How retailers can unlock long-term business value – and keep the regulators happy
Sustainability is no longer a ‘nice to have’ or catchy buzzword for retailers in 2024. Consumers are aware of its impact and now over a quarter of them are willing to pay extra for sustainability. Retailers must listen and think seriously about long-term changes to build a more sustainable industry. For Gavin Masters, Principal Digital Strategy & Transformation Consultant at Columbus UK, there are some key ways retailers can incorporate sustainability into their business processes and ensure a greener future. It’s all about recommerce and rental, the growing interest in repair, and reuse, and the need to meet the growing number of sustainability regulations. The retail supply chain alone is responsible for 25% of greenhouse gas emissions (GHG) globally so retailers can no longer avoid including sustainable measures in their operations. While sustainability has been a buzzword for many years, focus is now shifting to new practical approaches that can achieve results. In particular, retailers are increasingly exploring the value of the resale market, the need to incorporate sustainability practices throughout the supply chain, the influence of technology on sustainability efforts, and the commitment to adhering to ESG regulations and frameworks.
Retailers must respond to the rise of sustainable commerce
Concerns over waste and ethical practices in the retail market are high amongst Gen-Z and millennials, which has led to popularity increases within the recommerce and second-hand markets. In particular, the UK recommerce market is now worth approximately £6.5 billion and is forecast to nearly double in size over the next five years, reaching £12.4 billion in 2028. This shift in consumer mindset presents an opportunity for retailers to expand into this growing space.
Second hand platforms, a first choice for the sustainable retailer?
Digital buying and selling hubs such as Vinted and Depop are already helping to reduce the impact the retail industry is having on the environment, while offering consumers diverse and affordable shopping options. Recommerce reduces demand for new garments, which in turn decreases demand for raw materials and lowers energy usage in factories. What’s more, recommerce increases recycling opportunities and the reuse of items that are no longer needed but are still in good quality.
For their part, retailers can incorporate many effective sustainable practices into business models. Upcycling materials to produce products and selling items for cheaper when they reach sell-by date are just two ways that retailers can appeal to the growing shared economy.
This expansion into the emerging recommerce market introduces new ways for consumers to engage with physical commerce, all while still personalising interactions, which can help retailers make further market gains and futureproof their business.
The three retail R’s – Rental, Repair, and Return – driving the fashion circular economy Fashion rental services, led by industry giants, have emerged as a top trend in 2024. Rental initiatives offer consumers access to trendy clothing without the environmental burden of ownership. By opting for rentals over purchases, customers contribute to waste reduction while making affordable, high-fashion choices, underscoring an important shift towards more sustainable fashion.
One concept that’s been tried and tested is the return market – but how is this helping to further sustainability efforts in the retail sector? Retail management systems consolidate shipments and maximise product reuse to help organisations minimise waste, optimise operations, and contribute to a more sustainable industry.
What’s more, leading retailers are experimenting with data analytics to highlight return patterns, which can inform decisions to enhance product design and sizing accuracy. This proactive approach not only reduces future returns but also strengthens customer trust and loyalty.
… but don’t forget about the right to repair!
Today’s customers want easy, seamless, and frictionless experiences – and efficient repair services, which allow customers the flexibility to choose how and where products get repaired, provide an ideal fit. In addition to extending product lifecycles, repair services create new revenue opportunities in the aftermarket segment – but the benefits don’t stop there.
Repair services offered as part of sustainability initiatives can enhance customer satisfaction, strengthen brand reputation, and capture additional value from existing products – and it’s a way to increase footfall in physical stores. Retailers operating in the European markets will be familiar with the right to repair legislation. This new rule isn’t just about compliance as it offers companies further opportunities to elevate sustainability efforts. For instance, retailers able to provide an efficient repair service can reduce waste, lower environmental footprints, and position their brand as a leader in eco-friendly practices, which can help attract environmentally conscious consumers and improve the bottom line.
Legal regulations get the green light
It’s not just consumers that are holding retailers to account for their commitment to sustainability as governments, suppliers, and regulatory bodies are adding pressure on companies to reduce carbon footprints and adhere to sustainability targets. While there are currently very few ESG laws or regulations in the UK, the country is starting to follow in the footsteps of EU legislation with regulations being introduced such as the Streamlined Energy and Carbon Reporting (SECR) and the UK Sustainability Disclosure Standards (UK SDS).
UK retailers operating in the EU also have to comply with sustainability regulations such as the Digital Product Passport (DPP) and the Corporate Sustainability Reporting Directive (CSRD). So how can retailers get ahead of this ESG regulation wave and approach sustainability measures as more than just a tick-boxing exercise?
ESG reporting and product tracking demonstrate a long-term commitment to sustainability Witness what happened in the EU with the European Sustainability Reporting Standards (ESRS) and Corporate Sustainability Reporting Directive – these initiatives provide a roadmap for how retailers can strategically integrate environmental, social, and governance factors into business operations, and align sustainability goals with core objectives for competitive advantage. So where should retailers begin?
ESG reporting is a good starting point and can help companies tackle more than just compliance. Transparent ESG reporting, which involves the gathering and disclosing of data on a retailer’s environmental, social, and governance activity, nurtures collaboration, identifies areas for improvement, and anticipates regulatory changes. By embracing ESG reporting, organisations can successfully manage market complexities, drive societal impact, and ensure resilience.
Digital product passports (DPP) offer retailers another essential tool to address sustainability challenges. DPP provides a comprehensive record of a product’s lifecycle, including origin, composition, and environmental impact, enhancing transparency and accountability across the supply chain. The effective use of DPP presents an opportunity for businesses to enhance sustainability credentials and nurture innovation with help from technologies such as blockchain – a win-win for customer loyalty and the bottom line.
It’s time to put corporate sustainability firmly on the retail agenda
Greenwashing tactics just won’t wash with today’s environmentally conscious consumers and regulatory bodies. Retailers need to be able to demonstrate a long-term commitment to sustainable operations – and this is where new technologies and data-driven insights will be able to help retail leaders personalise customer experiences and build meaningful connections with consumers based on shared values.
About the Author
Gavin Masters is Principal Digital Strategy & Transformation Consultant at Columbus UK. Columbus is a global IT services and consulting company with more than 1,600 employees serving our customers worldwide. We bring digital transformation into your business, help maximize your value chain and position you to thrive far into the future. Columbus’ offers end-to-end digital solutions within Strategy & Change, Cloud ERP, Digital Commerce, Data & AI, Customer Experience and Application Management that address the lifecycle and sustainability demands of the Manufacturing, Retail & Distribution, Food & Process industries.
