From trend to core business strategy: Why sustainability became non-negotiable for CPG brands

Sustainability has been a big buzzword in the CPG space for over a decade. But more than just a passing trend, sustainability has become a core driving factor in consumers' purchasing decisions and the foundation of many brands’ business strategies. 

74% of consumers say that concerns over the environment influence their purchasing decisions. 

Younger generations are the most driven by sustainable values. Less swayed by flashy logos and brand equity, 75% of Gen Z consumers rank sustainability as more important than brand name. In the CPG space, where the likelihood of consumers switching products is high, sustainability has become one of the deciding factors in whether or not consumers buy from and remain loyal to a brand — beyond price, immediate availability and convenience. 

Products marketed as sustainable grew 2.7 times faster than those that were not, while 60% of consumers said they’d pay more for a product with sustainable packaging. CPG brands that aren’t developing and marketing their products as sustainable will be outpaced by the competitors that do. 

Global regulations have also tightened. Federal rules rolled out by the EPA addressing air pollution alongside energy and pesticide use have set caps on carbon emissions, irresponsible energy use, single-use plastics, and packaging waste in the CPG industry. While local state laws, like New York's Extended Producer Responsibility (EPR), require every business to make their single-use packaging recyclable or compostable by 2032. Failing to comply with sustainability laws can result in penalties beginning at $25,000 per day. 

With increasing pressure from both consumers and regulators, what can CPG brands learn from other brand’s missteps and effective strategies in the space? 

In this post, I take a look at sustainability in CPG in more depth. I’ll explore what we’ve learned from the most interesting CPG case studies, the latest CPG sustainability trends, how green claims influence consumers’ buying behaviors and the new sustainability metrics.

Despite increasing regulatory pressures and demands from consumers for more sustainable products and better sustainability practices, many CPG brands fail to hit their sustainability targets. 

Supply chain complexity is a key area where brands get caught out. Up to 90% of a CPG brand’s environmental impact takes place outside of its direct operations. The average CPG supply chain is typically multi-tiered and complex. Lack of control, transparency, and a disconnect between brands and suppliers can mean brands remain anywhere and unable to impact their suppliers’ failure to live up to sustainability claims at different stages in the supply chain. 

To deal with deforestation and threats to biodiversity connected to palm oil, Procter & Gamble (P&G) set out to gain more visibility and address these issues at the earliest stages in their supply chain. They sought out to improve traceability at the mill level, the starting point in many supply chains where palm oil from a range of sources is combined. 

They used satellite monitoring to uncover illegal deforestation practices — achieving 98% traceability of palm oil at the mill level. They also lent their support to the Roundtable on Sustainable Palm Oil (RSPO) certification and adopted towards Jurisdictional Approaches (JAs) — helping NGOs and local authorities set up deforestation-free zones.

Inflation is another big issue for brands when it comes to hitting sustainability targets. From raw materials to energy costs, expenses keep increasing. Green materials and practices cost businesses up to 75–85% more. CPGs need to carefully balance production and material costs with consumer price sensitivity and sustainability targets. As I cover below, while consumers often pay more for eco-friendly products, this isn’t always a guarantee and brands may find themselves at a loss when prioritizing typically more expensive sustainable materials and production methods.

Brands also often fail to hit meaningful targets because they fail to fully address consumers’ sustainability concerns — often leading to a drop in brand perception and loyalty. Many consumers say they see a disconnect between CPG brands’ claims and the reality of their business practices and choice of materials. 

Many consumers have become skeptical about greenwashing following highly-publicized cases from a number of CPGs. NIQ reports that 77% of consumers will quit a brand that's found guilty of greenwashing. 52% of consumers say they’ve come across false or deliberately misleading sustainability claims from supposedly sustainable brands. Consumers are frustrated by vague claims, purposefully chosen confusion-causing technical terms, and a calculated lack of information sharing. 

In 2022, P&G rolled out a new Head and Shoulders shampoo they claimed was made out of “beach plastic.” The suggestion? A bottle that used reused plastics, reducing the use of new plastics — making it better for the planet. The reality? Because the bottle was dyed blue, consumers couldn’t recycle it — making it less sustainable than other products in their line. 

Changing Markets Foundation says, “Greenwashing tricks us into believing change is happening, when in reality it’s not. The number of products labeled ‘sustainable’ or ‘green’ has increased exponentially in recent years, with many household brands guilty of greenwashing. Yet as businesses claim progress toward sustainability, emissions continue to rise, extraction increases and overproduction spirals. Greenwashing lulls us into a false sense of security – a smokescreen that conceals the continued exploitation of the planet and allows those responsible to get away with it.”

When it comes to driving sales and protecting margins, brands need to effectively manage the tension between three different elements: cost, convenience and sustainability. 

Brands are finding more creative ways to maintain the balance. Take PepsiCo. With a core focus on innovation, PepsiCo is working alongside manufacturers, engineers and product developers to help create innovative new packaging materials and technologies. 

The brand’s PepsiCo Positive initiative, launched in 2021, zeroed in on reducing the weight and thickness of their packaging materials without compromising sustainability. The brand’s R&D team developed a unique technology to pre-settle their snacks, reducing packaging by creating smaller bags — allowing them to cut costs and protect against packaging waste. They also traded in their traditional packaging materials for high-quality recycled polyethylene terephthalate (rPET). They aim to achieve 97% reusable, recyclable or compostable packaging by design in their main packaging markets by 2030.

According to PepsiCo:

“PepsiCo’s reinvention efforts focus on improving the environmental impact of our packaging by developing and supporting packaging innovations and new technologies. Such innovations can include plastics from non-food, plant-based sources and compostable options, paper-based alternative packaging formats as well as reuse models.”

Many other CPG brands have also focused on developing fully-recyclable packaging. Nestle recently recalled over 250 million plastic packs of Smarties including bars, sharing bags, and individual packets — switching up the packaging from plastic film and foil to fully-recyclable coated paper. 

Many CPGs are also putting circular-economy practices into play, cutting waste and reducing reliance on resources, by keeping products and materials in a continuous loop of use and regeneration. 

In Europe, Unilever launched their in-store refills service, allowing consumers to refill their liquid bottles for goods like laundry detergent, shampoo, and shower gel at self-serve counters in store. Ecorefill bottles use 75% less plastic than the standard cleaning bottles and reduce trucks on the road for product transportation by 87%.

After the successful trial, Unilever will be trialing their refill kiosks globally. 

NIQ says that sustainability has become highly personal — meaning consumers are adopting a sliding gradient of green practices. While consumers care about sustainability, 53% think that sustainable products cost too much. Often, price and convenience can win out over sustainable values. With consumers juggling inflation and tightening economic pressures, often the cheapest brand wins — even when they’re offered sustainable alternatives. 

While in the current climate, there’s a risk of consumers trading down to save, on average, many are still willing to spend more on green products. 71% of consumers said that if they have to choose between two products that cost $10 or less, they'd choose the sustainable one, while 80% say they’d happily pay more for a sustainable product. 

Often, when we think of sustainability in CPG we think of plastics, carbon and reducing waste, but ethical and sustainable business practices run so much deeper. 

As much as consumers care about recycling and cutting waste and carbon emissions — they’re often equally concerned about fair business practices, labor law adherence and brands’ social values.

Beyond measuring your carbon footprint, recycling and energy usage, you can help expand your use of metrics to help build a stronger sustainable foundation for your brand. As The Compliance Digest reports, from pollinator decline to soil health, biodiversity metrics are quickly becoming essential tools in environmental and social and governance (ESG) reporting. To successfully tackle environmental and social issues as a CPG brand, your approach needs to be holistic: 

"For years, carbon has dominated the sustainability agenda. Net-zero targets, carbon credits and emissions audits have become the standard tools in corporate climate strategy. But carbon-only metrics offer a narrow lens. A company can hit its carbon targets while still contributing to deforestation, soil degradation or water pollution. For example, planting fast-growing monoculture trees may sequester carbon, but it often destroys local ecosystems and reduces biodiversity."

To help businesses to think/take action beyond carbon, The UN Kunming-Montreal Global Biodiversity Framework was set up in 2022. It committed 196 countries to help stop biodiversity loss by 2030.

Biodiversity metrics provide a way to measure the health and variety of a range of different natural systems, including: 

1. Species richness: This metric counts the different species in a habitat 

2. Habitat quality: This refers to the extent to which a habitat, like a forest, is intact 

3. Ecosystem services: Such as pollination 

4. Soil health: This accounts for factors such as structure, microbial diversity, and nutrient cycling

These metrics provide a multi-layered look at the health of natural habitats, giving CPGs a way to quantify and measure their far-reaching, ”genuine” impact on the environment beyond their carbon footprint.

Social responsibility is also a core part of the ethical business practices that build trust and brand equity with consumers and support ethical business growth. Justin Honaman, Head of Worldwide Consumer Products at Amazon, shares:

“Companies achieve the highest stock returns when they focus on material ESG issues. ESG is not a philanthropic effort of ‘doing good’ with leftover profits but rather a metrics-driven approach with long-term business strategies. In other words, ‘doing well by doing good.’ Bottom line, ethical commerce is a practice that focuses on both environmental and social issues directly related to companies’ operational and financial performance.”

Beyond protecting the environment, brands should also prioritize measuring their social impact. As one of the leading sources of consumer behavior and CPG sustainability reporting, Edelman’s 2025 Brand Trust reports that 64% of consumers buy, choose or avoid brands based on, “Their beliefs about what is going on in society.” While a study from The Harvard Business Review found that when brands updated their core product or services messages with the right social messaging they saw a jump in average appeal from 42% to 62%.

Community initiatives, advocacy and choosing responsible action over quick profits help CPGs align with ethical consumers who want to shop with brands that share their values and fight for their chosen social causes. Disaster relief, helping to close the wealth gap and provide equal access to their products, supporting access to healthcare and addressing poverty alleviation are some of the main ways many CPGs are helping to support social causes. 

TOMS' "one-for-one" model is a popular initiative that saw the brand donate one pair of shoes to a child in need for every pair bought by a consumer. Since the campaign started in 2006, TOMS have donated over one-hundred million pairs of shoes to children in need.

Ethical sourcing, fair trade and labor are also heavily intertwined with building an ethical brand. Fair wages, supply chain transparency, regular partner audits and making sure working conditions are safe and fair are all essential to being a fair, ethical brand.

There are several green innovations gaining traction in the CPG space. 

The first is refillable packaging, like Unilever's self-serve kiosks mentioned above. Refillable packaging supports consumers to reuse and recycle their product packaging, reducing packaging waste and transportation costs. The global reusable packaging market is predicted to reach $7 billion by 2029. And the practice can reduce greenhouse gas emissions by up to 85% compared to single-use. 

Many consumers criticize brands' failure to make real positive change on an environmental scale. Enter: regenerative sourcing. 

Here, brands focus on strategically procuring raw materials in ways that help benefit ecological and social systems. For example, a brand may focus on improving soil health or restoring water cycles. 74% of consumers have a positive perception of food brands involved in regenerative agriculture. 

For instance, Nestlé helped wheat farmers who supplied wheat for its DiGiorno pizza brand transition to regenerative agriculture practices with both technical and financial support alongside Ardent Mills and another supplier. They aimed to help their farmers improve soil quality, use less water, energy, and fertilizer and reduce their carbon emissions. Farmers in the program using cover crops or living roots helped remove more than 3,800 metric tons of CO2e — equal to taking approximately 850 gas-powered cars off the road for one year.

As I covered above, supply chain complexity is one of the biggest barriers in the way of CPG brands reducing their environmental impact. AI can offer full transparency and traceability,  with the ability to map materials throughout the supply chain, the tech can analyze geo-spatial data, weather patterns to monitor suppliers and help make sure they are using sustainable practices. Machine learning allows AI to bring together disparate, siloed data and centralize it on dedicated platforms that can clean, standardize, and normalize your data — making it easy to review from a usable dashboard. 

According to McKinsey & Co:

“Despite pressures from consumers and regulators, as well as the growing body of evidence that integrating sustainability concerns can be a profitable strategy for retailers—the adoption of sustainable packaging materials has been comparatively slow. To date, and looking across regions and end use areas, our research has not observed any major categories make a concerted shift to more-sustainable packaging. Is this slow adoption a result of “sticky” consumer preferences? Could it be margin compression among FMCG and retail companies? Or are other factors potentially involved?”

Despite their benefits and the boost in positive brand perception they deliver, why are so many CPGs slow to adopt sustainable packaging and practices? 

McKinsey has uncovered six main barriers across the value chain that are getting in the way of adoption: 

1. Affordability 

2. Performance 

3. Lack of alignment on the meaning of sustainability 

4. Lack of clarity on regulatory standards 

5. Limited or unreliable supply

6. Lack of knowledge of existing and developing solutions

It’s essential to pinpoint which of these barriers are getting in the way and slowing down adoption for your brand. Early adopters can gain the advantage in brand awareness and equity, market share, and operational insights and efficiency.

Hitting your sustainability targets and maintaining your credibility with consumers requires a multi-layered, holistic strategy based on an authentic care for the planet. Consumers are becoming more skeptical of unverified claims and brands with social values that fail to match up with their ambitious plans for reducing their carbon footprint.

As a CPG brand, it’s important to think holistically about how you’re impacting both the planet and local communities, factoring in your impact across the supply chain and post production. 

There are several different inventive technologies, packaging materials and resources you can explore to help support you in your move to becoming a more sustainable brand. If you’re curious to find out how Zappi’s AI-based platform can help you explore consumer sentiment when it comes to your sustainable marketing messaging, creative and packaging — contact our team here.