Sustainability is becoming an increasingly important topic in the retail industry. Consumers are becoming more conscious of the environmental impact of their purchasing choices, and retailers are looking for ways to reduce their environmental footprint and improve their social and ethical responsibilities.
This series will explore some of the biggest challenges facing retailers when it comes to becoming more sustainable, as well as provide actionable insights and recommendations that you can use to start on your sustainability journey.
Part one of this series will explore:
- Why is being sustainable becoming more important?
- What are the big challenges businesses are facing when trying to become more sustainable?
Why are retailers becoming more sustainable?
There are many reasons why retailers are tackling sustainability topics and it varies from company to company. Some have it in-built in their DNA and purpose, like IKEA and Patagonia and have been working on this for decades. Others are just starting up as they realise that it is needed.
The main reasons that retailers are realising the importance of being a sustainable business are:
- Consumers want it – demand for sustainable products is growing all the time. According to a recent GFK survey, 73% of consumers think it is important that a retailer is responsible and 36% will select one brand over another because they support a cause they believe in. This is becoming even more prevalent with younger consumers.
- Investors require it – retailers looking to attract investors need to show their sustainability credentials. Surveys show that between 70-90% of investors look for this now. Boards are also clear that they require sustainability performance disclosures.
- Legislation demands it – in the EU, the Corporate Sustainability Reporting Directive (CSRD) will soon be applicable for most larger retailers, and all listed retailers by 2026. While the demands for information are big, retailers should also look to have good performance to report as the transparency will be much greater.
- It is good business to be a good business – whether in the short term or the long term, sustainability makes sense. There are many sustainable actions that reduce both emissions and costs at the same time. Businesses should also focus on initiatives that look after their employees, as engaged employees are more efficient, stay longer and do not have to be recruited as often. Longer term the very survival of the business depends on sustainability.
What are consumers’ expectations?
There are many things that consumers are asking retailers to do including:
- be transparent about their sourcing practices and ensure they are ethical, joining organisations such as FSC wood, better cotton, MSC seafood
- provide environmentally friendly packaging and cut down on plastic
- have environmentally friendly and energy efficient stores
- take a stand on social and environmental issues
- look after their employees and those in the supply chain
- make products from renewable or recycled materials and ensure they are fully recyclable
- provide circular options such as rental or second hand.
What are the key challenges retailers are facing?
With all this push to be sustainable there are still some big challenges for retailers to truly be sustainable. Especially in this time of a cost-of-living crisis, it is very important to hit the right note for consumers; the willingness and ability to pay more for sustainable products is even less than it would be normally.
- Affordability – how to make products both affordable and sustainable for the many people. According to a recent survey 66% of US consumers and 80% of young US consumers, are willing to pay more for sustainable products, however, in practice this behaviour does not always follow the surveys. To truly achieve affordable and sustainable products they need to be cheaper than the comparable, less sustainable product e.g. IKEA veggie hotdogs are 50-75% of the price of the meat hotdog in some countries.
- Identification of products – in the same survey, 78% of US consumers said that they did not know how to identify a sustainable product, which is a big challenge for retailers who have invested a lot of effort into ensuring products are truly sustainable.
- Greening products – it can cost a significant amount of money to switch to recycled materials or make a product that is truly recyclable at the end of its life. Companies need to think about whether it is better to make different products, or really invest in making their current products greener. Only at scale can a lot of solutions make sense financially and, while the curve of cost reductions can be exponential, it takes an initial brave first move.
- Greening brands – ensuring a brand is seen as sustainable is another challenge in itself. To truly be seen as green, a brand needs to take a stand and communicate that it is sustainable. This can sometimes open a brand up for accusations of greenwashing. You might find that it’s easier to say nothing than to put the brand in the firing line, however a strong message that a brand can stand behind, while a challenge, is important for all the reasons already discussed.
- Being a responsible employer – across the supply chain, a retailer is responsible for its own employees and the employees of its suppliers, while also having a responsibility for its consumers as well. Being a truly responsible employer across the supply chain is difficult and needs robust processes and follow-up.
- Circularity and the less consumption conundrum – to truly become a responsible retailer, a brand must use less raw materials over time as they are becoming scarcer and more expensive. This is the ultimate question; can we sustain this much consumption for 9bn people? The answer is of course no, however people still have needs, so ensuring that these are filled is important. Therefore, circularity is probably the biggest challenge of them all, how do we truly have circular loops that re-use, refurbish and recycle products at scale?
Knowing that these are some of the reasons to be sustainable and some of the challenges, keep an eye out for part two as we will explore what retailers are doing to walk the walk and be truly sustainable.
