Retail Reset: Paving The Way For A Sustainable Future
Image taken from : https://www.forbes.com/sites/googlecloud/2021/12/16/why-data-is-the-key-to-driving-sustainability-in-retail/?sh=754b5dac57b7
Introduction
Retail has been benefiting from an eCommerce boom over the past two years, as consumers relish the convenience, customisation, and speed made possible through digital transactions and technologies. In 2020, there was 15.5% year-on-year growth in retail eCommerce sales in Asia Pacific -- and the eCommerce sector is playing a key role in post-pandemic recovery, both regionally and globally. It is clear from this that eCommerce has moved beyond a trend, to become a major driving force in the world economy. Fuelling this force are concerted efforts by retailers to build brand authenticity, implement new technologies, and to form new brand partnerships and industry coalitions.
However, in line with this expansion has come an increased public awareness and sensitivity to commercial practices that can actively benefit society and the environment. Sustainability has become a watchword. At least 65% of world economies have made commitments to reduce their overall carbon emissions to net-zero by 2050, and new regulations in the European Union require businesses to disclose data concerning their Environment, Social, and Governance (ESG) efforts, and detail how they operate to manage social and environmental challenges.
As consumers increasingly embrace social causes and seek out brands that align with their values, purchasing habits are shifting into a new alignment. Many consumers are changing their purchase preferences based on sustainability. For example, Forbes reports that Google searches in 2020 reveal a third of shoppers stopped purchasing certain brands or products due to ethical or sustainability related concerns. And nearly 60% of consumers say they are willing to change their shopping habits to reduce environmental impact. To keep pace with these developments, retailers are having to reframe their position on sustainability, attuning their approach to the new hybrid lifestyles of consumers.
These warning signals aside, sustainability presents retailers with a huge opportunity to serve consumers with what they really want -- and to give the world what it needs to continue to thrive. However, this can only come about if organisations treat sustainability as more than just a trend, or an excuse for cosmetic exercises in “green washing.” Retailers should instead consider sustainability as an avenue for reframing their business models and operations, attuning to consumers’ new hybrid lifestyles, building brand authenticity, adopting new technologies, and forming brand partnerships and industry coalitions.
Image taken from: https://www.aiib.org/en/news-events/media-center/blog/2021/Driving-Capital-Markets-in-Asia-in-a-Sustainable-Manner.html
As part of Forrester’s COP26 series on the environment, the organisation conducted a study of 127 large companies in 12 key markets: Australia, China, Hong Kong, India, Indonesia, Japan, Malaysia, New Zealand, Singapore, South Korea, Taiwan, and Thailand. With the combined size and influence of these enterprises, their sustainability policies will have the greatest near-term impact on climate action in the region.
Overall, Forrester concludes that firms in Asia Pacific are still widely divergent in terms of what practices to implement, and how aggressively to pursue them. Government policies are also wildly inconsistent, creating confusion and giving many organisations an excuse to delay desperately needed action.
In terms of climate risk, the situation in APAC remains dire. Bush fires in Australia in late 2019 and early 2020 ravaged an area the size of Sri Lanka and released 715 million tons of carbon dioxide into the atmosphere. In July 2021, the central city of Zhengzhou, China was hit by a year’s worth of rain in just three days.
Consumers in the region are looking to enterprises and organisations to take the lead and are putting pressure on brands to take positive action. With sustainable finance schemes and monitoring into the ESG credentials of investments under their management, institutional investors are providing avenues for this action to take place. Countries in the region including India, Malaysia, and Thailand have published frameworks for ESG guidelines and reporting. Hong Kong and Singapore are taking steps to establish themselves as regional hubs for sustainable finance.
On the government front, environmental, social, and governance legislation remains fragmented throughout the region, in contrast to the European Union, which has a formalised framework for ESG disclosure. However, some authorities are making positive moves. New Zealand for example has become the first country in the world to enact a law forcing financial services firms to assess the effects of climate change on their own investments, and the companies they lend money to. And the government of Singapore has enacted laws forcing compliance with statutes concerning the release of hydrofluorocarbons into the environment.
Taking Practical Steps
Kantar’s Asia Sustainability Foundational Study 2021 covers nine markets in the region (Singapore, Malaysia, Philippines, Thailand, Indonesia, Vietnam, India, Japan, and South Korea). Its report reveals that Asian consumers care about seven key issues with regard to sustainability: Eradicating Poverty and Hunger, Good Health & Well-Being, Clean Water and Sanitation, and Environmental issues that span Climate Action, Life Below Water, and Life on Land.
The report suggests that taking a local approach to sustainability is key. Organisations must realise that what consumers care about differs by market. Retailers must therefore drill down to these local levels, and modify their brand message to talk to local cultures.
While consumers in Asia do care about the issue of micro-plastics and the ocean, they have a greater level of concern over broader community issues around water pollution. Brands looking to make plastics reduction a part of their sustainability strategy will therefore be wise to tie these efforts into programmes addressing water pollution.
Talk about sustainability often goes hand in hand with debate about the circular economy -- a resource conserving cycle that puts its emphasis on reuse, repurposing, recycling, rental, and the sharing of commodities and materials.
This concept has been gaining traction in the fashion industry, despite the many challenges it presents. As Eric Phu, Co-Founder, Citizen Wolf observes: “There are quite a lot of problems when it comes to sustainable fashion in Australia and one big one is that the whole industry green washes. People slap an organic cotton label right under their fabrics, but it might just be 2% and the rest of it is polyester -- but they will still claim it is environmentally friendly, and consumers don’t really dig deep enough to understand that. Fabrics aside, the bigger issue is that the whole business model of fashion is built on waste and not only does fashion currently consume 10% of the world’s carbon budget, it is going to raise by 50% in the next 10 years and 200% by 2050, which means it is just not sustainable compared to what we need to be doing, which is reducing our carbon emissions. The way to solve it is to stop overproducing and creating all these products in the hope that you can sell it in six months’ time.
The Need for Strategic Collaboration Along the Supply and Value Chain
With sustainability and digitalisation now key factors in the growth of retail, organisations require a leaner, more efficient supply chain which helps to streamline inventory and reduce waste. Asia is anticipated to top 50% of global GDP by 2040, and to drive 40% of the world’s consumption. Strategic waste management will therefore be critical to assuring a sustainable future. Beyond simple recycling, there also needs to be a shift to waste prevention, product re-design, and re-use. Supply chain management will need to emphasise the sustainable sourcing of inputs for production processes, more environmentally friendly methods of movement and delivery, and the extension of product life cycles
A value-chain approach can help key stakeholders to map out the sustainability risks, opportunities and impact existing within their business models and core activities. Forming strategic alliances with technology providers and industry peers can enable retailers to leverage rich data sets about the planet, new AI and machine learning models, and smarter analytics to extract insights and predict outcomes around sustainability.
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The Unique Dilemma of the Fashion Industry
From poorly regulated manufacturing and dangerous working conditions, through pollution and excessive extraction of water, to massive amounts of textile waste ending up in landfills, fashion is among the most environmentally and socially damaging industries in the world. Yet sustainability in fashion -- in the design, production, and movement of goods -- is gaining worldwide traction.
The circular economy may hold the key to making sustainable fashion a practical reality. Instead of short-term or “fast fashion”, the recycling of discarded materials and garments, use of renewable resources, clothes-swapping, second-hand shopping and garment rentals increase utilization and reduce waste. Moreover these principles are becoming increasingly popular among consumers.
Within Southeast Asia, the diversity and cultural richness of the region, and the talents found in small and medium-size enterprises (SMEs), operated by traditional artists, craftspeople and weavers, also have an immense economic potential, and can help in steering the garment industry along a more sustainable path.
Within the industry, a number of brands are taking active steps to promote sustainability and a circular approach to their use of materials and technology. For example, the appropriately named Tentree has a policy of planting 10 trees for every item purchased, giving customers a code so they can track the growth of their individual trees. The brand’s clothing is produced from ethically sourced and sustainable materials including cork, coconut, and recycled polyester -- and Tentree is on track to plant one billion trees by 2030.
With its Conscious collection, H&M is moving away from its fast fashion roots with a line that uses sustainable production methods and environmentally friendly materials such as organic cotton and recycled polyester. Customers can also recycle unwanted garments at H&M stores and receive a discount for future purchases. Under this initiative, H&M is purusing a goal to use only sustainably sourced materials by 2030.
Challenges and Tradeoffs Along the Path to Sustainability
With strategic waste management one of the keys to sustainable consumption, organisations will need to fully embrace the principles of reuse and recycling. Efforts to promote the regeneration of nature are also an important component of a circular economy. This presents challenges in a region where government initiatives on climate change and environmental pollution are often patchy, at best. Initiatives will require significant investments across the board, in renewable energy, cleaner forms of transportation, and greener modes of construction.
Consumption patterns must also change, for a sustainable future. Shared ownership models, such as those pioneered by brands like Uber, will need to gain adoption across a wider range of applications, including the ownership of retail commodities. At another level, digitalisation can enable businesses to facilitate a shift from material or tangible products to services -- be that on a rental or lease model, or in the form of cloud delivery.
