Cost challenges are pushing retailers to sideline their ESG Goals… or are they?

At the Retail Gazette Efficiency Debate last week [25th September], the audience was asked this question: 'Are your business’ ESG initiatives being sidelined due to cost challenges?'

Environmental, Social, and Governance (ESG) are part of many retail strategies. Whether it’s carbon reduction, sustainable packaging or ethical sourcing, these initiatives signal to consumers that a company stands for more than just profit.

But was the Efficiency Debate a reality check?

As commodity prices and inflation rise, along with supply chain disruptions and the pressure to keep prices competitive, are retailers starting to put their ESG goals on the back burner?

When the picture was taken, the room was divided: 37.5% said it remains a priority, and 34.4% said it was sidelined (along with other costs across the business).

The ESG-Cost Dilemma

The expectation is that “sustainability comes at a price*". There are assumptions that a hefty price tag is associated with sustainable packaging options, ethical sourcing and net zero carbon targets. Upfront investments and ongoing costs can add up fast, and in a climate where every penny counts, the retail world is taking a step back to re-evaluate.

That’s not a bad thing.

Under the ESG banner, some bold promises to go green have been made in recent years. The problem was that most of the time, these aspirations were not tested at scale and some of those ideas hurt the bottom lines, especially when consumers are more price-sensitive than ever. It's no surprise that some retailers are changing or even sidelining ESG.

We believe that re-evaluating internal ESG targets is not a bad thing at all. Every ESG plan is open to a test-and-trial mentality. Those that are focused on validated and tested must-haves rather than PR wins are proving to be a success to retailers across the board. ?

The problem was mixed messages from consumers.

Consumers are continually surveyed, saying they want brands to be sustainable and ethical, but only a few are willing to pay extra for these values. This paradox impacts the entire value chain.

It’s an especially tricky balancing act in sectors like retail and FMCG, where margins are already slim. Brands might want to move to eco-friendly materials, but it's a tough sell internally if the switch adds to product costs and squeezes margins. That's why a robust and validated business case is the best-case scenario for ESG, efficiency and financial savings.

The answer lies in Smart Strategy

Organisations that merge ESG goals with their core business strategy seem to emerge victorious. So is the key to success about switching the lens to look at ESG as an investment in future-proofing the business—not just a cost?

For procurement leaders, this might mean getting creative with suppliers or finding new partnerships that better align with ESG and budget goals. Packaging teams, for example, can merge efficiency with ESG with the correct change initiatives.

It comes down to Leadership and Vision.

Navigating this tension between ESG and cost is not just a challenge but an opportunity for fresh leadership tactics and a clear vision for the future. These examples were evident at the Efficiency Debate. Their on-stage conversations suggested that some retail leaders see ESG as a core value rather than a box to tick, and they are likelier to stay committed even when the economic landscape is challenging. These brands are thriving by gaining the trust of consumers and partners and by evolving their relationships with suppliers to collaboration relationships.

Final thoughts: ESG is not just a cost—it’s a value driver.

Yes, cost challenges could easily make retailers sideline their ESG goals, but that doesn’t mean they should. Brands that can strategically align their ESG initiatives with long-term business value will stand out. For those in packaging, procurement and supply chain, this means rethinking how to make ESG a part of the company’s values and a driver of business growth and resilience.

So, what’s your take? Are ESG initiatives at risk in your business, or are you finding new ways to make them work despite the pressures? Let’s continue the conversation here

*Credit goes to Jeremy at 4C for this gem of a statement