A change in consumer behavior and more visibility to packaging reduction and plastic waste has brought a new lens to how consumers are viewing their favorite brands, especially in retail. For businesses, this has a huge impact on brand loyalty, product choices, and the bottom line. What are the most relevant ESG issues in the retail sector?
ESG in Retail
The retail industry is facing a couple of environmental, social and governance (ESG) risks in its business model. Pulling together the risk analysis of the finance industry for retail, we see the most material ESG challenges to be addressed by retail companies:
- Change in consumer behavior
- Packaging reduction
- Climate change and environmental impact
- ESG integration in strategy
- Circular economy
- Reporting on ESG
- Corporate responsibility for supply chain (e.g human rights violation and environmental damage)
In today’s blog, we would like to address the two most material risks on the list - change in consumer behavior, and packaging reduction.
Sustainability Impacts Consumer Behavior
What are the main changes in consumer behavior in the sustainability field?
Consumer demand and behavior are influenced more and more by the increasing rate of natural catastrophes linked to climate change, pollution and littering, and the abundant media coverage of these events. Consumers want to be part of the solution in the following ways through their buying behaviors and choices in consumer goods:
- Cleaner products not harming the environment
- Healthier products (e.g. less salt, fat, sugar, meat …)
- Reducing waste with less packaging
- No plastic
- No harm done to animals
- No human rights violation in the supply chain
- Products they can repair instead of replace
These are just a few aspects consumers are looking for when choosing products and services or retailers. Perception of sustainability requires a deeper analysis: “products marketed as sustainable grew 5.6 times faster than those that were not” (Harvard business review) - BUT the perception of consumers on what is a more sustainable product is not always right and is becoming increasingly hard to discern.
Let’s consider one example often discussed in the media: Over 1/3 of all food produced globally goes to waste.
Consider plastic packaging for roast beef. If you implement a new and improved plastic packaging (skin packaging vs. MAP tray), the weight (and cost) of the packaging is increased. Although the total amount of plastic is increased, the overall CO2 emissions to enjoy the same portion of roast beef (due to increased shelf-life and the reduction of food waste along the supply chain) more than outweigh the additional plastic put into the packaging.
Pulling together the data and calculating the real impact of product solutions is an increasingly important first step for retailers who want to make a difference, and the Associates of Inogen Alliance are experienced partners who can help. A recent study on food waste and packaging can be found here.
According to this study, retailers need to:
- Define what are sustainable products
- Identify the right labels
- Know how sustainable their products are and have data to tell the story
- Get the knowledge on sustainable products into their own workforce down to the employees at point-of-sale checkout in their stores (where they can often be the face of the company)
Second on our list of ESG risks is the issue of packaging reduction.
Consumers are often confronted with reports of marine and environmental littering. According to a study by GfK in 2019, manufacturers of products are on top of the list of those responsible to take action against packing waste, with the retail sector following in the fourth position. Major retailers are working to reduce this problem by defining clear requirements for packaging for their suppliers.
Setting a reduction target for plastic packaging, increasing the share of packaging fully recyclable to 100% in the long term, and focusing on closing the material loop for packaging materials are goals that many major retailers have publicly announced, including Walmart, KROGER CO SCHWARZ GROUP, and Aldi.
Check out Sustainable Product Analysis services where Inogen Alliance associates support with:
- Packaging Portfolio analysis
- PCF and LCA of packaging solutions
- Update and preparation of supplier guides on improved packaging
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