Once satisfied by the right quality and a fair price, consumer expectations have now evolved far beyond this dual dimension view of a retailer’s product offering. Undoubtedly driven by increased public scrutiny, rapidly developing technologies, real time data, and the emotive influence of David Attenborough (for example); consumers are increasingly seeking a personalised, proactive service, across all channels, which also addresses the ethical and environmental issues they care about most.
Apparently not. Research shows that customers are switching from brand to brand to find the right experience and ethical partner, giving credence to the notion that companies are now competing on a much broader scope. So what value do we give sustainability?
Retail has been front and centre of some of the biggest sustainability stories over the last decade. Whether it’s the level of waste produced by the fashion industry (H&M alone was left with $4.3 billion in unsold product last year), or the destruction of habitats to make way for excessive palm oil consumption, retailer sustainability is often big news. And until now, the news has often been bad.
This is important because today’s consumers care, as they quickly leap from brand to brand, they’re buying the change they wish to see in the world. And so to meet consumer expectations, retailers need to be able to evidence good practice and quickly adjust to changing consumer tastes and standards.
Consider that… In 2017, plastic straws were widely used without a second thought; in fact, in England along nearly 5 billion were used annually.
In 2018, a video of a plastic straw, painfully stuck in the nose of a sea turtle, being removed went viral. This struck a chord with consumers, and the response was so significant that major outlets such as Starbucks and McDonalds announced a ban on plastic straws.
In fashion, fast fashion to be precise, the likes of H&M, Zara, and Primark have adopted in-store recycling and rebate schemes to combat the often negative publicity currently associated with the industry. Others including Nike, Burberry, and again H&M, have become core partners to the ‘Make Fashion Circular’ initiative. This programme, established by the Ellen MacArthur Foundation, sees the partners join forces with three key aims: creating a business model that keeps clothes in use, using renewable and safe materials, and creating effective recycling solutions.
These examples demonstrate how a retailer can identify and respond to the customer’s interest, and take their company where the customer wants to go. They are also examples of being proactive and personal, appealing to the younger and emerging customers who will dominate share of wallet. So, with some smart marketing, being a good citizen can also mean being a profitable business. Being first matters too. A recent study showing 80% of global millennial respondents find it important for companies to actively take steps to reduce their environmental impact. It is projected that consumers aged 25-35 will spend $150 billion USD on sustainable goods this year.
To ensure they tap into this budding market, companies must not only shout about what they are doing, they must also gain the consumers trust. Here are three examples of where this is happening.
- Invest in new product design and development
Coined an “absolutely vital” stage in reaching a circular economy by Ellen MacArthur, the research and design behind a product will ultimately dictate the usability and versatility of its end of life. Adidas has established themselves as a pioneer of this space. Initially collaborating with Parley for the Oceans to create trainers from recycled plastic, Adidas realised that consumers would care about product afterlife, even if they didn’t know it yet. With this in mind, they took a further step into the concept of closed-loop design. Aptly named, the Futurecraft Loop prototype trainer is made of a single recyclable material, which can be ground up into pellets and reused, versus the 12 types of material used on the usual design.
- Champion meaningful transparency
There has been no escaping the images of the orangutans losing their habitats, or the awful headlines of the Rana Plaza disaster. As such, there’s an increasing demand to know exactly where and how products are sourced and workers are treated. Infamously associated with child labour and deforestation, Nestle has had to focus efforts on improving practices and implementing supply chain transparency in recent years. Publishing supplier lists and being honest about product ethics (they have a commitment to achieve 100% RSPO-certified sustainable palm oil by 2023 but are not yet there), Nestle is working towards rebuilding customer trust. Critically, this commitment makes them stand out vs their peers.
- Avoid greenwashing campaigns
Although consumers want to buy better, often their only source of information are the claims from the company. However, if a company is to cash in on this trend without credibility behind such claims, they will be found to be green-washing, which will ultimately result in even less consumer trust. It is all about delivering on your environmentally focused statements. This was where Volkswagen failed; and they are dealing with the consequences at an individual, corporate, and shareholder level.
And so what for retail procurement?
Since most retailers have a vast array of suppliers and often complex supply chains powering Goods for, as well as Goods Not for Resale, there is an obvious need for procurement to be proactive. But it’s not as simple as ‘understand needs and buy better’. Part of the challenge for organisations is setting up the right standards and encouraging the right behaviours. That’s internal intent. Arguably a bigger challenge is the external one; understanding supply chains and ensuring that the partners you select are the right partners for your business and your brand, both now and in the future. Since suppliers are the most likely source of good or bad news, procurement needs to both be in it from the beginning and “in it” to the end…
- Helping the business understand the CSR contribution of the suppliers. It’s no coincidence that a number of organisations have recently created the post of Chief Procurement and Sustainability Officer.
- Working with the business to ensure that the applicable standards, measures, incentives, and more are understood by stakeholders. CSR starts at home, and if the organisation doesn’t understand, believe, and commit, suppliers will notice.
- Give the right importance to CSR factors in the selection of suppliers. It is no use having a commitment to CSR, if suppliers selected on price alone. In the circular economy, we might be looking at whole life cost and whole life impact.
- Be the example. Procurement needs to champion CSR in all discussions with stakeholders and suppliers, but also needs to be able to take a pragmatic view. This is particularly important when working with SME’s and start-ups, something which many aspire to do.
- Start doing supplier management now. Many firms have eschewed Supplier Management because it can be hard to measure the benefit. But supplier and supply chain management will be key to identify the good and eradicate the bad.
There will be a cost. Budgets have a habit of becoming available after something goes wrong, not before. Procurement consequently is often looking for ways to do less, not more. But this time, with sustainability it might need to be different.