<p>In 1875, with the aim of better understanding the science of brewing, JC Jacobsen founded the Carlsberg Research Laboratory. In the years since, the lab &ndash; which is still in Jacobsen&rsquo;s home city of Copenhagen &ndash; has <a href='https://www.carlsbergfondet.dk/en/About-the-Foundation/The-Carlsberg-Foundation/The-Carlsberg-family/The-Carlsberg-Laboratory-' target='_blank'>revolutionised modern brewing</a>: it is where the pH scale was invented, pure yeast was discovered and the barley genome was sequenced. </p><p>A scientific approach has been part of Carlsberg&rsquo;s DNA ever since. Now, the multinational brewer is using science and data to pursue sustainability. <a href='https://www.carlsberggroup.com/sustainability/case-stories/going-for-1-5-c/' target='_blank'>In 2017</a>, Carlsberg was among the first 10 companies in the world, and the first brewer, to have its carbon targets approved by the Science Based Targets initiative (SBTi) aligned with the 1.5 degree scenario. These kinds of rigorous measurements help to stop corporate sustainability efforts from becoming a box-ticking &mdash; or even greenwashing &mdash;exercise.</p>

of businesses say they have tangible and ambitious plans to achieve net zero by 2050

<p>But research commissioned by Smurfit Kappa and conducted by FT Longitude shows that many businesses struggle to even set net zero targets in the first place. Only 50 per cent of businesses say they have tangible and ambitious plans to achieve net zero by 2050, and just 51 per cent have set measurable sustainability goals based on industry-specific benchmarks.&nbsp;</p><h2>Data forms the foundation of sustainability targets</h2><p>Robust sustainability measurement needs data. In the Smurfit Kappa research, consistent use of or access to data is businesses' top barrier to improving the credibility of their sustainability initiatives, and businesses struggle to collect the huge amounts of data they need with the accuracy and speed that makes it useful.</p><p>Simon Boas Hoffmeyer, senior director, group sustainability and ESG for the Carlsberg Group, says that improving data use requires systematic change: &ldquo;Having a system, having a consistent approach to it, and having &lsquo;four eyes&rsquo; principles on every single piece of data you collect means that you actually have the ability to collect data fairly fast and with a fairly good level of quality.&rdquo;</p><p>For Carlsberg, setting clear and measurable SBTis has been central to this. The business wrapped up its Together Towards ZERO and Beyond programme in 2022 having exceeded its targets on carbon and water: <a href='https://www.carlsberggroup.com/newsroom/carlsberg-group-concludes-together-towards-zero-programme-exceeding-targets-on-carbon-and-water/' target='_blank'>since 2015</a> it has reduced relative carbon emissions by 57 per cent and relative water use by 31 per cent.</p><p>Boas Hoffmeyer says part of this success comes from aligning targets with areas where the company could make the biggest difference: &ldquo;There were a lot of ratings where we simply refrained from answering the questionnaires because we did not think it added value for our sustainability programme.&rdquo;&nbsp;</p><h2>Start slowly with Scope 3 data</h2><p>The data challenge becomes much more difficult when it comes to Scope 3 emissions, which are all indirect emissions that occur in the value chain of a company. While 61 per cent of businesses in the research are tracking their Scope 1 emissions, and 31 per cent their Scope 2 emissions, just 12 per cent are able to quantify their Scope 3 emissions.&nbsp;</p>

&ldquo;We would rather have more accurate data every three years, rather than having secondary data every year.&rdquo;

<p>&ldquo;Now, the talk of town is Scope 3,&rdquo; says Boas Hoffmeyer. And there is increasing scrutiny across the board, he adds, including: &ldquo;the validity of data, the depth of data, the depth of change in the value chain, and also whether you are able to consistently track your actions in the value chain to actual reductions&rdquo;.&nbsp;</p><p>To ensure accuracy, Carlsberg initially decided to collect Scope 3 data every three years. &ldquo;We would rather have more accurate data every three years, rather than having secondary data [data collected indirectly] every year,&rdquo; explains Boas Hoffmeyer.&nbsp;</p><p>Now that the data foundations are in place, the company is moving to collecting Scope 3 data annually. &ldquo;One of the major differences between our approach and that of many other companies is that we are not relying only on economic input/output models and secondary data in order to see and drive our reduction of Scope 3,&rdquo; says Boas Hoffmeyer. &ldquo;We are looking at primary data.&rdquo;&nbsp;</p><h2>Investors now expect much more</h2><p>Accurate and reliable sustainability data is also increasingly necessary to keep up with the requirements of investors. &ldquo;The amount of tailored, specific questions from our investors, and the number of one-to-one meetings that we are now having to satisfy the investor requirement for transparency has grown exponentially,&rdquo; says Boas Hoffmeyer.</p>

&ldquo;The number of one-to-one meetings that we are now having to satisfy the investor requirement for transparency has grown exponentially.&rdquo;

<p>Satisfying investors that a business has a full grip on its sustainability data is essential, because investors now scrutinise environmental performance. &ldquo;Back in the day, there was a lot of box-ticking from investors on sustainability, but that has changed significantly,&rdquo; says Boas Hoffmeyer. &ldquo;Investors have a real interest in understanding the profile of their investments - from an opportunity and a risk perspective.&rdquo;</p><p>For businesses, shifting from box-ticking to targets rooted in systematised data collection across Scopes 1, 2 and 3 is not an easy task. But as JC Jacobsen showed over 100 years ago, a science-based approach can really pay off.&nbsp;</p>

<p>&ldquo;The sustainability revolution has the scale of the industrial revolution coupled with the pace of the digital revolution.&rdquo; Strong words from Al Gore, former US vice-president and now chair of Generation Investment Management, speaking at the World Economic Forum in Davos in January 2023.&nbsp;</p><p>This revolution is already widely affecting the way companies operate. In a new Smurfit Kappa survey of businesses across 11 major economies, 61 per cent say that sustainability is already changing how they measure financial performance.&nbsp;</p><h2>Sustainability has gone mainstream</h2><p>Investors are increasingly engaging with sustainability and environmental, social and governance (ESG) factors are no longer a fringe concern. &ldquo;Now we're actually having meetings with some of our investors that are only about ESG.&rdquo; says Mads Twomey-Madsen, VP corporate communications and sustainability at jeweller Pandora. &ldquo;They want to meet us and hear about how we run that part of our business with full focus on that agenda.&rdquo;&nbsp;</p><p>Cathrine de Coninck-Lopez, global head of ESG at investment manager Invesco, agrees that a rapid shift is under way. &ldquo;Last year, we discussed ESG with nearly 3,000 companies,&rdquo; she says. &ldquo;That&rsquo;s up from about 1,000 two years ago.&rdquo; The increased dialogue reflects changing attitudes among investors, but it is also, she says, &ldquo;because sustainability is becoming more and more relevant to companies themselves.&rdquo;</p>

&ldquo;The sustainability revolution has the scale of the industrial revolution coupled with the pace of the digital revolution.&rdquo;

<h2>Consumers and investors are hyper-aware</h2><p>One reason for this is that companies now know about the new market opportunities sustainability can create. Consumers&rsquo; expectations about the role of business in everything from carbon emissions and packaging waste to diversity and inclusion and poverty alleviation are increasing rapidly. According to <a href='https://www.accenture.com/content/dam/accenture/final/a-com-migration/r3-3/pdf/Accenture-Human-Paradox.pdf' target='_blank'>one 2022 study</a>, more than half of consumers globally say the pandemic made them seek a more sustainable lifestyle, and they will favour brands that align with their values.</p><p>There is also widespread recognition among businesses and investors that if a company does not manage its environmental and social impacts, it will not continue to be profitable. As the world faces up to the unfolding climate crisis, unsustainable business models are a dead end: the future belongs to companies that can achieve net zero, and quickly.</p>

&ldquo;The level of awareness and understanding of the scale of the issues we are facing on this planet is now driving investors.&rdquo;

<p>&ldquo;Investors have a real interest in understanding the profile of their investments &mdash; from an opportunity and a risk perspective.&rdquo; says Simon Boas Hoffmeyer, sustainability director of Carlsberg Group, the multinational brewer. &ldquo;The level of awareness and understanding of the scale of the issues we are facing on this planet is now driving investors.&rdquo;</p><p>This point is underlined by Tim Orton, chief investment officer at insurer and asset manager Aegon. &ldquo;The science on climate change is there for all to see &ndash; as are the financial impacts and the social impacts.&rdquo; he says. &ldquo;We can see that this is a clear problem to solve and that as a financial services organisation, we've got a responsibility but also an opportunity of influence across our value chain.&rdquo;</p><h2>Investors&rsquo; role in the revolution</h2><p>What can investors do to support the businesses that are genuinely committed to reducing their impacts and are seizing the new opportunities? First, they will have some basic requirements: robust data and transparency about sustainability performance, and consistency in reporting to enable comparisons between firms.&nbsp;</p><p>So businesses will have to develop the capabilities they need to produce data on their sustainability performance. The leading businesses now have sophisticated processes in place, but many face complex challenges: Smurfit Kappa&rsquo;s research identifies issues with inconsistent access to data and supply chain transparency, for instance.&nbsp;</p><p>The data currently available from businesses is therefore patchy, and comparability is hampered by the absence of common reporting standards. But things are changing &mdash; at least in some parts of the world: the EU&rsquo;s<a href='https://finance.ec.europa.eu/capital-markets-union-and-financial-markets/company-reporting-and-auditing/company-reporting/corporate-sustainability-reporting_en' target='_blank'> Corporate Sustainability Reporting Directive</a>, for example, came into effect in January 2023.&nbsp;</p>

&ldquo;The science on climate change is there for all to see – as are the financial impacts and the social impacts.&rdquo;

<h2>Standards will improve accuracy and increase credibility&nbsp;</h2><p>Orton welcomes government moves to develop standards. &ldquo;It will help us all,&rdquo; he says. &ldquo;Because we'll get more complete data sets and more accurate information on things like carbon emissions to use as an input to our decision-making.&rdquo;</p><p>Global alignment on reporting standards is likely to be slow, but businesses can already enhance their credentials by adopting frameworks such as the Science-Based Targets initiative (SBTi). This kind of initiative can help to drive action internally and establish credibility among external stakeholders &mdash; including investors.</p><p>Al Gore&rsquo;s sustainability revolution is well under way and progressing at speed. Rapid action on sustainability, coupled with robust data and transparency on performance, will help businesses to thrive as the revolution continues.&nbsp;</p>

<p>As businesses try to reduce their environmental impact, many are recognising the power of transparency that is built on credible data.&nbsp;</p><p>In Europe, transparency is no longer a choice. The EU&rsquo;s new <a href='https://finance.ec.europa.eu/capital-markets-union-and-financial-markets/company-reporting-and-auditing/company-reporting/corporate-sustainability-reporting_en' target='_blank'>Corporate Sustainability Reporting Directive</a> requires certain companies &mdash; about 50,000 of them &mdash; to publish regular reports on their environmental and social impact. The legislation is a step towards a culture of transparency based on credible, comparable data on sustainability.</p><p>For some businesses, transparency is more than mandatory. They understand that it is essential for improving performance, building consumer trust and engaging their partners in the shift to more sustainable economic models.&nbsp;</p><h2>Data is paramount</h2><p>New research commissioned by Smurfit Kappa and conducted by FT Longitude finds that sustainability is reshaping how the majority of businesses are measuring their financial performance. And yet it also finds that many businesses&rsquo; efforts are hampered by inconsistent data and reporting standards.</p><p>In the survey, 61 per cent of European respondents say they have complete transparency on sustainability decisions. However, 31 per cent say that inconsistent access to data is damaging their credibility.</p><p>That is a major problem, because sustainability is increasingly important to customers, and businesses will only win their trust with clear data.</p>

of European businesses say they have complete transparency on sustainability decisions

<p>&ldquo;You do what you say, and you say what you do,&rdquo; says Nina Hajikhanian, director, DTC EMEA at clothing company Patagonia. &ldquo;You get the trust of the customer because they can see you.&rdquo;</p><h2>No action without accountability&nbsp;</h2><p>Assured reporting is an important part of transparency. <a href='https://www.irishtimes.com/business/2023/01/19/most-businesses-believe-rivals-are-greenwashing-new-study-finds/' target='_blank'>Research shows</a> that almost six in 10 organisations believe that other businesses exaggerate their sustainability, and 11 per cent admit that they may do this themselves.</p><p>The EU&rsquo;s new legislation will counter this by making independent third-party assurance mandatory for many businesses, which should also help to improve the quality of reported data.</p>

&ldquo;You do what you say, and you say what you do&hellip; For us, it's important to hold ourselves accountable.&rdquo;

<p>Patagonia&rsquo;s clothing is made using <a href='https://www.patagonia.com/environmental-responsibility-materials' target='_blank'>certified</a> fair trade and sustainable standards. The company regularly produces detailed data so that key business decisions can take account of environmental factors.</p><p>&ldquo;For us, it's important to hold ourselves accountable,&rdquo; says Hajikhanian. &ldquo;We have an environmental profit and loss calculation, similar to a P&amp;L, but to calculate carbon, water and waste costs on every item. So we get transparency on the product, we can cut products that don't meet these standards, and it holds us accountable.&rdquo;</p><h2>The next challenge is the supply chain&nbsp;</h2><p>Of course, to tap into the power of transparency, companies must first build the capability to generate and report relevant data. That can be a significant challenge, especially when they have complex supply chains.</p><p>Smurfit Kappa&rsquo;s research suggests that many businesses are struggling in this area. European respondents say inconsistent data access and poor supply chain transparency are the top barriers to improving credibility on sustainability initiatives.</p><p>Supply chain data in particular is critical to mitigating Scope 3 emissions across the value chain, which is why Smurfit Kappa gathers sustainability data at every stage of the product journey.&nbsp;</p>

For European businesses, inconsistent data access and poor supply chain transparency are the top barriers to improving credibility on sustainability initiatives

<p>&ldquo;We now have a database of over 100,000 supply chains, where we can see the average transport distance, the carbon footprint, the load efficiency and so on,&rdquo; explains Arco Berkenbosch, vice president of innovation and development at Smurfit Kappa.</p><p>That granular detail enables the company to identify ways to reduce its own emissions while also helping suppliers and customers to reduce theirs. &ldquo;That&rsquo;s just one example of the power of big data,&rdquo; says Berkenbosch.</p><h2>Data disclosure gets results&nbsp;</h2><p>Colgate-Palmolive is another company that is using its supply chain data &mdash; this time, to reduce plastic use and increase packaging sustainability.</p><p>To reach this stage, firms have to be able to answer questions about the materials they source, says Adrien Sen, the consumer products company&rsquo;s packaging sustainability innovation manager. &ldquo;So, where does the plastic come from? Is the recycled plastic really post-consumer recycled plastic? And so on.&rdquo;</p><p>It has not always been possible to answer these questions, but increased collaboration between companies is making supply chains more transparent than ever.</p><p>By 2025, Colgate-Palmolive plans to make all of its packaging recyclable, reusable or compostable. It aims to reduce virgin plastic by a third and ensure that any new packaging uses at least 25 per cent post-consumer recycled plastic.</p><p>As European businesses confront complex sustainability challenges, robust data will determine their success. In terms of winning customers&rsquo; trust, transparency gives companies the edge.&nbsp;</p>

<p>Consumers today are well informed and sceptical: just <a href='https://wwd.com/feature/greenwashing-fashion-sustainability-compare-ethics-1234626171/' target='_blank'>20 per cent</a> trust brands&rsquo; sustainability claims. Tired of false and misleading promises, they want companies to make meaningful changes that are independently verified.</p><p>There are clear benefits for businesses. Nearly <a href='https://www.ibm.com/downloads/cas/EXK4XKX8' target='_blank'>6 in 10 consumers</a> are willing to change their shopping habits to reduce environmental impact, and of those who are very committed to action on sustainability, 7 in 10 are willing to pay a premium for brands that provide this transparency. But many companies are not doing enough.</p>

of retail and consumer brands say their company’s actions rarely align with the sustainability ambitions they communicate to their stakeholders

<p>According to new research commissioned by Smurfit Kappa and conducted by FT Longitude, lack of transparency is damaging brand credibility. In the survey of business leaders from retail and consumer companies, nearly one-third say their company&rsquo;s actions rarely align with the sustainability ambitions they communicate to their stakeholders. When they do put out the right information, how do they show they can be trusted?</p><h2>Data is where transparency begins</h2><p>&ldquo;The most important thing is not to push logos or endless campaigns that just confuse the customer,&rdquo; says Arco Berkenbosch, vice president of innovation and development at Smurfit Kappa. &ldquo;I&rsquo;m a believer in the power of big data &mdash; that is what brings us a lot of trust.&rdquo;</p><p>According to Smurfit Kappa&rsquo;s research, poor access to data and supply chain transparency are stopping businesses from improving trust in their sustainability initiatives. One way to improve transparency is through traceability &mdash; monitoring products&rsquo; environmental impact at every stage of the supply chain.&nbsp;</p><p>&ldquo;We have a database of over 100,000 supply chains that shows us precisely the average transport distance, the waste, the carbon footprint, the load efficiency and how many empty trucks there are,&rdquo; says Berkenbosch.</p>

&ldquo;I&rsquo;m a believer in the power of big data &mdash; that is what brings us a lot of trust.&rdquo;

<p>By sharing this data with customers, companies can prove that they are paying attention to sustainability and give customers the information they need to make an informed decision, which also increases trust.</p><p>&ldquo;The transparency allows our customers to ask questions such as, &lsquo;Is this packaging reusable, or is it actually reused?&rsquo; &lsquo;If a truck is 90 per cent full, what does that mean in practice?&rsquo; &lsquo;How does it compare with the rest of the supply chain?&rsquo;,&rdquo; says Berkenbosch. &ldquo;If companies and consumers have this data, they are more equipped to navigate a path toward sustainability.&rdquo;&nbsp;</p><h2>Large, complex organisations can still be transparent</h2><p>Many companies struggle to reach this level of transparency because they have thousands of products and suppliers, each with their own carbon footprint.</p><p>Grupo &Eacute;xito is one example of a large business that has risen to the challenge. The South American retailer monitors and mitigates its own carbon footprint alongside its Scope 3 emissions to help its suppliers to reduce their social and environmental impact.</p><p>&ldquo;we have taken steps to map our suppliers to understand the most important groups to start working with,&rdquo; says Claudia Campillo Vel&aacute;squez, vice president corporate affairs and secretary general at Grupo &Eacute;xito. &ldquo;A great example is the cattle industry, where we are working with suppliers to monitor territories for deforestation. We are also working with these suppliers to try and help them practise biodiversity conservation.&rdquo;</p><p>Communicating these efforts is crucial to building trust. Grupo &Eacute;xito publishes extensive annual sustainability reports &mdash; one of the most effective ways to increase transparency for consumers, according to Smurfit Kappa&rsquo;s research. Grupo &Eacute;xito&rsquo;s online channels are another important transparency tool.</p><p>&ldquo;Many young people only engage with us via social media, so we need to ensure they have access to the information they need,&rdquo; says Vel&aacute;squez. &ldquo;The same goes for other stakeholders and our website.&rdquo;</p><h2>Sustainability does not end at the point of purchase&nbsp;</h2><p>Some companies are now working to create circular value chains that limit waste, pollution and consumption while reusing as many raw materials as possible.</p><p>Pandora, the world&rsquo;s largest jewellery maker, will exclusively use recycled silver and gold <a href='https://pandoragroup.com/sustainability/circular-innovation/towards-recycled-silver-and-gold' target='_blank' >by 2025,</a> which could save the equivalent of 37,000 tonnes of CO2 per year. It will source these recycled metals using the Responsible Jewellery Council&rsquo;s Chain of Custody standards &mdash; which adheres to a strict definition of what recycled means &mdash; to ensure that the whole process is verifiable, certified and traceable.</p><p>&ldquo;The validity of our sustainability data should be equal to all the data coming out of the company, and so we're always preparing for that.' says Mads Twomey-Madsen, Pandora&rsquo;s vice president of corporate communications and sustainability. 'We have also established an organisation with a central sustainability function and then embedded resources in many parts of the company, because we think that that's the way forward to make sure that this is credible and it's embedded in the business.&rdquo;</p>

&ldquo;What is important is that we understand the roadmap to the perfect situation, and transparency helps to define that.&rdquo;

<p>Steps like these can convert a cynical consumer into a loyal customer. By establishing transparency as a baseline and being clear about their purpose and activities, companies can build genuine trust in their sustainability mission and carry customers with them.</p><p>&ldquo;The challenge is not about defining the final, ideal sustainable package or supply chain &mdash; that does not exist,&rdquo; says Berkenbosch. &ldquo;What is important is that we understand the roadmap to the perfect situation, and transparency helps to define that.&rdquo;</p>

<p>Four million tonnes is a big number: it is more than the weight of 10 Empire State Buildings. It is also the amount of methane produced by the cows whose milk goes into Danone&rsquo;s products. The company made headlines in January 2022 when it <a  href='https://www.danone.com/media/press-releases-list/danone-announces-an-ambitious-plan-to-reduce-its-methane-emissions.html' target='_blank'>pledged to cut</a> these methane emissions by 30 per cent, becoming the first food company to set a methane reduction target in line with the Global Methane Pledge launched at COP26.</p><p>This alone is an impressive promise. But what really sets Danone &mdash; which operates in 57 countries &mdash; apart is its ability to harness large-scale, global commitments to deliver change on a local level. In Latin America, for instance, that means all conversations around sustainability must also encompass economic and social growth.</p>

&ldquo;The socioeconomic reality of our geographies asks for a more comprehensive approach to environmental and social problems.&rdquo;

<p>&ldquo;The socioeconomic reality of our geographies asks for a more comprehensive approach to environmental and social problems,&rdquo; explains Silvia D&aacute;vila, President of Latin America at Danone and Co-Chair for The Consumer Goods Forum in Latin America. &ldquo;We need to understand where we can contribute specific industry-based solutions that can then be escalated by other actors.&rdquo;</p><h2>Global commitments create local opportunities</h2><p>This holistic approach is bearing fruit in Mexico, where more than 900 dairy farmers are adopting climate-friendly practices thanks to Danone&rsquo;s <a href='http://ecosysteme.danone.com/projectslists/margarita/' target='_blank'>Margarita</a> Project. This social program supports smallholder farmers, who account for almost half of Mexico&rsquo;s milk production. Many low-income farmers lack training and resources, often struggling with poor production practices, rising input prices, environmental unsustainability and a lack of reliable buyers.</p><p>To counter these challenges, the Margarita Project offers training, tools and financial backing that farmers need to engage in sustainable systems. Danone guarantees farmers a fair price for their milk and offers low interest loans for technology such as milking machines, which drastically increase productivity. Farmers also receive training in regenerative practices such as reforestation, soil preservation, efficient water management and cattle feed that reduces methane emissions.</p><p>&ldquo;With the Margarita project, Danone Mexico is not just seeking to protect its production value chain,&rdquo; says D&aacute;vila. &ldquo;It is also empowering the local farmers on which it relies by making them more competitive and adapted to their own markets.&rdquo;</p>

&ldquo;Danone Mexico is not just seeking to protect its production value chain, it is also empowering the local farmers on which it relies.&rdquo;

<p>With Danone&rsquo;s help, some smallholders have been able to access technologies used on cutting-edge farms in the US and the Netherlands, including <a href='https://www.youtube.com/watch?v=UgQWDqNNOn4' target='_blank'>&ldquo;Fitbits for cows&rdquo;</a> &mdash; collars that track cattle movement and health to improve farmers&rsquo; knowledge of their herd&rsquo;s welfare. And some farmers have seen their revenue triple.</p><p>The economic stability this brings allows smallholders to take a much more active role in mitigating climate change. Today, a decade after the Margarita Project began, more than half of its farmers are implementing some form of carbon sequestration-capturing and storing CO2 <a href='https://www.technoserve.org/blog/partnership-helps-small-scale-producers-and-environment/' target='_blank'>emissions</a>.</p><h2>Local action makes business sense</h2><p>Research commissioned by Smurfit Kappa and conducted by FT Longitude reveals that 59 per cent of businesses will only change their approach to sourcing and procurement when greater regulatory intervention makes them, so Danone&rsquo;s proactivity makes it an outlier.&nbsp;</p><p>But it shouldn&rsquo;t be. Programs like the Margarita Project bring clear business benefits alongside social and environmental ones. Danone now has full traceability of its dairy supply chain in Mexico, which paints a much clearer picture of regional conditions and assures the social and environmental credentials of its milk supply.</p><p>Waste infrastructure is another area businesses can bring meaningful change. This was a key focus for Danone as its sustainability strategy includes a commitment to 100% recyclable, reusable or compostable packaging by 2025. The company is working towards a &ldquo;circular economy of packaging&rdquo; &mdash; but this is hard to achieve in Latin America, where limited waste collection systems make recycling a challenge.</p><p>&ldquo;The recycling value chain in Latin America is quite dependent on the informal sector,&rdquo; explains D&aacute;vila. &ldquo;It is important to integrate and support these organisations into cooperatives and structure their activities to strengthen the collection of recyclables.&rdquo;</p><p>Danone&rsquo;s <a href='http://ecosysteme.danone.com/projectslists/novo-ciclo/' target='_blank'> Novo Ciclo</a> project, backed by the Inter-American Development Bank and the Inclusive Recycling Initiative, aims to facilitate the organisation of a more productive system through the professionalisation of waste pickers. The project has invested in new waste management centres, training and technology to help waste pickers structure their businesses with the help of regional cooperative networks. It has helped more than 1,300 waste pickers to increase or secure their revenue and has led to the collection of 30 thousand tons of recyclables each year.</p>

&ldquo;It's a dual project. Global commitments translate into local opportunities.&rdquo;

<p>&nbsp;Danone&rsquo;s strategy recognises that sustainability initiatives are only successful when stakeholders are supported to do things differently. Everyone along the product lifecycle, from cow to consumer, plays a part in sustainability objectives. &ldquo;It's a dual project,&rdquo; says D&aacute;vila. &ldquo;Global commitments translate into local opportunities.&rdquo;</p>

<p>Businesses across the Americas are trying to be transparent about their sustainability performance, but their supply chains could be letting them down, according to new research commissioned by Smurfit Kappa and conducted by FT Longitude. As they try to accelerate their sustainability efforts, they will have to improve transparency and collaboration across the entire value chain &mdash; from suppliers to customers.</p><p>In the survey of business leaders from retail and consumer companies, sixty-seven per cent of respondents in the Americas say they have complete transparency around key sustainability decisions. That high proportion could be a result of increased political impetus. In the US, for instance, the 2022 Inflation Reduction Act (IRA) is prompting businesses to rethink their approach to sustainability and could be having a knock-on effect on neighbouring nations.</p>

of retail and consumer companies in the Americas say they have complete transparency around key sustainability decisions

<p>Other countries in the Americas are using sustainable finance taxonomies that identify activities that contribute to environmental targets. In 2022, Colombia became the first country in the western hemisphere to adopt a national green taxonomy, and taxonomies are also being developed in Mexico, the Dominican Republic and Peru.&nbsp;</p><h2>Stakeholder pressure forces businesses to get vocal</h2><p>Many businesses are also seeing a significant increase in stakeholder interest in sustainability, including from investors. &ldquo;Two years ago, we were not talking about sustainability in our annual results,&rdquo; says Claudia Campillo Vel&aacute;squez, vice president corporate affairs and secretary-general at retailer Grupo &Eacute;xito. &ldquo;Then we noticed an increasing number of questions being raised, which pushed us to include what we are doing from a sustainability perspective in our annual results.&rdquo;</p><p>Wider communication with consumers is also crucial. Grupo &Eacute;xito, for instance, aims to bring its sustainability agenda to life on social media and in stores. &ldquo;We have to be very vocal in all the things that we are doing,&rdquo; says Vel&aacute;squez.</p>

&ldquo;We noticed an increasing number of questions being raised, which pushed us to include what we are doing from a sustainability perspective in our annual results.&rdquo;

<p>This is a point echoed by Silvia D&aacute;vila, regional president for Latin America at Danone and Co-Chair for The Consumer Goods Forum in Latin America. &ldquo;Today, our customers, consumers and stakeholders demand to know what companies are doing,&rdquo; she says. &ldquo;It helps them make final decisions about what products to buy.&rdquo;</p><h2>The supply chain is a stumbling block</h2><p>Yet even as businesses use their external communications to publicise what they are doing on sustainability, many still face significant operational constraints. Supply chain transparency is a particular challenge: 45 per cent of survey respondents in the Americas say that it is undermining the credibility of their sustainability efforts.&nbsp;</p><p>&ldquo;Our supply chain is very complex because of the number of products we stock,&rdquo; says Vel&aacute;squez. &ldquo;We have more than 3,000 commercial suppliers and another 2,000 for goods and services, so we are talking about thousands of suppliers in the entire value chain, and we need to review what each is doing in its own supply chain.&rdquo;&nbsp;</p><h2>Scope 3 emissions are a work in progress</h2><p>This complexity is particularly debilitating as businesses attempt to cut carbon emissions. More than half of the Americas respondents in the research (55 per cent) say their ability to measure Scope 3 emissions, which are emitted up and down the value chain, is limited. Data access is another issue, identified by 43 per cent of the respondents in the Americas.</p><p>Garrett Quinn, chief sustainability officer at Smurfit Kappa, says that even businesses with advanced capabilities for calculating Scope 1 and 2 emissions are wrestling with the complexity of Scope 3 emissions: &ldquo;Most global corporates are dealing with tens of thousands of suppliers, so how do you collect that data? How do you verify it?&rdquo;&nbsp;</p><p>Smurfit Kappa&rsquo;s own initial estimate is that Scope 3 emissions account for about 35 per cent of its total carbon footprint. It has been reporting carbon emissions for over ten years, but measuring Scope 3 emissions, and working closely with supply chain partners to identify cuts, remains a &ldquo;work in progress&rdquo;, according to Quinn.</p><p>&ldquo;The more you get into capturing your Scope 3 emissions inventory, the more questions you tend to have,&rdquo; he explains. &ldquo;It&rsquo;s about asking, &lsquo;How comfortable am I with my scope 3 data, and then how can influence and reduce my Scope 3 emissions?&rsquo;&rdquo;</p>

Emissions from sources that a company owns and controls directly (e.g. onsite building energy use, company vehicle fuel).

Scope 1 emissions

Emissions that a company causes indirectly when the energy it uses is produced (e.g. purchased electricity).

Scope 2 emissions

All indirect emissions that occur in the value chain of a company, either upstream or downstream (e.g. employee commuting, investments, waste generated in operations).

Scope 3 emissions

What’s the difference between Scope 1, 2 and 3? 

<p>&ldquo;If you don&rsquo;t measure it, you can&rsquo;t manage it&rdquo; is a well-worn adage in sustainability reporting circles. But measurement is only half the story: if we cannot be confident about their integrity, sustainability metrics are meaningless.&nbsp;</p><p>Consumers are <a href='https://www.accenture.com/content/dam/accenture/final/a-com-migration/r3-3/pdf/Accenture-Human-Paradox.pdf'  target='_blank'>increasingly demanding</a> accountability from brands and expect corporate sustainability to be led with clarity and purpose. According to new research commissioned by Smurfit Kappa and conducted by FT Longitude, 79 per cent of leading retail and consumer businesses have developed tangible plans to achieve net zero by 2050. But these companies are often undermined by a lack of credibility caused by inconsistent access to data and poor supply chain transparency.</p><p>In the survey of business leaders from three sectors and 11 countries, 63 per cent say there is complete transparency on how and why their sustainability decisions are made. Yet a third say their climate disclosures are limited, and 61 per cent say they need to improve the way they communicate the sustainability of their practices and products. </p>

&ldquo;You wouldn&rsquo;t trust an annual report that wasn&rsquo;t assured, and a sustainability report should be no different.&rdquo;

<p>This gap between perception and reality highlights the need for reliable third-party assurance. Without consistent standards of measurement and disclosure, how can consumers and investors trust companies&rsquo; claims of progress?&nbsp;</p><h2>Assurance reassures investors</h2><p>&ldquo;You wouldn&rsquo;t trust an annual report that wasn&rsquo;t assured, and a sustainability report should be no different,&rdquo; says Ken Bowles, chief financial officer, Smurfit Kappa. &ldquo;We need to change the mindset that sees the sustainability report as some lesser thing in terms of the need for quality and assurance. If you look at the crossover between the two, it isn&rsquo;t logical to think it shouldn&rsquo;t be assured.&rdquo;<br /><br />About seven in ten business leaders surveyed by Smurfit Kappa say their organisation&rsquo;s sustainability reporting is assured — a process whereby the data that informs these reports is independently verified. In Europe, that proportion is set to change. <a href='https://finance.ec.europa.eu/capital-markets-union-and-financial-markets/company-reporting-and-auditing/company-reporting/corporate-sustainability-reporting_en' target='_blank'>From 2024</a>, all large EU-listed companies, including those with EU-based subsidiaries, will be required to publish assured sustainability reports.&nbsp;</p>

&ldquo;You cannot ask the detailed level of questions that we now face if you are just interested in a box-ticking exercise.&rdquo;

<p>That is good news for investors, because assured reporting makes good business sense. Simon Boas Hoffmeyer, senior sustainability director of Carlsberg Group, the multinational brewer, says many investors are now hiring specialists to determine the environmental, social and governance impact of their investments.</p><p>&ldquo;Back in the day, there was a lot of box-ticking from investors on sustainability, but that has changed significantly,&rdquo; he says. &ldquo;You cannot ask the detailed level of questions that we now face if you are just interested in a box-ticking exercise. Investors have a real interest in understanding the profile of their investments &mdash; from an opportunity and a risk perspective. The level of awareness and understanding of the scale of the issues we are facing on this planet is now driving investors.&rdquo;</p><h2>Data disclosure difficulties are holding some back</h2><p>Many global companies are seeing the benefits of improved transparency. Multinational food corporation Danone is one of them. In Mexico, it now has full traceability of its milk supply chain &mdash; thanks in part to its Margarita programme, which gives smallholder farmers the training, technology and financial support they need to engage in sustainable farming systems.</p><p>&ldquo;With the Margarita project, Danone Mexico is not only seeking to protect its production value chain,&rdquo; says Silvia D&aacute;vila, president of Latin America at Danone. &ldquo;It is also empowering the local farmers it relies on by making them more competitive and adapted to their markets.&rdquo;</p><p>Many companies, however, struggle to access this kind of information about their supply chains. Lack of transparency frequently prevents them from obtaining suppliers&rsquo; data, and 51 per cent of the businesses in the Smurfit Kappa research say they work with vendors even if their supply chains are unclear.</p><h2>A new culture of transparency</h2><p>Mandatory assurance will make the process clearer by encouraging improvements in the quality and availability of data. &ldquo;That is a big piece of work, because many different types of companies have to come together,&rdquo; says Mads Twomey-Madsen, SVP of global communications and sustainability at jewellery brand Pandora. &ldquo;They have been accustomed to exchanging information about the price of the product, for example, and now in that same data flow we need credible, verified information about the climate impact.&rdquo;&nbsp;</p>

of retail and consumer businesses say they need to improve the way they communicate the sustainability of their practices and products

<p>As the pioneer in mandatory sustainability reporting, the EU hopes its new legislation will create &ldquo;a culture of transparency&rdquo; about companies&rsquo; impact on the environment. &ldquo;But the key is to start moving,&rdquo; says Twomey-Madsen. &ldquo;Because if we don't start moving, nothing is going to happen.&rdquo;</p>

<p>When Yvon Chouinard started selling climbing tools to his fellow climbers from the back of his car, the profits were slim &mdash; so slim, that on his climbing trips he resorted to eating squirrel and even porcupine. More than half a century later, his company Patagonia makes sales of over <a href='https://www.statista.com/chart/28257/patagonia-inc-revenue-company-db/' target='_blank'>$1bn a year</a>. Chouinard, meanwhile, is making headlines.&nbsp;</p><p>In September 2022, he announced that &ldquo;Earth is now our only shareholder&rdquo; and donated all his family&rsquo;s shares in Patagonia, and with them about $100mn a year in dividends, to a trust dedicated to climate action. The move was the latest in Chouinard&rsquo;s decades-long pursuit to build a better business world, and for organisations everywhere, it marked the beginning of a new global standard on corporate sustainability action.&nbsp;</p>

&ldquo;We are 50 years into an experiment of how to run a responsible business.&rdquo;

<p>&ldquo;At Patagonia, we are 50 years into an experiment of how to run a responsible business,&rdquo; says Nina Hajikhanian, DTC (direct to consumer) director for EMEA. &ldquo;It started with producing durable, quality products and a commitment to cause less harm to the environment &mdash; and also to the people manufacturing the product.&rdquo;</p><h2>Listening to their people keeps businesses accountable</h2><p>Patagonia has built that responsibility to its employees into its DNA. In 1988, when its Boston store opened, employees started getting headaches that were linked to a build-up of formaldehyde fumes from the non-organic cotton products. The company commissioned an independent report into the environmental impact of cotton production and by 1994 Chouinard had decided that the entire product line would be made exclusively from <a href='https://eu.patagonia.com/gb/en/stories/how-we-got-here-organic-cotton/story-97024.html' target='_blank'>organic cotton</a>.</p>

&ldquo;That is what real transparency goes back to: taking hard decisions and committing to them while being transparent about it.&rdquo;

<p>This process was not easy, according to Hajikhanian. &ldquo;It meant cutting the product line back from 166 items to 60, and meant that 30 per cent of the range could not be produced until we found a solution,&rdquo; she says. &ldquo;That is what real transparency goes back to: taking hard decisions and committing to them while being transparent about it.&rdquo;&nbsp;</p><p>Hajikhanian links Patagonia&rsquo;s attitude towards its employees to its willingness to take tough decisions in the pursuit of environmental action. &ldquo;If you bring your employees along on the journey and you involve them in key decisions, then you will have a fantastic sounding board that holds you accountable,&rdquo; she says. &ldquo;You will continue to take the decisions that are right, even if they are painful.&rdquo;&nbsp;</p><h2>Transparency builds trust&nbsp;</h2><p>Many businesses struggle to make decisions that prioritise sustainability at the expense of short-term financial gain. New research commissioned by Smurfit Kappa and conducted by FT Longitude finds that in just over half of companies the need to balance customer demands for sustainability with shareholder expectations of return on investment compromises their decarbonisation efforts.</p><p>But Patagonia&rsquo;s efforts show that the relationship between consumer expectations and financial returns can be complementary. The company&rsquo;s clear action on sustainability and its transparent communication style are cultivating trust among consumers that it is not greenwashing.</p>

&ldquo;If you bring your employees along on the journey and you involve them in key decisions, then you will have a fantastic sounding board that holds you accountable.&rdquo;

<p>The Worn Wear repairs programme, one of Patagonia&rsquo;s long term conscious consumption initiatives, is designed to encourage customers to buy fewer Patagonia products and keep their gear in play for longer. The scheme provides guidance and in-store workshops on how to repair gear and how to recycle used items. It offers customers to have their Patagonia product repaired, often for free, for the lifetime of the product.</p><p>&ldquo;It's getting customers, consumers &mdash; even dealers &mdash; to think, &lsquo;How much do I put out in the market? Is that even necessary? What else can I do?&rsquo;,&ldquo; says Hajikhanian. &ldquo;You get the consumer&rsquo;s trust: they can see that you do what you say, and you say what you do.&rdquo;</p><p>Patagonia has found a way to grow long term without compromising its environmental goals, which Hajikhanian attributes to the company&rsquo;s openness. &ldquo;At Patagonia, we talk about leading an examined life,&rdquo; she says. &ldquo;That means learning as you go along and making sure you do the best you can at any point in time. When you learn you have done something wrong, make sure you are honest with yourself, your employees and your customers. Then, make sure you learn from it.&rdquo;</p>