Sustainability is increasingly dominating retail’s agenda. And for good reason. 2030, a key date underpinned by the United Nations' Agenda for Sustainable Development, is only a few years away. At its heart are 17 sustainable development goals - urgent calls for action, including responsible production and consumption, by all countries in a global partnership.
It is also becoming clearer that it pays to be green. A study into consumer spending behaviour by McKinsey and NielsenIQ broadly revealed a clear, material link between ESG-related claims and consumer spending. Green sheen (or greenwashing: falsely promoting an organisation’s environmental efforts) won’t cut it anymore. If regulations alone aren’t pushing brands to the right behaviour, investor sentiment and consumer behaviour are.
63% of consumers believe the retail sector should go further on ESG, while 39% of consumers said retail spaces could and should become more sustainable.
While progress is being made, much work is still needed to collectively achieve the Sustainable Development Goals. The industry should be encouraged to collaborate on finding innovative ways to meet the challenges including new operating models, more sustainable materials and processes, reducing waste, improving product durability, longevity and recyclability, and leveraging data and technology.
Here we explore three key themes dominating the sustainability agenda and how retailers are responding:
increasing regulation and reporting requirements
more responsible, sustainable supply chains
circular business models.
Increasing Sustainability Regulations and Reporting Requirements
Data plays a crucial role in sustainability: you can’t improve if you don’t measure. Many retailers already publish ESG (environmental, social and governance) metrics, based on one or more of the many ESG reporting requirements and standards. Many more are going further by voluntarily publishing impact reports.
Collecting data and setting clear targets and standards present a huge challenge for the retail industry with complex, global supply chains and a myriad of regulatory systems. Research by Deloitte (CxO Sustainability Report 2023) found that 24% of CxOs said the difficulty of measuring environmental impact was a top barrier to driving sustainability efforts.
Greater reporting requirements are coming. For this, data must be standardised to remove double reporting, eradicate green sheen, and prevent “green hushing” (where companies remain quiet about genuine efforts to avoid unfair claims of greenwashing). Consumers also need trusted data to make informed choices.
The EU, in its drive to become the first climate-neutral continent by 2050, is taking the lead with its Corporate Sustainability Reporting Directive (CSRD). Sensibly, its policies ensure interoperability and consistency between EU and global standards to prevent double reporting.
Greenwashing is being addressed too. The EU is set to ban ‘climate neutral’ claims and emissions offsetting as a basis for carbon-neutral or eco-friendly product claims by 2026. In the UK, the Competition and Market Authority (CMA) issued a compliance guide in September to help fashion retailers comply with consumer law and create a level playing field for businesses. The guide is based on its existing Green Claims Code which sets out 6 key principles to follow when making green claims. At the same time as issuing the guide, the CMA advised 17 well-known (albeit unnamed) fashion brands to review their business practices regarding their green claims.
Greater regulation for resource and waste management is also on the horizon. In the UK, there is the government’s Maximising Resources, Minimising Waste policy (published by the previous Conservative government), and in the EU, the European Commission’s Ecodesign for Sustainable Products Regulation (ESPR).
Digital product passports, extended producer responsibility (EPR) policies and product ecodesign will define the future design, performance, and information requirements for the industry.
Governments worldwide are stepping up efforts to encourage more circular practices by extending the scope of Extended Producer Responsibility (EPR) regulations. This means we're going to see more EPR schemes for clothing and textiles come to life. There are numerous initiatives retailers and brands can get involved with now - to help prepare ahead of legislation and influence proposals before government consultation. One example of an industry-led project exploring how a future EPR scheme on clothing and textiles in the UK could work, including the potential costly impacts of such a scheme, is a project being run by WEFT in collaboration with the UK Fashion and Textiles Association, the British Fashion Council, and the University of Exeter, and support from the British Retail Consortium.
Datitude is the project’s data partner and has been working with brands and retailers involved to establish what data is available across their supply chains and can be matched at an industry level (eg. production quantities, sales - new, resale and rental, fabric compositions, and take-back / recycling collections). We've also designed and built the data model and framework for an innovative data sandbox; enabling project participants to leverage the data and insights to understand the potential impacts of EPR and identify opportunities for improvement.
It all points to growing requirements to collect, measure and report information. If not already underway, retailers should be prioritising the availability of more extensive and complex data from across their operations’ multiple sources and layers.
More Sustainable Supply Chains
The elephant in the room is Scope 3 Emissions: those not produced directly by the company itself, but the result of third-party activities in its supply chain. They form a large proportion of total greenhouse gas emissions (GHG) for retailers, yet they are challenging to report and reduce.
Fashion brands in particular are under increasing pressure to switch from petroleum-derived synthetics and animal-based materials to more sustainable sourcing of fibres and materials, including "next-gen" materials.
Some considerations for brands and retailers looking to address Scope 3 emissions include:
The design phase is crucial: for example, data from the Waste and Resources Action Programme (WRAP) suggests almost 80% of the carbon footprint of a textiles product is determined at its design stage
Smart technologies including AI, blockchain and digital twins can drive all manner of innovation from energy-efficient, low-waste product design and packaging, to innovative fibres and renewable materials
Product lifecycle management (PLM) software can help retailers manage products end-to-end; tracing data from production to disposal
Digital IDs and digital product passports support traceability and transparency. They require a wealth of data to be captured and integrated into a digital label such as a QR code.
The Rise of Circular Business Models
Circular business models move beyond the linear ‘take, make, use, dispose’ to ‘reuse, recycle and remake’; keeping products and materials in circulation for as long as possible, at their highest value; generating revenue without making new products. Resale, rental and repair are also important to consumers seeking to reduce their environmental impact and consumption.
Some businesses are making big moves here, for example, Selfridges is working towards 45% of transactions coming from circular products and services by 2030 through its ambitious Project Earth programme.
Resale is by far the most mature model, particularly within clothing, with a range of channels including retailer-owned platforms, multi-brand resale platforms, charity shops and peer-to-peer marketplaces.
Rental services, whilst probably less well-known, except for more formal and occasion wear, are growing. For example, AllSaints has just launched a clothing rental subscription service. For one flat monthly fee, customers can rent two items at a time, and return and exchange items as often as they wish with free shipping. If they want to purchase a rental item, they can do so for up to 60% off the retail price.
Repair services (free and paid-for) are also becoming a part of retailers' standard service offerings due to consumer demand, a desire to keep products in use for longer and increasing “right to repair” obligations. Marks and Spencer has recently partnered with clothing repair and alternations experts SOJO to provide a door-to-door clothing repair and restoration service at the click of a button. The cost of repairs starts from £5 and items are returned to customers within seven to ten days.
With more to be done, many brands are making inroads into more circular business models. One retailer who is working towards closing the loop on circular fashion AND making it easy for consumers to shop and find pre-loved, recycle, repair and rental all in one place is Jigsaw’s Jigsaw Forever.
Sustainable Retail - Working Towards a Greener Future
Progress towards a successful circular economy needs stakeholders to work together to set better standards, find solutions to overproduction and overconsumption, and protect resources. Better traceability, visibility, and data transparency throughout the ecosystem are fundamental to this.
Such shifts must be supported by effective regulatory frameworks, greater accountability and proper investment in stronger digital infrastructures, new technologies and data solutions. And consumers need to be educated and engaged to encourage more conscious consumerism.
By integrating sustainability and circular business models into operations, organisations can unlock new business opportunities, lower costs and attract eco-conscious customers. It's crucial now and beyond as sustainability becomes increasingly regulated and a prerequisite for all stakeholders.
Everyone has a part to play in driving meaningful change to secure a more sustainable future. Doing the right things for people and the planet leads to better business.
* Footnote - Links to Reference Sources
United Nations:
Ellen MacArthur Foundation:
WRAP:
Rey House:
CDP (formerly the Carbon Data Project):
Clarins:
Lululemon x Geno
From Farm to Fork - Tackling Food Waste:
Statista:
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