There are signs of a disconnect between consumers and retailers when it comes to sustainability.
A recent report has found that two-thirds of consumers are willing to pay more for sustainable products than retailers expect — and reveals that consumer preference for recommerce models is also being underserved.
Further reinforcing this misalignment is the finding that only half of the senior retailer executives surveyed believe sustainability to be an important purchase consideration for consumers — a stark contrast to the three-quarters of consumers saying it is “somewhat” or “very important” to them.
Where the two sides do meet is with nearly all the senior retail executives agreeing that today’s consumer expects retailers to operate in a more sustainable way.
There’s Also Legislation to Consider
But operating sustainably isn’t just about meeting consumer expectations — there are industry and business practices to fulfil too.
Across the globe, lawmakers and government entities are introducing sustainability legislation. This year saw the proposal of the Fashion Sustainability and Social Accountability Act. If passed, New York will become the first state to hold brands responsible for their environmental impact.
Similarly, the European Union is set to crack down on fast fashion in a bid to force businesses to extend their products’ lifecycle, while Germany’s Supply Chain Due Diligence Act will mean enterprises are held accountable for any social- or environmental-related failures.
A Starting Point
As such, navigating the path to sustainability means meeting consumer expectations and industry legislation. To help accomplish this, retailers are adopting circular business models and innovative technologies.
For retailers finding it difficult to know where to start, there are a few ways to pivot and become greener — helping to protect the environment while presenting new ways to maximize revenue streams and engage with valued customers.
Here, we look at some of the initiatives — transparent sourcing, greater demand forecasting, recommerce and sustainable packaging — retailers are using to be more sustainable.
Transparent sourcing.
A material or ingredient’s origin can be an influential factor in determining whether a consumer purchases an item or not. In response, retailers can look to add “green” labels to their products and, where appropriate, seek alternative sources for their materials.
Some retailers and consumer goods companies are going a step further by investing in sustainable sourcing, such as farming or forestry, to ensure the long-term availability of a socially responsible supply. Take for example Ingka Group, a strategic partner in the IKEA franchisee system, which acquired approximately 60,000 acres of forestland in Oklahoma and Texas to boost its responsible forest management.
Post-pandemic and consumer appetite for supply chain transparency remains prominent, strengthened by a public increasingly savvy to the deceptions of greenwashing. The sourcing of raw materials, factory working conditions and the environmental impact of goods distribution matters — and it appears business leaders in fashion and retail are taking note.
According to McKinsey & Company’s The State of Fashion 2022 report, nearly 20% of executives cited radical transparency — the complete disclosure of information at every link of a retailer’s supply chain — as one of the top three themes impacting their business due to consumer desire for genuine and clear information.
To help meet transparent sourcing requirements, retailers are using the latest technology solutions to identify areas in a business’ supply chains that are neither ethical nor sustainable: tracing the lifecycle of products, the origin of raw materials through to the finished goods, and highlighting areas that can be more environmentally friendly.
Interestingly, another McKinsey report notes the potential environmental gains of supply chain transparency, with more than half of fashion decision-makers believing traceability will be a key enabler to reducing emissions in their supply chain.
Greater demand forecasting.
For today’s retailers, having an accurate method for predicting the optimal amount of stock is essential for reducing environmental footprint. Particularly for those operating in fast fashion, where the negative environmental and social impact of unsustainable practices is increasingly under public and media scrutiny.
Every season, 30% of the clothes manufactured are unsold — which means 92 million tons of fabric is wasted. Not to mention the billions spent by brands to ensure products do not end up at unauthorized retailers — and, in some instances, to incinerate unsold stock.
Furthermore, in the U.S., 85% of textiles are dumped into landfills or burned — with the average American throwing out 80 pounds of clothes each year.
Having exactly the right amount of product means a reduction in unsold goods and less waste sent to landfills. However, while simple in principle, in recent years the process of accurately forecasting demand has been complicated due to supply chain restrictions, disruptions in customer loyalty and spikes in demand relating to the pandemic.
To help address this, some retailers have been using advanced artificial intelligence (AI) to improve forecasting capabilities and optimize markdown processes to reduce product waste. One example is IKEA, which through the use of AI for smarter demand forecasting can now predict how much the business will sell in the future with 98% accuracy.
Recommerce
Reselling goods, popularized in markets like electronics and sporting equipment, is increasingly gaining momentum in fashion and apparel — with companies like Patagonia leading the way.
Patagonia’s initiative stands out for extending the lifecycle of a product, reducing the overall carbon footprint and helping to prevent more items from being disposed into landfills. Last year, its Fair Trade program saw the business use 87% recycled materials and 100% organically grown cotton in one of its collections.
However, recommerce is not without its own set of challenges given how many counterfeit products exist. Again, this is where having the technology to track and record the full traceability of a product’s lifecycle becomes essential since it allows retailers to prove authenticity.
Sustainable packaging
Plastic packaging has long been an issue across industries — and while its harmful effect on the environment is widely understood, it is still commonly used by companies all over the world.
Even today, we find brands like Coca-Cola and Unilever being challenged on claims relating to eco-friendly plastic packaging, including in a greenwashing report by the Changing Markets Foundation that says they are often misleading.
In response, stricter sustainability regulations are emerging on multiple fronts with increasing frequency. Some retailers, like Walmart, have been getting ahead of the game by working toward improving plastic use and exploring sustainable alternatives for their products.
It’s aiming to achieve a 15% absolute reduction of its virgin plastic footprint by 2025 by using recycled content, eliminating unnecessary material, redesigning its packaging and the exploration of reuse models. Walmart estimates this will reduce the 1.4 million metric tons of plastic packaging it used in 2020 by 180,000 tons.
Action-based authenticity
Along with adopting circular business models, to be perceived as genuinely sustainable retailers must be authentic.
Consumers want sustainability but remain skeptical over sustainability claims — with Deloitte’s research finding nearly one in two consumers either not knowing what commitments businesses have made to trust, or simply not trusting businesses on climate change and sustainability issues.
Action alone is not enough. Retailers will need evidence of their sustainable practices and initiatives not only to meet legislation but also to show consumers they are making progress rather than vague or unfulfilled promises for the future — or worse, greenwashing.
On this path to sustainability and reducing emissions, retailers will also need the technology for tasks — such as refining supply chains and tracing a product’s lifecycle — and to provide the data needed to convince consumers and satisfy legislation of the outcome of steps taken.
In return, sustainability presents an opportunity for retailers to give people what they want and benefit the planet while helping the business’ bottom line.
Source: Retail Touchpoints
