The retail industry is coming to terms with a seismic shift in management as consumer awareness and external factors thrust ESG (Environmental, Social & Governance) into the spotlight. Beauty and fashion brands spearhead this push towards sustainability, redefining how business decisions are made by leveraging powerful metrics to drive progress. With ever-increasing levels of consciousness among consumers today, having an effective approach to ESG has become essential for any organization wishing to stay ahead of its competition.
With the rise of cancel culture and social policing, business ethics have grown integral to retail. Consumers today are aware of and are more likely to call out the unethical practices of retailers. They are also more inclined to purchase products from responsible retailers when the option exists. The Harvard Business Report states that “if a company does not focus enough on ESG, it risks falling behind in the market, losing the support of employees, customers, and investors, and potentially even losing the license to trade in more stringent regulatory/ESG environments, like the U.S. and Europe.”
This module explores trends, technologies, and threats with ESG in retail.
“Most of the tech needed to effect massive positive change for this industry already exists; a scale is missing. Companies looking to demonstrate commitment can do so by putting pen to paper and promising to use innovative materials when they reach scale. That is how we get investment flowing and erode the competitive advantage of an unsustainable status quo.” – Tricia Carey, Chief Commercial Officer, Renewcell
TRENDS TO KEEP A TAB ON:From Fractal’s Future of Retail Study
1. Planet-friendly, pocket friendly for retailers
• Planet-with-profit brands are increasingly becoming consumer and shareholder favorites. With stable data orchestration, retailers can reduce supply chain disruption and draw insight from circular economies to manage bloated inventories and find secondary markets.
• Enterprise-wide data sharing is not a priority for retailers right now, propelled by a siloed approach of “every department for itself” regarding departments taking ownership of data sharing. With cross-organization data sharing, retailers can meet supply chain demand more efficiently.
• Implement resale as a service through an integrated platform for used products.
• Enable data orchestration across retail functions to represent one cohesive experience.
2. Functional minimalism; escape economic distress.
• With evolving consumer sentiment, retailers must look to create innovative products with a long-term outlook. Establishing themselves as mindful leaders of positive change through such initiatives would inspire customer loyalty and facilitate sustainable growth in the future.
• Digital consumers gravitate towards responsible minimalism, rewarding brands offering quality products with unobtrusive features. Retailers that prioritize sustainability measures in tandem with reliable delivery and disposal models will reap the rewards this burgeoning trend carries.
• Sustainability as a criteria/filter for AI-powered chatbots to help consumers curate responsible, informed decisions.
• Provide accurate information and recommendations for up-cycling/disposal of all product parts through labels/QR codes.
The Convenience Ceiling; At What Cost?
• Hyper-convenience comes at the cost of workers and the environment, eroding long-term sustainable business outcomes. Hence, businesses have the unique opportunity to strike an equilibrium between efficiency and environmental awareness for long-term sustainability. Consumers’ (potentially unhealthy) disposition for instant gratification can become the race to the bottom across stakeholders.
• Brands must recognize the potential consequences of increasing demand for quick, single-item delivery services. Ghost kitchens and stores can create public disturbances such as congested traffic, air pollution, or inadequate working conditions. Furthermore, heightened packaging waste from overconsumption could lead to increased emissions – demonstrating a need for sustainable solutions that benefit consumers and society.
• Opt-in for large or multiple boxes for order delivery using order consolidation.
• AI-based route planning to monitor carbon emissions from sourcing and delivery.
4. Shoulder-to-shoulder with aware consumers
• Consumers are increasingly becoming aware and conscious of being “sold” sustainability and, more importantly, being misled. Brands must tread carefully when labeling products as “organic”, “eco-friendly,” and other similar eco-labels, as governing bodies are not the only ones to ‘catch’ false claims anymore.
• Greenwashing has become increasingly well-known, and it is essential to practice what brands preach; otherwise, the consequence could extend beyond temporary negative reviews into lasting loss of public trust. This impact could be seen in the form of cancel culture, lost trust, and a damaged brand image. Hence, the future of retail lies in authentic, credible marketing and sticking true to environmental claims.
• Procurement by identifying fair trade suppliers and tracing suppliers’ certifications.
• Tracking materials that are sourced responsibly.
5. Accountability is a must-have for ethical retail.
• Consumer awareness & new compliance regulations are compelling brands to rethink core functions and understand how to ensure transparency for all functions and stakeholders. The cost of not having a strategy for managing AI (Artificial Intelligence) and data risks has become untenable.
• Integrating Responsible AI as a core layer across models & use cases is becoming the norm – with principles of Transparency, Accountability, Privacy and Safety, and Fairness integrated at every stage. With attacks becoming more inevitable, companies must refocus their energy from countering attacks to managing reputation & public trust.
• Integrate structured and unstructured data using supply chain control towers.
• Balance personalization with privacy; explore first-party data and synthetic data as alternatives.
RESPONSIBLE AI RETAIL PLAYBOOK:
Data orchestration for circulatory systems
• Measure the impact with data at the center.
• Strategic shifts can help solve inventory woes.
• Leverage resale as a service.
• Incremental shifts for better waste management across the supply chain.
1. Fleming. (2020, December 8). Circular economy examples – how IKEA, Burger King, Adidas and more are investing in a circular economy. Weforum. https://www.weforum.org/agenda/2020/12/circular-economy-examples-ikea-burger-king-adidas https://www.shutterstock.com/image-photo/gothenburg-sweden-october-12-2017-huge-790473640
2. Brooker. (2022, May 11). The Highly Caffeinated Future of Minimalist Fashion in China. Jing Daily. https://jingdaily.com/the-highly-caffeinated-future-of-minimalist-fashion-in-china/
3. Kushner, & Lindsay. (2021, December 7). The Dark Side of 15-Minute Grocery Delivery. Bloomberg. https://www.bloomberg.com/news/articles/2021-12-07/what-instant-delivery-services-could-do-to-cities
4. Shendruk. (2022, September 4). USA: H&M faces “greenwashing” class-action lawsuit over alleged misleading & false marketing of ‘sustainable’ clothing line. Business & Human Rights Centre. https://www.business-humanrights.org/en/latest-news/usa-hm-faces-greenwashing-class-action-lawsuit-over-alleged-misleading-false-marketing-of-sustainable-clothing-line/
5. Guo. (2022, December 19). 8A Roomba recorded a woman on the toilet. How did screenshots end up on Facebook? MIT Technology Review. https://www.technologyreview.com/2022/12/19/1065306/roomba-irobot-robot-vacuums-artificial-intelligence-training-data-privacy