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These Are Retail’s Biggest Sustainability ‘Mistakes’

More than half of corporate executives described their companies as guilty of greenwashing, a new report suggests.

The Harris Poll a survey of 1,491 enterprise leaders in 16 global markets on behalf of Google Cloud found that many were concerned about the authenticity of their companies’ efforts to promote sustainability.

While 80 percent ranked their organizations above average in environmental stewardship, 58 percent of vice presidents and C-suite members said their companies tend to overstate progress. Seventy-two percent of North American executives believe their organizations have given false or misleading impressions about the status of their green goals. Twenty-six percent of U.S. retail executives even agreed that “My company treats sustainability like A PR stunt.” Two-thirds of international executive question how genuine their companies existing initiatives are, with supply chain professionals most skeptical (41 percent).

Just 36 percent of companies assess progress on green goals, and 17 percent use those insights to inform their future roadmap. However, 64 percent describe ESG as a top priority and 96 percent have a sustainability program in place, including greener office policies (48 percent), carbon offsets (44 percent) and sustainable design frameworks (44 percent). Forty-three percent plan to shift operations to renewable energy or to optimize energy efficiency, while 44 percent choose to work with green vendors and 42 percent have instituted recycling programs.

Of note, 93 percent would be willing to tie their compensation to meeting ESG goals, despite 36 percent saying they’re not sure where to start.

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Two-fifths, meanwhile, said that technology would help reduce their organization’s environmental impact. However, 34 percent of executives said focusing on growth and profit has hindered technology adoption, and an equal number blamed the lack of a budget for falling short on sustainability progress. While 86 percent feel empowered to lead their organizations adopting new climate goals, 82 percent want senior leadership such as board members to gave them the space to make sustainability a priority. Another 53 percent said their leaders support environmental projects, and 77 percent said that their firms takes employees’ perspective and environmental goals into account.

The poll found that 85 percent of executives say they hold quarterly meetings on sustainability. Just 9 percent say their budgets meaningfully incorporate green initiatives. Fifty-five percent of retail executives said they planned to invest more in the space this year, while supply chain leaders (53 percent) and heads of manufacturing (52 percent) also agreed that meeting sustainability goals would form a bigger part of budgets in 2022.

‘Work to be done’

Additional research supports the notion that retail still has a way to go in its sustainability journey.

Fewer than 20 percent of retailers are on track to hit Paris Agreement targets, Boston Consulting Group (BCG) found in its “Sustainability in Retail is Possible—But There’s Work to be Done” report published in collaboration with the World Retail Congress (WRC). In fact, only a few large retail operations are significantly reducing the climate impact along their value chains, or even embedding sustainable behavior throughout their own organizations. And most companies have yet to put in place a comprehensive sustainability agenda, it found.

As sustainability becomes a strategic priority for retail, 90 percent who work in sustainability believe collaboration is the key to achieving their goals and targets.

While most agreed on the advantages to becoming more sustainable—competitive edge over rivals, cheaper borrowing, lower costs, attracting new customers, and potential for tapping into new revenue streams—the respondents also were “nearly unanimous” in their belief that sustainability initiatives would drive value in the next five to 10 years. In addition, half said they believed their companies would invest “whatever it takes” to reach their goals, according to the poll of 37 major global retail businesses with annual revenue between $1 billion and $500 billion.

A chart in the report shows apparel companies and fashion retailers, along with specialty retailers, achieving a level of opportunistic initiatives. Some are apparel and fashion companies that have made sustainability a decision-making priority throughout the organization, but none has harnessed sustainability as an advantage. Just a few have reached a category that BCG classifies as the “most mature level” where sustainability is at the core of a company’s strategy, decision-making and value creation.

However, the report found a disconnect between retailers’ bold ambitions and their actual sustainability progress.

“As the industry moves in the direction of greater sustainability, a focus on progress, rather than perfection, will be critical,” said WRC chairman Ian McGarrigle.

“There may be an inclination to wait for perfect data on sustainability drivers and constraints before starting to act, but that would be a mistake,” added Shalini Unnikrishnan, a managing director and partner at BCG and a co-author of the report.

The survey found that even though 60 percent of the respondents believed their goals were ambitious and differentiated, over half still have not set any key performance indicators, or KPIs, to measure progress. Less than 20 percent were on track to cut Scope 3 emissions, which encompasses supplier output, by enough to meet Paris Agreement targets set to limit the rise in global temperature to 1.5 degrees.

BCG indicated that companies can still do better in water usage and fleet modernization. Most retailers have done a better job activating plans to achieve targets connected with plastics, packaging and circularity, although many remain behind schedule.

In general, 40 percent of retailers have made significant progress against Scope 1 and 2 emissions, the direct greenhouse (GHG) emissions from operations controlled or owned by an organization, such as fuel combustion from furnaces, and GHG emissions associated with the purchase of electricity consumed by the company.

However, many retailers “concede that they don’t have clarity on how to improve their performance,” the report said.

The report urges companies in the “very early stages of their journey” to focus on small steps and quick wins to drive meaningful, continuous change.

BCG said retailers should prioritize, embed and reimagine.

In prioritizing business opportunities, as well as when evaluating business performances, sustainability targets should carry as much weight as other parameters. In addition, sustainability indicators must be weighted equally with costs and profits. Retailers should embed sustainability KPIs at all levels of the business. Furthermore, companies should fully embrace digital technologies, and deploy technology to support decision making. BCG said companies need to reimagine their value chains by localizing their production or integrating vertically. Novel financing such as green bonds should also be considered.

“Closer interactions with suppliers will be essential too, as will collaboration with industry peers,” BCG said.

However, more than 75 percent of retailers described low supplier sustainability commitment as an obstacle. And one global home-goods retailers acknowledged that, while it sees tackling Scope 3 emissions as the greatest sustainability opportunity for the future, it is struggling to collect, organize and parse data from its more than 21,000 global suppliers.

Collaboration could also become key for retail. In developing a peer ecosystem, the dialogue between industry participants can drive real movement and progress. The know-how and experience among those who are further along can help guide the retailers that are in the early stages of their sustainability journey, the report said.