Let’s be honest. There is no such thing as a fully sustainable company and retail as an industry is bad for the environment. But does this mean, it is time for retailers to stop.. well, retailing? No. People will continue to have needs and businesses will keep capitalising on these need to provide them with the products and services they want. Moreover, retail is is one of the biggest employers in the world, so the solution in no way is to shut down operations. Retailers would need to continue doing business, but they’d just need to do it better.
Sustainability and social consciousness aren’t seen as a nice-to-have offering for businesses anymore, as more and more customers are demanding it. And today, its no longer just enough for the businesses to say they are sustainable but they also need to prove it to their now more-informed and aware customers.
A well-implemented ESG (Environment, Social, Governance) Program can be hugely beneficial for a company both from a commercial (investor) as well as a consumer standpoint. ESG criteria are increasingly used by investors and REITs to judge which companies to back. To shoppers, especially Gen Z and millennials, sustainability and social standards are increasingly becoming important such that nearly six in 10 consumers surveyed by IBM were willing to change their shopping habits to reduce environmental impact. Now, top brands that include sustainability in their values also prefer retail partners and spaces that support their ESG initiatives.
Many retailers globally have actively adopted measures to let the world know that they are pro-environment. Amazon and Target are both seeking net-zero carbon certification for new store models. Starbucks is testing reusable cup programs, as well as partnering with Volvo to research the use and potential scalability of electric vehicle charging stations at its stores. Following H&M’s 2015 decision to remove their open door policy, the business estimates to save 77,522 kWh of energy per store per year. This adds up to as much as $1 million in avoidable annual costs across the 125+ H&M locations with exterior doors.
Although this region has been criticised for its extravagant habits, turning a deaf ear to environmental concerns, contributing hugely to energy consumption and wastage, measures are being taken on a governmental and organisational level to address these concerns. The UAE was the first country in the Gulf region to launch the SDG Data Hub in October 2017 to monitor and record the country’s progress in achieving the goals. The UAE has also set up a National Committee on SDGs to facilitate the alignment of SDGs across the private and public sectors. Saudi Arabia’s Vision 2030 includes a series of objectives and programs that overlap with the UN agenda. For example, the Kingdom has developed the National Renewable Energy program to diversify its energy sources and embrace clean energy.
UAE-based GMG, a global well-being company retailing international and home-grown brands across its sports, food and health sectors, recently announced the launch of its new sustainability strategy framework. The new framework will enable GMG to make a positive and transformative contribution to the environment and society as a whole as well as to its stakeholders and operations.
The framework which was developed in conjunction with EY, is built around Environmental, Social, and Governance (ESG) principles and based on three key pillars: Planet Forward, Spark People and Own Change. What do these pillars entail?
Planet Forward is aimed at ensuring that the company actions are geared towards building a better planet for everyone and not just for the business, by tackling energy, water and waste management.
Spark People is focused on ensuring the well-being of employees by supporting their career growth, as well as ensuring equality, health, safety and well-being
Own Change aims to inspire people to own and drive change for continuous growth and operational excellence. In other words, this pillar would focus on local procurement, responsible resourcing, ethics, cybersecurity, product safety and quality and Giving Back
While it is great to see companies taking the initiative and prioritising investments and efforts towards sustainability, the fact today remains that consumer trust in eco-friendly claims is wavering due to various reasons ranging from packaging confusion to unsanctioned standards for environmental ambitions.
54% of consumers believe environmental labeling is merely a marketing strategy to increase sales, per a survey of European consumers by consumer rights group Euroconsumers in April and May 2021. 53% said they could not distinguish between true and false green claims. Another survey conducted on behalf of Whole Foods found 75 percent of Americans say, when grocery shopping, it’s important to them that products are responsibly sourced, but 65 percent are confused about how to determine if it’s accurate of such products.
So then the question is, how do retailers overcome a customer’s ‘green skepticism’?
“Companies are now increasingly transparent in terms of their sustainability efforts, publicly sharing their commitments, targets, and progress against these. Nike, one of GMG’s signature brands, is one such example,” answers Razan Akrouk, Vice President – Corporate Communications, GMG. “Nike plans to reduce carbon emissions by 30% across its global supply chain by 2030 and achieve net zero by 2050 coupled with annual impact reports that include progress against these targets. This means that the sustainability credentials of companies such as Nike are now, more than ever before, under public scrutiny.”
What this also means is that greenwashing, which is when an organisation spends more time and money on marketing itself as environmentally friendly than on minimising its environmental impact, is becoming increasingly difficult. Companies now not only need to say what they are doing, but to be taken seriously, they have to prove it by sharing demonstrable progress against the targets they have set themselves and using transparent reporting frameworks to do so.
“Retailers now not only need to think about what they are doing in terms of sustainability but also what their partners are doing. This is particularly true when considering their supply chain that can link to any number of third parties, both directly and indirectly,” she noted.
A typical retailer’s supply chain accounts for more than 80 percent of its greenhouse gas emissions. And it isn’t only the environment that’s feeling the effects. Without a sustainable supply chain in the retail industry, for instance, a company’s profit is more likely to be affected by things like climate-change related disasters.
“As the sustainability credentials of suppliers can have a positive or negative impact on the businesses they serve, more and more companies are taking control by continuously monitoring and auditing them to avoid the potential risks to reputation and future competitiveness of working with a company that does not align to their sustainability agendas. It is, therefore, becoming increasingly important to work closely with suppliers to educate, train, and support them to incorporate sustainability in their organisational agendas,” she added.
A huge hesitation for retailers trying to go green, especially when it comes to their supply chain is the cost. They find themselves questioning how (economically) sustainable (ecological) sustainability really is?
Many manufacturers are overly reliant on one or two suppliers in their chain. Diversifying the supply chain to account for events like natural disasters helps avoid this over-reliance, preventing reputational damage and costly downtime. The global supply chain and increase in the frequency and severity of climate-related hazards will create significant disruption to operations by limiting the availability of raw materials, interrupting production, and raising costs and prices. All of these factors will undoubtedly have an adverse effect on a company’s financial bottom line and subsequent economic growth.
“Taking GMG as a case in point, although we do not extract raw materials, harvest agricultural products, or own farms, we do partner with companies that are involved in all aspects of food production. Therefore, ensuring a solid and uninterrupted supply chain is key to ensuring our success as a business,” she said.
“As GMG is committed to making a positive difference by creating a sustainable future, we are looking at all aspects of our business to see where we can do this. Some of the ways in which we are doing this include continuing to limit our operational waste, water, and packaging while working to reduce greenhouse gas emissions from our operations through the use of renewable energy,” she concluded.
The next stage of GMG’s sustainability strategy framework, ‘Make a Difference’ will involve kick-starting the implementation phase by setting out a detailed plan around the execution of the new strategy.
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