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?
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:
In today’s blog, we would like to address the two most material risks on the list - change in consumer behavior, and packaging reduction.
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:
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.
According to this study, retailers need to:
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:
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