Driving Change: Key Sustainability Trends in Retail

Posted on : July 29th 2024

Exploring the shift towards Sustainability in the retail sector 

Sustainability has emerged as a significant force in the global retail landscape, driving the race towards net-zero emissions. According to the United Nations, net zero means cutting carbon emissions to a small amount of residual emissions that can be absorbed and durably stored by nature and other carbon dioxide removal measures, leaving zero in the atmosphere.

The retail sector, as a key link between producers and consumers, significantly influences buying and selling decisions. The 2002 World Summit on Sustainable Development in Johannesburg identified shifting to more sustainable consumption and production (SCP) modes as a key objective of sustainable development .

In the U.S. alone, consumer spending exceeds $14 trillion annually, accounting for two-thirds of the US GDP, according to McKinsey in a February 2023 article. The article notes that a substantial portion of this spending goes toward consumer packaged goods (CPG), such as food, beverages, cosmetics, and cleaning products. Given its size, the CPG sector—with millions of employees and trillions of dollars in annual sales—is pivotal in building a more sustainable, inclusive economy.

Digitalization and Technological Advancements in Retail 

The COVID-19 pandemic significantly accelerated the digital transformation of the global retail market. Retailers strengthened their digital presence to offer safer, contactless shopping experiences, leading to a surge in investments in digitalization and omnichannel sales. This shift has had lasting impacts, driving continued innovation and integration of advanced technologies.

The retail ecosystem now leverages technologies like AI, cloud computing and analytics to create seamless and immersive shopping experiences. 

Key features:

• Integration with Global commerce stakeholders: Retail connects with primary producers, manufacturers, importers, packaging firms, waste management services, transportation, logistics providers, and warehouses. 

• Influence on Consumer Choices: Retailers play a crucial role in shaping consumer choices and driving consumption patterns through digital and physical platforms.

• Technological Innovation: AI, data analytics, and cloud computing enhance operational efficiency and sustainability, offering personalized and efficient shopping experiences. 

These latest technologies enable retailers to better understand customer behavior, optimize supply chains, and adopt sustainable practices.

Socially conscious consumers have emerged

Simultaneously, the growing awareness among consumers and retailers about the environmental footprint has sparked a sustainability transition. This is evidenced by consumers seeking information on production processes, origin, and ethical aspects. 

Retailers, responding to this demand, are adopting greener operations, sustainable practices, and circularity concepts. This alignment with regulations and consumer expectations offers incentives beyond enterprise sustainability and corporate responsibility goals. 

Data-driven retail sustainability 

Retailers are leveraging data analytics to gain a deeper understanding of customers shopping behaviors, product choices, and purchasing decisions. 

By analyzing this data, retailers can identify latest trends and opportunities, driving the growth of AI in retail. This partly underscores the healthy growth of AI in retail. According to Fortune Business Insights, the global AI in retail market was valued at USD 7.14 billion in 2023 and is projected to grow from USD 9.36 billion in 2024 to USD 85.07 billion by 2032, at a CAGR of 31.8%.

A snapshot of what companies are doing to boost retail sustainability

In June 2024, Target announced plans to introduce a gen AI-powered chatbot to support store associates in about 2,000 stores in the U.S. following a six-month pilot at 400 locations. 

The chatbot will be available as an app on handheld devices, providing immediate answers to queries about processes and procedures.  

AI-powered chatbots could soon help consumers understand the sustainability quotient of various retail products, such as eco-friendly packaging. CPG companies are also responding. 

• Mondelēz International aims  for approximately 98% or more of its packaging to be recyclable by 2025.

• Unilever aims to cut its virgin plastic use by 30% in 2026 and by 40% in 2028.

• Target envisions 100% of its brand packaging to be recyclable, compostable, or reusable by 2025.

• Nestlé aims for 95% of its packaging to be designed for recycling by 2025.

Retail sustainability is becoming a competitive advantage.

Authentic reporting of retail sustainability 

As sustainability gains importance in retail, ESG (environmental, social, and governance) reporting has become a standard practice. However, customers and investors are wary of ‘greenwashing’, the deceptive presentation of sustainability efforts. For example:

• Using confusing jargon to distract actual achievements.

• Providing minimal or unauthenticated data.

• Misleading claims or labels, such as calling products ‘eco-friendly’ or ‘sustainable’ without concrete efforts.

• Imbalanced or biased reporting, magnifying favorable ones and ignoring questionable pieces, etc.

Honesty is the best policy, as technology makes fact-checking easier in today’s world. By embracing sustainability and transparent reporting, retailers can build trust and loyalty with consumers while contributing to a more sustainable future.