodity costs hit an all-time high, “half of current profits will be erased” if companies continue standing by a “business-as-usual” approach, Mahler said.
13% to 31% are numbers that companies should be paying attention to – now. Adapting “green” policies and procedures, forward thinking companies can shield themselves from what seems to be an ugly situation 5,10,15 years down the road. The report also speaks of a few large companies that are already taking initiatives:
Companies like Procter & Gamble and Nestle have already implemented sustainability strategies. Nestle is placing more emphasis on sourcing materials locally to cut down on transportation. Meanwhile, P&G is cross-leveraging research and design teams across different brand categories. For instance, a brand manager on Pantene might consult with a fellow colleague on Tide for best practices, such as using packaging that requires less plastic.
We expect that as the world moves into 2009 and beyond, you’ll start seeing similar reports and predictions on a more regular basis, so taking action now can really give you the head start you’ll need to literally survive.