Why retailers need to care about sustainability
In the next 25 years, the UK needs to reduce its carbon emissions by a staggering 80% of those recorded in the 1990s. The target was set into law more than a decade ago and we’re making progress; as of 2017, levels had dropped by 43%. However, the Committee on Climate Change estimates they need to fall by at least 3% a year until 2050 if the government is to hit its ambitious, but vital, promise.
Climate change is no longer a problem for future generations; it’s one farmers, fishermen, and even insurers are facing as crop yields fall, fish die, and the damage created by natural disasters soars. One industry that will be hit hard, while also being one that can make a substantial impact, is the retail industry.
Research from GeoPhy recently found that 21 of the largest shopping centres in the UK account for pumping out 7,500,000 tonnes of CO2 every year. This is equivalent to the carbon footprint of 430,000 houses. It’s not just the shops themselves pumping emissions into the atmosphere, either. Delivery trucks, the energy used for chillers, packaging, warehouses and the cars being used to drive to stores all contribute. The production of a single sandwich, for example, from preparing, packaging, delivery and storage, can produce as much as 1.4kg of carbon – the same emissions as those created when driving a car for 12 miles.
As a result, many retailers are looking for energy efficient and sustainable solutions to protect the planet, but also make a tidy sum. This is because saving energy is one of the easiest ways to increase profits of any business. Even if energy costs only account for a small percentage of turnover – research claims it averages between 4% and 9% for retailers – any reduction can increase margins without an increase in sales. Specifically, the Carbon Trust has found that cutting energy costs by 20% has the same bottom line benefit as seeing a 5% increase in sales.
Becoming sustainable doesn’t have to be expensive; simple swaps, such as energy-saving lighting, automatic light and heating sensors, going paperless and ditching plastic bags all play a role. Investing in LEDs alone can save up to 85%, when compared to the energy costs of incandescent bulbs. Becoming sustainable doesn’t need to be complex, either. Partnering with energy providers helps you become cleaner without the hassle or in-house expertise.
70% of retailers say consumer interest in sustainability affects the way they do business, according to a RetailWeek and E.ON survey. Download the full report on uncovering the value of sustainability here.
Take Marks & Spencer, for example. For the past 10 years, the retail giant has been working with E.ON to improve its energy efficiency. After E.ON experts discovered M&S’s heating, ventilation and air conditioning were a major source of inefficiency, it connected them to its Energy Management Centre. From this remote location, in Glasgow, engineers monitor the company’s energy use and optimise consumption, provide support and give technical guidance 24 hours a day. They can even predict faults in machinery before they occur. This has equated to an energy saving of 34% across 550 stores.
E.ON claims that on average 75% of customer incidents reported to its Energy Management Centre are resolved remotely, without the need for technicians on-site – reducing the carbon footprint further. In Germany, METRO Cash & Carry recently worked with E.ON in a different way; by installing combined heat and power (CHP) units at its stores in Germany and Russia. The units lower the company’s energy costs and reduce carbon emissions by up to 20% – saving 800,000 tonnes of CO2 being released.
Becoming a sustainable retailer doesn’t just benefit the environment, and lead to substantial cost savings, it can also boost brand loyalty. A study from Sustainable Brands found that more than 80% of customers consider a company’s corporate social responsibility when deciding what to buy, where to shop and when recommending brands to others. Almost 90% are more loyal to such brands, and would even switch to a brand if had sustainable credentials.
Separate research from Unilever discovered that one in five customers would “actively choose brands if they made their sustainability credentials clearer on their packaging” and this adds up to a £851 billion opportunity. What’s more, a report from the Retail Industry Leaders Association showed that customers are willing to pay up to 20% more for environmentally sound products. This can have such an impact that seven out of 10 retail leaders say they have changed how they do business to meet these consumer expectations. And it’s paying off. Sustainable companies, such as Tesco and Walmart, are financially outperforming their rivals. Investing in “lean and green” initiatives can generate a return on investment of a staggering 233%, according to the World Wildlife Fund.
When M&S launched its “Plan A” sustainability scheme in 2007, it was estimated to cost £200m and has already generated £105m and counting. What’s more, research from Harvard Business School found that if you’d invested in businesses focusing on environmental and social concerns 20 years ago, you’d see a 28% ROI, compared to 14% on investments in companies not interested in such issue.
As we march towards the 2050 target, the demand for sustainable brands is only going to increase and will be the differentiator between the businesses that soar, and those which fade out like fossil fuels.