— By Andy Anderson —
The business case for prioritizing environmental responsibility.
While the retail industry plays an indispensable role in our society, bringing valuable — and often essential — products and services to consumers, and serving as a major source of employment and economic growth, it also takes a significant toll on the environment. In fact, the industry accounts for roughly 25% of global emissions, with much of these emissions occurring in the retail value chain.
From the energy-intensive demands of brick-and-mortar stores to the packaging and transportation waste associated with e-commerce, the emissions produced by the retail industry are vast. In response, consumers are demanding more sustainable business practices from the industry and governments across the globe are imposing regulations that will require more transparency and accountability from all sectors.
Since consumers and governments alike want to see a more sustainable retail industry, organizations must prioritize sustainable business practices to remain competitive, future-proof their assets and avoid risks associated with non-compliance. While there’s no one-size-fits-all solution to steer the industry in the right direction, there are a variety of ways to make significant progress toward global carbon reduction and ultimately a sustainable future.
The Benefits of Prioritizing Sustainability
The road to sustainability is complex, especially as retail organizations must balance the cost of sustainable business practices with the demand for convenience from consumers including fast shipping and inexpensive goods and services. However, there are meaningful business benefits to prioritizing sustainability and implementing environmentally friendly practices.
Governments across the globe have already introduced plans to mitigate climate change, with some mandating carbon-neutrality by 2050. Most recently, in the United States, the SEC issued its final ruling on climate reporting for public companies in March 2024. As of early April, implementation of the ruling was paused pending the results of ongoing legal challenges, but in its current format the ruling will require public companies to provide climate-related disclosures, including Scope 1 emissions (direct emissions from owned or controlled sources, such as fuel combustion in boilers, furnaces, vehicles) and Scope 2 emissions (indirect emissions resulting from the purchase and use of electricity, heat, steam and cooling) in their annual reports and registration statements for the year ending December 31, 2025. Although the final rule omitted Scope 3 emissions (all other indirect emissions that are a consequence of an organization’s activities but are not directly owned or controlled by the company), organizations should still consider including them in reporting as they typically make up the majority of an organization’s footprint and other regulations, like California’s SB253, require Scope 3 disclosure.
The United States is not alone in its efforts. The European Union, China, Australia, Canada and more have adopted sustainability regulations. As these regulations are passed and finalized, retailers will have no choice but to respond and complete sustainability disclosures. Preparing for these regulations as soon as possible is crucial, as gathering data and establishing processes is an intricate undertaking that requires a significant time investment.
The desire to positively impact the environment and climate change is another pressing concern across all sectors. Climate change presents a myriad of threats to the retail industry, ranging from potential weather-related harm to assets, disruptions in supply chains and more. This in turn has financial implications for retailers as the cost of insurance, maintenance and repair costs increases with the uptick in natural disasters (hurricanes, flooding, landslides, etc.). Prioritizing sustainability now to ensure readiness will prove far more effective than scrambling to react to crises as they unfold.
Lastly, the retail store or e-commerce experience is an extension of a retailer’s brand and today’s consumers seek brands who are transparent and making a positive impact on the environment. In fact, consumer research suggests that shoppers are willing to pay a premium for environmentally friendly products, sometimes as high as 60%. Businesses that are found to be non-compliant, or even just falling behind competitors, are at a disadvantage when it comes to customer loyalty and brand reputation. Even if there is uncertainty around consumers’ willingness to pay for sustainable goods, an emerging view expects that the transition to a low-carbon economy will create new value pools. The demand for low-emissions products and services will continue to grow.
While a significant undertaking, implementing an effective sustainability strategy can reduce business’ carbon footprint, promote social responsibility, aid in preparing for rigorous mandates in climate reporting and allow the industry to contribute to a more sustainable future.
Getting Started: It’s All in the Data
The adjustments necessary to implement an effective sustainability strategy will vary among sectors, but to identify a plan that will align with business goals and result in financial success, every organization must start with data.
Right away, decision-makers should either look at the data they currently have or begin tracking emissions data to gauge their baseline. This will allow organizations to identify where there is opportunity for immediate improvement and where resources should be allocated for future enhancements.
The quality of data is crucial. Trustworthy emissions calculations are a prerequisite to effective carbon reduction initiatives. Retailers should use science-backed carbon accounting following the GHG Protocol to calculate their full emissions, which provides a foundation for effective carbon management. Incomplete or inaccurate data can result in ineffective actions and hinder progress in carbon reporting and reduction initiatives. This can also expose businesses to non-compliance with reporting regulations, waste time and resources, and make it challenging to prove their sustainability efforts — which can lead to allegations of greenwashing and hinder brand equity and customer attraction.
Once it’s equipped with complete, high-quality data, an organization can then develop a strategy that is right for their business. Companies that have had the most success in delivering financial returns while implementing sustainable business practices have launched strategies that are rooted in data and are embedded in the company’s organizational structure, governance, and overall purpose.
Implementing Sustainability: Opportunities & Challenges
Once data has been captured, organizations will have a better idea of the opportunities and challenges they will need to consider as they establish a sustainability strategy.
For the retail industry, the most common challenge is around the value chain. Unfortunately, many negative sustainability outcomes in the retail industry stem from policies that prioritize consumer convenience, such as cheap goods and services, fast shipping and convenient delivery.
However, advancements in technology and shifts in consumer preferences have also created opportunities for organizations to identify ways to make positive changes to achieve their sustainability goals.
Reducing Operational Emissions
Retailers can seek to improve operational efficiency by leveraging new products and technologies that are designed for energy reduction. For instance, retailers with physical store locations can improve the energy efficiency of stores with LEDs, more efficient HVAC motors, on-site solar-power generation and battery energy storage. When it comes to shipping and moving of goods, retailers can reduce their carbon emissions associated with transportation by evaluating the benefits and costs associated with upgrading to zero-emission vehicles. For some, an overhaul of current systems and processes may be necessary, but if that’s not an immediate option, there are adjustments businesses can take to slowly improve energy efficiency and decrease emissions.
Decarbonizing Supply Chains
Retailers can also advance their environmental impact goals by adjusting their supply chain strategies, such as swapping high-emission products with more sustainable alternatives. They also could update internal procurement guidelines to prioritize suppliers that comply with sustainability criteria or make it mandatory for suppliers to disclose their emissions. For online orders, “rush shipment” for rapid last-mile delivery has a larger impact as it increases the likelihood of air transport or deliveries on partially empty trucks, contributing to overall inefficiencies. Shipping options that are more efficient include no-rush shipments, consolidating items into one box or increasing store inventory to ship online orders.
Minimizing Waste
Waste is a massive contributor to the retail industry’s sustainability woes. Retailers can influence customers to make more environmentally conscious choices to reduce downstream emissions such as clearly labeling products with recycling instructions or implementing reuse programs with a reward system for customers. Retailers can also evaluate their current packaging and determine if there are any new solutions or formats available that are more environmentally friendly.
A Meaningful Shift in Thinking
To meet sustainability goals, retailers may have to make some sacrifices or shift current ways of thinking to implement more sustainable business practices. However, the benefits associated with efforts toward decarbonization will far outweigh the costs as government regulations and consumer demand make them necessary to remain competitive in today’s global retail marketplace.
By implementing sustainable practices, retail businesses can reduce their carbon footprint, promote social responsibility, prepare for rigorous mandates in climate reporting and contribute to a more sustainable future that will benefit society on a global scale.
— Andy Anderson is chief sustainability officer and executive vice president, energy & sustainability solutions at Tango, provider of cloud-based real estate and facilities management software, including energy and sustainability management. Tango is the leader in Store Lifecycle Management and Integrated Workplace Management System software, delivering a single solution spanning real estate, design & construction, facilities, energy and sustainability management, and more. Website: www.tangoanalytics.com.