The Climate Of Business #114: 5 critical decarbonisation strategies for retail businesses

Climate Change Reality

• Polar bears face starvation threat as ice melts (BBC )
• Spain drought: Tenerife to declare emergency due to water shortages (Euronews )
• British and Irish rivers in desperate state from pollution, report reveals (The Guardian )
• 1 in 5 migratory species are at risk of extinction, says a new UN report (World Economic Forum )

• Sinking skyscrapers, new beaches: Chicago faces the climate crisis (Financial Times )
• Microplastics found in every human placenta tested in study (The Guardian )
• 'Ice bumps' reveal history of Antarctic melting (BBC )
• EU to introduce 10-year prison sentences for environmental crimes (Euronews )
• Natural gas prices plunge as US set for warmest winter on record (Financial Times )
• Frequent Heavy Rain Has Made California a Mudslide Hotspot (WIRED )

Business Climate Reality

• Deep retrofits: how repurposing old buildings can mitigate climate change (World Economic Forum )
• The festivals searching for greener ways to rock (BBC )
• London is most exposed city in world to air pollution from aviation, study finds (The Guardian )
• Spain bans short-haul flights where you can take a train (Euronews )
• AI boom sparks concern over Big Tech’s water consumption (Financial Times )

• UK’s net zero economy grew 9% in 2023, report finds (The Guardian )
• ‘Time has run out’: Why is Germany planning to store carbon undersea? (Euronews )
• Google joins mission to map methane from space (BBC )
• How Germany’s steelmakers plan to go green (Financial Times )
• The Transport Companies Leaving Fossil Fuels Behind (WIRED )

Reality Check

By 2024, almost all businesses have realised that increasing regulatory requirements, shifting stakeholder values, and global emissions reduction targets means that comprehensive emissions tracking, measurement, and reporting is no longer a ‘nice-to-have’, but rather an imperative business component necessary to remain competitive.?

Accordingly, the retail sector – an industry at the forefront of such a rapidly evolving landscape – is being faced with the pressures of undergoing sustainable transformation due to its immense influence on global greenhouse gas (GHG) emissions and thus its vast potential to aid global decarbonisation efforts. Despite its negative environmental impact, the retail sector is uniquely positioned to lead transformational change.?

Accordingly, this week’s newsletter contains a deep dive into how the concentrated nature of the retail sector ultimately facilitates the implementation of critical decarbonisation practices, which emphasise a comprehensive approach to Corporate Social Responsibility (CSR) and are critical to reducing its environmental impact.

Understanding the carbon impact of the retail industry

The retail sector, with its extensive global presence, plays a vital role in the global economy and the natural environment. In 2022, the global retail market amassed an impressive $27 trillion in sales, a figure expected to surpass $30 trillion this year. Nevertheless, this economic achievement comes with a substantial environmental price tag. The retail industry ranks among the top 10 most carbon-intensive sectors, contributing to approximately 25% of global greenhouse gas (GHG) emissions.?

The bulk of these emissions stem from the extensive retail value chain, and such Scope 3 emissions ultimately highlight a critical area for intervention. These emissions primarily include:

• The procurement of goods
• Transportation
• Distribution
• The end-of-life processing of products

While such emissions are not directly controlled by retailers but associated with their value chain, they represent a significant portion of the sector's environmental impact. For many companies, especially in the home and fashion segments, Scope 3 emissions can constitute up to 98% of their carbon footprint .?

Businesses within the retail sector are gaining a competitive edge via decarbonisation

The retail industry finds itself at a pivotal juncture where sustainability is not merely a choice but a crucial factor in gaining a competitive edge.? Research shows that 89% of institutional investors now integrate ESG data into their decision-making processes, demonstrating the financial significance of sustainability initiatives. These endeavours have been proven to enhance shareholder value by $1.28 billion over 15 years, underscoring the substantial return on investment achievable for retail businesses that implement sustainable practices.

Moreover, adopting sustainability measures can result in significant cost savings for retail enterprises. Studies suggest a potential 60% enhancement in operating profits through reductions in resource expenses, presenting clear financial advantages. The areas where retailers can realise these savings include decreased energy bills, diminished fossil fuel consumption, and streamlined supply chains. Embracing sustainable and circular practices not only boosts profitability but also positions companies as leaders in sustainability efforts.

Further reading: The critical role of sustainability within B2B relationships

5 key decarbonisation strategies for businesses within the retail sector:

As highlighted within the latest ‘Strategies for sustainable transformation’ guide on the Plan A Academy , retailers can implement and adapt effective strategies to embark on a path that not only mitigates their environmental impact but also positions them as leaders in sustainability. While the following actions are covered extensively in further detail in Plan A’s latest academy piece, here is an overview of the 5 fundamental strategies that organisations within the retail sector must consider:?

1. Setting ambitious energy targets: Committing to aggressive goals for enhancing energy efficiency and incorporating renewable energy sources. Retailers must invest in innovative technologies – such as carbon accounting software – and practices that reduce energy consumption across their operations (i.e. from stores to distribution centres).?
2. Enhancing supply chain sustainability: Retailers can make significant emissions reductions by optimising logistics, investing in sustainable materials, and only collaborating with suppliers who prioritise carbon footprint reduction.?
3. Adopting sustainable retail operations: Implementing green practices in retail operations, such as using sustainable building materials, energy-efficient lighting, and heating, ventilation, and air conditioning (HVAC) systems, plays a crucial role in decarbonisation and operational efficiency.?
4. Product-level emissions transparency: Tracking emissions at the product or subcategory level enables retailers and customers to make informed and sustainable decisions.?
5. Incorporating emissions criteria into procurement: Embedding emissions criteria into sourcing processes allows for the identification of cost increases related to decarbonisation. In doing so, retailers can ensure that negotiations with suppliers are grounded in the realities of transitioning to greener materials and processes.?

Further reading: Decarbonisation strategy: The comprehensive guide for 2024

The retail industry evidently holds a critical role within global efforts toward fighting climate change. By implementing sustainable approaches and prioritising decarbonisation across the wider supply chain, retailers can not only diminish their environmental impact but also create new prospects for growth and innovation.

Ready to lead the charge in transforming the retail industry by leveraging cutting-edge decarbonisation strategies? Book a demo with Plan A today to kickstart your journey toward sustainability success.

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