Product Giving: A Review of the Market, Business Case and Impacts
In Kind Direct’s 20th Anniversary has been an opportunity for us to consider how we continue to meet the needs of charities working to alleviate major social issues for the next 20 years. Thanks to a grant from The Prince of Wales’s Charitable Foundation, we commissioned PricewaterhouseCoopers (PwC) to undertake research to understand the size of the product giving market and its potential for growth, to quantify the economic, social and environmental value generated by product donations, and to estimate how the market is likely to be affected by major global trends. We also asked PwC to make recommendations for us and for our existing and potential product donors. Here the main outputs of the research.
As we celebrate our 20th Anniversary, it is clear that the original vision of our Founder, HRH The Prince of Wales, for our charity, has never been more relevant than it is today. Our research project with PwC has been central to identifying the ways in which we can make a step change in our growth, as well as recognising In Kind Direct’s authority to advocate for product giving and engage in a broad dialogue with our key stakeholders and the media. The impact of the research findings and our response to them will affect charities throughout the UK and have a knock-on beneficial impact for our overseas affiliates. The research will, no doubt, spark an interest in product giving and the opportunity companies have to integrate this simple step into their existing strategies.”
In Kind Direct’s 20th anniversary falls at a time of unprecedented change affecting the organisations In Kind Direct works with and supports. Advances in technology are changing the way companies manufacture, distribute, and sell their products. Cost and environmental pressures are driving greater resource efficiency and moves to ‘circular economy’ business models. And there is growing need for support from charities and beneficiaries in In Kind Direct’s network. This work with In Kind Direct and some of its key partner organisations will hopefully help to promote a better understanding of the need for product giving activity, how it can create value for business and for the charities receiving goods, and really positive impact for people who receive products.
This research report has been made possible thanks to a grant made to In Kind Direct by The Prince of Wales’s Charitable Foundation.
Demand for product giving is likely to remain high
Many people in the UK struggle to afford life’s essential products. The Joseph Rowntree Foundation estimates that 184,500 households are reliant on charities for products such as food, clothes, shelter, and toiletries. Hygiene poverty, where people cannot afford basic personal hygiene and cleaning products, is also on the rise. A survey by In Kind Direct in 2017 indicates that 37% of people in the UK have had to go without, or cut down on, hygiene or grooming essentials due to lack of funds. At the same time, many small and medium-sized charities are facing funding cuts despite increasing demand from those in need. Product giving thus plays a potentially important role in supporting both charities and beneficiaries.
There is a significant amount of surplus yet to be accessed for product giving
Industry experts suggest that up to 2% of the products manufactured and intended for sale potentially become surplus for the six non-perishable product categories we reviewed (personal care, baby care, cleaning and laundry, clothing and footwear, homeware and kitchenware, and toys) – this surplus is worth £1.9bn in the UK. In Kind Direct, as the biggest recipient of donated non-food surplus products in the UK, still only received approximately 1% of this available surplus to distribute in 2016.
The primary route for managing surplus products is sale to discounters and liquidators
Retailers and manufacturers typically have a ‘surplus products management hierarchy’, which starts with the most preferred option of selling surplus to discounters, and ends with disposal of the surplus through landfill or incineration. Product giving ranks in the middle of the hierarchy of available options.
Product surplus is unlikely to be completely eliminated
Rapid technological advancements and continuous changes in business practice will continue to drive significant improvements in production efficiency and quality, and reduce the production of surplus goods. However, these improvements are likely to be offset by trends such as a faster moving market, increasingly niche markets, and rapidly changing consumer demand. Our discussions with companies and industry experts suggest that surplus products are never likely to be reduced below 0.5% of products manufactured and intended for sale.
It comes to a point where further tightening of processes to reduce waste and surplus is too costly and outweighs the benefits. Therefore, there is always an expected level of surplus.
The business case for product giving can be linked to wider Corporate Social Responsibility (CSR) and sustainability agendas
There is increasing pressure on businesses from investors, consumers, and employees to act responsibly and demonstrate commitment to social and environmental issues. Product giving presents an opportunity for businesses to demonstrate, in a practical way that they are meeting such expectations. This often results in enhanced brand and reputation, which are important for building customer loyalty and attracting top talent. Furthermore, product giving is a cost effective and efficient way of clearing slow and obsolete (SLOB) products to make space for new stock.
Businesses are shifting towards a ‘circular economy’ business model – product giving can be easily linked to the circular economy agenda and described using the circular economy framing.
CSR and Sustainability initiatives are increasingly central to business strategy and the core ‘purpose’ of business
PwC’s 2016 Global CEO Survey found that 64% of CEOs say that CSR is now core to their business rather than being a standalone programme. As more businesses define their corporate purpose and link this to their CSR and sustainability programmes, they should consider how to strategically incorporate product giving alongside other sustainability-related initiatives.
Whilst it is more commonplace to work with a specific NGO to build a cause related campaign, there are many benefits to working with an intermediary such as In Kind Direct. Most notably it can offer you a breadth of societal impact that might not have otherwise been possible with just one partner.
Product giving is often not considered at a strategic level
Despite the strengthening business case for product giving as part of the wider embedding of sustainability principles into core business, our discussions indicate that decisions on product giving are still often taken at an operational level in companies. There is an opportunity for businesses to rethink surplus product management strategy considering the financial, business, environmental, and social impacts as part of decision-making. For example, before deciding to sell surplus products to discounters, businesses could consider the revenue gains of this option against the potential adverse impacts to profit margin, relationships with customers, and missed opportunities to deliver social impact.
Above all, donating products is good for the communities in which we operate as it helps people in need. However, there are also economic benefits: delivery cost for donating to a charity is lower than if it was taken away as waste for landfilling or recycling.
Businesses and charities are increasingly expected to measure and report on their social and environmental impacts
For many charities and businesses, impact assessment work is still at an early stage, with data availability being a particular challenge. As a start, as they work together, charities and businesses should map out the relevant impact pathways they are a part of and determine what data they will need to demonstrate the impact and value of their actions for beneficiaries, charities, the donor, and wider society.
Consider the emerging business trends and better understand which product categories will have most surplus availability and most value for society
- (Donors) Evaluate the impacts of emerging retail and manufacturing trends on your supply chain to assess potential surplus availability.
- (Donors) Quantify the surplus generated and evaluate its potential value to charities and wider society alongside other options.
- (Recipients) Continue to monitor, explore, and promote the future outlook for product surplus availability and demand, and target potential product giving donors accordingly, using market data to help build the business case for product giving activity.
Develop a more systematic and strategic approach to management of surplus products
- (Donors) Review the surplus product management hierarchy by evaluating the advantages and disadvantages of each surplus management option, identifying opportunities to maximise value from surplus products where appropriate.
- (Donors) Develop a solid and robust process for managing product giving to increase efficiencies and maximise impacts of product giving.
Better understand how product giving links to CSR strategy, core purpose, and business strategy
- (Donors) Consider how product giving can help deliver on your corporate ‘purpose’ and areas of focus for your CSR and sustainability programmes.
- (Recipients) Demonstrate more widely the business value of product giving for donors to form more long term partnerships with them, supporting their CSR and sustainability objectives.
Continue to focus on developing approaches to impact assessment
- (Donors, Recipients) Work collaboratively on developing data collection and impact measurement approaches to monitor and quantify the benefits of product giving activities.
A strategic and operational guide to product giving
The first ever guide to product giving, coproduced by In Kind Direct and PwC.
There are various ways for businesses to engage in product giving. Some prefer to make ad hoc donations as and when surplus products are available, others manufacture specifically for product giving. Regardless, many businesses are seeking ways to generate greater social impact and internal business value from their product giving initiatives.
However, work carried out by PwC and In Kind Direct has indicated that businesses could benefit from taking a more strategic and systematic approach to product giving.
In response, In Kind Direct and PwC have produced a ‘Strategic and Operational Guide to Product Giving’ to support businesses that are considering to enhance their social impact through product giving. This guide sets out a structured approach to identifying products suitable for donations and ways to maximise both business value and social impact from product giving. It also helps users determine the relevant functions and individuals to engage with when developing a product giving plan, and the systems and processes that should be in place for it to be successful.
What is this guide?
This guide sets out a step-by-step process to developing a product giving plan. Users can either follow the guide from start to finish or refer to individual sections to address specific issues of interest. This guide comprises:
- A decision-making flowchart: setting out on two pages the key steps and decisions necessary to develop a strategic product giving plan.
- Supporting guidance: Details and additional guidance for each stage in the decision-making flowchart.
Who should use this guide?
This guide is intended to be used by individuals within businesses who would like to, or are already involved in, developing a strategic approach to product giving. The guide helps users think through critical considerations and processes required to deliver a successful product giving plan ensuring executive level and senior management support and participation.
When should this guide be used?
A successful product giving plan should, as far as possible, be aligned to core business objectives and integrated with other business activities e.g. business planning, manufacturing, sales, marketing, and Corporate Social Responsibility (CSR). This will enable product giving to be carried out more efficiently and effectively as an integral part of business activity. This guide can be used when initially setting up the product giving plan or when reviewing existing product giving activities. It can be used as often as required but it is recommended that businesses review their product giving strategy at least annually.
Our response to the results of the research is 'Join the Product Giving Revolution', a manifesto setting out our commitment to the product giving model for the coming years, and calling on businesses to join us. 20 leading companies from Amazon to P&G, Pentland Brands, Johnson & Johnson, Disney Store and Essity are the first to have signed the manifesto, and we expect many more to pledge in the coming weeks.
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