Climate crisis: Retail industry as confused as ever
The Retail industry has a lot to do to reduce its carbon emissions and become ESG-compliant, but what part does the ever-confused consumer have to play in helping to achieve this?
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Muddled, contradictory and hypocritical. Much of the thinking on Environmental Social and Governance (ESG) generally is all these things, perhaps even more so in retail than other sectors.
One key barrier is that understanding and prioritisation of ESG themes varies between Retail stakeholders (investors, landlords, retailers, consumers), who each have their own view and agenda which is unlikely to be consistent.
The other key barrier is that Retail is slave to the consumer – and the consumer is as confused as anyone and rising consciousness on ESG does not necessarily translate into ESG-compliant behaviour.
Carbon footprint
Environmentally, Retail generates a massive carbon footprint, with physical stores responsible for significant operational and embodied carbon emissions. According to the Building Energy Efficiency Survey (BEES), Retail ranks as the top energy consumer, accounting for 17% of total energy used by non-domestic building stock.
But online, to which there has been a very well documented flight, is tangibly worse if all considerations are taken into account:
- Shorter lead times = higher polluting transport such as air freight
- Multiple purchases = split shipments, multiple deliveries and individualised packaging,
- Higher product returns = increased landfill.
So many more questions than answers.
Retail largest private employer
Environmental has a tendency to dominate ESG narrative, but Social and Governance issues are of equal significance – and are perhaps even less transparent. Amongst the headlines heralding the decline of the high street, it is easy to gloss over the fact the Retail industry is the UK’s largest private employer, providing jobs to over 2.8 million people, approximately 9.3% of the working population.
Retail remains a core component of the UK’s social fabric, with Retail vacancy frequently cited as a barometer of a town or city’s health. Retail bricks and mortar contribute a huge amount of wealth for communities and the public purse – with Retailers paying 25% of all business rates.
"Put simply, consumers are yet to practice what they preach – they talk the ESG talk, but don’t walk the ESG walk."
Consumer confusion
But within S and G, you don’t have to look far before the contradictions set in. Without naming and shaming, many of the best Retail operators in terms of performance (trading and share price) are those with some of the most dubious ESG credentials. For example, revelations of modern-day slavery practices at a number of online fashion operators have not derailed their trailblazing performance in any discernible way. Put simply, consumers are yet to practice what they preach – they talk the ESG talk, but don’t walk the ESG walk.
ESG is rightly rising up the agenda in Retail, but consumers and investors alike remain vulnerable to greenwashing. The holy grail in retail remains achieving significant cost savings from environmental strategies, thereby obviating the ‘cost vs conscience’ deliberation that currently dominates thinking.