The mega-trends affecting retail sustainability

Brands are now competing to be the most purposeful. Boston Consulting Group’s 2015 study shows consumers are embracing products in the fast-moving consumer goods (FMCG) space with “socially responsible overlays,” and retail brands should be taking note.

The retail industry has been slow to embrace the environmental, social and financial benefits of sustainable practices, though momentum is building globally and locally.

Ahead of a new project by The Fifth Estate to focus on the sustainability of the retail sector, and how it can navigate the future sustainably and profitably, we’ll be sharing some of the major trends in the industry.

Following is the first in a three-part series on global retail sustainability trends, with insight from Sustainable Business Australia chief executive Andrew Petersen and We First chief executive Simon Mainwaring.

Responsible consumption brands – organic, natural, ecological, local and fair trade – have moved from a niche category to a driving force in Europe’s grocery industry, according to the Boston Consulting Group. Its 2015 comprehensive study on the factors driving growth in the fast-moving consumer goods space found the majority of growth came from products with “socially responsible overlays”, and companies should be taking note.

According to Sustainable Business Australia, the UN General Assembly’s Sustainable Development Goals, adopted in September 2015, and the COP 21 Paris Agreement, adopted in December 2015, provide a unique framework for action.

“If you look at the sustainable development goals for the retail sector then there are a number of issues but also opportunities around finding and developing a comprehensive strategy that reflects and, in fact, supports the work that the United Nations and all developed and developing countries will undertake,” SBA chief executive Andrew Petersen says.

Consumers are voting with their hard-earned dollars for companies authentically investing in making our world a better place socially and environmentally.

Simon Mainwaring, chief executive, We First

The 17 goals include no poverty; decent work and economic growth; industry, innovation and infrastructure; sustainable cities and communities; and responsible consumption and production.

“You have this toolkit of ideas about what sustainable growth looks like over the next 15 years,” Petersen says.

The key drivers

According to California-based Simon Mainwaring, chief executive of brand consultancy We First, it’s a consumer push as well as an industry pull that is driving change.

“Consumers are voting with their hard-earned dollars for companies authentically investing in making our world a better place socially and environmentally,” he says. “On the latter, brands are realising that to maintain their relevancy they must shift towards making positive change. Further, the competitive landscape is nudging these efforts forward and, in the future, we will see a shift towards brands competing to be the most purposeful.”

The retail sector is the “canary in the coalmine”, according to Petersen.

“The retail sector, the advocacy consumer sector and the product sector is much like every other sector at the moment and that is looking at any contributions that can be made to create value in a carbon-constrained world, in a water-constrained world, in an energy-productivity-opportunity world, in a world where resources – if not scarce – will certainly need to be better managed. Resources will need to be much better coordinated from a policy, technology and finance perspective.”

Over the series, Mainwaring and Petersen will share insights into the nine sustainable mega-trends shaping Australian retail.

1. Supply chain transparency

With the consumer and regulatory spotlight increasingly highlighting dodgy practices, companies around the world are scrambling to clean up their supply chains.

“Confection is obviously a very big issue at the moment because of narratives around sustainable palm oil and discussions about the need for a price signal in relation to sugar,” Petersen says.

With the consumer more globally aware than ever and Australian businesses increasingly becoming part of the global supply chain, the importance of these issues can’t be understated.

“These are not northern hemisphere conversations. They are affecting and are impacting and are being responded to by Australian businesses,” Petersen says.

In the UK, the Modern Slavery Act now requires larger companies that do business in Britain to publish a board-approved, public annual slavery and human trafficking statement. And there’s a lot of work to do, with the Ethical Trading Initiative reporting that 71 per cent of UK retailers and suppliers believe it’s likely there are slaves in their supply chain.

Petersen says companies globally and nationally are undertaking enormous work to sort out their supply chain.

“The single biggest driver for the retail sector has been the realisation that quite often their own operations are not terribly inefficient but their supply chain can be identified as having inefficient use of resources,” Petersen says.

“So the work that is being done by a number of companies – Unilever, and particularly Kimberly Clark and Procter & Gamble, major leading international brands – identifying the impact they have as a major customer of business right across the world, it’s somewhere where they have an enormous ability to effect change. The supply chain impact is going to be quite significant.”

This story was published with permission from The Fifth Estate. Read the full story.

Read Part 2 here.

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