Mieczysław Gonta
Partner at PwC Polska, leader of the retail and consumer goods team at PwC CEE
Tomasz Barańczyk
Partner at PwC Polska, leader of ESG initiatives at PwC Polska
The consumer goods and retail sector is particularly sensitive to sustainability issues. Expectations of companies are high - today's consumers, although still sensitive to the price factor, are paying increasing attention to environmental and social aspects. Their choices are more environmentally conscious than just a few years ago.
Numerous regulations are also coming into force, which emphasise transparent operations and greater corporate responsibility. Therefore, today, if companies want to maintain their competitive edge and continue to thrive, they cannot overlook ESG issues.
However, our survey shows that the consumer goods industry still has a lot of work to do in this area. What is clear from the data we collected? Sustainability is still not included in business strategies. Only 20% of the companies we surveyed declared the presence of clearly defined sustainability goals in their business strategies. These are figures for Polish companies. Indeed, the situation in foreign-headquartered companies looks very different, as this percentage rises to as much as 67%.
Only 25% of the companies surveyed have implemented or are implementing a significant number of sustainability reporting processes. This is a worryingly low percentage, especially considering the regulations coming into force that oblige reporting, such as the European Union's CSRD directive. Furthermore, as many as 81% of respondents are not currently ready in technological terms for such reporting.
ESG data reporting is also an important factor affecting business relationships. According to our report, 78% of companies have not yet carried out an assessment of ESG risks in their supply chains, and only 13% of respondents declare that they have assessed their suppliers' ESG profile.
How do ESG activities influence corporate strategy?
Building an ESG strategy is playing an increasingly important role in the consumer goods sector, which will translate into measurable business benefits in the long term.
Global experience shows that the sector's largest companies have already been taking ESG action for many years, from reducing the use of non-renewable raw materials and reducing CO2 emissions to actively supporting local communities, protecting human rights and improving working conditions. Their commitment to ESG issues is often a key element of business strategies aimed at both generating profits and creating a positive social and environmental impact.
In recent years, there has been a significant increase in interest in ESG aspects among companies on the domestic market. It is worth emphasizing, however, that still about half of the surveyed companies do not have a complete sustainable development strategy. Taking into account ESG strategies and individual aspects of sustainable development in a company's business strategy is important and can bring many benefits, including:
Building the company's value in the eyes of customers, employees, investors and other stakeholders and improving the company's image and brand
Easier access to new sources of finance and more favourable credit terms
Reducing the cost of electricity and other utilities
Increasing the return on investment
A sense of security and customer awareness that products comply with broad environmental requirements
Greater opportunities to establish contacts with new business partners
Increasing staff motivation
Clear structure of responsibility for ESG aspects
ESG areas covered by operationalising the strategy among the surveyed companies
The surveyed companies declare the implementation of sustainable solutions in the areas of emission reduction, decarbonisation, optimisation of energy and water consumption. A growing awareness in the social area and concern for employee welfare and development can be seen, as well as a commitment to the issues of diversity and providing equal opportunities for employees.
The company's communication with stakeholders on ESG topics, including in the area of corporate governance, remains a major challenge. It is still noticeable that there is a relatively low awareness and number of actions taken regarding the value chain and relations with suppliers and end-users.
ESG reporting, or how companies collect and present non-financial data?
Non-financial reporting is a challenge to implement new processes
The Corporate Sustainability Reporting Directive (CSRD) is the European Union's response to the commitment to sustainability and represents a significant change in corporate reporting.
The new obligations introduce a requirement for a dual materiality analysis, which should cover not only the risks and opportunities of the business, but also the impact the company has on the environment and society. For this reason, companies are required to carry out an analysis not only at company level but also at its value chain level, and to manage numerical and qualitative disclosures (so-called ESRS) in a diligent manner.
Has your company implemented or is your company in the process of implementing the following ESG reporting processes (multiple-choice question):
61% of respondents say they have carried out a carbon footprint analysis, but it is not clear from the responses whether the analysis has comprehensively covered all scopes of emissions, including Scope 3, which often accounts for the largest share of most companies' emissions.
The fact that 37% of respondents declare to have carried out a dual materiality analysis is a good prognosis, as it shows a willingness to comply with the latest reporting requirements introduced by the CSRD and demonstrates the maturity of entities undertaking this type of process.
Technology tools have the potential to make the process of adapting to new reporting requirements much easier
New regulations require non-financial data to be presented in a standardised digital format. The role of IT tools in ensuring the reliability and credibility of the non-financial data management process cannot be underestimated - digital solutions facilitate the structured collection, management and reporting of ESG data that comes from different areas of a company's business, often in both standalone and consolidated form. They provide a structured approach to sustainability reporting and ensure that the data presented is reliable, comparable and can be validated.
Has your company started preparing for sustainability reporting in accordance with the ESRS Standards? (single choice)
Companies recognise the potential of technology tools to collect and manage ESG data, but less than one-fifth of companies actively use them. Only 19% of respondents said they use ESG data management tools. This is definitely an area for improvement given the level of detail in the new disclosures under the ESRS standards. The use of dedicated tools supporting both the data collection process and the calculation of required indicators is the right direction.
The fact that only about half of the more than 70% of respondents who declare that they do not have tools, plan to use them in the future indicates that there is a great need in the market, in terms of education on the importance of a properly implemented data management system.
Supply chain as a source of opportunities or risks in ESG activities
The proposed and existing ESG regulations signal that the integration of ESG aspects is becoming an important element of supply chain management.
The European Union as well as selected member states have stepped up their activities by focusing, among other things, on legislation concerning the due diligence system.
The Corporate Sustainability Reporting Directive (CSRD), adopted in January 2023, imposes obligations on large companies to assess their actual and potential adverse impacts on human rights and the environment, in relation to their own operations, those of their subsidiaries and those of their business partners, including suppliers.
Companies in the supply chain are essential to the success of almost all businesses and can be a significant source of value creation and innovation, particularly in the area of sustainability. Supply chains go beyond a company's core business, exposing it to hidden and uncontrollable risks, usually caused by ESG factors such as:
depletion of natural resources,
violations of human rights,
corruption.
These issues can definitely damage companies' reputations, operations and financial performance. Research shows that the supply chain has a huge impact on a company's sustainability, which is why building a resilient supply chain is so important. At the same time, as the results of our survey show, up to 90% of a company's impact on sustainable development comes from its supply chain, and only 22% of respondents declare that they assess ESG risks in their supply chain.This is a clear signal that this area needs special attention and involvement from companies in the sector.
ESG aspects considered by respondents while assessing suppliers
Supplier profile analysis is much more frequently performed by companies than two years ago, but it is still a neglected topic
Companies integrating ESG aspects into their business strategy are increasingly paying attention not only to carbon footprint issues, but also to social and corporate governance aspects while managing their supply chain.
22% of the companies surveyed say they have conducted at least once a supplier analysis that took ESG issues into account. It is not environmental issues that lead the way in supplier assessment, but the social aspect that takes into account workplace safety and respect for human rights.
About the study
This report comprises the results of a Polish survey conducted by European Conferences United on behalf of PwC Polska.
The survey took the form of an online survey (CAWI) and was conducted in February 2024 among 112 companies from the retail and FMCG sectors operating in Poland.
ESG in consumer goods and retail
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