- Integrated initiatives have a favorable effect on corporate success. Companies are achieving considerable cost savings through efficiencies linked to environmental sustainability.
- By encouraging more circularity, or giving a second life to items, retailers can create commercial value by remerchandising once-used items.
- Packaging and labels that are sustainable, eco-friendly, and biodegradable are not just a unique selling point anymore.
by Lesley Suen
Sustainability is high on the agenda for many organizations. As companies continue to implement ESG-focused initiatives within their operations, many are doing their best to implement sustainable practices. For retailers, this transformation is being driven by consumers, with 80 percent of American shoppers reportedly considering sustainability before making a purchase.
Over in the UK, Tesco has pledged to be carbon neutral by 2035, and since 2015, the retailer has managed to reduce scope 1 and 2 emissions by 52 percent. Similarly, in the US, retail giant Walmart has its own sustainability goals, aiming to achieve net zero across global operations by 2040.
However, sustainability does not always work out as expected. In 2021, UK retailer Iceland announced that it planned to become carbon neutral by the end of 2022. However, as a result of conflict in Ukraine and the lasting ramifications of the pandemic, plastic-free has become too expensive and will no longer be possible for the retailer — which instead reverted to using palm oil in some products to minimize costs. This latest initiative begs the question: are retailers ready to prioritize the planet over profit?
Practicing Sustainability is Not as Expensive as You Think
A common misconception among corporate executives is that they can either have sustainability or profitability, not both. This is likely a legacy of the 1970s and 80s, when low-quality and expensive environmental products failed on the market and early socially responsible investments produced low returns.
Prevailing wisdom is now changing, and retailers are in a strong position to promote sustainability across operations. Sustainable leaders are seeing ESG not as a problem that needs to be fixed, but as a means of implementing cleaner, more effective, and less wasteful processes — all while also saving money and driving sales.
28 percent of Millennials and Gen Zers report starting or deepening their relationships as customers with organizations whose products or services benefit the environment. Retailers risk losing customers if they cannot demonstrate their commitment to sustainability and their environmental, social, and governance (ESG) credentials.
There is little doubt that integrated initiatives have a favorable effect on corporate success. Companies are achieving considerable cost savings through efficiencies linked to environmental sustainability. In addition, the financial returns result in greater competitive advantage and innovation. Additionally, investors now monitor companies that consistently outperform their peers in terms of ESG, and are associating improved ESG with greater financial performance.
The Rise of Re-commerce
Going forward, retailers may be expected to prove their sustainability efforts by following in the footsteps of others in expanding their regional fulfillment facilities, as Amazon has done, thereby cutting waste and CO2 emissions. Another example is the encouragement of re-commerce, or the sale of second hand items. Patagonia and Levi’s® have both launched similar campaigns, requiring agile technology to support it.
With environmental concerns continuing to dictate consumer spending habits, companies are looking to adopt more circular models of retailing. By encouraging more circularity, or giving a second life to items, retailers can create commercial value by remerchandising once-used items.
Particularly within the fashion industry, circular campaigns have been launched by Patagonia and Levi’s.
The benefits from a circular retail model are firstly reducing waste, benefitting the retailer’s sustainability efforts. Secondly, there are financial incentives for retailers who choose to re-merchandise old or used products without the associated manufacturing costs that brand new items would command, thus reaping the benefits from the added resale value.
Brands Adapting to Green Packaging and Labeling
Retailers also need to reevaluate their packaging and labeling strategies, whether they trade online or in-store. Packaging and labels that are sustainable, eco-friendly, and biodegradable are not just a unique selling point anymore. Organizations that are committed to their environmental efforts are revolutionizing the future of packaging and labeling.
Large brands have already taken the pledge to greener packaging and labeling. Zara, global fast fashion leader, now ships online orders in 100% recycled cardboard boxes manufactured from boxes previously used in-store. By 2025, the brand intends to have zero waste in its shops, offices, and logistics centers. Womenswear apparel shop, Pink Boutique, has taken a strong position on sustainable packaging. It replaced its polythene mailing bags with a greener sugarcane-based alternative.
Green hang tags from the H&M Conscious line draw attention to products that use at least 50 percent sustainable materials. With innovative technological solutions, the retailer is continually working to make its range even more sustainable. This trend shows no sign of slowing, with research from Forrester Consulting indicating that 40 percent of retailers have already invested in more sustainable packaging and tagging.
Evidence in favor of sustainability’s mainstreaming is overwhelming. Executives no longer have the luxury of viewing sustainability as a necessary but unrelated addition to “actual” business. Retailers that proactively integrate sustainable, circular practices into their business strategies will spur innovation and inspire fervor and adherence from their key stakeholders. They will be benefiting both the environment and their bottom lines.
Lesley Suen is the Senior Vice President of RFID Technology & Corporate Marketing at SML Group.