November 12, 2015

It's a Transparent, "Clean Label" World. Are You Ready?

In Germany, McDonald’s is experimenting with selling a burger made with organic beef. Subway just joined a growing list of companies (including, again, McDonald’s) committing to buy mainly antibiotic-free meat. Why are big, mainstream food companies moving toward more natural ingredients? Clearly, there’s a broad trend toward health and wellness, but that’s not the big news here.

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The real story is the relentless shift to transparency and what many call the “clean label” movement. In the food world, a clean label focuses on having fewer ingredients that are very clear about their origins, and recognizable (e.g., “cream” versus “microparticulated whey protein concentrate,” which the fast-growing chain Panera has placed on its long “No No List”). But “clean” is a catchall for a much broader and growing list of demands about the human and planetary impacts of all products and services (and the companies behind them).

Two major forces are driving this clean label world: (1) technology-driven transparency about products and their supply chains, and (2) Millennials, who are regularly demanding good behavior from the companies they buy from and work for. This movement, while hitting a fever pitch around products we put in or on our bodies, is not just affecting the food and personal care worlds.

The financial community, too, has noticed the new demands from Millennials — and the money that can be made by appealing to their larger aspirations. At the recent Sustainable Brands Metrics conference, Audrey Choi from Morgan Stanley presented some fascinating research on investor attitudes, with particular focus on Millennials. Choi explained the simple reason banks care about this generation: 10,000 people are turning 30 every day, and that’s roughly the age they start amassing assets (and having kids to spend money on).

This latest generation of workers and parents are, according to Morgan Stanley’s research, three times as likely to “seek employment with a company because of its stance on social and/or environmental issues.” And they’re twice as likely to “check product packaging to ensure sustainability” (in the search, I presume, for a clean label), purchase from a brand because of its sustainability credentials, or put their money in investment funds that target sustainability outcomes. Blackrock, the world’s largest money manager with $4-trillion-in-assets, launched a new “impact investing” fund this month specifically to please these demanding Millennials. The fund will “seek stocks that advance health, the environment, and treatment of workers.”

This is clean-label investing.

But Millennial consumers aren’t the only ones driving the transparency train. All generations have access to more technology and businesses are raising the bar on what they expect from their supply chains. How ready are you to answer these kinds of tough questions from your employees and customers?

Answering these questions, and dozens more like it, will not always be easy. But companies are developing the systems – data/IT, organizational, financial – they need. The bigger shift, to answer these honestly or admit what you don’t know, may be a cultural one. We Gen X-ers, or Boomers, may not have the level of comfort with transparency that Millennials expect. But even if these types of questions do make you uncomfortable, tough luck. There’s not much choice anymore.

Neglecting the clean-label movement will cost you customers and workers; avoiding it as a purposeful strategy could destroy the company or a few careers. Just think about Volkswagen, the poster child for creating the anti–clean label. By flat-out lying on its labels, VW damaged its brand, possibly irrevocably. So get proactive about really understanding your products and supply chains deeply, and get ready to share what you learn with the world.

(Photo: Flickr, ilovebutter)

(This post first appeared at Harvard Business Review online.)

(Andrew's book, The Big Pivot, was named a Best Business Book of the Year by Strategy+Business Magazine! Get your copy here. See also Andrew's TED talk on The Big Pivot. Sign up for Andrew Winston's blog, via RSS feed, or by email. Follow Andrew on Twitter @AndrewWinston)

Comments

On November 29, 2015 9:09 PM, Polly said:

It's an exciting time to be alive ... transparency is a beautiful thing!

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