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Report: Retail Sustainability Progress & Predictions

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The Retail Industry Leaders Association recently released an in-depth look at the state of retailers on a range of sustainability topics.

The Retail Sustainability Management Report 2017 shows that progress is being made and that the industry continues to set new goals for continuing to evolve its products and processes. While the many retailers that were polled report seeing benefits in the areas of reduced costs, brand enhancements and meeting regulations as a result of their sustainability efforts, far fewer say they’ve boosted profits or revenue. However, the majority of respondents indicated additional benefits like avoiding tarnishing the company’s reputation and the ability to protect human rights.

Nearly 50 percent of respondents say their companies have between two and five executives dedicated to sustainability and another 20 percent report employing six or more people in this type of role. For 42 percent, sustainability is a part-time function for employees who have other operational responsibilities.

Seventy-six percent of those polled reported their budgets either remained the same or increased compared to last year. They also say their companies expect to see a return on investment within two to three years, though there’s some indication that more companies are taking a longer view of these efforts.

The survey, which polled 31 retail companies, representing more than 30,000 locations and $600 billion in global revenue, asked respondents to assess their companies on 30 different metrics, indicating how mature their efforts are for each. The 5-point scale included: initiating, progressing, excelling, leading and transforming.

For retailers looking to learn more, the report also provides links to resources for each metric along with case studies illustrating each topic area.

Recent achievements

RILA noted six areas in which retail is meeting or exceeding expectations. The first of which is developing a strategy for achieving sustainability goals, which it noted is a crucial first step for any business wishing to address this issue.

Most of the respondents reported that their firms have moved past initiating, with 11 in the “progressing” phase and 12 reaching “excelling.” These businesses have defined teams with both short- and long-term goals and their strategies are focused on operational priorities. For those that are a step ahead, merchandising and sourcing strategies are also a core concern. These companies represented also have plans to power forward to hit greater maturity markers in the next two years. The three most advanced organizations (ranked transforming) have executives that regularly incorporate sustainability in all communications and who regularly receive reports on sustainability efforts.

The report also found that companies have done a great job of rallying support internally and from the community through corporate giving, foundation and volunteerism. Fifteen of the respondents describe their companies as leading in this area, indicating that they’ve successfully developed campaigns in local communities on a national and international level. Five companies have reached the highest level by creating strategic partnerships with groups like NGOs to support supply chain workers.

Further, the industry seems to recognize that achieving its sustainability goals requires collaboration across companies. For many of these companies, joining forces with industry associations is standard practice. Still others have expanded their work to include government agencies and academia, while the four companies in the top tier are actively developing tools and capabilities for the industry at large.

Employee wellbeing and development is also one of the more mature areas reported in this survey. Seventeen companies are excelling or better with wellness programs, family leave, career development, and for the businesses that are most far along, progressive benefits like electric car charging.

Currently, 15 respondents describe their companies as excelling in the area of energy and greenhouse gas emissions. Their achievements include developing energy management programs that track data and train employees and introducing coordinated energy efficiency policies across operations and the value chain. For the nine businesses self described as leading, they’re making capital expenditure decisions based on energy cost implications and using alternative energy for at least 25 percent of their overall energy needs. The five transformers in the group say 40 percent of their energy comes from alternative sources.

Though retailers made the least amount of improvement in the area of waste and recycling, it is an area in which the industry is fairly mature already, with 16 of the 31 respondents indicating their firms are at least excelling on this metric. Of these, all have at least initiated programs to reduce, recycle and reuse waste at stores and in warehouses and beyond, while others have committed to zero waste goals at store locations. These retailers have ambitious plans for the coming years, with 27 firms expecting to rate excelling or better in two years.

(Read more about efforts to consider products’ after life: Repair and Reuse Drive Fashion’s Sustainability Movement)

Two-year outlook

Looking ahead, those surveyed were asked to rate where their companies were expecting to see the biggest improvements in the next two years. Along with strategy, four areas rose to the top. First, most were hoping to achieve more funding for their sustainability efforts. Currently, 12 of 31 companies are stuck in the initiating tier with minimal funding and only basic mechanisms to track ROI. Only three are on the other end of the spectrum at transforming in which funding is on an upswing.

“Access to capital is a critical component in any corporate initiative. Building trust with the finance team should be a priority. Sustainability can drive business value, but it needs to be measured in financial terms in order to demonstrate that value to consistently receive funding and support,” according to RILA.

To help make the most of the resources they have, respondents listed making commitments or goals around sustainability as another key area for growth. Currently 23 companies are hovering in the initiating and progressing phases with cost savings driving the company’s goals and achievements benchmarked against peers. More would like to be able to identify absolute reduction goals for categories like energy, water and waste in the future.

Though the companies represented didn’t report marked improvement in the area of end-of-life for products and packaging, they do see a big potential for maturity here. None described themselves as transforming, but six firms said they fall into the leading category. These companies have created collections that take reuse or recyclability into consideration from conception, and they market take-back programs at the consumer level.

(Read more about how consumers think about sustainability: Infographic: What do Consumers Really Think About Sustainability Anyway?)

To meet consumers’ growing awareness of the need for sustainable products and packaging, the industry has greatly boosted its marketing efforts to articulate its achievements. From 2015 to today, this area is one that has seen the biggest improvement, and respondents indicate that more big strides are one the horizon. They’re looking to dedicate more funds to marketing, hire a dedicated marketer who is focused on sustainability and demonstrate the effectiveness of these efforts in terms of financial ROI.

Shortcomings

As they look ahead, two areas for which these companies are less optimistic center around warehouses and transparency.

Respondents expect efforts toward improving warehouses and distribution centers to lag over the next two years. Currently 14 of the 21 consider themselves progressing with programs in place to improve workflow, minimize waste and get low energy lighting and equipment installed. The report suggests moving the needle in this area might require hiring differently. The six companies achieving leading or transforming ratings also have a sustainability employee who holds an environmental science/studies background.

Though critical to identifying the stages where the biggest opportunities for sustainability lie, transparency and traceability are still in their infancy at many of the companies represented. Thirteen of the 31 are at the starting gates, simply complying with laws by publishing information on suppliers and country of origin. The eight that ranked excelling or above—with practices like making audit results available publicly, working with credible third parties to introduce best practices and publishing detailed lists of factories with photos—have seen a boost in the company’s reputation as a result of their efforts.

(Read more about the industry’s attempts to transform: Transparency Has Become Fashion’s Hot Trend)

Going forward, the RILA expects to sustainability to gain traction as companies recognize the benefits their efforts to date have afforded them. “As more retailers build their sustainability strategies and report on their successes, they will further solidify the business case for sustainability,” the report notes. “That, in turn, will increase commitment to these programs and expand programs’ resources, building momentum across the industry.”

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