Sustainability in Retail: Is It Sustainable?

Socially Conscious Consumers Are Embracing Retail Sustainability

What is Sustainability?

Sustainability is achieved through strategic efforts within an environmental, social, and governance, or “ESG,” framework. ESG efforts can encompass anything a business does in a fair and responsible way – from providing plastic-free or biodegradable packaging, to following ethical labor practices.

Consumers’ top 3 sustainability concerns are:

Source: Mintel

A 2024 Mintel consumer study on the global sustainability outlook showed that consumers’ top three concerns are climate change, air quality, and global warming, indicative of a drive toward health and self-preservation. This becomes understandable considering the expansive wellness market, which is growing 5% to 10% annually. [Source: “The trends defining the $1.8 trillion global wellness market in 2024,” McKinsey, January 16, 2024.]

In an NRF sustainability report that refers to GfK’s research, the term “circularity” is used to refer to the well-accepted practice of reducing waste and sourcing responsibly. In fact, the study found that nearly half of U.S. consumers purchased something secondhand in 2023. Interestingly, over the last decade, second-hand purchases by higher-income consumers have increased, while they have decreased among lower-income consumers.

The NRF Center for Retail Sustainability supports the retail circular economy, which also includes selling products made from recycled or regenerative materials; refurbishing and reselling products; and improving reverse logistics processes.

Retail Sustainability Drivers

Meanwhile, a Deloitte report  identifies four key drivers of retail sustainability: the resale market, sustainability practices embedded across the supply chain, technology in sustainability, and adherence to ESG regulations.

4 Key Drivers of Retail Sustainability:

Resale Market

Many well-known retailers are already selling pre-owned clothing and other goods, amongst their new items. The wave of the future could see a blended business model, where retailers provide consumers with both new and used items through their own production channels.

Sustainable Supply Chain

Recent research by Normative indicates that the retail supply chain currently contributes 25% of greenhouse gas emissions (GHG) globally. Retailers are under pressure to prioritize control of these emissions. This may require re-imagining the production, delivery, and disposal of retail products, in collaboration with suppliers and their logistics platforms. Sustainable supply chain operations come with the added benefit of retail cost savings and greater efficiencies.

Technology-Enabled Sustainable Progress

“Green technology” can enable retailers to use digital resources in a way that is efficient and saves time and money. Deloitte explains that blockchain technology, for instance, can increase traceability and transparency across the supply chain. This allows insights into what is happening at every stage of the product lifecycle, giving users the ability to pinpoint areas where sustainability practices can be injected or improved.

Adherence to ESG Regulations

Naturally, retailers must operate in compliance with local and national legal requirements, whether it pertains to waste removal, recycling, or labor law. But if retailers want to keep pace with consumers’ environmental concerns, they must develop action plans that are more stringent than these basic standards, which mitigates predicted risks from climate change and global warming, guiding them toward an even more sustainable future.

Practical Sustainability Tips for Retailers and Brands

Achieving sustainability is a big ask, particularly of large international companies and brands that are clearly driven to maximize profits. Investing in ESG can be expensive, but it delivers big returns—not only in conserving our planet’s resources—but also in terms of positive reputation and brand respect.

Small steps can make sustainability a reality:

• Use sustainable materials to design your store
• Use electronic shelf tagging systems instead of paper
• Digitize paperwork
• Green up your supply chain
• Minimize returns

A genuine, corporate-wide agreement on sustainability principles and a commitment to processes and products that forward those principles form the foundation for differentiating a retail brand and strengthening its competitive stance. Environmental consciousness is not going away, and as innovations develop over time, approaches to salvaging our planet’s resources will naturally change. Retailers should plan to adopt those changes or develop their own.

Sustainability as a Competitive Advantage

Looking at the financial picture of sustainability, it’s interesting to note that in the face of economic constraints, consumers may be less willing to spend more on environmentally friendly brands. Still, the McKinsey/NielsonIQ study makes a case that creating environmentally responsible and socially responsible products “are not just a moral imperative, but also a solid business decision.”

Consumers don’t expect retailers to solve the planet’s conservation and cleanup dilemmas on their own, but they do expect them to be making responsible decisions toward these goals. Some large retailers recognize that taking responsible sustainability actions can be a competitive advantage.

For instance, Target envisions 100% of its brand packaging to be recyclable, compostable, or reusable by 2025. Nestlé aims for 95% of its packaging to be designed for recycling by 2025.