The mega-trends affecting retail sustainability: part 1
Sandra Edmunds | 3 August 2016
The retail industry has been slow to embrace the environmental, social and financial benefits of sustainable practices, though momentum is building globally and locally.
Ahead of a new project by The Fifth Estate to focus on the sustainability of the retail sector, and how it can navigate the future sustainably and profitably, we’ll be sharing some of the major trends in the industry.
Following is the first in a three-part series on global retail sustainability trends, with insight from Sustainable Business Australia chief executive Andrew Petersen and We First chief executive Simon Mainwaring.
Responsible consumption brands – organic, natural, ecological, local and fair trade – have moved from a niche category to a driving force in Europe’s grocery industry, according to the Boston Consulting Group. Its 2015 comprehensive study on the factors driving growth in the fast-moving consumer goods space found the majority of growth came from products with “socially responsible overlays”, and companies should be taking note.
According to Sustainable Business Australia, the UN General Assembly’s Sustainable Development Goals, adopted in September 2015, and the COP 21 Paris Agreement, adopted in December 2015, provide a unique framework for action.
“If you look at the sustainable development goals for the retail sector then there are a number of issues but also opportunities around finding and developing a comprehensive strategy that reflects and, in fact, supports the work that the United Nations and all developed and developing countries will undertake,” SBA chief executive Andrew Petersen says.
The 17 goals include no poverty; decent work and economic growth; industry, innovation and infrastructure; sustainable cities and communities; and responsible consumption and production.
“You have this toolkit of ideas about what sustainable growth looks like over the next 15 years,” Petersen says.
The key drivers
According to Californian-based Simon Mainwaring, chief executive of brand consultancy We First, it’s a consumer push as well as an industry pull that is driving change.
“Consumers are voting with their hard-earned dollars for companies authentically investing in making our world a better place socially and environmentally,” he says. “On the latter, brands are realising that to maintain their relevancy they must shift towards making positive change. Further, the competitive landscape is nudging these efforts forward and, in the future, we will see a shift towards brands competing to be the most purposeful.”
The retail sector is the “canary in the coalmine”, according to Petersen.
“The retail sector, the advocacy consumer sector and the product sector is much like every other sector at the moment and that is looking at any contributions that can be made to create value in a carbon-constrained world, in a water-constrained world, in an energy-productivity-opportunity world, in a world where resources – if not scarce – will certainly need to be better managed. Resources will need to be much better coordinated from a policy, technology and finance perspective.”
Over the series, Mainwaring and Petersen will share insights into the nine sustainable mega-trends shaping Australian retail.
1. Supply chain transparency
With the consumer and regulatory spotlight increasingly highlighting dodgy practices, companies around the world are scrambling to clean up their supply chains.
“Confection is obviously a very big issue at the moment because of narratives around sustainable palm oil and discussions about the need for a price signal in relation to sugar,” Petersen says.
With the consumer more globally aware than ever and Australian businesses increasingly becoming part of the global supply chain, the importance of these issues can’t be understated.
“These are not northern hemisphere conversations. They are affecting and are impacting and are being responded to by Australian businesses,” Petersen says.
In the UK, the Modern Slavery Act now requires larger companies that do business in Britain to publish a board-approved, public annual slavery and human trafficking statement. And there’s a lot of work to do, with the Ethical Trading Initiative reporting that 71 per cent of UK retailers and suppliers believe it’s likely there are slaves in their supply chain.
Petersen says companies globally and nationally are undertaking enormous work to sort out their supply chain.
“The single biggest driver for the retail sector has been the realisation that quite often their own operations are not terribly inefficient but their supply chain can be identified as having inefficient use of resources,” Petersen says.
“So the work that is being done by a number of companies – Unilever, and particularly Kimberly Clark and Procter & Gamble, major leading international brands – identifying the impact they have as a major customer of business right across the world, it’s somewhere where they have an enormous ability to effect change. The supply chain impact is going to be quite significant.”
In Australia, companies such as David Jones and Cue are leading the way. David Jones’ ethical sourcing program and supplier code of conduct aims to ensure its 1600 brands are sustainable, environmentally friendly, and child and slave-labour free. Cue’s clothes are predominantly Australian-made and the brand is accredited with Ethical Clothing Australia, which means they have taken practical steps to ensure workers receive fair wages and work in good conditions.
Ethical Consumers Australia’s Good on You app helps consumers to choose brands that have a positive impact on people, the planet and animals while avoiding brands that don’t stack up.
Internationally, Mainwaring names US e-retailer Everlane as one to watch for its “radical transparency”.
“Everlane continues to push boundaries of transparency in the apparel space with a view to offering fairer prices in a highly inflated industry,” Mainwaring says.
UK retailer Marks & Spencer achieved its “Plan A” goal of making its business carbon neutral and has now introduced Plan A 2020, which consists of 100 new, revised and existing commitments such as sourcing sustainable cotton, exploring alternatives such as hemp and using recycled plastic.
In addition to the environmental and social benefits, Petersen says there is also an opportunity for brands to cleverly market their efforts.
“It can also attract, but probably more importantly retain, consumers so over time the consumer himself aligns his own values with those of a company that is more likely to be more sustainable in its approach,” he says.
However, the will to change needs to be authentic. According to the Food Chain Workers Alliance, Walmart’s “responsible sourcing” code of ethics appears to be “mostly a public relations stunt” and hasn’t translated to improvements for most of its food supply chain. The Alliance’s Walmart at the Crossroads: The Environmental and Labor Impact of its Food Supply Chain report says Walmart’s influence on both suppliers and distributors gives it incredible power in the global food system. While Walmart has slowly been moving in the right direction, it has “a long way to go”.
Part 2 and 3 will cover the other 8 mega-trends in retail sustainability.