Business challenges in the era of global warming
OPINION: The consequences of climate change are manifested in crises around the world. From fires in Australia and California to flooding in New York and Auckland, there seems to be a daily crisis related to climate change. As a result of these crises, governments are under pressure to fight global warming.
In this era of global warming, companies should take a very careful look at their carbon footprint. Are their operations perceived as playing a role in global warming by stakeholders? If business activities are perceived to be harmful to the environment, there could be negative consequences.
These could be consumers boycotting a company’s products, investors buying shares in more socially responsible companies, and employees working for competitors perceived to be better corporate citizens. The government can also pass a law to restrict the activities of a business.
One of the ways companies use to reduce their carbon footprint is by reducing new plastic in their products. Plastic releases powerful greenhouse gases from exposure to sunlight and heat. These greenhouse gases accelerate climate change.
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Several large companies recently announced their intention to reduce the amount of new plastic in their products and packaging.
PepsiCo plans to significantly reduce the amount of new plastic in its products by using 50% recycled content by 2030. McDonald’s also announced that it will reduce the amount of plastic in its Happy Meal toys by 2025. This is very important because McDonald’s makes more than a billion toys a year.
Finally, our national carrier Air New Zealand tested reusable plastic for meal packaging. The new packaging is made from bagasse, a by-product derived from renewable plant fibers with a low carbon footprint.
It should be noted that in the case of PepsiCo, this is not the first time the company has changed its product to become more environmentally friendly. However, the company’s previous experience with a packaging change did not go as planned.
In 2010, Frito Lay, a subsidiary of PepsiCo, was relatively early among the big companies in its attempts to reduce the amount of harmful plastic in its packaging. This American snack food conglomerate has changed the packaging of its Sun Chips brand to a biodegradable bag made from plants instead of plastic.
This change may have been good for the environment, but Sun Chips consumers were in turmoil. The new packaging caused a loud rumble, which was very annoying for people who wanted to eat their chips while watching TV, or talk with their friends or family while eating the chips.
Frito Lay has received a considerable amount of negative media publicity due to the noisy new packaging, and customers have also taken to social media to express their outrage. As a result of this debacle, the company stopped using the new packaging, and reintroduced quieter sustainable packaging in 2011.
Hopefully PepsiCo has learned from its experience with Frito Lay and the company will conduct sufficient market research for its new recycled packaging before it is presented to the public.
Likewise, McDonald’s also needs to think carefully about the changes it plans to make to its toys. How will children react to new toys? What will the parents’ response be? Many people express their public support for the fight against global warming, but drastic changes in packaging and product design by companies are not always welcomed by consumers. Air New Zealand is using the right approach by testing its new packaging before making large-scale changes.
In addition to the importance of conducting market research before making product changes, companies should consider when to switch to more environmentally friendly materials in their products. Ideally, this should happen before the government orders a change. An early move by the company signals to the public that a company’s actions are motivated by a genuine concern for the environment, as opposed to pressure from the government.
A good example is the ban on single-use plastic bags in supermarkets in 2019. Supermarkets were forced by the government to stop supplying single-use bags from July 1, 2019. Countdown was the first New Zealand supermarket to commit to phasing out single-use plastic bags by now. late 2018, and it received positive media coverage as a result of its actions that took place before its competitors.
Businesses must be proactive in their approach to global warming. By making their products more environmentally friendly ahead of government mandates and competitors, companies increase the likelihood that they will be perceived by the public as playing a positive role in the fight against climate change. However, rushing to make changes can also be risky.
Market research should be conducted before implementing changes. Companies don’t want to introduce changes in their products that alienate customers. Effectively managing both timing and product adaptation in times of climate change can be difficult. However, it is essential for success in today’s volatile business environment.
Daniel Laufer, PhD, MBA is Associate Professor of Marketing at Victoria University of Wellington and an expert in crisis management.