As the world races to net-zero emissions, consumer brands must make a meaningful contribution to be more sustainable for short - and long- term - profitability.
Sustainability and the need to mitigate the disastrous effects of climate change have soared up the social and political agenda since the COVID-19 crisis. A sense of the urgent mission to protect our planet and fragile natural resources has finally infiltrated retail and shopper decisions are increasingly motivated by purpose, values and eco-consciousness.
COP26 is the most important global climate change event in years, with some arguing that the planet and all humanity is now at risk without necessary and ambitious commitments to stop global warming.
Like never before, a sense of urgency in facing the climate change challenge is becoming evident across every sector, retail included. Retailers and consumer brands are recognising that failing to take action could result in them soon losing relevance and market share.
Research in 2021 by Deloitte found that almost a third (28%) of UK consumers have stopped buying certain products due to ethical or environmental concerns. The study - a survey of 2,000 shoppers - also found that 61% of those asked said they are cutting back on their use of single-use plastics in an effort to lead a more sustainable lifestyle. Almost half (49%) suggested they are buying more seasonal produce and 45% are buying more local goods.
Are your products ‘clean’ enough?
Anyone still in doubt that sustainability is now an essential theme in the industry need only look at the world’s largest retailers outside China: Amazon and Walmart.
Amazon’s Climate Pledge Friendly label, designed to highlight products that meet specific sustainability criteria, is anticipated to prove highly influential.
Firms wanting to use the label have to demonstrate their improvements to one of several certification organisations. These include the Rainforest Alliance, the Forest Stewardship Council (FSC) and Fairtrade.
Customers browsing Amazon for products can now check off the badge as a search item. This means they won’t see products or brands that haven’t signed up to the pledge.
Recent analysis by Edge by Ascential using our proprietary software Edge Digital Shelf and Edge Market Share has found that some items with the pledge label next to them have recorded double-digit growth in conversation rates. In this research, we have found customers are more likely to buy a comparable item if it is Climate Pledge Friendly, underlining the significance of carbon compliance under Amazon’s criteria.
Walmart is taking a similar approach with its ‘Built for Better’ programme, an online destination that makes it easier for customers to identify and shop for products that are better for them and for the environment.
Customers browsing Walmart online can see icons indicating items that are ‘Built for Better - For You’ (highlighting products that meet certain nutritional requirements, for example) or ‘Built for Better - For The Planet’ (products made in line with certain environmental standards).
The onus is on brands to work with such initiatives to ensure their products meet the label certification criteria and to upgrade their own product promotional details accordingly.
Green investment priorities
In the course of producing competitive intelligence on the future of retail, our research has identified a range of sustainability themes and actions across the broader supply chain.
They can be grouped into areas such as:
- responsible production and carbon reduction actions;
- environmentally-influenced assortments that provide consumer choice; and
- actions that help to manage resources effectively such as removing, reusing and recycling packaging.
Retailers are implementing programmes to reduce, reuse or recycle packaging, including ‘loop’ schemes that allow customers to buy reusable containers and recycle them each time they shop in order to cut down on single use packaging.
Sainsbury’s is among the supermarkets that now provides customers with the facilities to recycle all flexible plastic packaging that isn’t typically accepted for curbside collection, while Tesco, Coles, Walmart, Woolworths and Carrefour are among the many large retailers committed to ensuring all packaging materials are fully recyclable, reusable or compostable by 2025..
Retailers are also working closely with suppliers and manufacturers to develop packaging reduction and recycling programmes.
In the UK, Coca-Cola, Mars and Kellogg are among the consumer packaged goods brands working with Asda to introduce new products in refillable formats for its refill zones.
Henkel in Germany has partnered with store operator Kaufland to launch refill stations for its ‘Love Nature’ detergents brand, while Alibaba and Unilever have collaborated on China’s first large-scale closed-loop plastic recycling system and Mars is working with partners to incorporate recycled polypropylene plastic into pet food packaging.
Labels, eco-certifications and scoring
When it comes to consumer choice, we see more retailers developing product curations under icons, labels or badges that indicate they are environmentally-sound alternatives, and which make it easier for customers to shop eco-consciously.
Carrefour France, for instance, is introducing eco-score labeling that measures the environmental impact of food products, giving a rating on the basis of factors such as packaging, transport and geographical product origin.
Lidl is trialling a similar five-point eco score label that classifies the environmental impact of the products it sells.
Independent sustainability ratings are also becoming popular. The Good On You app, for instance, provides a five-point ethical brand rating that customers can use to see how a certain product or brand measures up on a range of social and environmental issues facing the fashion industry.
While such schemes are among the more tangible manifestations of sustainability initiatives, much of the work is largely unseen by the end customer.
With a growing number of multinationals outlining their commitment to net zero emissions across their supply chains by 2050, suppliers and manufacturers have to engage with those initiatives and align their products with the necessary standards and certification programmes.
Walmart’s Project Gigaton, for example, sets targets for suppliers in key areas including energy, waste and packaging, with the aim of avoiding one billion metric tons (a gigaton) of greenhouse gases from the global value chain by 2030.
A sustainable advantage
Efforts to reduce emissions and reach net-zero are accelerating across the value chain. As retailers develop their own green product labels there is a competitive imperative to meet the criteria for eco-friendly product curations.
In addition, consumer goods businesses must make sure they align their ecommerce strategies to leverage carbon compliance status. For example, using appropriate terms, like ‘recycling’, ‘reusable’ and 'organic' in product display pages and investing in key search words will be imperative to drive traffic on platforms like Amazon.
This isn’t a temporary shift - the fight against climate change will reshape the entire value chain. Organisations that fail to connect with customers on the most pressing challenge of our age will lose relevance.