Sustainable From Beginning to End - With the naturals trend pushing boldly forward, the time when natural products claim a stalwart position in the industry and become a part of consumers' way of life might not be far away. Naturals have become a key growth platform for the personal care industry, as consumers are more informed about product ingredients.

However, product composition alone is no longer the only important factor driving purchases. With growing environmental awareness among consumers, the desire to know that the products they buy have been produced in a sustainable manner has also increased.

Why Is Everybody Talking About Sustainability?

Companies and consumers in every industry are becoming increasingly aware of sustainability issues. Their understanding may be focused on concepts such as "green," "natural" and "organic"-all buzz words so often heralded by the media, retailers, and our governing bodies. However, media hype is only part of the driving force behind the growth of the naturals market. Primary drivers of growth include a global change in consumer behavior and attitudes, new product development, and the mainstream convergence of the natural/organic trend.
Media coverage regarding the damage that industry and human activity is doing to the environment has stimulated much discussion about the need for sustainable manufacturing. According to the Global Language Monitor, which tracks global language trends, "climate change" was the top phrase of the decade 2000-2010. Similarly prominent was "sustainability," which made it to the top of the 20 most used words list during that same decade, evidencing the fact that awareness is growing in regards to the integral role sustainability plays in both business and everyday life. This includes interest in sustainable sourcing of raw materials, the preservation of human rights, fair trade, indigenous communities, and other social aspects.

Natural Sells

Sales of natural personal care products grew by 14% in 2008. In 2009, the recession slowed this growth down; however, the segment still posted a 9% gain despite the unfavorable economic conditions. In 2010, the segment posted over 14% growth at the manufacturers' level. With overall growth rates in the naturals industry expected to increase post recession and average out at just over 12% through 2014, suppliers are working hard to develop natural ingredients to meet demand. While progress has been made in some ingredient categories to deliver the natural positioning and performance required, some categories remain a challenge.

Surfactants

One area within personal care which has historically been a "non-natural" business is surfactants. Of the $600+ million specialty surfactants market, only about 10% of the raw ingredients available in this category are naturally derived. However, sustainable and naturally derived surfactants are now gaining traction in the mass personal care market. On average, natural surfactants are growing at around 4% at the global level in contrast to their synthetic counterparts whose outlook is less rosy at 2%. Similarly, fixative ingredients used in hair sprays and other hair styling products are a big challenge when it comes to developing an effective, natural alternative. Synthetics make up 99% of the active ingredients in the fixatives market.

Substantiated Specialty Actives

On the other hand, other personal care ingredients are much more readily available in natural form. Substantiated specialty actives are a unique class of ingredients which are 100% naturally derived. These ingredients, including peptides, bio-tech actives and enzymes, and their associated claims, are key to formulators making anti-aging products in the luxury, high-end mass market, professional and specialty trade classes.

Emollients

Similarly, emollients, which are among the most widely used ingredients in personal care, are more readily accessible and affordable to derive from natural sources such as minerals and vegetable oils. As a result, naturally derived emollients make up around 55% of the total emollients market. A strong shift away from animal-based proteins in favor of plant-derived proteins is also taking place in the conditioning proteins market, where more than 60% of the market now consists of plant-derived products.

Various Shades Of Green

As the appeal of naturals grows, manufacturers are pushing the envelope of what passes for natural in order to get on the bandwagon. Kline's ingredient analysis finds that nearly 74% of so-called natural personal care products are not so natural after all. The overwhelming majority is considered "natural-inspired," and mostly comprises of synthetics with just enough natural ingredients thrown in to take advantage of low consumer differentiation. While a pan-European standard for natural certification is brewing, currently the lack of explicit standards that define the degree of naturalness in most markets makes it possible for manufacturers in some countries to call any of their products "natural." A high proliferation of naturally inspired products exists in the Brazilian naturals market, where only 3% of products on the market are truly natural. On the other hand, in the U.S., 44% of the naturals market is truly natural.

Making a declaration about going green and embracing sustainability in a company's mission statement is one thing, while a true commitment to the cause is another. Just as gaps remain in providing clear certification for truly natural products, measuring sustainability is also challenging. In order to try and provide a measure of sustainability, a number of ratings have been developed. The Dow Jones Sustainability Index and Climate Counts are just two examples. Kline's recent global study Natural Personal Care adopts a 10 point rating system to identify brands truly committed to sustainability. Among criteria analyzed are environmentally friendly manufacturing practices; promotion of sustainability through the value chain; possession of eco-friendly chemistry; promotion of environmentalism among employees; and alignment with channel partners who share the same values.

Is Natural Always Sustainable?

A green image is more often spoken about by the media than a sustainable image. While there is a connection between offering natural products and being perceived as an environmentally friendly company, the two do not often go hand-in-hand with each other.
Interestingly enough, the degree to which products are truly natural does not always coincide with the level of sustainable practices involved in their production and vice versa. Kline's research on natural personal care clearly shows that there is a disconnect between some brands' natural product offerings and their degree of sustainable practices. Several companies that practice rigorous sustainability are selling products that score lower on the natural scale. However, the differences are not vast. For example, the highest truly natural scores often have medium-level sustainability practices.

Sustainable Benefits

Although "natural" and "sustainable" are preoccupying themes on the personal care market, they have often been overshadowed by other concerns including profits, growth and competitiveness. As a result, the question "what makes natural personal care an attractive market and why does sustainability matter" has preoccupied many marketers. First of all, the natural personal care market has experienced very strong growth when compared with personal care market as a whole, even though it is a much smaller segment. A natural positioning with well-integrated sustainable measures offers market appeal that speaks to the environmentally conscious customer and provides a way to differentiate and extract value in a competitive market. Drivers have been strong enough to entice major marketers to expand into the natural segment via key acquisitions.

Contrary to popular belief, adopting sustainable practices does not necessarily mean incurring higher costs. Conforming to the strictest standard globally actually saves companies money. When enterprises comply with the least stringent standards, they must manage component sourcing, production and logistics separately for each market, as compliance rules differ by country. However, companies that enforce a single norm worldwide benefit from economies of scale and can optimize supply chain operations.

A Market Open to Green Products

With more information at their fingertips, consumers are more than ever before looking at product labels to scrutinize their contents. The current market is open to truly green products which have comparable efficacy to standard formulations. The green wave is having a transforming impact on the industry and it appears that in terms of the future, there is no alternative to sustainable development. However, this can be interpreted by manufacturers and formulators as a favorable opportunity rather than a burden, as compliance to sustainability norms can be lead to the development of new, successful and innovative solutions.