Jenny Davis-Peccoud, partner and founder of the global sustainability and responsibility practice at Bain & Company
Indian companies have an exciting opportunity to go deeper in their sustainability journey because of the growing economy, and the earlier they get into it, the bigger will be the business benefits, says Jenny Davis-Peccoud, partner and founder of the global sustainability and responsibility practice at Bain & Company. During her recent visit to India, she sat down for an exclusive interaction with Forbes India to discuss how business can move towards sustainable practices even in the absence of policy support. She spoke about how companies, particularly in the FMCG industry, can approach sustainability from an innovation lens, and how the perception of sustainable practices can go from something that costs money to something that makes money for businesses.
Davis-Peccoud, a globally recognised expert in sustainability and ESG with an MBA from Harvard Business School, has deep expertise in areas, including food systems transformation, circularity, nature and biodiversity, and carbon transition. She has over 30 years of advisory experience, focusing on sustainable business and value chain transformation. Her expertise is in linking sustainability to value creation, leadership alignment and sustainability venture creation. Edited excerpts from the interaction:
Q. Is it right to expect consumers to pay more for sustainable products or is it a cost business can bear, given the long-term benefits?
It is a nuanced question, because not all consumers are the same. In our research, we see that there are about 15 percent consumers in India who are what we would call ‘sustainability champions’; they care, buy and pay for sustainable solutions. Then there are another nine or 10 percent, who are champions in specific categories. Maybe they care about food, sustainable fashion. These two categories put together is already 25 percent, which is a big chunk of consumers who are willing, certainly to buy, and possibly to pay, for sustainable products. Of course, that leaves a big chunk of consumers who are not willing [to pay more for sustainability]. Every company will need to understand who their consumers are, what they are interested in, what they are willing to pay for, and how much they are willing to pay. What companies put on the shelves as sustainable products can be two to three times more expensive. Even I look at some of those products and think, ‘Why on Earth would I pay that much more for, say, a bottle of shampoo?’ So, companies have to be careful how much they are getting consumers to pay, and then communicate, clearly, why they are expecting them to pay that much. Transparency is important.
Q. You work a lot with FMCG companies. Many of them have different strategies for rural and urban areas. In rural areas, for instance, they introduce smaller packs. From purely an environment and waste generation perspective, how sustainable are small packs?
Small packs generate a lot of waste, but they also fill a need for consumers who are in the socioeconomic challenge part of the spectrum. So, the solution is not to get rid of small packs. Instead, we can question how recyclable these packs are, what kind of infrastructure there is to recycle them, and if that could be a job creation opportunity for people. It is also an opportunity for innovation for businesses.
Q. Do you see companies being open to taking action towards recycling or innovation?
On the sharing economy side of things, we see that happening. For example, there are renting or sharing models around tractors or other farm equipment. On the packaging side of things, things are still coming, because, of course, the regulation is coming. The first step is for companies to make sure those packs are recyclable.
Also read: Beyond Trade-offs: Importance of making sustainability aspirational and profitable
Q. Policy and regulation will take their own time, as it often does. Can businesses step up the sustainability game even without a lot of policy incentive?
There is a lot that companies can do even in the absence of other policies, which can be beneficial to their business, and they are just not doing it. Energy efficiency as an example, that saves you money, that is NPV (net present value) positive now, and you do not need a whole sway of policies for it to make business sense. Of course, there will be other things where you do need more policy certainty. Like if you are trying to put in big capex investments that are going to last 20-plus years. Businesses can look at all the different sustainable solutions, and determine which pieces they can get going with already. When you look at the marginal abatement curves, which is all of the different carbon solutions ranked based on how much carbon it will save and how expensive it is, many industries can get halfway through decarbonisation with economically beneficial solutions. So, to some degree, businesses have to get going and make it happen, as opposed to saying, ‘Oh we need the policy’.
Q. What are some of the factors that deter businesses, particularly in India?
I think one, there is a sense of ‘This is how we have done it’, so we do not always ask the question of whether there is a new way to do it. Second, what we hear from companies that have gone further in the sustainability journey is that once you have gotten started, it is much easier to keep going. This is an exciting opportunity for India, because the economy is growing so quickly. The faster or earlier you get in, you get the benefits. In a way, the more developed countries will not be able to scale down the cost curve as quickly, because they are growing more slowly. So, I think some of the challenges are just around taking the time, taking the investment, understanding what the economics really are. Sometimes, people look at this [sustainable alternatives] and say that it is too expensive. But if you look at it over five years, the prices will fall because it is new technology, which, over the long run, will not be as expensive versus other things… there is a little bit of myth that people have in their heads, both managers as well as consumers, that somehow sustainability has to cost more. However, sometimes, sustainability does not cost more simply because you are using less [over time].
Q. Does sustainability have a perception issue? How do we change its image from something that costs money to something that can save or make money for the business?
Does sustainability have a perception issue? It probably does. Most people think it is hard and expensive, and as I said, not everything is more expensive. It can be cheaper; it can create other benefits, like in terms of delivering something new for your customers. It can force innovation. Sometimes, sustainability has felt like a regulatory-driven obligation, or more of a finger-wagging thing of ‘Oh, we have to get under two degrees, so you have to do it’, which has made it somewhat less of an exciting business tool. I think that is where it is exciting in India for businesses to come in and show that there can be value-creation around sustainability.
