Protecting the future P&L while improving this one 

I remember the early optimism vividly. It is almost two decades since M&S launched Plan A, with Unilever’s Sustainable Living Plan close behind, and it was genuinely exciting to be part of Team Sustainability. No doubt, there has been real progress. Since last year, Vinted has led French apparel sales by volume (1). In the US, products marketed on sustainability take more than a quarter of all consumer packaged goods sales and keep outgrowing their conventional rivals (2). Tesco has just hit its target of 65% of sales from healthier products (3). But the fundamentals of the consumer product business model are largely unchanged, and the UN describes progress against its Sustainable Development Goals as fragile (4). In reality, we have never been better enabled to consume. Virgin plastic production is still forecast to grow at nearly 10% a year over the next decade (5). 

Where cotton or tomatoes grow well this season may not be where they grow well next, and when a drought breaks a supply chain, the fallback is often airfreight, an expensive ‘panic’ decision. Risks sustainability teams have been voicing for a decade are now being debated in board rooms, corridors and planning cycles. Business leaders rightly focus on this year’s P&L. Far less brainpower has gone into protecting the future P&L. And for too long, outstanding sustainability and resilience expertise has been on the bench, part of the team but rarely on the field, consumed by regulation and disclosure.

Protecting the future P&L is not a reporting framework. It is a decision tool. This year’s P&L and a modelled view of future growth opportunities and costs avoided, for example, gives confidence on what to prioritise and to what commercial end.

There is a tactical opportunity in this too. Almost every large retail and consumer business is running cost-out programmes at the moment, across operations, manufacturing, procurement and assortment. Circumstances have made them unavoidable. Those programmes are already gathering exactly the data a forward view needs, so folding resilience in while the work is underway, makes sense. One programme then does two jobs: it takes cost out of this year’s P&L and keeps future cost out of the next ones, the ones that climate shocks, regulation and supply headwinds would otherwise add. Half the work has already been done because for every cost impact there is a sustainability mirror, in results already delivered and the potential still on the table.

Recent transformation programmes provide clear evidence. In one, reducing 12% transport costs led to emissions reductions, while in another, cost of goods savings of €125 million shrank the amount of material and resource required. Range optimisation increased gross margin by 3%, cut overproduction and decreased unsold stock. Lighter packaging cut costs and freight volume by 3 to 4%, and reducing waste by 15% improved production processes by 50%. Correcting overbuying at single-style level cut cost and avoided 15 tonnes of CO2e per season. And so on.

Commercial teams are on the case and are starting to pull their sustainability people into debating and solving the tough problems that put their business model at risk, like how to keep good quality fresh food on shelves, not just this financial year but well into the future too. 

Protecting the future P&L, as it turns out, is not a new programme. It is an additional question, asked of commercial work already up and running. Keep asking where the savings are. Then ask which future costs and risks this programme could help you avoid, and what every saving is worth in both commercial and carbon terms. That is the moment a cost programme starts informing strategy as well as improving this year’s P&L.