It’s never been easier to order a product online and get it to your door, possibly in under 30 minutes. Retailers worldwide are transforming their business models to cater to service and personalization, all with the goal of gaining — and keeping — customers.
Take a moment to consider the tons of plastic and cardboard waste generated by these whirlwind deliveries, especially around the holiday shopping season. On top of that, think about the items themselves. Apparel alone makes up 10% of global carbon emissions, spurred by the easy accessibility of fast fashion. It takes about 7,500 liters of water to make a pair of jeans; that’s one person’s drinking water for seven years. How many pairs are in your closet right now?
Many large retail companies are already dedicating significant time and talent to ESG (environmental, social and governance). The challenge, however, is scaling and integrating these efforts into all business processes without jeopardizing the company’s success. Numerous studies have shown that companies that address ESG concerns do not have a negative impact on value creation. On the contrary, sustainable actions pay off and there is a positive correlation between them and financial performance.
Concrete Actions we can Take Now
For some, the scale of change seems a little scary, so much so that it can even prevent that change. Organizations need to start small, communicate properly (externally and internally), measure transparently and expand the level of change according to an agreed plan. There are concrete actions that can be taken NOW:
- Clearly and honestly state the strategic intent, avoiding “greenwashing” and sharing it internally and externally, and integrating sustainability KPIs into every project in the organization to increase awareness and propel ideas to reinforce impact. Creativity should be one of your most powerful weapons.
- Introduce measures to minimize online returns (more product information, customer reviews, online employee advice programs, and accurate sizing features).
- Implement a strong data platform as a basis for data penetration throughout the value chain, control the quality and accuracy of the information and make it available through the different channels and partners. The data platform has a special role to play. It should support retailers by:
- Fostering transparency and increasing consumer awareness by disclosing the individual carbon footprint of products and improving labeling in the different sales and customer interaction channels. Being conscious of our individual impact as consumers is the first step on the path to data-led decisions toward more sustainable options. Sharing information as a company creates the appropriate basis for each decision-maker in the company to choose the most optimal sustainable option.
- Improving supplier negotiations away from price toward total cost of ownership and value: reducing production to reduce waste, limiting the merchandise that needs to be sold and promoted, and rationalizing the product range to increase value for the entire chain.
- Promoting collaboration between value chain members by creating data-transparent and scalable consumption models.
- Enriching customer information and segmentation criteria, including their interest in sustainability, preferences for products, delivery alternatives and second-life programs.
- Sharing location data with references to emission reduction initiatives such as use of recycled or eco-friendly certified materials in stores, LED lighting, biodegradable mannequins and use of solar panels.
A strong increase in sustainability measures can be expected in the coming years. Public interest is increasing, retailers and partners are joining forces, and governments are launching investment support programs. For retailers, data transparency across the entire value chain will be a key element of all sustainability initiatives as part of this development.
Miriam Molino Sánchez is Head of Global Retail Practice at Stibo Systems. She brings with her deep expertise in retail, with more than 25 years in the industry as a consultant serving retail corporations in multiple strategic and operational initiatives, including working for one of the biggest retail companies in Spain as it underwent a massive digital transformation. At Stibo Systems, Molino Sánchez is reinforcing the company focus and value orientation toward retail clients.