Driving Sustainable Value within the retail sector is an increasingly important issue in today’s world. Consumers are becoming more aware of the impact their purchases have on the environment and society and are looking for retailers and consumer brands to take responsibility and make a positive impact.
We assembled a group of commercial and sustainability experts, chaired by the excellent Kate Hardcastle, to discuss whether retailers and consumer brands organisations are doing enough to really prioritise long term sustainable value over more shorter-term economic objectives. To facilitate this discussion, we looked at sustainable value through 4C’s Prosperity Framework consisting of 3 core pillars (Ethical, Environmental and Economic) that represent the values and behaviours that enable a business and the world it impacts to sustainably prosper.
Ethical Value:
One way for retailers to demonstrate ethical value is by adopting a responsible sourcing policy, only sourcing products from suppliers who can demonstrate a positive impact on the environment and society, and who operate in a fair and ethical manner.
It was felt organisations need to prioritize ethical value by ensuring their supply chain is transparent and only working with suppliers who uphold ethical standards and calling out bad practices eg Supermax gloves and the US gov’t, even if this comes at an economic cost.
However, it was felt there was a distinct lack of available resources to determine what makes an ethical supplier eg education for buyers, access to independent auditors and ultimately a universally accepted guideline to follow (such as the ILO indicators). There is too much reliance on suppliers self-certifying their actions and buying departments are too time poor to conduct any meaningful evaluation of supplier submissions.
It was acknowledged that public sector organisations have generally been more proactive in addressing this within their supplier evaluation frameworks and there are potentially learnings that could be applied here.
Is there an opportunity for the development of an independently verified supplier database and a gold standard based on industry standard indicators (eg the 11 ILO indicators for Modern Slavery) for fully compliant suppliers– enabling buying organisations to know with certainty that they are using only the most ethical suppliers. Development of effective supplier scorecards that feature measurable ESG targets and standard, free to access education programmes to inform purchasing organisations on how to build effective ethical and responsible sourcing strategies. Greater collaboration as an industry to share development costs and adopt standard practices would increase transparency and adoption rates.
Environmental Value:
A large number of retailers make environmental impact a prominent part of their sustainability agenda but concerns were voiced around the existence of genuine baselines upon which some of the claims were based. Tracking and analysing end to end lifecycle costs is possible but rarely done in a way that can be verified independently verified or substantiated. Carbon (GHG), water consumption and land use metrics can be combined into an overall ecosphere number that can tangibly tell us what our environmental baseline is and where it can be improved.
Retailers and consumer goods companies have gone to the last degree to make products available to customers wherever and whenever they want them (same day delivery, marketplaces) reducing the barriers to customer purchase decisions and thus encouraging an overconsumption vs genuine need. The knock on effect of this drives increased stock holding, warehousing & logistics costs, excess packaging waste – all of which carry an environmental impact. It was noted the growing success of the second life, preloved sector and also companies being more diligent about disposal or repurposing of returns, seconds and faulty products.
Retailers can make a huge impact here if sustainability is truly embedded in their commercial agenda. The ‘Re-Selfridges’ programme focusses on resale, rental, repair, refill and recycle and now incorporates a preloved marketplace on its main website along with a rental and repairs service and it is messaging like this that will drive consumers to think and behave more sustainably. They are also publicly setting themselves a target for 45% of transactions to come through circular products and services by 2030!
Setting stretching targets using quantifiable measures and collaborative working between retailer, brands and manufacturers each holding each other to account will increase the rate of progress and set benchmarks across the sector.
Economic Value:
In our last event, discussion ventured into whether sustainable practices (eg alternative materials) came at a cost that deters wider adoption, especially during a period where trading conditions have been so tough. Today, there was an overwhelming view that sustainability does not have to mean higher price. Being more sustainable in the development of products can and should mean using best in class design principles to minimise waste and utilise the most efficient materials for the job. Being efficient was in effect being sustainable.
However economic value is not always the responsibility of the retailer to deliver. Consumers need to act responsibly with their purchasing choices, but it was felt that better education and more ‘incentives’ are needed to make this happen. The implementation of carrier bag charges has driven a rapid decline in the consumption of bags at limited inconvenience to the consumer, because it is generally accepted to be the right thing to do…so why stop there. PRN and EPR regulations target the retailer / producer with shouldering the costs, but is the reality more that consumers facing a penalty for buying an ‘unsustainable’ product can ultimately make the biggest impact and put pressure on the retailer / producer accordingly. Consumer behaviour following the implementation of the ‘Sugar Tax’ saw a decline of 35% on more expensive sugary drinks as consumers found alternatives (1). Similar incentives to the carrier bag scheme will drive better behaviours.
By prioritizing ethical, environmental, and economic values, retailers can create a sustainable business model that is profitable, contributes to the economy, and supports the local community. As consumer awareness of sustainability issues continues to grow, retailers that do not prioritize sustainable value risk losing market share and damaging their brand reputation. By adopting sustainable practices, retailers can differentiate themselves from the competition and build a loyal customer base that prioritizes sustainability.
Conclusion:
Driving sustainable value within the retail sector is essential for retailers to remain competitive and build trust with their customers, however it is important to note that driving sustainable value within the retail sector is not just about gaining a competitive advantage for businesses. It is a responsibility shared by all individuals and organizations to ensure steps are taken towards increased sustainable value. To achieve this, it is necessary for organizations to pool their resources, collaborate with each other, and invest in achieving wider macro goals. By working together towards common goals, organizations can create more significant and long-lasting impacts on the environment and society. Ultimately, the success of sustainable value creation within the retail sector will depend on the collective efforts of all stakeholders involved, including businesses, governments, and consumers.
Those who prioritize ethical, environmental, and economic values are better positioned to build trust with their customers, increase their market share, and improve their bottom line.
This was a positive and collaborative discussion upon which we will build further in our June 6th event – please get in touch if you are interested to attend.
Looking to take your company’s sustainability efforts to the next level? Start with our free self-diagnostic test! The test is a great way to assess your company’s current sustainability performance and identify areas for improvement.
4C Associates have a diverse set of Service Offerings which can help retailers manage and mitigate costs, optimise ranges and drive data driven pricing and promotional decisions. Contact Andrew.davidson@4cassociates.com to discuss how 4C Associates can work with you to navigate these exceptionally challenging trading conditions.
(1) https://www.instituteforgovernment.org.uk/article/explainer/sugar-tax#:~:text=Sugar%20consumption,135%2C500%20tonnes%20to%2087%2C600%20tonnes
