Decarbonization and Growth: What’s Next for CPG business?

The CPG business landscape is evolving faster than ever, driven by consumer demands, sustainability targets, and technological innovation. Decarbonization is a priority with the EU’s value chains contributing roughly 40% of overall greenhouse gas (GHG) emissions.

According to McKinsey, 10–40% of emissions can already be reduced at no or low additional costs by aligning with sustainable suppliers. This is a pressing issue for CPG leaders focused on balancing profitability with environmental responsibility​.

Simultaneously, technologies like Big Data in CPG and AI-powered tools are revolutionizing operations. Research by Fortune Business Insights projects the global CPG market will reach $2.3 trillion by 2030, driven by data-led insights and innovative CPG marketing strategies.

CPG Industry Faces Opportunities and Challenges in Decarbonization Efforts

The consumer packaged goods (CPG) sector is navigating a critical juncture as climate protection regulations and consumer demand for sustainability reshape industry standards. According to a recent McKinsey report authored by experts in agriculture, chemicals, consumer goods, and sustainability practices, achieving net-zero products is possible and can also be cost-effective, with additional costs ranging from 1% to 14% of retail prices depending on the product​.

The report highlights that 40% of surveyed companies are incorporating sustainability principles into their product ranges and supply chains. European CPG manufacturers and retailers, in particular, must address their value chains, responsible for 40% of the EU’s greenhouse gas (GHG) emissions. Approximately 95% of these emissions are Scope 3, encompassing farming, manufacturing, and transportation​.

Anna Littmann, a McKinsey partner, emphasized the urgency of action: “Decarbonization leaders in the CPG industry have already demonstrated that substantial emissions reductions are achievable without significant cost burdens. The window of opportunity is still open, but swift action is required to stay competitive.”

Three Major Challenges to Decarbonization

The report identifies key hurdles CPG companies must overcome to decarbonize their supply chains:

• Reliable CO₂e Baselines: Companies often lack accurate and standardized emissions data, complicating efforts to pinpoint reduction opportunities.
• Abatement Levers: Early adopters with granular knowledge of abatement strategies and their costs can secure low-carbon materials at competitive prices.
• Implementation Roadmaps: Transforming supply chains demands leadership commitment, supplier engagement, and robust tracking mechanisms​.

Sebastian Gatzer, a McKinsey partner, noted, “Successful decarbonization hinges on superior knowledge and transparency across value chains.”

Some product categories are less expensive to decarbonize than others. For example, emissions from beer production can be reduced relatively easily by changing agricultural practices, while dairy-based products like crème fraîche face higher costs due to the complexity of their CO₂e drivers. Despite this, the report suggests that aligning with low-emission suppliers can achieve reductions of 10–40% at minimal additional costs​.

CPG leaders are advised to act decisively, leveraging partnerships across the value chain, from farms to recyclers. Measures such as electrifying transport fleets and adopting renewable energy in manufacturing are already yielding results. McKinsey’s analysis underscores that leadership, transparency, and supplier collaboration are critical for long-term success.

As Tomas Nauclér, another co-author, puts it, “The future of net-zero products lies in collaboration and innovation. Companies that move now will position themselves as leaders in a low-carbon economy.”

For CPG companies, the path to sustainability is clear: addressing Scope 3 emissions while capitalizing on early-mover advantages in a rapidly evolving market. This transition offers not only environmental benefits but also competitive differentiation in a consumer-driven, climate-conscious era.

What is a CPG business?

A CPG business focuses on fast-moving consumer goods like food, beverages, and household products. These essentials are typically low-cost and high-volume, with rapid turnover due to frequent purchases. Whether it’s a global snack brand or a niche health-focused company, every CPG business must master efficiency, branding, and consumer trust.

Understanding the CPG business model

The CPG business model relies on scale and consistency. Most companies operate in a fiercely competitive market, where success depends on streamlining production, branding effectively, and meeting consumer expectations. Key to this model is maximizing shelf presence while ensuring products remain accessible to price-sensitive customers.

Developing a CPG business plan

Every successful CPG business begins with a solid plan. This includes market analysis, target audience segmentation, and financial planning. You’ll have to look into CPG marketing research to identify trends, preferences, and gaps in the market. For instance, health-conscious consumers are driving demand for plant-based products, while younger demographics prioritize eco-friendly packaging.

How to leverage CPG business intelligence

In the age of Big Data in CPG, businesses can track purchasing patterns, predict future trends, and optimize supply chains. AI-driven tools analyze billions of data points to uncover opportunities and risks. For example, advanced platforms can identify which product flavors are trending regionally or pinpoint inefficiencies in distribution.

Optimizing CPG business processes

Operational efficiency is vital in the CPG business. From sourcing raw materials to shelf placement, each step affects profitability and customer satisfaction. Automation, predictive analytics, and real-time inventory tracking have become standard for brands aiming to enhance their CPG sales.

Steps to starting a successful CPG business

Starting a CPG business involves several critical steps:

Step 1: Identify a niche

Focus on specific consumer needs, like allergen-free snacks or eco-friendly cleaning products.

Step 2: Conduct market research

Use CPG market research to understand demand and competition.

Step 3: Secure funding

Initial capital should cover production, branding, and distribution.

Step 4: Establish partnerships

Collaborate with manufacturers and retailers to ensure a smooth supply chain.

Step 5: Invest in marketing

Leverage CPG branding to create a memorable identity and build loyalty.

Tastewise: empowering the CPG industry

Tastewise provides actionable insights into consumer behavior, helping brands make better decisions faster. Through its AI-powered tools, Tastewise enables CPG businesses to innovate in product development, packaging, and CPG marketing. Whether identifying the next big flavor trend or optimizing recipes, Tastewise ensures brands can stay ahead in a competitive market.

The future of the CPG business lies at the intersection of sustainability, technology, and innovation. Embracing tools like Big Data in CPG and AI can drive CPG growth while aligning with consumer expectations for transparency and environmental responsibility. As businesses adapt, those investing in sustainability and cutting-edge tools will lead the charge in defining tomorrow’s market.