The retail sector faces significant challenges in achieving sustainability. Industries such as fashion, for example, face significant customer stakeholder pressure as well as complex, decentralized supply chains with the heavy burden of Scope 3 emissions (approximately 96% of the sector’s total). For home and retailing brands, 98% of emissions are within Scope 3. At the same time, underfunded sustainability teams spend much of their time educating other departments rather than executing initiatives.
To meet Net Zero goals and comply with evolving regulations, companies must integrate sustainability across the value chain — from raw materials to design, sales and marketing and supply chain management. This requires targeted upskilling in critical areas like carbon accounting and management, sustainable procurement and stakeholder management. Establishing clear communication protocols, cross-departmental KPIs and accountability measures is essential.
How Puma is Working with Financiers, Suppliers to Create Real Change
But how do you orchestrate action in your supply chain when you have no direct control over behavior, data sharing practices or operations? Companies like Puma are creating novel business models to attempt to bring suppliers into key alignment: aiming to achieve win-win outcomes to drive sustainability.
Puma, in partnership with a coalition of financiers (e.g. BNP Paribas, HSBC and IFC) are leveraging supply chain finance, tied to sustainable operation, to align with suppliers which, if standards are met, can unlock real benefit to the business including preferred and lower interest rates, tiered financing and access to more working capital. The program now covers 72 suppliers and has grown in total supply chain financing from $100 million in 2016 to $800 million in 2022, highlighting the critical role of value chain collaboration in decarbonization efforts. This coordination is a great example of embedded sustainability and bringing the functional expertise of both supply chain and finance to bear in addressing challenges in supplier engagement.
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Embed Sustainability Across the Company
This topic is front of mind for OnePointFive as we look systemically at how organizations can accelerate their decarbonization plans. OnePointFive’s insights into how organizations, especially in the retail and consumer sector, can best decarbonize and reach their sustainability goals is the focus of our latest playbook — Forget the Sustainability Unicorn. How to Upskill a Workforce — examining how organizations can “embed” sustainability into the organization.
Through interviews with more than 30 sustainability leaders in the U.S., we discovered that in order for organizations to both benefit and pull off ambitious climate strategies, they need to take their sustainability strategy out of the sustainability team and embed it into the wider organization as part of a companywide transformation.
To do this, companies must stop searching for “sustainability unicorns” — a term we’ve coined that explains hiring someone who has both academic sustainability experience and tenured sustainability industry experience — to unlock your sustainability strategy. Instead, organizations should upskill their functional and business units, such as supply chain, to create meaningful progress on goals and ensure value creation.
Upskill Existing Employees to Become Sustainability Champions
Brands such as Theory and Nordstrom recommend leveraging the expertise of those who run the business. This can be done by expanding job descriptions across departments to include sustainability responsibilities and offering upskilling for employees to broaden their skillsets to meet these goals. If employees are at full capacity in their existing roles, consider hiring individuals with the required mix of green skills and industry expertise to support implementation efforts.
Our research highlights that U.S. fashion brands are doubling down on sustainability data availability and transparency, not just in their organizations but also within their supply chain. This naturally engages more of the business model, from finance to IT to supply chain.
To achieve these objectives, focus upskilling efforts on carbon accounting and carbon management skills (to understand the organization’s Scope 1, 2 and 3 emissions). Next, turn to skills such as sustainable procurement, supply chain management and stakeholder management.
This might come as welcome news for American companies unsure about the impact to their sustainability strategy in the wake of the recent U.S. election that fear impending budgetary pressure on the sustainability team. Upskilling the wider organization can provide more resiliency into a sustainability strategy that is tied to longer term Net Zero targets, such as those from the Science-Based Targets initiative or the Taskforce for Climate Disclosures (TCFD). These guide companies through how to consider the short- and long-term impacts as well as the opportunities of climate change.
At COP29 in Baku, Azerbaijan, the annual climate gathering where global leaders meet to plan, collaborate and make decisions on how to deal with climate change, there was a sense of pragmatism on the ground, with an increased feeling of responsibility and opportunity for the private sector to help address the lack of progress from policy initiatives.
Finding Ways to ‘Embed’ Sustainability
While talking to someone from Suntory Japan’s supply chain about sustainability, it was apparent that the Japanese approach to strategy and operations management represents a form of embedded sustainability.
Traditionally, many Japanese employees in large conglomerates stick with the same company but move from function to function. As a result, they quickly upskill cross-functionally across areas like sales, marketing, strategy and supply chain.
Suntory walked me through its sustainability and sustainable procurement approach (which you can view here and here), especially how they look at purchasing different materials in their supply chain. This project-based approach brings in multiple parts of the business: understanding the climate risk of agricultural raw materials, understanding the financial value at risk, building a project plan and then shifting this to the supply chain team to manage suppliers. This approach connects sustainability, supply chain, quality, R&D and finance.
This approach is not all about simply being sustainable and acting because it’s the right thing to do. When companies end up embedding sustainability, we see that one, firms report 52% higher profitability, according to IBM; two, cross-department KPIs can better align diverse teams toward shared sustainability goals, making emissions reductions more attainable; and three, tailored sustainability training ensures staff develop relevant skills, such as carbon accounting and sustainable procurement, thereby directly impacting emissions goals.
To adopt embedded sustainability, businesses should focus on creating cross-departmental KPIs, enhancing supply chain collaboration and building climate fluency within teams. By aligning internal processes with sustainability goals, companies can address Scope 3 emissions and supply chain climate risk more effectively, thereby fostering innovation and operational efficiencies. Investing in targeted upskilling also can empower existing employees to contribute to sustainability efforts, ensuring alignment with Net Zero objectives while avoiding the pitfalls of broad, non-specific training programs.
Matthias Muehlbauer is a startup advisor, climate entrepreneur, writer and Co-founder and COO at OnePointFive, a Forbes Next 1000 climate advisory and training organization. He helps drive OnePointFive’s strategy, advisory work and is a lead facilitator for the OnePointFive Academy. With 10 years of experience working across Australia, Japan and the U.S. in management consulting and entrepreneurship roles, Muehlbauer has given talks at COP28 and COP29 on the future of the Climate Workforce and is a previous World Economic Forum contributor writing on ESG investment and innovative climate technology solutions. Check out OnePointFive’s full playbook for insights and strategies on how to future-proof your workforce, or reach out to engage with OnePointFive’s advisory and OPF Academy to transform your sustainability approach and build a skilled, climate-ready workforce.