What do retailers need to do to become more sustainable?

Words by Ali Sajwani, General Manager Operations, DAMAC

Sustainability – once considered a high cost by retailers, tied to a fleeting consumer trend – is increasingly recognised as a source of competitive advantage that can help drive top-line growth.

According to an Accenture’s study on corporate sustainability, 99% of chief executives from leading organisations say sustainability is critical to their future success. The majority also see a clear link to business value.

The UAE has already demonstrated a long-term commitment to sustainability with its codified plans for a green economy. Still, we must all take individual, collective and corporate responsibility to make our nation and planet more sustainable.

So, what must retailers do to become more sustainable? My research has revealed a clear pathway.

Consumer choice

Consumers are increasingly aware of their environmental footprint and are keen to alter their behaviour around consumption. Retailers need to help consumers in their product knowledge and offer more sustainable choices. Carrier bag bans or charges are just the beginning. A holistic approach to company sustainability is necessary, with such practices good for business and the planet.

Retailers looking to improve their environmental footprint, reputation and overall competitiveness should consider:

Committing to sustainability. Business leaders must take sustainability personally and advance the circular economy, holding people accountable for sustainability goals and forcing discussions with investors to lead to positive change.

Adopting circular business models. Such models can deliver tremendous value, enabling retailers to eliminate waste, drive positive impact across the value chain and improve competitiveness. In addition, circular business models provide financial viability. Therefore, retailers can choose those that will deliver the most significant rewards.

Rewarding consumers. Retailers can build longer-term loyalty by empowering and rewarding customers’ behaviour. This could be through eco-incentives, reuse and recycling schemes, and broader ecosystem rewards.

Urgency of sustainable retail increased by COVID-19 

Many retailers experienced a significant shift in customer preferences and expectations during the COVID-19 pandemic. In a McKinsey report, 65% of German and UK consumers said they will buy more long-lasting, higher-quality items, while 64% of Chinese consumers said they will consider more environmentally friendly products. “For our first ten years, sustainability was not even in the top five reasons why customers chose our company. Now it is one of the top two reasons,” says the CEO of one fashion company in the report. “Customers want to see data on the environmental impact. Transparency is crucial.”

A coalition of 150 companies, primarily retailers, is encouraging policymakers to invest COVID-19 recovery funds in green initiatives in line with the wide-reaching climate change goals of the global Paris Agreement.

Sustainability at the heart of the organisation

Sustainability aligns with retailers’ strategic and operational goals. For example, reducing waste packaging also reduces costs.

Not only is it good business, but sustainability efforts can increase supply-chain resilience. But, unfortunately, some companies remain hesitant to employ sustainable alternatives through fear of compromising on quality or brand damage. When this is the case, reasonable first steps might be to begin a trial and launch a strong employee education programme.

Ensuring you can implement circular economy principles (reduce, reuse, refurbish, repair, and recycle) is key to realising change.

Set targets and ensure progress is real

Many consumer companies have started setting aspirational goals. For example, note Unilever’s commitment that “by 2030, 100% of carbon for our entire home-care business will come from renewable sources.” However, it is crucial that these goals are translated into concrete steps, even if those steps are small.

So-called “greenwashing” risks causing a public backlash. While authenticity is important, customers increasingly expect that brands’ efforts are backed up by real action and data.

Use industry metrics and standards

There are more than 460 sustainability logos, which understandably confuses consumers. Retailers should use common, clear, recognisable industry-standard objectives (for instance, the UN Sustainable Development Goals), measurement techniques (for example, the Higg Index for fashion), and certification (e.g., B Corp Certification for responsible businesses).

Price matters

Most of us like the idea of electric cars but are reluctant to purchase at the high price point. Retailers must ensure sustainable products are not just “add-ons” to the product line. Pricing of sustainable options must be in line with other options, or the products should provide distinct benefits.

To pay more than lip service to sustainability, the retail sector must continue reaching ambitious targets. I believe industry coalitions driving collective goals will be more common in the near future. Actions that could make retail more environmentally friendly, socially caring, and economically responsible are available, relatively easy to implement and bring long term benefits to the bottom line and customer loyalty. In short, sustainability must not be ignored in the retail sector.

The industry needs to work together with government, customers, and suppliers to define standards, change operations, and create new products. As the world emerges from a pandemic, retail can and should lead the way into a bright, sustainable future.