CEOs are constantly tasked with finding new ways to increase growth while managing risk. In an era of heightened volatility and uncertainty, many are looking to Environmental, Social, and Governance (ESG) factors as a way to achieve both stability and success.
By incorporating ESG into their strategies, retailers can become more resilient and better able to navigate challenging times. Moreover, embracing ESG can also lead to increased profits and market share. Learn more about how retailers can use ESG in this insightful blog post.
The Benefits of ESG
Aside from the fact that establishing a solid sustainability programme will hopefully lead to more companies doing the same, we can also see other benefits.
Companies who have core values in sustainability and ESG report cost savings, improved productivity, increased revenue and an overall improvement in company performance.
Why is it important for retailers to use ESG
Across the world, retailers are facing increased pressure to reduce their impact on the environment, with a special focus on climate change, biodiversity, and scarce resources.
Fashion, Fast Fashion in particular accounts for 4 percent of greenhouse gas emissions. Rightly so, consumers are paying increasing attention as the next generation of consumers are focused on making sure that waste does not exist. Many see the next generation as those who will be seeing the biggest shift in climate change related disasters, so who can blame them?
ESG isn’t just environment though; Companies are taking action to improve their impact on society with companies incorporating it into their brands, they need to demonstrate that they care about the communities they work with and serve.
We’re seeing initiatives that include audits at factories and suppliers’ factories, with an increased attention to social inclusion. Consumers are using their voices and wallets, meaning companies have now adapted their targets to include racial and gender representation targets that include their suppliers too.
As Executives, we have a responsibility to translate governance into investment. This is especially important as the assets under management (AUM) for environmental, social, and corporate governance (ESG) funds has doubled in the past three years.
How can retailers use ESG to become more resilient and grow
Sustainability within the supply chain is, as any procurement professional will tell you; Very important to your business. You need to be able to ensure your supply chain is able to cope with the challenges of operating in a volatile world, and ESG can help with that.
Margins are always tight in retail so running more efficiently means cost is taken off your bottom line, allowing you to stay ahead of the competition.
There isn’t one yet, but a universal framework and reporting process is coming, and investors are paying attention to their portfolios ESG propositions. If you do not have your house in order, then this will limit your access to investment.
Ways that a retailer can use their supply chain and sustainable practices as a force for good
Walmart, Nike, Starbucks, and Levi’s are just some of the retailers who have really embraced ESG! These companies have seen a significant increase in sales as well as increased customer loyalty from adopting these practices.
They do this by reducing their impact on the environment, support their workers and promote sustainable living throughout their company.
Examples of how other companies have used sustainability to succeed
Christy Dawn
The LA-based brand makes dresses out of deadstock fabrics, the stuff manufacturers usually leave behind on sewing tables and, therefore, waste.
The company promotes sustainability everywhere they can: create limited edition pieces, reduce the usage of fabric, deliver their product in wooden boxes rather than polyurethane bags, and advocate minimalism to support the overall image of the brand.
Bosch
Bosch has dedicated 50% of its research and development budget to create and support technology that protects the environment.
This includes supporting the work of universities and other research programs focused on sustainability.
IKEA
These guys have invested in sustainability throughout its entire business operations, including things customers can readily see and things they can’t. Lets take their supply chain, where close to 50 per cent of its raw materials (wood) are sourced from sustainable foresters and 100 per cent of its cotton from farms that meet the Better Cotton standards, which mandate reduced user of water, energy and chemical fertilisers and pesticides.
IKEA also has more than 700,000 solar panels powering its stores, and plans to start selling them to customers in the UK.
Conclusion
The retail industry is in a state of flux. Consumers are demanding something different from retailers and it’s not easy to keep up with the latest trends. That said, there has never been an easier time for companies that want to adopt sustainability strategies like ESG (environmental, social and governance). If companies like Walmart, Nike, and Starbucks an have seen significant increases in sales after adopting sustainable practices then why can’t you?
They’ve done this because they’re able to identify what consumers care about most — their health and the environment — which means you might get left behind if your company doesn’t start paying attention too. We can help you figure out how to incorporate these changes into your business strategy so that you don’t fall behind either! Contact us today for more information
