NRF: Sustainability Still Searching for the Why
By Tom
Ryan
With the eco-movement at retail steadily building for years, it’s surprising
that nearly all of the Sustainability Sessions at Sunday’s NRF convention touched
on the motivations for going green. The unasked question: If the majority of
consumers still aren’t ‘demanding’ it, what’s driving the movement?
Speaking at one session, Kevin Hagen, director of social responsibility at
REI, the outdoors chain, listed reasons why retailers and brands must have
proactive plans for product stewardship. One is activists — he showed a sign
outside a Disney store exclaiming, "Stop Selling Toxic Pajamas to Kids." Second,
government agencies are holding firms accountable to know what’s in their products
and where they come from. Third, consumers are asking for more detailed social
and environmental information behind products. Finally, it’s comprehensive
programs across retail, particularly Walmart’s.
But another reason is retail’s reputation. As an example, Mr. Hagen encouraged
the room to view "Story of Stuff," a 20-minute film attacking America’s
culture of consumerism by activist Annie Leonard that has been viewed over
1.3 million times on YouTube.
"It’s going to have two impacts on you if you’re like me," said
Mr. Hagen. "First of all, it’s ‘Wow! That’s really depressing.’ The second
is ‘Wow! That’s really inflammatory.’ Because as a business person, ‘The Story
of Stuff’ says that not only are we part of the problem, we are the problem."
He also somewhat agrees that retail has culpability for the "take-make-waste" environment. "Our
sort of rational for a long time has been – ‘We’re making an economic impact
and we’re hiring people and we’re doing good things. And we’re giving people
what they want and people keep buying the stuff so it must be okay.’ – and
we kind of realize that we’re rationalizing to ourselves a little bit."
Eventually, green promises to be used much more as a sales tool. Mr. Hagen
was speaking on behalf of the Eco Index, an environmental assessment tool being
piloted by more than 100 companies within and beyond the outdoor industry.
It is currently being used to measure the environmental footprint of apparel,
footwear and gear but expected to eventually be used as a customer-facing label,
mimicking the Energy Star series on appliances.
Four years into development, however, the content isn’t deemed to be rich
enough to come up with a rating system for consumers. Said Mr. Hagen, "Our
supply chain is great at getting us product. It’s really terrible at giving
us information."
But he insists sustainability doesn’t have to be consumer-driven.
"I think the ultimate question is – why do we need customers’ permission
to do this? We’re finding innovation in our supply chain. We’re actually driving
costs down or making better products. Consumers will love it. But they don’t
need to be the reason why we’re doing it. And ultimately they’re going to appreciate
what we’re doing and it’s [becoming a requirement]. It’s no longer the cool
green thing to sell. It’s the expectation that we know what’s in it and where
it came from and we got to figure out how to get that information."
Discussion Questions: What do you think is driving
sustainability efforts for retailers and brands? How critical is it that
sustainability programs have a strong consumer-driven component?Â
Consumers are all for “going green” under the following terms:
1 – Not inconvenienced.
2 – Product and service quality remains the same.
3 – Pricing is the same (not higher).
The eco movement has two driving forces: the press and government. The consumer is only willing to go along in most cases if it doesn’t create any inconvenience in his or her life, or there is a true personal economic gain to go along with the system.
The sustainability effort is being driven by many factors; retailers, cost, consumers, image, etc. The fact that it is moving forward says that all of these components are relevant. Companies that do not utilize sustainable products and processes are going to fall behind the curve and the cost of catching up can be very expensive as lost sales are always the most difficult and expensive to recover. Every product line and manufacturing process has different variables, however. Leaders in movements usually get rewarded and this is no different.
While our work is solely focused on connecting brands and customers, the question of sustainability and the need for it to be customer-driven is actually not something that must be or even should be an issue. The question, so aptly put by Mr. Hagen of REI, is why in fact it should be consumer driven?
Too many companies have been too socially irresponsible for too long. Whether it’s labor exploitation overseas or neglecting their communities, there are a myriad of reasons for them to step up and be good corporate citizens. Ultimately, this sends a strong message to stakeholders and employees, which then will connect with customers, given the strong correlation between employee loyalty and customer loyalty.
When you talk sustainability, it is good to note that the topic is very broad for retailers. Sustainability for the supply chain could be about packaging, energy efficient lighting in distribution centers, energy efficient fork lifts, route optimization for logistics, and energy efficient trucks, recycling, etc. For merchandisers it’s product specific and development in what region specific. Quality of product, preservatives free and toxic free materials, etc.
In 2010, sustainability became the new buzz word in the industry. What’s driving it? Corporate responsibility in some cases but in the supply chain, most efforts are reducing costs, so it just makes sense.
Sustainability just makes good sense. And for that reason alone, retailers and brands should get behind it. Sometimes retailers lead consumers and other times consumers make demands on retailers. Regardless of which group is taking the lead on this issue, sustainability needs to be a priority for all.
Some consumers are demanding sustainable products and retail services, but most are not.
So, what is driving the movement? Guilt.
If retailers are doing it for any other reason than their customers demanding it, they should be asking themselves why. It drives cost into their delivery and offers no real certain measure of return.
It’s the customer. It’s the customer. It’s the customer. They should be the driver — period. If not, a retailer is on a mission of failure.
Sustainability is an essential part of Corporate responsibility. At the end of the day, companies are responsible for what they make and what they sell. Products and packaging that are not based on sustainable practice will be less valuable — there is a cost to companies and consumers for items that are not sustainable — and all will pay the cost in the longer term. Depletion of limited resources, fair trade practice, safety, disposal at end of life — all these issues have to be considered as they affect our daily lives in the near and longer term.
Consumers care. Some shop at Whole Foods; many are buying more natural and organic products; they want local produce. Their purchase decisions are changing across retail channels.
Consumers may not necessarily be exhibiting demand for sustainable products with their purchases…because retailers are still not really offering them. Most consumers do not wish to purchase products packaged in plastic. They purchase these items because they are the only convenient option offered. Future successful manufacturers and retailers will need to “push” more sustainable products to consumers, who are eager to see the change.
Sustainability forces the kind of innovation brands/retailers need today. Highly regarded management guru, C.K. Prahalad, wrote that sustainability leads to innovation. Though he has since passed away, the idea that he was “going green” from a purely business case is something!
As well, if retail and brands are as serious about marketing more effectively to women as they seem to be, they should continue to pursue sustainability in both those shelf-noticeable places (like packaging and promotion efforts) and the behind-the-scenes socially responsible corporate ways. If women have been the index for the coming hour with regard to consumer behavior change, then “green-minded” women are the ultimate index for that today. They may not appear to be demanding it, but when you deliver it – just the same – women will really notice. Still – it’s worth noting that a “green” label of some sort, on its own, will not do the job – and could very well backfire.
Finally, sustainability is all about being able to make long-term decisions and changes without being able to absolutely see where it will head (but to be able to trust that those changes are at least pointing us in a business and socially positive direction). I write on these topics a lot and have seen great Twitter discussions as well.
Sustainability is not just about responsiveness to consumer demand(s) per se. That said, Sustainability is not only good for the environment and a company’s public image; it should be perceived as a means to improve business operations and reduce supply/value chain costs. Think “Green Supply Chain”: a supply chain that has integrated Sustainability concepts/requirements into core operations – from sourcing through production, distribution, delivery, and end-of-life recycling. This, in turn, will yield financial benefits that go beyond corporate citizenship, mandate or government compliance, or the current consumer zeitgeist.
There are three reasons that a company (or retailer) will pursue a sustainability (green) strategy. The first, it saves them money. The second, their customers will go someplace else if they don’t offer it. The third, the government requires it.
The one reason they will not do it is “because it is the right thing to do.” There is a library full of history of business that says if one can get away with egregious behavior, environmental or otherwise, one will.
The real problem is, sustainability efforts by companies will probably pay out in the long term, but American business is so short-term oriented that they will be left in the dust.
I had a recent conversation with an executive of GE regarding the company’s strategic move into alternative energy. He said they have judged that the U.S. is 10 to 20 years behind Europe, China, India and Brazil in these efforts.
Green is great and I am all for the movement … as long as I do not have to pay more and am not inconvenienced by it, as others said. Maybe others feel this way, maybe not. But the real facts are the movement is not going away so soon. So jump on the “green” bandwagon. Someone earlier mentioned guilt as the reason. Could it be guilt because others decided to do it before you and you don’t want to be left behind?
My sense is that the sustainability movement is mostly PR and political correctness, though I don’t doubt that in some quarters it represents a sincere desire to be out front on something that’s perceived as socially responsible and in the longer term might have competitive or financial relevance. I don’t think it’s customer-driven at this point in time, however, beyond a very, very small niche of customers.
That there is not more enthusiasm for “sustainability” may have something to do with the fact that probably only one person in ten — if even that — could define it if asked. Is that small percentage enough to constitute a “movement”? And of course, government — sometimes — has a legitimate interest in forcing change as well: that cars no longer pollute as they once did was certainly not due to customer demand.
The consumer has demanded a certain level of green and so most retailers have responded to this. Will it continue to rise is not really as relevant as the impact on retail brands. The convergence of product lines across retailers means that consumers can one stop shop in so many places now and there are fewer ways for retailers to differentiate themselves. The retail brand is one of the ways left and so adding a sustainability component to a retail brand adds another layer that connects with the consumer.
So the consumer may not be demanding sustainability but they are responding to it as are the best and the brightest managers seeking to work for the best companies. I do not believe it is a coincidence that some of the best performing retail companies are also the ones further along the path of sustainability.
I was hoping that the progress of RFID would encourage manufacturers to cut back on excessive packaging. You know, the kind that’s supposed to stop theft with oversized, chainsaw-proof plastic? I always thought that RFID, when used as a pilfering preventer (in addition to inventory functions), would help to reduce packaging materials.
Similar to the terms “organic” and “all-natural,” “green” has no specific definition, has become a meaningless buzzword, and can be attached to any product label without fear of breaking a law or FTC guideline.
Allow me to add another term to David Biernbaum’s succinct comment: Consumers also need to understand exactly what “going green” means. And forget about “sustainability.” That will never make it into most consumers’ working vocabularies.
And this might make you grin: Hitchhiking on Scanner’s as-usual, on-the-nose comment that retailers risk failure if they embark on missions that are not customer-driven, I’d like to add that it’s all about the dollars. The expansion of private label products was NOT customer-driven, and yet it has all the appearance of success. Retailers forced this movement for the dollars, not out of a sense of duty. Can sustainability be made profitable? Sure, there are lots of ways, but they need application and proof. Do that, and “green” will drag in the “green,” if you mean what I know.
Our studies with Millenials have shown two things consistently, A) they EXPECT companies — much different than demand — to be green and B) they don’t want to pay more than a 5% up charge for the green goodies.
This group of consumers, dubbed “the largest generation” by some standards, you’d think, would be much more demanding about sustainability and much less laissez faire about it all. But no. This information alone tells me that in general, consumers are still quite a ways from pushing retailers to a different level.
The recession didn’t help either, of course.
As much as some would like sustainability, it has two parts not one. First are the products we sell at retail. The facts are straight forward. If the product does not perform, customers will not buy. Yes there are some customers what will accept lower performance to be green, but not the majority.
Unquestionably, products should be safe. Now with so much of our consumer goods manufactured overseas, too many companies have lost control. Lead paint and poor design will kill a brand faster than a recall.
The second part is how we operate the company. The answer here is simple unless the costs are lower or the investment payback equals building a new store, you are wasting stockholders’ money.
One aspect of sustainability initiatives in business that is rarely discussed is whether the initiative itself is sustainable. Is there a way to strip costs out on an ongoing basis from current operations? Or a way to create additional sales? If that doesn’t happen, internal support won’t be enough: then greener practices will be driven mainly by activist pressure and legislation.
At another level, let’s face it, some of the greatest social changes–abolishment of slavery, labor rights, universal suffrage–didn’t happen to improve profitability of businesses.
So is “guilt” a good enough reason, if we can’t find another, more “business-like” rationale? I think so.