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Environmental Sustainability in Style for the Retail Sector

With a growing number of customers now becoming more involved in socio-civic beliefs towards environmental initiatives, this places pressure on businesses to have full transparency into their social and environmental practices.

Retailers have felt the same pressure and some are considered to be the most progressive when it comes to specifically leveraging environmental sustainability to improve business performance, reputation and ultimately profits. Retailers around the world are actively setting targets and making performance improvements to reduce their carbon footprints inside store walls and throughout their supply chain.

In a recent report published by the Retail Industry Leaders Association (RILA), the association points out that most retailers currently measure energy, fuel, material usage and waste generation. And more than one-quarter of retailers said that over the next two years, they would begin to measure code-of-conduct compliance, water usage, suppliers’ compliance with social responsibility standards, renewable energy generation and usage of specific chemicals. It is therefore tantamount across the breadth of activities to track the necessary sustainability metrics to provide transparency to different stakeholder groups. Moreover, RILA crafted a roadmap to help retail energy managers optimize their energy programs. Retailers can use it first to baseline the maturity of their program and then to identify the highest leverage opportunities for improvement (Energy Management for Retailers, Energy Manager Today, April 2014).

However another report, the Board Oversight of Sustainability Issues, finds that many other industries subject to scrutiny – such as paper, forestry, healthcare and utility companies – are among the most likely to adopt environmental sustainability practices. Even with their company boards providing oversight of environmental and/or social issues, the retail sector still encounters snags because of the attention paid to recycling, labor and human rights practices. This is based on the study commissioned by the Investor Responsibility Research Center Institute (IRRCi) and conducted by the Sustainable Investments Institute (Si2).

Key Environmental Sustainability Issues that for the Retail Industry

According to PWC, some of the key issues affecting companies in retail include those involving supply chain management, ethical trading, corporate social responsibility (CSR), reporting and regulation, consumer trends and other issues:

  • Supply Chain Management
    As retail companies endeavor to monitor quality at every point of the supply chain, end-to-end tracking of ingredients, work flow process, human and even technological factors, have become a challenge.

  • Overseas Sourcing and CSR
    Retail and consumer companies are currently facing risks (and rewards) of sourcing from and investing in the new markets such as China, the Far East and Eastern Europe. More so, with pressures from various stakeholders on businesses to manage social, ethical and environmental risks throughout their supply chains, companies have turned to implementing more socially responsible practices.

  • Accounting, reporting & regulation
    With the recent changes brought forward by the International Financial Reporting Standards (IFRS), companies are also reviewing their existing financial and non-financial reporting to pin-point key performance indicators, including environmental metrics, for inclusion in business reviews. Stakeholder demands and certain legislation(s) also increased regulatory pressures for the industry.

  • Consumer and demographic trends
    Majority of retail and consumer goods companies have adjusted promptly to the effects of the internet and new consumer spending habits (e.g. online retailing versus high street/“brick and mortar” shopping). Companies are also reacting to the polarization of buying behaviors such as from 'value' or bargain shopping, particularly in clothing, to high-end luxury purchases such as in technology and furniture.

How Retail Companies Incorporate Sustainability

Retail organizations have made a conscious effort to be more sustainable to meet the ongoing demands and changing needs of their key stakeholders. Some of these sustainability programs are efforts to explore cost-saving opportunities and enhance workforce commitment, reduce energy, greenhouse gases and chemical wastes.

  • Nike, a multinational footwear and apparel brand, was made a constituent of the FTSE4Good Index Series last March 2013. FTSE4Good recognized the corporate social responsibility standards that has been embedded in Nike’s sustainability strategy. With sustainable innovation at the heart of its design principle, Nike came up with its own Materials Sustainability Index (MSI). The Nike MSI is a tool which helps Nike product creation teams to select better environmental footwear and apparel materials from better suppliers.

  • Marks & Spencer in 2013 published its annual sustainability report (called Plan A) that outlines their efforts to mitigate the business’ impact on the environment. Keeping in mind the magnitude of people the company itself touches everyday – like with their corporate and store workforce and their walk-in customers per day— the company recognized its power to create change within the society.

  • Adidas AG has been selected to join the Dow Jones Sustainability Indices (DJSI) for the 14th consecutive year. The DJSI is the world's first global sustainability index family tracking the performance of the leading sustainability-driven companies worldwide. In the “Textiles, Apparel & Luxury Goods Industry”, Adidas AG was rated as industry leader in sustainability issues and corporate responsibility for the tenth time. The indices serve as benchmarks for investors who integrate sustainability considerations into their portfolios, and provide an effective engagement platform for companies who want to adopt sustainable best practices.

  • Staples, Inc., a company who made it to the Global 100 Sustainability Index, is the only one located in North America. Staples helps make more sustainable business practices happen by offering eco-conscious products, providing a range of recycling and green services, maximizing energy efficiency and renewable energy use and reducing waste.

  • Starbucks, on the other hand, created eco-friendly stores showcasing cabinets made of 90% post-industrial material and low-flow water valves. They have also started adjusting the temperature of their air-conditioned stores to reduce operational costs.

Steps for Retail Companies to Achieve Sustainability in Style

The companies mentioned above are but some of the big retail brands who have successfully implemented their sustainability programs and are currently reaping the benefits of their efforts. How can other retail businesses launch their own environmental initiatives?

Adam Siegel, a sustainability expert notes that “experienced professionals spend most of their time on orchestrating internal efforts, developing strategies and engaging executives”, and further advises that “newcomers should follow their example.”

Observing the sustainability experts closely from some top companies, we can summarize their efforts into a five-step methodology:

STEP ONE: Review your Company’s position

Retailers should start by analyzing globally-pressing social, environmental and ethical issues. From there, assess your company’s strengths and find the best course of action in addressing any or most of these concerns. This includes asking the company’s core sustainability team on how the company can utilize operational functions of the business such as buildings (store and distribution centers), products and supply chains, and stakeholder engagement in launching sustainability programs. If you don’t have a sustainability team, consider starting one!

STEP TWO: Meet with internal stakeholders

Integrate plans with the rest of the company by looking for internal stakeholders who can help increase support for the execution of plans and programs geared towards sustainability. Companies need to get the stakeholders’ buy-in for the proposed projects. At this point, these key influencers from different departments or teams will be working with the core sustainability team and will help not only with responsibility-sharing but also with communication-cascading.

STEP THREE: Create and complete your winning strategies

The way a company views the world and their strengths can now be molded together with the goals of the core sustainability team. From here, the sustainability strategy/ies formulated can create positive environmental impacts and can gain the most internal enthusiasm. Siegel says, “Retail sustainability strategies typically have a 5-year horizon and include goals, internal and external engagement tactics and reporting mechanisms.”

STEP FOUR: Execute and evaluate

Project execution is a continuous process and, therefore, requires pro-active management and monitoring. The sustainability team can use both formal and informal mechanisms to actively collect feedback and new ideas.

For most retailers, intranets, employee blogs, forums or interest groups are used to engage employees throughout the organization. These channels surprisingly spur new ideas and continue to expand the excitement for sustainability programs.

STEP FIVE: Report back progressively

Encourage engagement by keeping all stakeholders informed. Maximize corporate communication tools and mechanisms to “keep the fire burning” as well as encourage everyone’s active involvement. Management should be open and communicative throughout the initiative so that others who recently find out about the programs can join. The more people who are aware and involved in the programs, the more expert contributions, resources, time and energy can be expected and this will likely lead to the program/s’ success.

Retail firms have concrete attributes which contribute to the growth and success of their sustainability programs. As a sustainability consulting provider to retail businesses and their supply chains, FirstCarbon Solutions (FCS) helps retailers achieve sustainable success and become an energy leader. How?

FCS recommends how to reduce the resource and consumption costs of their operations and to establish effective scorecard programs for their supply chains. Moreover, FCS provides solutions that can audit and reduce resource costs throughout the entire organization via carbon footprinting or a full-scale life cycle assessment (LCA).

FCS’s retail consulting services, software, and data management services will help companies find opportunities for conservation and implement sustainability management plans that will improve bottom-line results.