The Future of Retail is Green
2019 has been a year of environmental awareness, aptly demonstrated by David Attenborough's Glastonbury appearance and Greta Thunberg's speech to world leaders at the UN Climate Action Summit.
Day to day, many consumers now expect sustainability commitments from the companies that they spend their money with.
Reflecting this continuing shift in public consciousness, law makers have sought to drive changes in corporate and consumer behaviour. For example, the EU has already banned plastic straws, the Companies (Miscellaneous Reporting) Regulations 2018 require applicable companies to report on (amongst other things) their impact on the environment, and the UK government has proposed a tax on packaging that does not contain enough recycled content.
The expectation of corporate environmental responsibility presents both challenges and opportunities for retail businesses and we have already seen some retailers differentiating themselves with high profile sustainability initiatives.
For example, Adidas recently collaborated with eco-savvy designer Stella McCartney (a long-time champion of sustainability). Stella's collection for Adidas is made with sustainable materials such as regenerated nylon waste from landfills and oceans and utilises low-water, low-energy printing technology. Innovative new retailers are also launching off the back of the sustainability movement; online retailer Staiy recently unveiled its platform for strictly eco-friendly fashion brands only – the first of its kind.
However, there are challenges for some retailers.
In an industry where price competitiveness is often a key factor, there appears to be a tension between investing in environmental initiatives on the one hand, and avoiding price increases on the other.
For this reason, we anticipate that many retailers will seek to implement cost effective strategies which will demonstrate their environmental commitment whilst minimising the risk of material price increases. For example, retailers could switch to greener options in their existing supply chains (e.g. incorporating electric vehicles) and consider so called 'circular' supply chains by reintroducing products back into the chain through reselling, recycling and repairing. Look out for RPC's future blog posts on supply chain sustainability for more on this topic.
In the beauty sector, there are several examples of the circular model, with long-standing recycling initiatives such as Mac's 'Back to Mac Scheme' whereby customers can exchange 6 Mac packages in return for a free lipstick. Similarly, Lush's signature black pots can be recycled in store in exchange for face masks.
A perhaps less obvious and longer term tension is the potential social threat that sustainability initiatives could create, as recently highlighted by H&M's CEO. For instance, if the only way of going green for businesses is to sell sustainable products at higher prices, lower income consumers could be segregated from the green retail drive. Similarly, the move towards a circular supply chain could cause job losses in related sectors such as manufacturing. To minimise this threat and balance both their social and environmental impact, retailers may seek to create alternative jobs in the circular supply chain, for example at the recycling or repair stage.
As retailers looks to establish the approach to sustainability that works for their business and customers, one thing is certain - the era of conscious capitalism is here and likely to continue to drive big changes in the sector for the foreseeable future.