We are living in a world where retailers are transforming their business models towards a paradise of service and personalization to gain competitive advantage with less loyal customers. It is a world where customers can order a product online and have it at home in less than 30 minutes. Tonnes of plastic and cardboard waste generated by this delivery whirlwind are a result of these forces. According to the World Bank, the apparel segment makes up 10% of humanity’s carbon emissions. Fast fashion has increased clothes “consumption” by making fashion accessible to the masses and increasing the demand for new garments to an unsustainable extreme. It takes about 7,500 liters of water to produce a single pair of jeans, which is equivalent to one person’s drinking water for seven years. Impressive figures when we look at the various jeans in our wardrobes.
Is it possible to reconcile a customer-oriented, competitive environment with a strong sustainability claim and make it compatible? How can both goals be aligned and well combined?
The retail industry has shown great examples of sustainability commitment. Many large companies have dedicated a lot of time, effort, and talent in promoting, managing, and communicating sustainability. The challenge now is to scale these efforts and systematically integrate them into all retail processes without jeopardizing business success. Numerous studies have shown that companies that address environmental, social and governance concerns do not have a negative impact on value creation. On the contrary, sustainable actions pay off and there is a positive correlation between them and financial performance.
At the same time, public opinion is becoming increasingly aware and demanding action. According to a recent Eurobarometer public-opinion survey, most European consumers want a stronger focus on sustainability and the environment, and they want industry stakeholders to act accordingly. PwC’s June 2021 Global Consumer Insights Pulse Survey reveals that 59% of consumers say they are more “eco-friendly” today than in previous times. According to shopping trends reported by Forrester, shoppers are increasingly evaluating products and brands based on a company’s ethics and values. However, this is not only true for retail customers, but also for retail employees, suppliers and partners. There is a common concern and a common call to action for sustainability.
Sustainable retail models will bring relevant, profound and transformative changes to significantly reduce emissions: Use of new materials and manufacturing processes, a different and more sustainable energy mix, alternatives to existing packaging with recycled and lighter materials, waste-reducing production, new service models at the PoS moving to bare products and “reusable packaging,” an increase in circular business models that encourage renting, reselling, repairing, refurbishing and recycling, and delivery models moving from thousands of vans to more sustainable types of transportation, etc. There are already examples of all these initiatives around the world, but none of them are widespread enough to really make a difference.
For some, the scale of change seems a little scary, so much so that it can even prevent that change. Organizations need to start small, communicate properly (externally and internally), measure transparently and expand the level of change according to an agreed plan. There are concrete actions that can be taken NOW:
- Clearly and honestly state the strategic intent, avoiding “greenwashing” and sharing it internally and externally.
- Define a complete sustainability plan with allocated budget and Sustainability Impact Assessment (SIA).
- Include sustainability KPIs into every project in the organization to increase awareness and propel ideas to reinforce impact.
- Create a proper ecosystem with employees, customers, and partners to identify ideas and develop and test initiatives. Creativity should be one of your most powerful weapons.
- Provide customers with options with clear indications of the sustainability impact – from product selection to delivery alternatives.
- Introduce measures to minimize online returns (more product information, customer reviews, online employee advice programs, and accurate sizing features)
- Implement a strong data platform as a basis for data penetration throughout the value chain, control the quality and accuracy of the information and make it available through the different channels and partners.
This last point, the data platform, has a special role to play. It should support retailers by:
- Fostering transparency and increasing consumer awareness by disclosing the individual carbon footprint of products and improving labeling in the different sales and customer interaction channels. Being conscious of our individual impact as consumers is the first step on the path to data-led decisions towards more sustainable options. Sharing information as a company creates the appropriate basis for each decision maker in the company to choose the most optimal sustainable option.
- Improving supplier negotiations away from price towards total cost of ownership and value. Reducing productions to reduce waste, limiting the merchandise that needs to be sold and promoted, and rationalizing the product range to increase value for the entire chain.
- Promoting collaboration between value chain members by creating data-transparent and scalable consumption models.
- Enriching customer information and segmentation criteria, including their interest in sustainability, preferences for products, delivery alternatives, and second-life programs.
- Sharing location data with references to emission reduction initiatives, such as use of recycled or eco-friendly certified materials in stores, LED lighting, biodegradable mannequins, and use of solar panels.
A strong increase in sustainability measures can be expected in the coming years. Public interest is increasing, retailers and partners are joining forces, and governments are launching investment support programs. For retailers, data transparency across the entire value chain will be a key element of all sustainability initiatives as part of this development.