Sustainability is catching on, from small startups making green jeans to giant retailers making bold moves.
“Every time you spend money, you’re casting a vote for the kind of world you want.” These words, from Small Planet Institute founder Anna Lappé, encapsulate the modern challenge before the retail industry – how to source, manufacture, package and sell products that line up with what consumers increasingly value: durable and eco-friendly goods, produced and brought to market by people paid a livable wage.
More than 93% of consumers around the globe expect brands to support social and environmental issues, according to a Retail Industry Leaders Association report. And they’re willing to pay a premium for brands that align with their values – up to 20% more, according to the same report.
“Companies are realizing they need to improve their ESG scores, and it’s because they’re finding it provides a meaningful return,” says Matt McClintock, a senior consumer research analyst for Raymond James. The benefits include saving money through reduced packaging waste or energy use; enhancing the firm’s brand by treating workers, customers and suppliers well; and positioning the company for the future through investments in alternative energy.
Retail sustainability programs have also been a rich source of innovation in recent years. Here, we browse through a few standout projects among retailers and consumer goods companies.
Clothing has long been a means of expression and a part of how we construct our identity. So it’s a logical place for sustainability to take root. The garments we wear against our skin are a very personal choice – one with significant environmental impact. Clothing and footwear production is responsible for 8% of global greenhouse gas emissions, according to U.N. figures.
One innovation that aims to shrink that carbon footprint is Circular ID, an RFID tracking system designed to make it easier for brands to recycle, repair and resell fashion products. A chip in each garment would allow us to toss our old shirts and shoes into the recycling bin – scan the chip, and the materials can be identified. Depending on the item’s condition, it could be pulped and made into cleaning cloths or auto insulation, or resold at thrift shops or increasingly popular resale sites. H&M Group, Target and Microsoft have so far signed on for the project, headed by fashion technology company EON. Other companies, such as Nike and Ikea, have developed circular design guides and processes to reduce waste.
Fashion manufacturing could also use a green makeover. A single pair of blue jeans, for example, takes nearly 2,000 gallons of water to produce, equal to the amount the average person drinks over a seven-year period. What’s more is that the indigo dyeing process creates a significant amount of wastewater, with polluting substances like cyanide. Spanish denim mill Tejidos Royo aims to change all of that with its waterless foam-dyeing process, Dry Indigo. In development for nearly a decade, the Dry Indigo method is now being used by brands including Banana Republic and Wrangler to save water and energy and reduce pollution.
When it comes to ESG, “everybody wants to be a leader, nobody wants to go first,” sustainability scholar Robert Eccles told Harvard Business Review, pointing to Novo Nordisk and Unilever as pioneers. That’s why it’s good news that retail giants have increasingly embraced sustainable practices, from Target’s ambitious plan to cut emissions 30% by 2030 to Walmart’s Project Gigaton. Both aim to decrease not only scope 1 and 2 emissions, which include a retailer’s own stores and factories, but also scope 3 emissions from suppliers. In this way, the rising tide may lift all green projects.
Their ESG efforts aren’t limited to reducing their carbon footprint, however. Both major retailers have been increasing hourly wages and adding benefits in a bid to retain quality workers. While Target has long prized social responsibility – it hasn’t sold tobacco products in decades, and doesn’t sell guns – Walmart’s sustainability focus has been in line with cutting costs, such as boosting energy efficiency and reducing packaging. That focus may be broadening, however. After deadly shootings at two of its stores in 2019, it announced it would stop selling handgun and short-barrel rifle ammunition nationwide. That same year, the world’s largest brick-and-mortar retailer released its first ESG report, and joined the Renewable Energy Buyers Alliance to push utilities to offer more green options. With hefty influence, each step these titans take reverberates. “When Walmart pushes, it changes the whole industry because if the suppliers are going to cut waste for Walmart, then they want to do it for everybody – that’s a good thing,” McClintock says.
As a society, everything we eat, wear and buy comes with an invisible cost in the form of environmental and social impact. Because these issues are global in scope, it takes collective action to make a dent, but the individual has a role to play. “In many ways, the buck stops with the consumer,” Gernot Wagner, an economist at New York University, told Scientific American.
With companies’ increased focus on sustainability, transparency is a natural side effect that empowers consumers – and investors – to make more informed choices for the world they want to see.
Learn more about how industries are making future-minded progress at RaymondJames.com/PoweringForward.
Sources: Raymond James Equity Research; company reports; Retail Industry Leaders Association; Sustainability Accounting Standards Board; Harvard Business Review; Renewable Energy Buyers Alliance; Scientific American
Utilizing an ESG investment strategy may result in investment returns that may be lower or higher than if decisions were based solely on investment considerations.
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