Photo: Walmart
Will climate action become less of a priority for retail post-pandemic?
Deloitte’s latest “Climate Check“ report shows that over 80 percent of executives are concerned about climate change. The pandemic and economic downturn, however, have stalled ambitious actions, according to the respondents.
Asked about the biggest environmental sustainability/climate change issues already impacting or threatening to impact their organization, the top five answers were:
- Operating impact of climate-related disasters (e.g., facilities damage, workforce disruption), cited by 27 percent;
- Scarcity/cost of resources (e.g., food, water, energy), 26 percent;
- Regulatory/political uncertainty, 26 percent;
- Increased insurance costs/lack of insurance availability, 24 percent;
- Reputational damage, 17 percent.
Almost two-thirds of the 750 executives participating in the survey cited a need to cut back on their sustainability efforts in response to the pandemic and economic downturn.
“The pandemic has slowed some of the momentum toward combating the climate crisis that has been building over the last couple of years,” said Michele Parmelee, Deloitte’s chief people & purpose officer. “On the other hand, there has emerged a newfound sense of determination that if we act now, we can alter the course of climate change and avoid worst-case scenarios down the line.”
For retail, surveys show sustainability has become a purchasing driver.
The sixth “EY Future Consumer Index,” a survey of 14,500 consumers globally fielded in January and February, found 49 percent will prioritize the environment and climate change in how they live and the products they buy. For 26 percent, sustainability will be their most important purchase criteria three years from now.
Frequent/or extreme weather patterns stemming from climate change will also drive extensive supply chain disruptions, finds a McKinsey case study, released last August. The impact could include physical damage to facilities, inventories and other assets; interrupted production and shipments; higher costs and prices to restore operations; and ultimately reduced revenues. McKinsey wrote, “Supply chains and the infrastructure that supports them are designed for a stable climate.”
Andrea Ranger, shareholder advocate with Green Century Capital Management, told S&P Global that President Joe Biden’s environmental agenda may soon force retailers to offer more detail on long-term climate goals. More evidence is expected to be sought in areas such as decarbonizing supply chains and transitioning away from fossil fuels.
- 2021 Climate Check: Business’ views on environmental sustainability – Deloitte
- Is business too busy saving itself to save the environment? – RetailWire
- Survey: Americans Embrace Sustainability Despite COVID-19 Upheaval – Genomatica
- Can retailers drive climate change action? – RetailWire
- The Hidden Price of Climate Change for the Retail Industry – Loss Prevention Media
- Could climate become the weak link in your supply chain? – McKinsey
- New Survey of Experts Finds COVID-19 Pandemic Risks Slowing Progress Towards the Sustainable Development Goals – GlobeScan
- U.S. Cotton Trust Protocol: A Year Into Lockdown, Research Finds Sharp Increase In Consumer Demand For Sustainable Products And Business Practices – U.S. Cotton Trust Protocol
- US Future Consumer Index Edition 5 – EY
- Retailers could face more investor scrutiny amid Biden climate policy agenda – S&P Global
Discussion Questions
DISCUSSION QUESTIONS: Will the pandemic slow or accelerate retail’s initiatives to combat climate change? How have the drivers of climate action for retail changed over the last year?
Poll
BrainTrust
Nikki Baird
VP of Strategy, Aptos
Rodger Buyvoets
CEO/Founder, Crobox
ESG is now a major factor for businesses. And this time it doesn’t feel like a buzz word. This time feels like a real pendulum swing toward compliance. Will it accelerate or slow initiatives? I think the answer is that we will see a prioritization of these initiatives. The end-consumer is demanding it.
It’s a human tendency to pay disproportionate attention to problems with immediate tangible impact over something that’s perceived to be intangible and less immediate like climate change. From a messaging perspective, we need to be able to relate the climate change issue to the pandemic – the more you ignore it, the bigger the impact. Thankfully, the Millennials and Gen Zs seem to encourage sustainability, and retail/CPG executives are taking note of it. Just over the last six months, I have seen a much higher percentage of people bringing their own reusable bags. The other day I noticed Whole Foods carrying laundry detergent packaged in a cardboard container – these are good leading indicators of change.
There’s a third actor in play that I think will ultimately have more power than governments or consumers to keep change rolling at retailers: the financial industry. I think now that investment researchers and firms have started to take notice and price sustainability awareness and actions into stock price guidance, you will see more focus on climate initiatives, and more discussion about it at an executive and board level. So far, consumers have been the biggest driver with their support and rapid rise of brands built on sustainability. The pandemic has underscored that importance, not eroded it. Now U.S. government leadership is climbing back into the saddle on a global stage, so government requirements could ratchet up, but I expect that won’t be as fast as it needs to be. So it’ll be investment firms who punish or reward climate plans in the markets that will ultimately have the most impact in the near-term.
Nikki, I just got off a webinar with the following panel:
When asked about climate, they agreed and said almost exactly what you posted today.
So interesting! I had Jamie Dimon top of mind when I was thinking about the question. Always good to see other data points!
Climate change is a slow-moving crisis that government and business have ignored for far too long. We’re already over halfway to the tipping point, according to some studies. Hopefully, consumers, businesses, and governments will wake up before it’s actually too late. The retail industry has to make a choice between being on the right side of history, or not. As bad as the pandemic is, it certainly shouldn’t be used as an excuse to do less on climate change. Execs who do nothing might ask themselves what their grandchildren will think of them in 50 years (or less).
Some companies may have tapped the brakes on sustainability and climate issues during the pandemic, but higher customer awareness and demand going forward will put the focus squarely back on engaging with these issues and again making progress toward a greener future.
You would think that the retail sector would continue to address climate change in tandem with how they adapt to the changes made by the pandemic. But the reality is, capitalism is driven by what consumers want. True, many Gen Zers and Millennials demand the brands they shop from to be sustainable these days (which the move to supporting local brands also demonstrates), and herein the demand will match the supply. But if there isn’t the demand for it, my view, unfortunately, remains not as idealistic. Sustainability requires creativity, disruption, and cost, and retailers will have a lot on their plates coming out of the pandemic. However let’s not end on a down-note. If brands do continue to combat climate change, this will carve out their competitive edge in the long run. It’s retailers’ obligation to take a stance and be socially responsible. The more brands can demonstrate this, the more legitimacy and authority they will eventually establish coming out of COVID-19 and beyond.
I just wrote a piece on this topic this week. It’s time to deal with sustainability and climate change. Why? Because the consumer demands it. The pandemic didn’t change the pre-existing conditions of extreme weather, the environmental impact of fast fashion and the fashion business in general. The younger generations really do care and reward efforts to mitigate the problem. Heck, even older folks like me do.
It’s no longer just about cost-savings and calling it “sustainability.” Now it’s very, very real. When the Army Corps of Engineers present a proposal to your home town that the only way to keep the sea from overwhelming the shoreline is to build a 40 foot high wall along the waterfront, it’s time to get creative, smarter and stop the bleeding.
Yes, that just happened here. That drives the consumer and that, in turn, will drive retailers. Simple as that. There’s no longer any denying that we have a problem.
There is a big difference between the “fact” that over 80 percent of executives are concerned about climate change and whether “in fact” any of them will actually do anything about it, or how effective their actions will actually be. As far as “retail’s initiative to combat climate change,” let’s face it, whatever those initiatives are or aren’t, they aren’t working fast enough. The “drivers of climate action” are tough regulation (often at the expense of retailers) and the climate itself. We may be happy to tell ourselves that we have the crisis in hand, but the planet keeps showing us exactly how misguided we are. An accelerating climate crisis will result in less food, lower industrial production, and — being brutally honest — a whole lot fewer consumers. We can’t wait for surveys to tell us to take this seriously. We are already 50 years behind where we should be, at least if we really want to stay in business — and alive.
A push to be more sustainable doesn’t need to be an all or nothing approach. If we just look at the last mile as an example, retailers can put steps in place today including order consolidation (reducing shipments per order) micro-fulfillment (fulfilling and shipping from a store closest to the customer) and click and collect, which can help reduce the emissions stemming from home package delivery.
Yes, the pandemic will accelerate retail’s initiatives in sustainability. I was recently in a meeting with 20 of our customers across industries and asked: Has the focus on sustainability increased, decreased, or stayed the same this year? Every single customer said increased. While this is a small data set, from my vantage point there has been a collective transition to more sustainable activities by consumers and society as a whole since early 2020.
A potential next question may be, how will retailers establish climate action and sustainability goals and measure those goals? Consumers are resourceful and intelligent and will see through platitudes. Retailers that really want to be distinct and accomplished in sustainability will have to realign their values, establish and publicize their goals and build a foundation to reach them. This requires a development of metrics for their goals, and a map on how the retailer will be able to use product, supplier and operational data to measure their success and ultimately share it with their consumers in a transparent way.
Climate change means different things to different people, and climate change means different things to different industries, including retail. For retail, it’s all about sustainability, which will take a back seat for a while, because sustaining the basics of business, profit, regenerating in-store traffic, improving e-commerce to compete better with Amazon, and dealing with inflation for the first time in many years, and a number of many other immediate concerns, all will be more urgent. That’s not to suggest that sustainability will regress. It won’t.
Most chain-retailers are publicly-held corporations, and shareholders are all for good conscience, but more concerned, at present, about the growth and sustainability of their investments.
Retailers and brands need to focus on climate change because it impacts the products they offer/produce, supply chains and consumer sentiment.
Whether business leaders buy into the climate change rationale, reject it as fake, or simply don’t give a fig, none can deny the rule they were taught in kindergarten: “Clean up your mess.”
Every business leaves a footprint. Every business activity has consequences for the local and global environment. Every unnecessary gram of carbon, or thousand-year bit of plastic is everybody’s problem. Every contaminated gallon of fresh water is an economic loss for the planet.
For too long, too many investors and business leaders have ignored the mess and left it for others to clean up. This is both immoral and unsustainable. A disgrace with dire consequences.
Among businesses, retailers occupy a unique position of daily contact with the citizenry plus immense influence over what products can reach them. This must be regarded as a grave responsibility and a privilege.
I can visualize no plausible scenario where retailers would not exert increasing influence over planetary stewardship. The marketplace will punish harshly those who don’t clean their messes.
Environmental sustainability = business sustainability.
Looking at how much more retail has moved online and how terrible that is for all of these initiatives, I think you have your answer regarding this industry. Sales are the first priority. Period. Without sales there will be no retail industry. Of course if all the things that are predicted to happen with climate change happen, there will be no retail industry either.
Many who have been preaching this climate change thing predicted doom in 2010, doom by 2020, etc. And we are never doing enough to combat climate change. Well, we aren’t doomed yet. Fear mongering? Or will ignoring it doom us when it is too late to reverse course? Unknown.
But if there is one thing we have learned in the past year it is that scaring people is sure an effective means of control. COVID concerns and the upcoming economic challenges as a result have set climate initiatives way, way back.
Most of the measures I have seen comparing the carbon footprint of retail stores to online, compare the stores heating, electricity, cooling, etc. to the entire supply chain of the online retailer, ending at the door step of the customer.
What seems to be missing in the measure of the carbon footprint of the retail store is the driving to the store or mall, and driving home again, or the driving to and from home of the associates, and the bag or wrapping the purchase is put in. They don’t seem to include the deliveries to individual stores, many are drop shipped. Then there is the larger tractor-trailer that continues to run its engines while it is being unloaded.
Does anybody have further insight into this?
Ultimately the initiatives for retailers related to climate change may now have to complete for internal financial resources with investments in technology and supply chain infrastructure driven by the more rapid acceptance of digital shopping and retailer’s needs to embrace unified commerce as a critical business strategy.
That said, environmental sustainability has shown to be an avenue for cost savings for a number of retail organizations. Walmart and other savvy retailers get paid for their recyclable materials such as cardboard, rather than paying someone to haul them off. They also benefit from a lower cost to operate a store, warehouse or office with LED lighting and more efficient HVAC systems. Working with suppliers to development more efficient supply chains will also save significant monies over time.
So … I think the answer is “no”; retail will continue to lead and invest in climate initiatives AND tech/supply chain enhancements.
There is nothing like a pandemic to crystalize your priorities. While most executives say they are concerned about climate change, in light of the pandemic we see most actions to combat climate change have stalled. Translation: it’s important but not essential … right now.
Still, it will be consumers who motivate merchants and brands to reinvigorate their climate change efforts. The environmental awareness of consumers is only increasing. When this awareness starts to impact purchase decisions (more than it already has) companies will either listen and adapt or, navigate the unpopular and revenue- diminishing downside of ignoring consumer values.