November 08, 2023 | Supply Chain Strategy
The retail industry is undergoing a significant shift towards sustainability. Consumer preferences are changing, with more shoppers looking for eco-friendly and ethically sourced products. Brands that fail to adapt risk losing market share to those leading the sustainability charge. For procurement and supply chain professionals, this transition brings both opportunities and challenges.
Customers, especially younger generations, increasingly factor sustainability into purchasing decisions more than brand name when making a purchase, according to a survey on attitudes toward sustainable shopping. With millennials and Gen Z wielding increasing economic clout, retailers must align with their values.
Governments globally are enacting regulations to mandate environmental and social responsibility. Violations can lead to legal jeopardy and reputational damage. Staying compliant is essential.
A growing roster of institutional investors apply sustainability screens to assess risks and returns. Brands failing to measure up may encounter activist shareholders or pay higher capital costs.
Sustainability helps retailers differentiate themselves from their rivals and capture market share. Patagonia and IKEA built brand equity as sustainability pioneers. Laggards in this area will have to play catch up later.
Efficient resource use, waste reduction and energy conservation boost the bottom line. The business case for sustainability is strengthening.
Ensuring decent working conditions and environmental responsibility across complex global supply chains. Audits and supplier partnership are critical to driving success here.
Designing products for durability, recyclability and reduced virgin resource use. Applying principles like reduce, reuse and recycle to create a more circular economy.
Boosting energy efficiency, adding renewables, electrifying vehicle fleets, reducing waste and conserving water in corporate facilities.
Phasing out single-use plastics in favor of recyclable and compostable materials. For example, Walmart has set an aim of using 100% recyclable packaging by 2025.
Benchmarking progress and disclosing efforts through formal mechanisms like the CDP and GRI.
Working hand-in-hand with suppliers to instill sustainable practices across procurement categories.
Leveraging blockchain and RFID to map supplier impacts and provenance of goods. Allows mitigation of identified risks.
Rethinking product lifecycles, usage models (i.e. product-as-service) and recovery logistics to close the loop.
Harnessing data to optimize processes, reduce waste and pinpoint inefficiencies. Identifying sustainability pain points.
Developing next-gen sustainable packaging materials derived from recycled, renewable and biodegradable sources.
Quantifying and reducing emissions across the value chain. Offsets can address hard-to-abate emissions.
Supporting supplier sustainability with trade finance, preferential payment terms and other incentives. I.e., using a carrot, not just a stick to drive compliance with sustainability goals.
Sustainability raises complex challenges too. Compliance demands can outstrip resources. Shifting virgin materials to recycled sources strains procurement teams. Securing buy-in across siloed functions is difficult. Product costs may rise if suppliers pass along sustainability expenses. Finally, credible reporting remains a struggle, limiting transparency.
While the road won't be easy, leading the retail industry to a sustainable future promises significant payoffs. Beyond driving growth and optimizing costs, retailers can elevate their purpose and values. As supply chain stewards, procurement professionals will play an integral role in this transformation.