The development of sustainable practices that can help reduce a retailer’s negative impacts on the environment and curb their contribution toward climate change has long been a focus for many operating within the industry. The consumer, too, has increasingly grown environmentally-conscious through the years, expecting more from their favourite brands when it comes to their commitment to the health of the planet. In fact, it’s a sentiment that’s been accelerated by effects of the COVID-19 global pandemic, intensifying and rising in importance amid a reassessment by Canadians concerning their values and beliefs. As a result, the practices of retailers everywhere are coming under sharper focus. And, as Joe Solly, Partner, Sustainability & Climate Change, Deloitte Canada, points out, it’s a heightened awareness and concern that’s driving positive change throughout the retail value chain.
“There isn’t a retailer anywhere that intends on posing a negative impact on the environment,” he says. “By default, however, as a result of the expansive supply chains that most retailers rely on, their contribution to the environment and climate change is adverse. In fact, 90 percent or more of most retailers’ overall emissions accountable to their business activities or enterprise come from their supply chain. Virtually every product within a grocery store, for example, has a carbon footprint. As a result, each supply chain partner within a retailer’s value chain has a significant contribution to those overall emissions. A retailer that operates its own trucks, fleet, buildings and stores can directly control those aspects of their business through renewable energy, energy reduction initiatives, fuel switching, electric vehicles and a number of other things. But, it’s the many different components and partners within the supply chain that retailers are challenged to improve.”
Reducing negative impacts
Exacerbating the issue of emissions within the supply chain, explains Solly, is the fact that the market operates within a global sourcing model in which many products travel a significant distance to arrive at their destinations. This model, combined with the fact that much of the planet is still transporting goods via combustible engines, trains and road logistics, renders the emissions created as almost unavoidable. In addition, the sheer nature of the North American economy, one which tends to place greater emphasis and focus on buying and selling rather than creating products that can be kept, maintained, repaired and reused, only worsens the issues around emissions and their detrimental effect concerning climate change. And, although the challenges that arise as a result of these factors and influences seem almost innumerable, Solly believes that there are some meaningful improvements that retailers can achieve by simply assessing their value chain, identifying where their negative impacts can be reduced.
“Because much of the emissions and impact that retailers are accountable for are found within their supply chains, they need to focus on developing strong partnerships with their suppliers,” he asserts. “They’ve got to work closely with them, because the emissions of their supply chain partners are their emissions as well. And, when they examine their supply chain, many are beginning to recognize the value in adopting a local sourcing and manufacturing model where appropriate in order to dramatically reduce the length of the supply chain and the distance a product needs to travel. These things can help retailers address some of the challenges they face while also promoting and supporting their local businesses and economies.”
The circular economy
Solly goes on to explain that there are a multitude of tweaks and changes, large and small, that retailers can make to their operations and supply chains that can help improve their impact on the environment. However, he points to the development of the circular economy as one of the more significant movements within the industry posing perhaps the greatest benefits to the planet. In fact, it’s a movement that’s being driven by consumer sentiment, as evidenced by findings within a recent Deloitte report titled Consumer Business: Merging climate change and business strategy to benefit the bottom line. According to the report, consumer attitudes toward environmental, social and governance issues have risen, with concern around reducing the use of single-use plastics (59%) and climate change (56%) topping the list. In addition, 42 percent of consumers surveyed for the report cited to have changed their consumption habits over the past year as a result of their environmental concerns. They are consumer concerns that Solly recognizes as critical for retailers to address, and an area of opportunity for them to focus more holistically on the construction and use of their products.
“Creating a more circular economy is a vital need,” he stresses. “We collectively put a lot of valuable materials into landfills every year such as plastics and unseparated materials. Some discarded products are separated and dismantled as much as possible, but there are often so many layers of various substrates, plastics, foams, leathers and everything else that some other product can’t be reused or recycled at all. Municipalities everywhere are struggling to understand how they deal with all of the materials that are being discarded. It’s leading many to explore the ways in which we can keep more materials in circulation, where waste materials from one business or home perhaps becomes input to another, and the profound benefits that can be achieved as a result. And the goal for many now is to become a business of zero waste in the hopes of one day negating the need for landfills. To execute on this properly, however, businesses need to tweak their design thinking. They need to focus on their products and the ways in which they can make them more modular and reusable, extending the length of their life.”
Barriers and constraints
In addition to enabling retailers and other businesses to do the right thing, the report also indicates that environmental initiatives aimed at reducing their negative impact will also win over the hearts and minds of their consumers as well. With respect to consumer expectations of companies when it comes to their environmental initiatives, 77 percent of survey respondents said that they think CEOs of consumer companies should be more engaged in recycling and reusing materials to help support a circular economy, while 75 percent expect executives to champion reductions in carbon emissions and the production of single-use plastics. And, it seems that some CEOs are listening and developing initiatives that are lending to increased momentum around the development of a circular economy. Ikea, for instance, recently introduced its ‘Sell-Back’ program in which the retailer offers in-store credit for the return of its used furniture and other items. And Walmart, which has long been a leader in the area of sustainability, launched a goal to become a regenerative company, decarbonizing its global operations and targeting zero emissions by 2040. Despite the impressiveness of these initiatives, however, Solly recognizes barriers that remain in the development and rollout of similar actions throughout the industry at large.
“There are still some inherent impediments and constraints when it comes to the development of these types of initiatives,” he says. “We are ultimately a make, use and dispose society in which product is short-lived. And this is a problem within the current manufacturing system in which there’s almost a design obsolescence. What’s required is stronger regulation in order to enforce longer warranty periods on consumer products in order to keep them in circulation longer. And, when product breaks or malfunctions, retailers need to be offering really good repair options that are affordable. There’s also a massive need for the introduction and availability of more ‘take-back’ programs in order to increase accountability on retailers and their manufacturing partners with respect to the life of their products. These improvements, however, are currently counterintuitive to, and conflict with, the nature and design of commerce in our society which is linked heavily to shareholder return. This mindset and approach need to be replaced by a focus on stakeholder return and value, instead, which is going to require retailers to think differently about their operations and the impact of their supply chains with downstream thinking in mind.”
Starting at the top
Although Solly admits that the required shift in thinking has not yet occurred at a substantial enough rate to proclaim real progress throughout the industry as a collective, he says that it’s underway. Driven by a thorough examination and assessment of an organization’s operations, the risks that they pose to the environment and society, many are developing and enhancing their strategic direction with respect to reducing their negative impacts on the world around us. And, he says, it’s a direction and vision that needs to start at the top in order to cultivate the proper awareness throughout a business and improve the future condition of the planet and the health and wellbeing of everyone on it.
“In order for environmental initiatives to gain traction, the board and executive team members need to be educated concerning the impacts of their operations and supply chains, including all of the risks and opportunities that are involved. And, in turn, retailers have got to educate their consumers and measure the success of their initiatives, understanding their baseline to most effectively set targets and goals for their businesses. All of this requires innovation, which doesn’t mean simply coming up with a smart solution or two. It’s a program, accompanied by governance, that consistently drives new ideas and ways of thinking. But, in the end, issues around climate change and carbon emissions have got to be tackled by retailers with a holistic supply chain approach, bringing it to the centre of the business, making sure that the potential environmental impact of every aspect of their operation is considered every step of the way, from sourcing to shelf. The retailers that act the fastest on these issues, building a high level of trust with their customers, lowering their costs and finding new operating ways that are profitable, are going to be the ones that will win going forward.”
