As Fast-Moving Consumer Goods companies increasingly wrestle with how to translate their sustainability and net-zero climate commitments into action, Generative AI is emerging as a critical tool to drive environmental impact while also creating value for customers and shareholders alike through innovative sustainable products and business models.
Dive in to explore how AI is transforming the FMCG landscape, driving both sustainability and growth.
AI is creating a new future where FMCG brands can take meaningful action for people and the planet by directly linking their operations – from ingredient discovery all the way through to consumer experience – to their corresponding environmental impacts.
This shift mirrors the broader revolution AI is causing across all facets of the FMCG sector reshaping how brands connect with consumers, opening up new avenues for creativity and growth (see Marketing's AI Revolution: A New Era of Creativity or a Pandora’s Box? article).
Global FMCG brands who are already facing increased scrutiny of their sustainability performance and targets from investors and government regulators, also face a unique challenge compared to other industries when investing in new technologies to advance sustainability industries. They’re often stuck in the middle between their price-sensitive consumers and suppliers with whom they need to optimize for cost and reliability to achieve scale.
Gen AI is enabling companies to move beyond this conflict by unlocking new opportunities to create value and also to create entirely new consumer categories and business models while achieving their sustainability goals and climate ambitions. From eliminating food waste to reducing carbon emissions and developing sustainable ingredients, the technology helps companies achieve their sustainability goals more effectively and efficiently.
Organic food waste is one of the most pressing issues in the FMCG industry, with over 1 billion tons of food lost globally every year, leading to significant economic losses, and contributing substantially to environmental problems, including greenhouse gas emissions and biodiversity loss.
Gen AI is stepping in to address this issue by providing innovative solutions that help both companies and consumers reduce waste. How?
It can forecast demand more accurately so brands can optimize inventory levels, reduce overproduction of perishable food waste, improve quality control, and optimize delivery routes and schedules to decrease spoilage during transport. Consumers can also leverage Gen AI to reduce waste at home by finding creative ways to use leftover ingredients.
Reducing the carbon footprint of FMCG products often requires that more than 50% of emissions cuts come from upstream suppliers.
Generative AI helps companies monitor and reduce emissions across their supply chains by providing real-time data on supplier practices. AI copilots can alert brands when a supplier risks non-compliance with sustainability goals or regulations. These tools also streamline the creation of sustainability reports, ensuring they remain up-to-date as regulations change.
By integrating AI with IoT sensors and satellite imagery, FMCG brands can analyze key supplier practices—such as soil health, water usage, and energy consumption—offering actionable insights to help suppliers improve their sustainability practices.
As consumer demand for sustainable products grows, FMCG companies are increasingly leveraging Gen AI to innovate more sustainable ingredients and product formulations. Traditional ingredient discovery processes are often slow and resource-intensive, but Gen AI can expedite this by analyzing vast datasets to identify and develop sustainable alternatives more quickly.
Gen AI can help FMCG companies optimize their product formulations to extend shelf life without compromising quality, reducing waste in the process. By integrating it into the ingredient discovery process, brands can rapidly explore new sustainable formulations, potentially transforming how products are developed, reduce their environmental footprint, and meet consumer demands for more sustainable products.
Generative AI can also create and optimize packaging formats, designs, and materials to decrease emissions, minimize material usage, and enhance recyclability.
Brands can model the entire lifecycle of a product—from production to disposal—and optimize processes to reduce waste. This includes AI-driven systems that track packaging from the consumer back to the producer, ensuring materials are efficiently returned and reused.
Consumer Packaged Goods (CPG) brands are using AI to integrate supply chains with recycling and waste management systems, making it easier to reclaim used packaging materials. AI algorithms help coordinate the collection, sorting, and processing of recyclables, closing the loop in the product lifecycle and reducing dependence on virgin materials.
Hellmann’s, recognizing the massive impact of food waste on both the environment and consumer pockets, teamed up with Google Cloud AI to create an innovative solution called "Meal Reveal." This tool empowers consumers to reduce food waste by making meal planning easier and more engaging.
By allowing users to snap a photo or record a video of their fridge contents, the AI identifies individual ingredients and suggests creative recipes that use up all available items, even those that might otherwise be forgotten or discarded.
Procter & Gamble (P&G) joined forces with Cainiao Group, Alibaba’s logistics arm, to create an AI-powered supply chain system designed to reduce emissions and enhance efficiency. The partners aim to reduce transportation costs and carbon emissions by deploying a fulfillment algorithm that can predict demand for goods and then consolidate cargo headed for the same address.
By cutting down on unnecessary trips and maximizing load efficiency, P&G is not only lowering transportation costs but also significantly reducing its carbon footprint.
The partnership represents a strategic move to leverage cutting-edge technology for sustainable logistics management.
Generative AI is proving to be a powerful ally in the industry's pursuit of sustainability. By reducing food waste, cutting emissions, and developing sustainable ingredients, it helps companies achieve their environmental goals while improving operational efficiency.
Looking ahead, the role of Gen AI in fostering sustainability will only grow. With consumer demand increasingly leaning towards eco-friendly products and practices, companies are under more pressure than ever to innovate responsibly.
A recent trend shows that $1 in every $5 spent in FMCG is from environmentally conscious consumers, indicating a shift towards more sustainable consumption habits [McKinsey]. Moreover, advancements in AI-driven analytics and automation are enabling companies to measure, manage, and reduce their environmental footprints more effectively than ever before.
However, the journey towards sustainability is not without its challenges. Companies must address issues of transparency and ethical sourcing to ensure their efforts lead to real, measurable outcomes rather than just surface-level commitments. Learn more about the key frictions and obstacles companies face in scaling AI in our recent article [read here].
The real question for FMCG leaders now is not whether to adopt Gen AI for sustainability, but how quickly and effectively they can do so, to stay ahead in a rapidly changing market. The future is here, and it's green—and AI is driving the charge.
For tailored strategies and expert guidance, contact us today, and let's secure your brand's future in an AI-driven world.