For Retailers, Unprecedented Commitments to Sustainability Are the Only Workable Future
Dr. Gautham Vadakkepatt shares 4 essential approaches to sustainability demands
Over two decades in, the 21st century is fraught with challenges social, political, economic, health-related. The scope of the changes society may need to undergo to address those challenges in the future is still not fully understood.
If retailers want to be a part of that future—and respond to a consumer base that increasingly cares about the world they both grow into and leave behind—a decades-overdue pivot toward sustainability-centered systems changes must become a core operating ethos; in other words, mainstream and second-nature, both culturally and in actuation.
Strategic leaders must understand that the demand for sustainability is rooted in the nigh-unanimously accepted science that human activity is affecting the climate and that even if it somehow weren’t, the consequences that we are both already seeing and predicted to see are not something that an 11th-hour technology will fix, not something that will eventually simply go away.
Like COVID-19, climate change is part of a new normal, an inevitable condition of the human experience that will demand sharp adaptation.
Business as usual has announced its exit
At our current juncture, COVID-19 and climate change have become a deeply intertwined crises; according to a report by McKinsey, “COVID-19 accelerated [the importance of sustainability], with two-thirds of UK and German consumers saying it has now become even more important to them to limit the impact of climate change.”
Furthermore, while Americans have long been known to be overall less concerned about environmental impacts than their European counterparts, this is also changing, developing into a broader global consensus on the urgency of sustainability.
Similarly, events such as the invasion of Ukraine and fears of looming market instability as a result of systems shocks from a variety of potentially devastating sources (such as yet another housing collapse) coupled with recent and severe examples of sudden supply chain disruptions (e.g., the Suez Canal disaster that alone stoked fears of severe global supply failures for 12% of world trade) paint a global economic outlook defined by uncertainty where awareness of the incredible depth, complexity, and looming failures of just-in-time global production systems have skyrocketed.
Insincere responses are insufficient because sustainability is not a fad, not another brief, transitory consumer trend, but a global-systems-wide demand for a redefinition of the modern business that will require major cultural shifts toward longer-term strategic goals.
This cannot be emphasized enough. Greenwashing is not a sustainable response to the mounting demands of a changing climate in a plastic-choked world with finite—and sometimes quickly dwindling–resources, and this is true for all businesses and retailers from fashion (noted for contributing an estimated 5% of global emissions) to supermarkets.
To boot, greenwashing increasingly comes with costs for businesses in the form of a likelihood of brand damage and lower consumer engagement, particularly with younger generations that are not plugged into legacy media systems but a bursting Web3 era of endless interconnectivity and ever-broadening socioeconomic and cultural awareness.
It’s those same systems that make so many modern consumers better educated on production and consumption waste than any generation prior and more likely to respond positively to businesses that place sustainability at the forefront of their operations; according to a report by Kantar, “63% of consumers believe businesses have a responsibility to act on climate change.”
In other words, the costs of ‘half-measures’ are mounting not just for public opinion, but in terms of risks to the bottom line and supply-chain resilience.
Young consumers are efficient, critical, and well-informed, utilizing a mixture of offline and online shopping techniques, and when (e.g.) Starbucks changed their lids as part of an environmental campaign to remove straws but failed to do so in an effective way (by implementing new designs which consumed more plastic than the straws they were abandoning), Starbucks immediately stood to lose both money and face via social media-driven dissemination and even faced a backlash from the disability community.
‘Purpose-driven consumption’ continues to shape dominant trends. Business strategies that don’t affect sustainability footprint in any meaningful way combined with the high visibility afforded by better educated, purpose-driven consumers (who are increasingly willing to pay more for products or services which assure greener delivery) make for PR disasters nobody wants.
A way forward
What to do? While the task is great, it is not insurmountable, and amid many continuing unknowns regarding exactly how it will all play out, long-term commitments to sustainability are still very much worth pursuing in the quest for healthier companies, better consumers, and more reliable, socially conscientious profits.
True sustainability impacts lie within businesses’ expensive and essential supply chains; according to data provided by the National Retail Foundation, 95% of a retailer’s sustainability footprint lies deep within those supply chains.
RETHINK Retail spoke with Dr. Gautham Vadakkepatt, associate professor of marketing and director of the Center for Retail Transformation at George Mason University, to look into what retailers can do moving toward not only responding to mounting sustainability demands but understanding what those meaningful responses are.
“The end goal for retailers is that the products or service they offer are sustainable which generally means that it does not harm the environment or kind, does not deplete nonrenewable sources, and wasn’t made is an unethical matter,” said Dr. Vadakkepatt.
To achieve this, Dr. Vadakkepatt’s points to four areas of focus (both action points and places for greater awareness and understanding) that will facilitate the kind of informed, holistic strategic planning aiming toward the kind of systems changes existing vulnerabilities demand.
Of these focus areas, supply chain sustainability far and away tops the list.
Argues Dr. Vadakkepatt, supply-chain analyses simply must approach from a “holistic systems perspective” that requires a “significant collaboration amongst supply chain members,” noting that supply chain discussions often stop at tier 1 suppliers when tier 2 and (particularly) tier 3 supply partners are where sustainability innovation is most gravely needed: “if you go down to lower level suppliers, research has shown that many engage in practices that are not sustainable .”
In other words, what ‘systems changes’ most succinctly look like for retailers is this deep, uncompromising examination of the ecological and humanitarian impacts of their entire supply chains.
Dr. Vadakkepatt’s second and third points, meanwhile, focus on understanding consumer trends and better educating both consumers, stakeholders, shareholders, and leadership (‘both sides’) on what sustainability commitments truly mean.
First, the ‘behavior-intent gap’ refers simply to the gap between what consumers say they will do (e.g., paying more for ‘greener’ products) and what they’re actually prepared to do; while this gap is gradually shrinking, it does remain and is important for businesses to study and understand to get an accurate depiction of what consumer’s true behaviors are in the current market.
Second is deeper and broader education initiatives [GV1] on both the scope of growing environmental impacts and what it means to seek truly sustainable business practices, particularly given the daunting complexity of globally interdependent supply chains. While Dr. Vadakkepatt maintains that many companies are genuinely and increasingly interested in sustainability, an education gap remains; time and collaboration is needed to “[learn how to do it] in an ethical and responsible way.”
“Retailers must educate consumers as well as firms and suppliers on sustainable options, why sustainability matters, and how to enhance their footprint,” said Dr. Vadakkepatt.
By collaborating with academics, research groups, and launching internal reviews of company attitudes and awareness levels for (e.g.) the impacts of supply chain choices on ecological footprints, companies can foster cultures that both better value and grasp these challenges which are so central to operating viably in the 21st century.
Returning to warnings on ‘greenwashing’, however, is Dr. Vadakkepatt’s final focus area: transparency. Transparency allows for not just better relationships with regulators, but greater levels of consumer confidence and trust that—to again reiterate the trend of purpose-driven consumption—will drive sales and brand loyalty. Companies want to avoid (e.g.) the kind of debacles that the fashion industry has recently seen in New York.
“…there’s a lot of shareholder proposals that are actually driving the transparency imperative with regards to some of these sustainability efforts. There is a demand for it. Being transparent and authentic [is important]. And I think that will increase,” argues Dr. Vadakkepatt.
Indeed, writes Pascal Canfin for Recharge, “What is sustainability’s most valuable currency? It’s trust.” In short, this trust is an essential component of what sustainability will have to look like going forward.It must be re-emphasized, however, that concrete action is the crux of real sustainability for companies looking to survive the coming unprecedented challenges.
Companies must commit to strategic realignments that prioritize thorough examinations of waste and emissions up and down their supply chains so that both vulnerabilities and excessive environmental externalities are accounted for and nullified to the strongest possible extent.
Nothing less will do.
Want to know more about the challenges and opportunities facing retail businesses as they seek to improve their sustainability footprint, be it sourcing and materials, managing returns and resale, utilizing data to enable a circular economy, or nudging consumers to engage in sustainable behavior?
Please join the GMU Center for Retail Transformation for a panel discussion on April 14th at 12 noon ET as Dr. Vadakkepatt hosts four leading experts to discuss these topics and more.
Register for the event here.