TriplePundit participated in the Retail Leaders in Sustainability tweet-up this morning – an inspiring chat. Not only has the retail industry (at least on paper) recognized that sustainability is here to stay, but many leaders within the industry have moved from looking at sustainability as a cost center to seeing it as an opportunity to reduce risk, improve relationships with customers and employees, and deliver better products. It’s an exciting road ahead!
The Retail Industry Leaders Association sponsored the tweet-up to promote their new report on sustainability in the retail industry. Data was collected from the most recent sustainability reports of 30 RILA retail member companies including Best Buy, Gap Inc., The Home Depot, IKEA, Petco, Safeway, Sears, Staples, Target, Walmart and Whole Foods Markets. The make-up of the organization is quite diverse:
1. Retailers are working across sectors to achieve sustainability goals. Achieving social and environmental goals is a significant challenge, often requiring expertise that the organization doesn’t have. That means that employees charged with sustainability-related tasks are going outside the organization and even the sector to learn about how to improve their organizations. The research indicated a noticeable uptick in stakeholder engagement.
2. Sustainability has turned from a risk mitigation and cost center into an opportunity for business growth. Long-gone are the days of focusing on the low hanging fruit like energy efficiency (which is being tackled store-by-store as a no brainer to save money on energy costs and reduce risk associated with the fluctuating energy market). Sustainability programs are increasingly seen as a source of innovation and a key way to differentiate in a competitive market.
3. Developing systems for continuous improvement. Sustainability isn’t over when the report is written. That has been the battle cry of sustainability consultants for years and not just because they want to keep their jobs. It’s great to see that retailers see the benefits of continuous iteration of sustainability projects. Retailers are now developing long range sustainability programs with short- mid- and long-range goals. “These goals require infrastructure development like management, measurement, and IT systems for continuous improvement. Such mechanisms include environmental management systems, supplier scorecarding and management training, employee training and engagement, energy and waste reduction goals, and sustainability reporting.”
4. Fostering transparency in operations and in the supply chain. Long-gone are the days of pushing compliance off as the responsibility of 3rd party suppliers. Retailers now recognize that engagement and transparency all the way down the supply chain mean heading off risks at the pass.
Public watchdogs now expect retail brands to have full responsibility for the social and environmental policies at their factories and suppliers, and retailers are rushing to put policies in place to keep abreast of information.
Additionally, financial reporting is no longer sufficient to tell the full story of the company’s health. Social and Environmental indicators are so closely tied to risk that sustainability reporting is a necessary part of the company’s story. “Retailers are recognizing their responsibility to act on this by increasing the transparency of their operations—disclosing their activities, strategies, goals, challenges, data, and more. Doing so institutionalizes their efforts, adds public accountability, and invites stakeholders into the conversation.”
Opportunities in sustainability
The most exciting part of the report is the sector-wide shift from sustainability as a cost center to a money saver and opportunity-maker. The retailers reviewed in the report identified a plethora of opportunities provided by a sustainability outlook:
- Reducing Waste means financial savings. When business operations are viewed through the lens of sustainability, a whole host of environmental and financial efficiencies become visible like the reduction of energy, fuel, materials, waste, packaging, and other resources.
- Actively mitigating risks. “Decreasing dependence on natural resources like fuel and materials, both internally and in the product supply chain, reduces exposure to price fluctuations and market volatility. Ensuring proper labor standards, managing at-risk suppliers, and ensuring the safe manufacture and use of products mitigates brand risk.”
- Discover new innovations. Sustainability can drive a new way of looking at problems and opportunities to save money and build brand value.
“Last year, Safeway diverted approximately 490,000 tons of materials….To achieve their waste reduction objectives, Safeway has engaged its stores, corporate offices, distribution centers, and manufacturing plants in a range of diversion programs. The company has developed a compost program and performed trash audits in each of its U.S. divisions.
Store sustainability champions help ensure recycling procedures are followed and training programs reinforce proper recycling practices. Certain messaging has also proven to foster employee enthusiasm: framing the importance of recycling as “how Safeway is making a difference” and “how you can make a difference.” Its stores recycle materials like cardboard, plastics, compostables, food wastes, paper, construction materials, and more. In its southern California (Vons) operations, it is also piloting an initiative to turn fryer grease into biodiesel fuel.”
- A strong sustainability program helps companies recruit and retain top talent. Employees want to work for companies they can be proud of. It makes sense given how much time we spend at work. Sustainability initiatives, including employee engagement, keep the top performers happy and loyal to the company. Strong sustainability programs attract and retain top employees by providing them with opportunities to positively influence society.
- Enter new geographies. Retailers that constantly reinforce the value they bring to communities, beyond that of simply economic value or job creation, are more likely to be welcomed in new locations. Remember WalMart’s predatory moves into communities in the 90s? That sort of behavior is long-gone, as companies realize they can save a lot of time and effort by working with communities to make sure that their presence is mutually beneficial.
- Enter new product markets. As customers continue to look for healthy and sustainable products, retailers who offer them will see market share grow.
- Improve reputation with the industry’s stakeholders. When sustainability efforts address the concerns of NGOs, suppliers, vendors, consumers, and other stakeholders, stakeholders will support a company more holistically both with their dollars and with positive brand value.
What’s up next?
A key goal of the report was to determine where the industry currently is on sustainability and where it’s going. Sustainability professionals in the retail industry will see their efforts progressing in the next five to ten years in the following ways:
- Sustainability will become more integrated into the business. As sustainability strategies expand in scope, responsibilities will move from being centered in the sustainability department to being shared across the organization in every department from facilities to purchasing.
- Retailer-supplier relationships will be transformed. No longer will retailers be hands off and in the dark about where their materials come from. Every supplier and subcontractor will come into the fold as a key stakeholder, so that retailers can better control product quality, sustainability, and brand value. “The retailer-supplier relationship will continue to evolve, using sustainability as an opportunity for generating shared value.”
- Industry collaboration will become the standard. Retailers can’t hide operations behind the cloak of competitive knowledge. The industry will continue to shift as a whole, and in many cases that means it makes sense for individuals within a company to avoid reinventing the wheel and seek advice from other industry leaders. Companies will continue to share best practices “to address pressing social and environmental issues, such as managing product lifecycle impacts, human rights concerns in the supply chain, and the safety of products. This approach will become increasingly common; industry and stakeholder collaboration will help retailers identify and address the root causes of deeply embedded social and environmental challenges.”
- Business models will evolve as consumption habits change. Business models will embrace closed-loop product design and manufacture, recapturing resources and products and incorporating the value of ecosystems services. That means shifting away from a disposable culture toward one where products can be fixed rather than thrown away, and re-used at the end of their lives
At the end of the day, the biggest sustainability challenge for the retail industry is that a business based on the sale of products and the promotion of consumption isn’t super sustainable. That doesn’t mean that one retailer can’t be more sustainable than another, nor does it mean that it’s not worth trying to improve. It most certainly is, and this report demonstrates that the retail industry “gets” the benefits of sustainably thinking and is applying them across the board to improve the business.
Of all the findings in the report, the very last plan for the future, about business models evolving, is the one that’s the most exiting for us to see because it means that these retailers understand that many of the current models are unsustainably financially, environmentally, and socially. That they’re looking ahead to the adjustments they need to make is extremely encouraging.
Readers, what do you think about the findings? Anything you’d like to see the retail industry pay attention to? Share your comments below– they’ll be reading!