Sustainability and ESG action plans are becoming a standard business practice for many retailers. In the wake of this past summer’s heatwave and drought affecting large swathes of Europe, the topic is more urgent than ever before.
Retail’s greenwashing credibility crisis
The retail industry is more advanced than many other industries on the subject of sustainability, with it being widely discussed in the media and within the industry itself. Retail Week reported in July this year that “65% of boards said they already have remuneration linked to ESG targets or planned to introduce them in the near future”.
However, while recyclable packaging and “eco materials” have been around for years, you could be fooled into thinking that retail is well on the way to being carbon neutral, net zero, environmentally friendly, or one of the many other terms that are easily thrown around without much to back them up. Yet the reality is that the majority of the industry is just scratching the surface of what needs to be done to achieve the EU’s target of being carbon neutral by 2050.
Just last month the U.K. competition watchdog announced it will launch an investigation into the somewhat dubious “green” claims some of the U.K.’s largest fashion retailers have made. The problem of corporate “greenwashing” isn’t just limited to the U.K., however. Earlier this year a German consumer advocate sued a Dutch lingerie brand for misleading sustainability claims and issued warnings to two other retailers. So how can retailers be confident in what they are reporting?
Tackling scope 3 emissions
As we dive into the details of sustainability challenges within retail, let’s clarify some definitions for those that might be new to the topic. Emissions fall into one of three different categories: scope 1, 2, or 3.
- Scope 1: This covers the greenhouse gas (GHG) emissions that a company directly produces; for example, the fuel used in its fleet of delivery vehicles.
- Scope 2: These are indirect emissions from the generation of purchased electricity, steam, or heating and cooling that is consumed by the retailer.
- Scope 3: This includes all other emissions that are not directly associated with the retailer, but that the organisation is indirectly responsible for, either up and down its value chain; for example, production of purchased raw materials or end-of-life treatment for sold products.
The low-hanging fruit of reducing scope 1 emissions within the retail value chain can be easily tackled; for example, through the use of delivery vehicles powered by renewable energy sources or the construction of eco-friendly stores. However, the vast majority of the retail industries carbon emissions sit deeper within the value chain, and consist of scope 2 and scope 3 emissions.
In fact, scope 3 emissions alone can account for as much as 90% of the total GHG emissions within an organisation. One example would be a consumer goods company that sources its aluminium for packaging from many different suppliers. The production and sourcing of this aluminium falls under scope 3 emissions for the end retailer. As you can imagine, tracking the carbon footprint of all the different inputs within just procurement is a huge undertaking, especially for business models that rely heavily on outsourcing. The amount of data required to fully understand the true carbon footprint of your business can be daunting.
Why data should be at the heart of your sustainability strategy
Understanding and taking meaningful action with your organisation’s data is just one element in developing your sustainability strategy. Data can be a powerful tool to help organisations understand where true impact can be made. Yet it can be hard to know where to start or how to effectively implement changes with your organisation’s data. Retailers have always been data-rich organisations, but data silos and data governance issues have been the barrier to taking advantage of these rich data assets already sitting within your business.
Unified data without silos should be at the heart of any sustainability project or strategy your business undertakes. Retailers don’t need to pick sustainability over profits—these initiatives can go hand in hand. Unified data is critical for unlocking the greater potential value of your data, getting the right information to the people who make critical business decisions every day, such as demand planners and procurement teams. Not only does this allow for more efficient data processes, but it also helps to establish trust in your data.
A single source of truth is particularly important when we talk about retail sustainability. The customer is more knowledgeable about these issues than ever before, and their spending habits are intrinsically linked to how “sustainable” they perceive a retailer to be. A recent Retail Week report, “Green Is the New Black,” found that over two thirds of consumers would either stop patronising entirely, or at least reduce doing business with, any retailer they believed did not live up to its sustainability claims. Unifying your first-party data allows you to strategically set the right sustainability targets with purpose and confidence, not only protecting your perceived image in the market but also your financial bottom line.
How one Snowflake customer leverages data to reduce CO2 emissions
An example of a retail and consumer packaged goods (CPG) organisation that has made an impact already is one giant multinational consumer goods company with a complex supply chain. This organisation reduced its CO2 emissions by optimising its expensive, inefficient warehousing practices. Leveraging both Snowflake and Powered By Snowflake partner PEAK, this company uses data and AI to optimise stock levels at each distribution centre and the movement of stock between multiple centres. These data insights significantly reduced its transportation and operational costs. In doing so, the company was able to reduce the distance travelled by its fleet of trucks by 200,000 km and save 147 tonnes of CO2.
To learn more about how the company did this, we recently hosted a webinar on this very topic.
Putting data to work
You might be wondering what happens after you have unified your data and started tracking and collecting information. What is the sustainability solution to then apply?
One great place to start is by making existing operations within your business more efficient with the use of data. Take demand forecasting as an example. You could enrich your first-party data with third-party data sets, such as forecasted and historical weather data from AccuWeather, or geospatial and footfall data from SafeGraph. With the Snowflake Data Cloud, you could leverage these data sets without having to move or copy the data, and allow your data science teams to build more accurate models to predict precisely what products you need in exactly which stores. Not only can this increase sales and profits, it can also mean producing less stock and less miles travelled by your fleet of vehicles. Additionally, all of these actions can create a trackable insight into exact carbon savings if implemented with data in mind.
Overall, being able to back up your claims as a business is more important than ever. By choosing to be a data-driven retailer, you can sit more comfortably at the sustainability round table.
Originally posted on November 8, 2022 @ 11:01 pm
