Green is the new black: But what’s driving this change for retailers?
With The Collins Dictionary naming ‘single-use’ as its Word Of The Year for 2018, it’s clear that sustainability will be high on the agenda for the year ahead.
To understand how this is impacting the retail industry, we worked with Retail Week and 50 senior retailers to explore what is driving them towards the green economy. The two most common themes? Consumer consideration and pressure on the bottom line.
Consumers are increasingly aware of how their decisions impact the environment – and this is now actually influencing where they shop.
More than half (51%) of all consumers claimed ethical brand credentials were either ‘very’ or ‘somewhat’ important when deciding between different brands for clothes according to a recent study by Morgan Stanley.
In a Darwinian sector, where only the fittest survive, it’s no surprise that retailers are taking this seriously. 70% of the retailers we spoke to said consumer demand for environmentally friendly, sustainable or ethical behaviour had inspired a direct impact on how they do business.
One of the biggest issues grabbing people’s attention is single-use plastics. Blue Planet II was a wake-up call for many, who realised that the soft-drink bottles, plastic straws and coffee cups they’re simply throwing away are ending up in the sea, causing huge issues for wildlife that lives there. The nation rallied around this cause, putting pressure on themselves, the government and brands to fix the problem.
But although plastic is currently top of the agenda, it is just one of many environmental issues we all face. Supply chain sustainability, energy efficiency, weather-related natural disasters, and other environmental issues could all be put under the same intense scrutiny as plastics by a Blue Planet-style moment. Certainly, most retailers and trend watchers will be looking closely at what David Attenborough is going to say next.
One of the brands leading the way in tackling these issues is the supermarket Iceland. As well as substantial pledges on plastics, it took a stand on the issue of use of palm oil and removed it from its own-label products. Iceland made this issue the focus of its Christmas advert. While this campaign was subsequently banned for breaching advertising rules, many, including the Chief Executive of ITV and celebrities such as James Corden, lauded the supermarket for taking this stand.
Making decisions such as these requires investment – removing palm oil cost the frozen-food specialist £5m, according to experts. So from a purely business perspective, sustainability measures have to result in increased consumer loyalty and purchase or they must reduce costs.
Iceland’s managing director, Richard Walker, says: “Consumers are rightly much more interested now in the ethics of the organisations they buy from or work for, and they are voting with their wallets.
“The businesses that survive and thrive in the future will be the ones with purpose, that listen to their customers and live up to their social and environmental responsibility.”
Pressure on the bottom line
Investment away from the shop floor is always a tough pitch for most retailers – especially those on the high-street, who are facing increasing pressure on their bottom line.
But being green doesn’t just help you make appeal to consumers, it can often save you money too – this is where energy efficiency comes into its own. According to the Carbon Trust, a 20% reduction in energy can result in the bottom-line benefit to business similar to 5% increase in sales – one way to meet your annual targets!
Indeed, the most popular motive among respondents to our survey for becoming more energy efficient was reducing running costs (44%). More than half the retailers (54%) questioned revealed their energy bills are a factor in the overall competitiveness of their business, so reducing their energy bill could make a big difference to their profitability.
There are simple steps a business can take to reduce energy usage, such as switching to LED lights. Sainsbury’s has committed to 100% LED fittings by 2020, which will cut is energy use by 58%. Likewise Tesco has reported a staggering saving of £200m on its energy bills each year by cutting its energy use and switching to renewables.
We partnered with Marks & Spencer to connect the lighting, heating, ventilation and air conditioning systems of its stores to our Energy Management Centre.
Our smart energy controls allowed us to work together to understand how much energy was being used in each store and where they were losing energy. Subsequently, M&S reported massive energy savings of 34% across its UK stores. This programme is just one part of the brand’s Plan A 2025 scheme, which was launched in 2007 and, so far, has helped M&S to save more than £750m through efficiency strategies.
Richard Oakley, Customer Account Director at E.ON adds: “More than 80% of retail organisations are looking to reduce their energy consumption and the main driver behind energy policy is running costs. The cost of energy is important for customers, and many companies focus on procuring the lowest pence per unit, but the cheapest unit is the one that is not used at all.
“Many customers do understand how much they’re consuming, but not necessarily how, where and when, and that’s particularly challenging for businesses with more than one location. We provide analysis and a visualisation of how, when and where their current energy is being consumed. We work together to create a strategy and then help implement it.”
For retailers, just like any business, being as profitable as possible is key. Sustainability does not have to come at a cost – it can increase customer loyalty while also saving money, making it a vital long-term investment.
Given that consumers care increasingly about the state of the planet and with pressure on the bottom line increasing, it appears that for retailers green will be the new black for years to come.
On average, we’ve delivered an ROI between 25% and 40% for our retail clients. Click here to find out how you can create the perfect retail environment for your customers whilst cutting energy costs.