Disclosure legislation is appearing more frequently as consumers increasingly demand transparency from brands into the products they buy. The California Cleaning Product Right to Know Act, the FASTER Act for sesame labeling, the National Bioengineered Food Disclosure Standard (NBFDS), and now proposed legislation for using the term “healthy” on packaged foods all require brands to disclose various information about their products. And new disclosure regulations are sure to come.
In this article, we’re looking at why compliance is crucial (beyond avoiding penalties for failure to comply) and how digital disclosure is a future-proof, scalable approach to disclosure that will ensure brands and retailers are prepared for whatever additional disclosure legislation lies ahead.
Why Accurate Disclosure is Crucial
Even if disclosure weren’t mandated, brands and retailers would be wise to implement transparency due to the many benefits it delivers. Here are five reasons why accurate disclosure is a smart move.
Avoid Penalties and Prevent Litigation — Legal mandates come with penalties for non-compliance. Governing bodies may initiate investigations on non-compliant companies. Additionally, disgruntled consumers and competitors are likely to litigate.
Prevent Loss of Market Share — Consumers will eventually find out that a product not labeled appropriately actually contains ingredients they were seeking to avoid. As a result, they’ll likely move to a competitor.
Build Customer Confidence — Consumers have expectations when it comes to product labeling. Brands that commit to disclose will win market share as they build trust.
Protect Reputation — Violations are often publicly available, and the news that your company has failed to comply is likely to come out in the press. Additionally, consumers will write bad reviews airing their disappointment.
Maintain Transparency — Ensure shareholder value by honoring transparency mandates.
Disclosure is just as much about marketing and branding as it is about compliance. Consumers demand knowledge about the products they buy. Failing to comply creates a risk of falling behind in an increasingly competitive marketplace.
Why Digital Disclosure is the Ideal Method
Many companies are choosing digital disclosure as their method of compliance because it’s flexible, efficient, and future-proof. And with a strong vendor, you can dramatically simplify the compliance process. Here’s why so many companies are choosing digital disclosure.
1. Improve Profitability and Resources
Creating a digital disclosure is more cost-effective than disposing of packaging without the disclosure and printing new packaging. Multiplied over the number of individual products in your portfolio, these costs add up significantly. Leading brands report repackaging investments cost millions of dollars and hundreds of man-hours. In addition, the USDA estimates between 92 and 260 million dollars in printing costs alone for food manufacturers.6
2. Differentiate Through Digital Adoption
Consumers are doing more and more searching and shopping online. More groceries are being bought online now than ever before, and 90% of shoppers plan to stick to at least some of their new shopping habits post-COVID. If trends continue, online grocery shopping will account for 21% of all grocery sales by 2025.7 [insert source
As the world moves to digital solutions, regulations will increase. And customers will patronize the brands that offer transparency. By taking customer education and disclosure online, you make it more accessible.
3. Leverage Disclosure as a Growth Engine
A commitment to consumers to deliver product transparency is now a strategic initiative for many leading brands. 81% of shoppers say transparency is important or extremely important when it comes to their buying decisions. And when you offer one-click disclosure, you build trust and brand loyalty. By prioritizing customer education at a critical point on their path to purchase, your brand value increases.
New regulations like those included in the NBFDS are sure to come. We’ve seen an increasing pace of new regulation as consumers demand transparency and safety. For example, within the last decade, the industry has had to make significant changes to comply with FDA Food Safety and Modernization Act (FSMA) regulations. With digital disclosure, you have scalable data intelligence that enables you to comply with new regulations quickly.
Digital Disclosure is a Competitive Advantage
As you can see, digital disclosure is far more than a compliance solution — it’s a competitive advantage that will deliver marketing benefits and position a brand for success in the future. And working with a strong data partner will empower brands to implement it easily and experience the benefits.
Anna Thibaut is the Sr. Solutions Consultant for Product Data Management at Label Insight and a former production chemist with a BS Chemistry from University of Missouri. Anna is a Licensed Cosmetologist and Esthetician with 8 years of experience as a beauty advisor in a retail cosmetics environment.