Every day across the globe, billions of consumers are searching for the best deals both online and offline, looking to stretch every dollar as far as possible. This has led to a prevalence of cheaper goods in a race to the bottom, as manufacturers aim to beat down prices. However, beneath every bargain lie hidden costs that are not immediately apparent but profoundly impactful. These costs extend beyond the price tags and affect our environment and the communities where these goods are produced, often with devastating effects.
For example, a 2017 report showed that, in 2007, air pollution caused by goods manufactured in one part of the world but used in another resulted in over 700,000 deaths. Furthermore, 11% of all air pollution fatalities in China were traced to goods and services used in the United States and Western Europe.
Soumaya Hamazoui, RedCloud’s COO, is passionate about eco-friendly production and distribution of consumer goods, especially in emerging markets, where demand for these goods is rising rapidly. She believes that everyone, from manufacturers to traders to consumers, shares the duty to protect the environment by prioritizing sustainable consumption patterns.
The hidden environmental and social costs of cheaper consumer goods
With almost 2 billion people set to be added to the global consuming class by 2025, consumer demand is expected to rise significantly, especially in emerging markets, and provide major opportunities for consumer companies. This increase in demand for cheap consumer goods will have a considerable impact on the environment, as the multi-trillion dollar CPG industry already accounts for 60% of all global greenhouse gas emissions and between 50 to 80% of total land, material, and water use.
The environmental effect of this industry is seen more acutely in emerging markets like Asia, where the drive to produce inexpensive items for Western markets has spiked pollution levels. A striking example comes from a 2015 report that shows that China contributed over 25% of the world’s total carbon emissions – about 10 billion tons of CO2. However, a significant portion of those numbers – about 5 to 6 per cent of global emissions, comes from goods destined for export.
This demand for cheap consumer goods from the West also has dire human costs. Available research from 2017 shows that in 2007, the American and Western European consumption of popular goods like smartphones, shoes, and furniture produced in China were linked to choking levels of air pollution that resulted in 100,000 and 170,000 deaths, respectively.
Another industry that exemplifies this issue is the rise of fast fashion. This rapidly growing sector is currently responsible for up to 10% of global carbon emissions. The industry’s model, which is centered on quickly producing trendy fashion items en masse, demands vast raw materials, generating significant waste and pollution.
For example, Shein, a major player in the fast fashion industry, grew explosively from $10 billion in sales in 2020 to an astonishing $100 billion in 2022. The company, which reportedly produces up to 50,000 new fashion items daily, emits over 6 million tons of CO2 every year – the same amount as 180 coal power plants. Beyond environmental harm, Shein has also faced criticism for labour practices, with reports of workers working 75-hour shifts in substandard conditions. In one factory, workers were reportedly paid a daily base salary of $20 per day and were fined up to $14 if any garments had mistakes.
These industries and their impact on the environment and society show the urgent need for a shift towards a more sustainable and ethical production and consumption model.
Shifting towards sustainable production and consumption
In recent years, there’s been a marked shift in awareness regarding the environmental consequence of producing cheap consumer goods, which has sparked a demand for sustainable practices among consumers and regulators alike. Today, companies in the Consumer Packaged Goods (CPG) sector must adapt to this new consumer preference for sustainability or risk stunted growth. A recent study underscores this trend, with 78% of consumers emphasizing the importance of a sustainable lifestyle and over 60% of respondents to a consumer sentiment survey saying that they are willing to pay a premium for products with sustainable packaging.
This consumer preference is not just a passing trend but a significant driver of market growth. A 2023 study by McKinsey, which analyzed US sales data from 2017 to 2022, revealed that products boasting ESG (Environmental, Social, and Governance) claims contributed to 56% of all consumer growth over five years and showed a cumulative growth of 28%, outpacing the 20% growth of products without such claims.
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However, there is still much work to be done by consumer companies to meet the required sustainability targets. For example, to meet the ambitious CO2 emission targets of the Paris Agreement, CPG companies will have to reduce their carbon intensity — the amount of greenhouse gas emitted per unit of output — by more than 90% between 2015 and 2050. Achieving this will require brands and manufacturers to drastically minimize the natural and social costs of their offerings.
The best pathway for companies to enhance their sustainability performance lies in optimizing supply chains, as this is where the majority of the consumer industry’s environmental impact is concentrated.
Traditional barriers, such as the lack of visibility across these supply chains, prevents many brands from collaborating with supply chain partners to enhance sustainability. Therefore, transitioning to sustainable production and consumption necessitates the adoption of new technologies aimed at creating more resilient and transparent supply and distribution chains.
How RedCloud is pioneering sustainable choices across emerging markets with Open Commerce
RedCloud, under Soumaya’s leadership, is at the forefront of driving sustainability across emerging markets. Our AI-powered Intelligent Open Commerce Platform provides in-depth visibility and transparency across supply and distribution chains, allowing brands, distributors and brands to gain better insights into the source of their goods, make informed, data-driven decisions, and prioritize partnerships with eco-friendly businesses.
Open Commerce also connects retailers directly with brands and distributors, so they can buy from them, making it easier for retailers to streamline their inventory management and reduce waste.
With Open Commerce technology, RedCloud is championing a sustainable future for thousands of brands, distributors, and retailers, empowering them to operate more efficiently and with a smaller environmental footprint. To learn more about how Open Commerce can help sustainable brands drive outsized growth in emerging markets, please book a demo at https://redcloudtechnology.com/contact/
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