The number of consumers who hold significant purchasing power is increasing. These consumers have a remarkable ability to ‘vote with their dollars’ by purchasing or boycotting products and services based on sustainability performance. As the main point of contact for consumers, retailers have a tremendous opportunity to shape consumption patterns by not only influencing purchasing choices, but also, through the supply chain and ultimately, redefining the retail business model. To understand the potential role for retailers in furthering sustainable consumption we interviewed Heather Mak from the Retail Council of Canada.
Q: How can retailers in Canada engage consumers more deeply on sustainable consumption?
A: If we define sustainable consumption as consuming so that there are enough resources for future generations, and eliminating negative social and environmental impacts throughout a product’s life cycle – I think getting consumers to do this on their own is a tall order, save for the niche “dark green” consumers. I believe that the average consumer does not buy green – it is more of a “gift with purchase” that accompanies another product attribute; other examples include a perceived health benefit, status, reduced cost, or enhanced efficacy. This means retailers, as owners of private label brands and regular consumer touch-points, have two responsibilities. First, they must do their homework on the life cycles of their own products. This is an enormous undertaking, but ultimately the more you know about the products, the better off you are at mitigating long term risk, particularly for those products that have complex supply chains.
Their second responsibility is to engage consumers more deeply by playing an education role at the point of purchase. Retailers, such as grocery stores – where consumers enter a store multiple times per week – are ideally positioned to educate consumers and change behaviour. I really like Unilever’s Five Levers for Change, which provides useful principles to do just that. From a Canadian perspective, there have been several great campaigns in the retail space, from partnerships with NGOs on sustainable seafood, to government and NGOs partnering for consumer health and wellness.
Q: In the future, do you see opportunities for retailers to embrace service-oriented business models in pursuit of advancing sustainability? If so, how?
A: Yes, definitely. The world is running out of resources and space, so what better thing to do than have service-oriented business models? Right now we are seeing a lot of high value to low-usage ratio products used in a collaborative consumption format – accommodation, cars, instruments, appliances etc. Several retailers are already getting in on this – for example, DIY retailers rent out tools, car companies/retailers are getting into the car sharing space – it will be interesting to see if this model can be applied to lower value items.
Q: What issues should retailers in Canada, and around the world, have on the radar in the next 5-10 years?
A: A couple of things. In the shorter term, certainly:
Extended Producer Responsibility – commitments are continuing to grow, and retailers are increasingly looped into these arrangements. We’re seeing a move to harmonize programs in Canada.
Packaging will continue to be important – from an optical standpoint it is what consumers see and comment on the most; however, more importantly without the package, product can spoil (providing it is a perishable item). There is a lot of work to be done here to reduce the amount of packaging used, while protecting the product inside. In addition, packaging is a huge area of spend for retailers and manufacturers. Intertwined with this, is the necessity of tackling food waste.
Water – we are lucky to have so many freshwater resources in Canada. However, this will not be around forever and retailers must begin with understanding water use in their operations. As well, they need to thoroughly understand water use throughout their supply chains.
Refrigeration – Hydrofluorocarbon refrigerants have a huge carbon impact, and there is a need to go back to natural refrigerants such as CO2 or ammonia, which are much less impactful and were used extensively several decades ago. These refrigerants were previously phased out due to safety issues, but we have been seeing successful and safe applications again in retail settings globally. In addition, to the high impacts of refrigerants, the act of refrigeration is highly energy intensive, so definitely an area of opportunity.
The interplay between human rights and deforestation, particularly in the supply chain and in the sourcing of commodities – the two are very complex, and have huge reputational and long term supply impacts. I’ve seen several industry initiatives under way on commodities such as cocoa and palm oil, but I think there is still a lot to do over time, with more stakeholders.
Biodiversity – lastly, with the Natural Capital Declaration being released at Rio+20, I think this put the spotlight on ecosystem services, and the need to put a value on intangibles that are not well captured in financial statements.
Q: How could retailers best balance the challenge of potentially thinning margins and sustainability commitments, particularly since the consumer movement is not yet as compelling?
A: I think striking the balance between thin margins and sustainability commitments is a very real challenge that all retailers are facing at the moment. Retailers, like other companies, are pressured by investors to report on their results on a quarterly basis. However I think we have to reframe how we think of sustainability and margins. Consider this: if retailers already have thinning margins and they do not think about the sustainability profile of their products, then there is a threat that they may not even be able to offer them in the future. Everyone’s favourite Sage of Omaha, Warren Buffett, even says that we need to invest for the long term! If retailers and consumer goods manufacturers aren’t proactive, then by the time they wait for the consumers to act it will be too late.
Taking into account the pressure on our planet, resource constraints and corresponding cost fluctuations, the retailers that aim to be successful in the long-term are those that are already investigating some of the ideas and concepts above. It will be interesting to observe how some of the leading retailers encourage sustainable consumption, transform their business models and pursue a more closed-loop economy in response to the many challenges and opportunities that lie ahead.
– Helle Bank Jorgensen and Agnieszka Rum Moore