Podcast
July 26, 2022

The Recipe for a Sustainable Business Strategy with Hugh Lewis, Gousto

In today’s episode we talk to Hugh Lewis, Head of Sustainability at Gousto, a food tech unicorn company on a quest to make sure every meal leaves the world better off. We boil down the key sustainability challenges facing the food industry and talk through the ingredients to Gousto’s success in cutting emissions, saving food waste and reducing packaging- all whilst accelerating business growth.Ready to unbox Gousto’s sustainability journey? Tune in.

Transcript:

Jamie Dujardin:
This is Altruistiq, where we speak to pioneers in the race to zero and unpack the lessons from their experience for you, our community of impact professionals. I'm your host, Jamie Dujardin. In today's episode, we're going to talk about driving impact reduction in retail. If you're in the UK, you are probably familiar with Gousto, the market leading recipe box company that is disrupting grocery and restaurant categories with nutritious meal kits that lead the world better off. Today, we're in conversation with Hugh Lewis, head of sustainability at Gousto. We're going to unpack Gousto's pioneering journey to a more sustainable recipe box, spotlights on some of the innovative, environmentally-friendly solutions that Gousto has championed along the way. Hugh, welcome.

Hugh Lewis:
Hi. Great to be here.

Jamie Dujardin:
Can you tell us a little bit more about Gousto, your role and how you came to be head of sustainability?

Hugh Lewis:
Yeah, of course. Gousto is a pioneer of the recipe box industry in the UK. We were founded 10 years ago almost exactly in 2012 with the goal to minimize food waste. We're now one of the largest recipe boxes in the country. We have almost 2,000 employees and we deliver around eight million meals per month. For those of you who might not be familiar with what a recipe box company is, as a customer, you select which recipes you want delivered to you, the number of portions and the day of delivery, and the menu, which is currently 60 recipes per week. Changes each week, so you get new variety, new things to cook. Your Gousto box arrives containing all of the ingredients in pre-portioned quantities and then recipe cards for you to create your delicious home-cooked meals.

I've been at Gousto for almost three years now. Most of the time, I've been heading up what we call the proposition strategy team that is essentially our innovation team, looking at how we can improve things for our customers and sustainability has been a really important and growing part of that. I've become more and more fascinated in sustainability generally and also some of the biggest challenges that we face within food. I did the business sustainability management course at CISL, at Cambridge Institute Sustainability Leadership during one of the COVID lockdowns, which opened my eyes even further. It was an easy decision for me to make the move into heading up the growing sustainability team at Gousto, which is where I am today.

Jamie Dujardin:
That's so interesting to hear your journey into sustainability. I guess on the business side, why is sustainability important to Gousto? Is there a business case for sustainability?

Hugh Lewis:
I go back to the fact that food is vital to sustainability. Food production and distribution is responsible for a lot of the negative environmental impacts as well as the future solutions. It's clearly important from a social perspective as well with food inequality being such a significant issue worldwide. I think all of those things mean that sustainability needs to be important to Gousto as a food business. The food sector also happens to be one of the most complex areas to tackle from the sustainability perspective. It's not an easy area to decarbonize, for instance, but that makes it an even more exciting challenge and all the more important, I think, for us to play our part in solving those problems. Sustainability in Gousto, it's been central from the very beginning. Our purpose has always been to build an amazing product with a positive impact on people and the planet, but besides that and besides it being the right thing to do, I guess part of my job is to advocate for sustainability.

I do believe there is a really strong business case, things like it meeting customer demand, helping us to attract and retain the top talent, reducing risk, anticipating regulatory requirements, lots of great stuff around fostering innovation, driving efficiency, attracting and engaging investors. I think all of those factors combined together into a business imperative for ESG being central in any forward-thinking business.

Jamie Dujardin:
I totally agree. Obviously at Altruistiq, we want to help businesses like Gousto and understand what that business case is. Actually, the thing I really loved about that is your definition of sustainability, including both the environmental side and the social side. I think sometimes we do get a little bit too hung up in just looking at, for example, carbon emissions, but forgetting what the wider impact of our decisions are. Actually, having an overall view of externalities is really what's most important in this case. What do you identify as the key objectives of your sustainability strategy at Gousto?

Hugh Lewis:
We have an overarching mission for every meal to leave the world better off, which we can rally the business around. Beneath that, we have prioritized areas which are split between people and planet. Picking off on your point around the social side, the social side features really prominently within our strategy. I won't go into those six areas in detail, but they have objectives like offer healthier choice and inspiration, help develop thriving communities, fighting food and packaging waste, safeguarding the environment. The selection of those areas has drawn on a really wide variety of insight. We ran a materiality assessment every year and that involves us consulting our key stakeholders, customers, investors, the board, communities, asking them what areas are important to them in the area of sustainability and also that they feel are important to Gousto. It's interesting not just to see the overarching priority of those areas, but also how things move year on year.

So carbon emissions, for instance, between 2020 and 2021, has become much more important to our stakeholders. We also run things like lifecycle assessments that help us to identify the biggest areas of impact across our end-to-end value chain. For instance, we don't use that much water at all in our operations. It's really just for floor cleaning in canteens, but water usage is obviously much more prevalent in the farm and distribution stages. Then there are external frameworks as well. SASB helps us to identify sustainability and impacts the financially material to a company in a particular sector. All areas in the strategy are important to us. We have targets for each of those areas. There are two that have extra special focus. One of those is acting on climate change. We all need to do a bit in the face of the climate emergency.

I think it was the WWF chief executive, Tanya Steele, who summed up the best by saying we are the first generation to know we're destroying the world, but we could be the last that can do anything about it. I think it has to be a priority for everyone within the food industry given food is responsible for a quarter of all greenhouse gas emissions from human activity. Then the second big priority for us is health, so offering healthier choices and inspiration. That's partly prompted by what we see in the UK. We're the third most overweight country in the G7. Three in 10 adults are obese. Poor diet contributes to an estimated 64,000 deaths every year in England alone. Putting aside the enormous impact that that has on people's health, it also places an enormous burden on the NHS here in the UK.

I think there were over a million hospital admissions where obesity was the primary or secondary diagnosis in 2020, and that was up 17%. So Gousto has a really important role to play in that area. We deliver eight million meals per month and we have the goal of tackling the barriers to healthier eating to make it much more accessible, so helping with inspiration outside of the standard repertoire of recipes that we all have. I, for one, cook a lot more vegetarian recipes than I used to before growing up in quite a meat-eating household. We also helped to reduce the time and effort of scratch kicking, meal-planning, shopping, and prep that is so time-intensive. Also related to cost, trying to keep our service accessible to as many people as possible. That's all the more important given that processed foods are so much more cheaper on average than healthier foods. I think that, on average, three times cheaper per calorie than healthier foods.

Jamie Dujardin:
It's amazing your focus on such a variety of topics, but I also love the fact that you're prioritizing those topics based on a materiality assessment, surveying your customers, really letting your users prioritize what is most important to them from a sustainability standpoint, and then being there to guide them on delivering that. That's really exciting. Just from the short time I've seen a bit of Gousto, I'm very confident that you have a data-driven approach to everything. All your decisions seem to be backed up by a lot of insights, so it's really exciting to see that throughout the sustainability strategy. In September last year, you announced that Gousto had gone through the process of becoming a B Corp. Really, really rigorous process. We're also on that journey at the moment. I would absolutely love to understand why was the B Corp certification important for you guys to achieve at Gousto?

Hugh Lewis:
Yeah. I touched a little bit upon us being founded with the purpose of tackling food waste. If you go back to when Timo was originally thinking about different businesses that he could launch, sustainability was a really important factor in him choosing to start a business in this area. It's been a priority ever since he saw the scale of food waste. Food waste in the home represents 17% of UK food waste. If you think about all of the nested emissions that have happened to produce that food and get it to that point, you can get a sense of the kind of impact that that has in terms of carbon emissions, for instance. So by sending out pre-portioned ingredients to customers as in the Gousto model, we can reduce that 17% to almost zero and on top of that, we're transforming distribution.

So around 40% of food is wasted in the traditional supermarket supply and consumption model. We have a much shorter route to the customer because we don't have the retail stage. Our food waste levels in our facilities are below 1% due to the quality of forecasting that we have and also redistribution of edible food surplus to those in need. We're also pretty nimble as a business. So when a customer orders from Gousto, they're ordering recipes. Those recipes can be tweaked if there's a supply issue or a glut of a particular ingredient rather than a much less flexible supermarket aisle, which means that when you run a comparative LCA comparing model versus the supermarket model, Gousto reduces emissions by 23% for the equivalent meal bought from a supermarket store. That obviously compounds. So on average, Gousto order saves two kilos of food waste and seven kilos of CO2 emissions versus the same shop at a supermarket.

I think it's because of that purpose, it's because of that business model, the B Corp was something that really resonated with us already and we wanted to become certified to hold ourselves accountable to that commitment to growing in the right way for people and for planet. In addition to that, B Corp has, you know, go for the certification yourselves, is a well-respected, comprehensive, independent framework that has the momentum to become even more of a leading certification in the area. So I think when we were first looking into it in earnest at the end of 2019, there were about 2,750 B Corps. I think now there were over 4,500 and there are plenty of benefits besides the framework and the certification. There's the wonderful community of B Corp businesses. There are the working groups on hot topics like food waste and packaging and regenerative agriculture. There's also the fact that you can use the framework to inform your sustainability strategy and really importantly, it's a fantastic way of engaging employees and also attracting new talent. So it's been a fantastic thing for us.

Jamie Dujardin:
Absolutely. Great to hear. In particular, what do you see is the biggest benefits or opportunities for Gousto in becoming this sustainable business and a B Corp?

Hugh Lewis:
We do know that there are direct correlations between our progress in sustainability and also our business growth. We know that our customers care about sustainability and will choose a product or a brand that is more sustainable over one that is less. It's not just about customers in terms of perceptions, it's also regulators. It's investors. Gousto has a revolving credit facility with a bank, which is sustainability linked. So the rate that we pay on that loan is affected by our progress against three sustainability targets. So you can see that our progress in the area is beneficial to us in lots of different ways with those kinds of stakeholders. It also helps us to foster innovation. In our case, we know that customers retain better if they see, for example, less plastic in their Gousto box. So reducing plastic is an area that we've made progress in.

We cut plastic in our boxes by 50% in 2021 by switching to a more sustainable packaging across a lot of our primary ingredients. Also launching the Eco Chill Box, which is the insulator that we have in Gousto boxes which is made of recycled cardboard and keeps ingredients fresh in our boxes. The focus on sustainability also helps us to mitigate risk and drive efficiency. With TCFD reporting coming in while having to surface all of those biggest climate-related financial risks, extreme weather events, biodiversity loss could have really devastating effects potentially on food suppliers, so it requires companies in our sector to reduce environmental impact, but also work with suppliers to implement environmental impact mitigation and adaptation strategies.

Then finally, I think for Gousto, there's an interesting point about leveraging our unique advantages. I've already talked a bit about Gousto's business model and how it's more sustainable than the alternative because of the reduction in food waste. We're also a D2C technological food business, which means that there are some unique opportunities that we have in promoting healthier diets, reducing food waste, lowering emissions, which a lot of people within the wider sector won't necessarily have. So that's an exciting area for us.

Jamie Dujardin:
Yeah, definitely really exciting. It's amazing to see Gousto innovating and getting ahead in this space compared to so many businesses. Just, Hugh, maybe stepping back in time a little, we'd love to know how Gousto's thinking about sustainability has evolved from your early wins in the sustainability space and where your thinking is today.

Hugh Lewis:
Yeah. I think in our early days as a startup, we were very much focused on getting the foundations right and scaling, knowing that our business model was more sustainable than the alternative because it reduces food waste and food waste is a really important contributor in greenhouse gas emissions. Since then, once we had more momentum and investment in the business, we have focused on targets in areas that we know are particularly important to stakeholders. For instance, our pledge to cut plastic packaging by 50%, and now I guess we're in the third stage really of taking a much broader view of our impact, identifying areas of largest impact by improving our data and monitoring and really targeting progress in those, which you can see in our broad sustainability strategy.

Jamie Dujardin:
It makes an absolute ton of sense. Actually, it's something ****being mirrored across industries we work with. We actually spoke to Eshita Kabra, who's the CEO of By Rotation, a rental fashion platform. Fundamentally right now, just the rental model is so much more sustainable than other models that exist on the market, that just scaling is the most beneficial thing that they can be focusing on. Then when the momentum is with them, then that is the moment where they can start to go, how do we make rental more sustainable and really work on the big transformative changes? It's definitely something we're seeing across a number of different industries.

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We'd love to move into discussing next steps and Gousto's ambitions for sustainability and particularly how you are measuring your impact today and how you want to change that into the future.

We'd love to know, how were you measuring your sustainability impact prior to using Altruistiq, and then what challenges did you face with that that meant that you wanted to look into a software solution such as Altruistiq?

Hugh Lewis:
Yeah. We were measuring our impact effectively via a spreadsheet, environmental management system just for scopes one and two. We were using consultants also ad hoc as part of that. It was very time-consuming to collect data and that data itself was incomplete. It didn't cover all of the scopes. It was also only refreshed once a year. We weren't able to scale to include lots of primary data. We were just using emissions, average emission factors. Also, as a food business, carbon is just one piece of the puzzle. There are lots of other really important environmental impacts beyond carbon and we wanted longer term to include those in order to get a bit more of a balanced view of our impact and make better decisions as a consequence. So all of that led us to investigate alternative ways of doing things, which started off the story with Altruistiq.

Jamie Dujardin:
It's a very common story we hear, is people doing this in spreadsheets and finding that they might be doing it inconsistently over time or it just becomes really unwieldy. The spreadsheet is almost un-openable. I think it's an interesting journey in measuring maturity.

That is really exciting. In particular, what made you think about going for the software as a service solution rather than going down a consulting route or another route?

Hugh Lewis:
The cost was definitely a factor. It's less expensive when you factor in the consultant fees that we were paying and also the time that we were spending internally. Scalability was a really important one. Scope three is massively important for us. It's more than 99% of our associated footprint and we needed a model that could incorporate that. We also needed to incorporate those other factors beyond carbon and that brings a bit more complexity and incorporation of primary data. We needed to move beyond averages and that requires building processes to manage the complexity of creating a more accurate picture of your supply chain, and then visibility.

So at the time that we were doing it manually, we were obviously only doing it once a year and impact management or measurement in the future can't be static. It needs to be as close to real time as you can get to help with decision-making and course correction on particular initiatives. I think the final thing was just around efficiency. All of that data being available in real time leads to better identification of initiatives and also optimization of those initiatives. It helps us to allocate resource better. It means that external reporting is easier on an ongoing basis. We've seen a huge amount of benefits from moving to a SaaS platform.

Jamie Dujardin:
Yeah, and huge benefits as well from having a cloud-based solution where all this data is available in real time, able to pull it back out of the system in ways that you want to see it and so on. It's an essential part of this as well. I guess I was really focused on the measurement side of understanding your impact, but we'd love to know as well how you are thinking software could support in terms of management of your impact over the next five, 10, 15 years.

Hugh Lewis:
Yeah. I think it's partly about the quality of the data, and it's also about how that data flows between the platform and our business, so making the data more accurate in terms of inputs, collecting information from suppliers in order to move those average factors up or down, and get a more accurate picture of our supply chain, but also making sure that we're collecting that data through integrations in order to make it more up to date. It can be expressed in ways that are meaningful to us as a business. We have our impact breakdown in terms of recipes and that will help with menu planning, recipe development, but also what information potentially we display to our customers in the future. We can also take emissions information back into our business for more strategic uses, say things like setting KPIs or creating tools.

Jamie Dujardin:
I guess, from all of what we're hearing, Hugh, Gousto's obviously pioneering, I think, in this space in terms of driving sustainable practices in the UK food industry. We'd absolutely love to hear what are your plans for this year. What are your plans for the next 18, 24 months?

Hugh Lewis:
Decarbonization is a big focus for us this year. When it comes to reducing emissions, there are two areas that are by far and away the most important for reducing Gousto's emissions intensity and both of those sit mainly in scope three. So dietary switching is hugely important. Also, decarbonization of farming methods. This year, we're developing a decarbonization plan and we're putting the foundations in place to support progress in that area. We're getting more accurate data. We're surveying our supplies to get a better understanding of our supply chain's footprint. We're also building data integration so that we can better use sustainability data in our decision-making and surface it to customers and make it much more real time. Then we're trialing some exciting pioneering things. So the carbon pricing for business cases, how we can incorporate the environmental impact externalities into cases for initiatives.

We're also looking at things like in setting in our supply chain to help our suppliers make their practices more sustainable as well as obviously, improving our footprint. We're also beginning to measure and monitor our environmental impact beyond carbon, so looking at pollution and water use and biodiversity. We've got exciting plans in the area of health. We're pushing forward with the representation of healthier recipes on our menu currently, at least two of your five a day and a third of recipes on the menu are healthy in our definition. We're going to be pushing forward with each of those areas as well.

Jamie Dujardin:
Not a short list you've got there. What I love about that in particular from the environment side is it's amazing to hear that you're really thinking about the whole value chain. There are pieces there around engaging your suppliers, pieces around engaging your employees in decision-making with the carbon pricing and so on**,** and then pieces around engaging your customers. You're really taking that holistic view of how to decarbonize a business like this. In terms of next steps on that then, what does success look like for Gousto and how are you going to measure that?

Hugh Lewis:
In very broad terms, it's getting closer to our vision of every meal leads the world better off. When it comes to an area like decarbonization, success is about reducing our carbon intensity as we grow, aligned to the one and a half degree pathway set at the Paris Agreement to reach net zero by 2050 in line with the advice from SBTi. That's where we're going to be placing our bets and our focus over the coming years.

Jamie Dujardin:
Amazing. We'd love to know how you think Altruistiq is helping to hit those targets as well.

Hugh Lewis:
Altruistiq have helped us to establish our baseline in 2020, and we just redid baseline for 2021 and also drafted the targets that we're currently reviewing for decarbonization and are currently also providing the data and in the future, the tools that will enable us to actually drive decarbonization initiatives across the business, helping us to develop tools, which we can use in recipe ****development in menu planning in engaging our suppliers around sustainable practices. It's a hugely important partnership for us in this area.

Jamie Dujardin:
Really excited to go on a journey with such an ambitious company. One final question from my side is just based on your journey so far, what are your top three pieces of advice that you'd offer to others, other businesses like Gousto that is embarking on their sustainability journey?

Hugh Lewis:
One would be around embracing the learning and being open to new opportunities and new information. One thing that has really taken me by surprise, less so now, but certainly initially is the speed of change in the area and the amount of new companies that are emerging, and the fact that what is true today won't necessarily be true tomorrow, and the importance of challenging any assumptions that you have and running trials and MVPs in order to learn. I think you can't underestimate the value of that given where we are in sustainability and at the stage of maturity that we are in a lot of these areas.

A second one would be feel like you have a mountain to climb, but to try not to be paralyzed by that. One of the things that we try to do is as much as possible, create roadmaps in different areas. I think that's so important in seeing each stage as an important step towards your destination and helps you realize that any start is better than no start at all. Then I think maybe the third area would be about seeking balance and support. I think it requires a lot of resilience when you see the road ahead and the amount of things that we can do. I would recommend finding ways to de-stress and recharge. We need to avoid ESG burnout and remember that we're all in it together.

Jamie Dujardin:
Yeah. It's really interesting to hear. If I were to take away something from this conversation from my side, just how holistically Gousto thinks about sustainability, whether that's the joint view on impact on planet and people, whether that's from the suppliers through to customers and the impacts throughout the value chain, or whether that's thinking about the impacts of thinking about sustainability and ESG burnout. It's really exciting to see a company thinking so holistically about this problem and really embedding it into its vision and strategy. Hugh, thank you so much for taking the time to speak to us today. It's been an absolute pleasure from my side. It's so exciting to hear about Gousto's trailblazing approach to sustainability.

Hugh Lewis:
Thank you. My pleasure.

Jamie Dujardin:
Thanks for listening to today's episode of This is Altruistiq. Do you get in touch if you're on a journey to understanding your business' environmental impact? The notes from this episode are available in the show notes below and you can also find more episodes of This is Altruistiq podcast on Spotify, Apple Podcast, and Google Podcasts.