Retailers need to prove their sustainability cred to grow sales

Photo: Amazon
Jan 27, 2022

Through a special arrangement, presented here for discussion is a summary of a current article from the blog of Oliver Guy, Senior Director, Industry Solutions, Software AG.

Retailers in 2022 will need to prove their sustainability commitments and establish their environmental, social and governance (ESG) credentials or lose business.

Investors, partners and customers alike are putting pressure on retailers to be more sustainable — and will abandon them if they do not prove it. These market forces are more powerful than any government or environmental protest group could ever be: In fact, 73 percent of global consumers say they would change buying habits to reduce environmental impact, according to Bain & Co.

It is a double-edged sword for retailers, involving a precarious balancing act:

  • Tradeoffs: For example, reducing plastic use can result in higher food wastage because wrapping some produce in plastic doubles its shelf life.
  • Time wars: As consumers demand faster delivery, one might assume CO2 emissions will go up. However this is not always the case as more distributed fulfillment centers closer to customers mean final leg routes are shorter, with a lower CO2 footprint.

Expect retailers to demonstrate their credentials by:

  1. Expanding local fulfillment centers, such as has, reducing both CO2 and waste.
  2. Promoting re-commerce — the selling of used products. Patagonia and Levi’s have initiatives in this area and UK supermarket Asda has also trialed clothing ranges. This new business model will require flexible technology to support it.
  3. Implementing in-store energy use monitoring and control. Some large retailers are already moving in this direction, where IoT has a major part to play. Sainsburys have even highlighted it as a key area to investors.
  4. Providing consumers with some visibility of environmental impact in delivery choices as well as the potential to evaluate distribution choices based on environmental impact, as well as cost and speed.

DISCUSSION QUESTIONS: What will be some of the biggest trade offs that retailers will have to make in pursuing sustainability goals? What are some of the easier versus more complex solutions?

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"Retailers do not have the luxury of time to define and develop meaningful sustainability initiatives. There is no time like the present."

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12 Comments on "Retailers need to prove their sustainability cred to grow sales"

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Mark Ryski

Retailers must take sustainability seriously, and there are several great examples of how to do it contained in this article. Green-washing just won’t do, as consumers are becoming much more aware of the negative impacts some practices are having. We have a collective responsibility to help stem the environmental impact. As rightly noted, the convenience and environmental sustainability appear to be conflicting notions, but something has got to give. One of the more complex problems retailers/brands need to solve is the environmental impact of online sales, and especially the returns.

Brandon Rael
Retailers do not have the luxury of time to define and develop meaningful sustainability initiatives. There is no time like the present to make significant commitments to sustainability and carbon reduction strategies. One of the more recent initiatives has been Walmart making a substantial investment in vertical farming and sustainability with their funding of Plenty. Walmart’s investment is part of a $400 million round of funding for Plenty led by One Madison Group and JS Capital, with participation from SoftBank Vision Fund. With the move, the country’s largest grocer is diving into a trendy area of food tech that brings farm produce closer to customers’ kitchen tables to boost freshness, limit waste, and promote sustainability. Indoor agriculture also has become a potential solution to unpredictable weather patterns and natural disasters, such as California wildfires fueled by climate change. Walmart sees the approach as an environmentally friendly way to ensure a reliable supply of high-quality and affordable produce year-round. Starting later this year, Walmart’s 250 stores in California will have leafy greens grown on a vertical… Read more »
Melissa Minkow

I think most retailers assume they are trading off profit for sustainability. They think sustainable products will always be more expensive to the consumer, therefore not capturing sales. If retailers actually pursue sustainable product offerings, they will inevitably find brands they can stock at no additional cost to the consumer.

Among the biggest tradeoffs retailers may actually have to make is consistent inventory. If they source from sustainable brands or manufacturers that don’t have the demand yet, scalability to produce simply won’t be there.

Liza Amlani

It is critical for retailers to put sustainability initiatives as primary focus throughout their retail end-to-end as this is what customers will now expect. Accountability and transparency are key driving values that are aligned with today’s consumer and brands need to put more money into innovation to uphold sustainability claims and adhere to government mandates. There is no room for excuses anymore. The time to act is now.

There are so many responsible retailing solutions around product development and merchandising that we haven’t scratched the surface. Rethinking assortment planning and increase seasonless product, reduce sampling by enabling technology and digital product creation, and working with suppliers to reduce overproduction and minimum order quantities.

David Spear

Over the last couple of years, primarily spurred by the Pandemic, we’ve seen the emergence of faster and faster delivery times, from 4 hours to 2 hrs to 20 minutes! Bundling of several orders with 20 minute cycles may not be possible and therefore, CO2 emissions increase. Weighing the balance of these initiatives becomes tricky with the public scrutiny on sustainability.

IoT sensors and the data analysis of in-store emissions is another huge area of opportunity where retailers can make tremendous progress. So is packaging. The entire Retailer/CPG industry must start to look at packaging in a different light. Does every case of water/isotonics need a piece of thick cardboard on the bottom of the shrink-wrapped package? Can it be eliminated or reduced in thickness?

Adhering to Scope 1 and 2 guidelines will require retailers to look at data lineage and data integration as a fundamental element so that immutable reporting can be achieved. There’s a lot of work to be done, but charting a path and adhering to it is paramount so consumers can see progress.

David Weinand

While I agree that sustainability has a substantially higher profile at the consumer and the industry level, price and perceived value will take precedence from the majority of consumers. I know what studies say but for low and mid-income families that have seen the price of their food and other products rise significantly, I believe they will pick the item that is perceived as providing more bang for the buck vs. being sustainable. At the higher income levels, sustainability will be a priority.

Mohamed Amer, PhD

The rise of online retailing has exasperated the E in ESG. The carbon emissions of the last mile delivery and packaging severely impact the environment. Online orders delivered to the home require more packaging and have fewer items per transaction, and multi-item charges can result in multiple deliveries. Physical stores offering BOPIS capture the convenience of online and store pickup efficiencies. Making consumers aware of more sustainable ordering and delivery patterns can make a sizable dent in the carbon footprint of online products.

In addition to the Environmental factors, retailers can’t ignore the Social and Governance elements of ESG. Their customers have surely not!

Lucille DeHart

Consumers will ultimately dictate the speed and depth of initiatives that they expect from retailers and brands. The key for the retail industry, including manufacturers/wholesalers, will be to make their progress meaningful and to deliver true impact.

As a marketer, I can appreciate the messaging and superficial efforts that are happening in the market just to be part of the conversation, but the reality is we may actually be creating more waste by trying to be sustainable.

One short-term way to succeed in this space is to produce less goods up front, which will ultimately reduce waste throughout the supply chain including product destruction and final transportation to off price channels.

Investing in the less sexy systems side of the retail business is the key. Having accurate planning systems, transparency throughout the supply chain and more targeted allocations for goods will ensure the highest sell-throughs with the least amount of product. That is a win for the brands, for the consumers and for the planet.

8 months 5 days ago
Sustainability initiatives like the ones described are well-intended. But they’re just window-dressing the problem. And on this environmental front, it’s really not for the retailers to take the lead. Nor will they, as they exist to give customers what they want. Which is a mixed bag of consciousness versus convenience, affordability versus sustainability. Yes, there are those who can afford to shop based on pure ethics. But that is such a marginally small group that makers and sellers can, in fact, pander to them, easily. And because it really doesn’t cost them very much to do so. The rest of their businesses chugs along as always. Meanwhile, don’t you think it’s rather ironic that every other discussion on RW has to do with the exact opposite ways to deal with this issue? They are always about how much more can be done, made, and sold at the fastest and cheapest. Only once in a while does a comment address the repercussions (of the advice and inevitable actions). It is also rather notable that this chat… Read more »
Craig Sundstrom

I’m curious what the evidence is for the basic premise behind this article; oh, I don’t doubt survey says X% of people claim sustainability is “important,” but we know just how often people match — or really don’t match — their actions with their words. Of course a response could be “even if it’s a small number it’s important,” so there’s nothing to lose, but maybe that’s not true. Is it possible there’s an equally important “anti-sustainability” customer (?), as absurd as it might sound (and actually is). Moral of the story: I think retailer’s pursuits will vary a lot, based on their customers.

Andrew Blatherwick

There is increasing pressure on retailers from consumers to be more sustainable. During the pandemic we saw consumers buying local and understanding that this helps the environment, possibly at the expense of cheaper imports. There has long been a drive to reduce packaging, much of which can be done without impacting shelf life and increasing wastage, which is a growing priority for customers. Food wastage in particular has multiple impacts on the environment — the cost of production, distribution is all wasted and then the cost of disposing of wasted food has a huge impact on the environment.

Technology has moved on considerably to enable retailers to manage inventory better and help reduce waste. It also helps in developing new ways of keeping food fresh without excess packaging. Cheap one-use clothing is now seen negatively and the growth of rental and second use clothing will only increase. It has to become a focus for retailers and increasing pressure on their strategy and policy will push them towards greater sustainability.

Anil Patel
I appreciate the sentiment expressed here. Yet, the surveys do not necessarily reflect the true state of affairs. Customers DO prefer a sustainable alternative. However, it requires foregoing convenience, spending more, and making numerous lifestyle changes. Sadly, a handful of customers are willing to take on these challenges. Therefore, most environment-friendly retailers are battling with commercial scalability while trying to remain profitable. Leveraging existing tech and retail strategies such as BOPIS and pre-orders can help a retailer’s sustainability ambitions get off to a better start. Using BOPIS instead of last-mile delivery can help minimise carbon footprint, save money on logistics, and increase sales. Similarly, Pre-orders help reduce waste and curb the damages of fast fashion. Also, knowing a good approximation of how much to produce will always be valuable to a business. Consumers are taking note and it’s high time retailers took some substantial actions to mitigate the environmental damage. We still have a long way to go securing a more sustainable future. However, this shouldn’t stop people or businesses from doing the bare minimum… Read more »
"Retailers do not have the luxury of time to define and develop meaningful sustainability initiatives. There is no time like the present."

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