Sustainable Retailing for a Sustainable Planet
Circularity and smart spaces help retailers save waste, natural resources, cost, and the planet.
For the retailing business, 2020-21 was a period of extreme outcomes. Even as lockdown spelt shutdown for countless stores, ecommerce giant Amazon saw visits to its site soar to 2.7 billion last June.
On the plus side, the pandemic also caused a subtle but welcome shift in consumer attitude in favour of ESG (Environmental, Social and Governance) principles. According to a market intelligence firm 39 percent of U.S. consumers said they were now more likely to buy local, independent brands. A November 2020 virtual forum on global economic issues shared that two-thirds of consumers in Germany, the United Kingdom and China were considering purchasing more sustainable products – for example those that lasted longer or were environmentally friendly. “Good for me and good for the planet” seems to be the sustainable buyers’ rallying cry.
But good intentions alone will not create a more sustainable retail industry, where a single category, namely fashion, emits 4 percent of the world’s greenhouse gases, and its sectoral ally, textiles, is responsible for 35 percent of the microplastics dumped into the environment. Just as consumers are trying to make more environmentally responsible decisions, businesses must also take urgent, meaningful, and practical sustainability actions. Three of these, namely changing sustainable intent into action, joining the circular economy, and making retail stores smart spaces, are discussed in this article:
Change sustainable intent into action
Consumers may be genuinely inclined towards environmentally friendly products, but not everyone has crossed over. Unwillingness to pay a premium for an ethical or eco-friendly product is clearly a barrier to growth. However, a lack of interest in a sustainable lifestyle, or of awareness, is also to blame. This is something that retail companies can address more easily than price to improve consumers’ engagement with ESG concepts. Since all ESG-minded consumers are not the same, connecting with the right customers with the right messaging, is key. For example, Bulb, a green energy provider in the U.K., addressed its middle-aged, mainstream, mainly rural customers with an easy-to-understand campaign detailing the brand’s benefits versus competing products.
Providing a choice of green as well as regular products could make consumers feel they have the power to decide, which they might then exercise in favour of the sustainable option. An American retailer that offers an alternative packaging that is less visually appealing but more eco-friendly, is seeing many customers opting for it. If customers are informed about the total environmental impact of different product and delivery combinations, it will nudge them towards more responsible choices.
As far as the higher price of sustainability is concerned, retailers may be able to offset it partly by reducing other costs. Take waste, for example. Every year, discarded clothing costs enterprises worldwide half a trillion dollars. By using digital technologies, such as analytics and AI, to forecast demand more accurately, they can improve production and distribution efficiencies, and also reduce the cost of waste. In fact, minimizing waste is the top priority for a sustainable economic model called circular commerce.
Join the circular economy
Each year, the industrial textiles sector generates about 9 million tons of waste. While estimates of industrial waste are hard to find, one suggests that some years ago, the U.S. alone created about 7.6 billion tons annually. Covid-19 has turned a bad situation into a nightmarish one by increasing the consumption of plastics and packaging, besides creating mountains of discarded masks and gloves that are being dumped, rather than recycled, because of safety concerns.
While it is a long, hard journey to the ecological ideal of “zero waste”, the retailing industry can make a start by adopting a circular supply chain.
The principle of circularity is about minimizing waste creation and other environmental impact by designing products that can be reused at the end of their life, by converting them into (reusable) components and materials, or by repairing, refurbishing, repurposing or recycling them. Applying circular principles to this value chain – enormous in the case of big companies with widespread operations and supply networks – can improve operational and logistical efficiency, but beyond that, it also pushes enterprises to reduce resource consumption. For example, it is getting companies to revisit traditional, reusable packaging materials, such as wood, metal or glass while transporting goods, instead of using cheap plastic.
The technology industry is setting a great example by reclaiming materials from discarded goods, going light on packaging, and recycling materials to not only become more sustainable but also more operationally efficient. Apple has a stated goal to eliminate plastic from its product packaging by 2025. Also, the company’s Independent Repair Provider program is extending the useful life of products by allowing providers of repair services access to genuine Apple parts, tools, diagnostics, and manuals in more than 200 countries. In the world of fashion, Poshmark is reducing textile waste by creating a platform for selling used apparel.
Ecological advantages apart, circular supply chains – because they also respect social and governance principles – encourage ethical and lawful behaviour across sourcing, production, transportation, storage, distribution and consumption processes. For example, large supply chains that are true to circular principles will not abuse their advantage to consume an unfair share of natural resources at the expense of the other supply chains in their markets.
Make retail stores smart spaces
Buildings and physical spaces are also big ecological offenders, housing components such as data, hardware, technology etc. that account for a whopping 40 percent of all greenhouse gas emissions. So, creating sustainable spaces that are connected, accessible, secure, and less polluting, is a huge step towards shrinking the carbon footprint.
The convergence of a bunch of digital technologies, such as Internet of Things (IoT), cloud, artificial intelligence (AI), machine learning (ML), data and computational power, allowing the aggregation of incoming data, is chiefly responsible for the creation of smart spaces. This data, which ranges from machinery and equipment signals to ambient conditions to people-related information, forms the basis of critical decisions optimizing the building, its assets, and the workforce inside it.
Digital tools fitted into smart buildings automatically adjust heating and lighting systems based on real-time data, such as occupancy. Smart buildings are extremely energy efficient because they also use renewable resources.
There are possibly few better examples of smart spaces than Infosys campuses, which have been using smart automation for the past decade to reduce carbon emissions, water usage and energy consumption in their offices, to achieve carbon neutrality 30 years ahead of the Paris Agreement deadline. Despite staff strength increasing by 160 percent since 2008, the company’s energy usage has only risen by 20 percent. Along with that, the smart spaces have improved employee productivity, as well as visitor experience satisfaction rates.
These two metrics are additional incentive for retail outlets to evolve into smart spaces. Leveraging IoT, they can gather data from the various devices and things that are part of the selling and purchasing lifecycle and then process and analyse it into insights that can be used to improve decisions, operations and experiences, and also the sustainability of the business. Specifically, IoT applications can reduce product waste across retailing operations, minimise losses in supply chain and delivery processes, etc.
As one of the industries with the biggest ecological footprint, it is incumbent upon retailing to join the fight against climate change and pollution. Among the many sustainable actions worth considering, three proven and practical options are influencing sustainable consumer choices, implementing circular supply chains, and creating smart physical retail spaces. However, to achieve meaningful progress, every part of the retailing value chain, from sourcing and procurement to distribution and after-sales service, needs to play its part in implementing these initiatives.
