Ask any retailer what the main issues are facing their business today and you’ll be hard-pressed to find one who doesn’t mention sustainability. But who is doing good things here and how are they getting results?

Over the past two years, sustainability has risen up the boardroom agenda, with an increasing number of businesses setting targets to reduce their impact on the environment.

As co-founder of business-focused environmental campaign group A Plastic Planet, Sian Sutherland, puts it: “It’s gone from being the sustainability director who no-one really wanted in the room to the person who is absolutely front and centre.”

Perhaps most visible is the sector’s war on plastic; a move in the UK that was spurred by Sir David Attenborough’s 2017 Blue Planet II BBC series, which – after showing how plastic pollution was devastating the world’s marine environment – ignited a major public debate.

Sustainability-infographic

Research commission by Retail Week and Ometria, conducted by Censuwide this month, found that 72% of shoppers say its important that the brands they shop with have sustainable credentials while two thirds (66%) would consider stopping shopping with a retailer because they are not sustainable.

With such a heightened awareness it’s difficult for businesses to turn a blind eye to exactly how they are contributing to these problems – particularly for retail.

Statistics show that 10 UK supermarkets alone are responsible for flooding the market with 810,000 tonnes of single-use plastic every year, says Greenpeace.

Textile production, meanwhile, is responsible for more greenhouse gas emissions than all international flights and maritime shipping combined, according to the Ellen MacArthur Foundation.

The good news is that as these issues gain more attention, so too do the ways in which they can be tackled, as British Retail Consortium head of sustainability Peter Andrews points out.

“We’re getting a better understanding now of the impacts we’re facing and we’re seeing more evidence of the likely scenarios of our planet warming, but also of the opportunities to mitigate some of that and what companies can do to start taking action.”

In this special report, Retail Week explores:

1. The retailers getting results

For the grocers, a lot of that opportunity and focus to date has been directed at reducing the amount of plastic packaging they use.

One company leading the way is Iceland. Dubbed by the group’s managing director Richard Walker as a “corporate activist”, Iceland has set a bold target to completely remove plastic from its own-label products (more than 1,000 product lines) by the end of 2023.

Laying out the challenges his business faces in meeting these targets, Walker says: “Retail is one of the most competitive industries in the world.

Richard Walker

Richard Walker: ‘Iceland is not a sustainable business yet but we’re trying’

“We’re trying to balance being more purposeful with operating in this very competitive environment where we have sales pressure, we have more competition from the rise of online retailing and the likes of the German discount retailers.

“All these different factors are at play, all the while we’re trying to become more sustainable. Iceland is not a sustainable business yet but we’re trying.”

So far, the group has removed 2,000 tonnes of plastic out of the 13,000 tonnes used in its packaging annually, says head of sustainability and CSR Hilary Berg.

“We’ve got a very clear five-year technical plan to do this, as well as plastic-free champions throughout the business, who are doing it as part of their day job,” she says. “We’re also working really closely with our suppliers to make sure they are completely engaged in that plan as well.”

Iceland_paperbag_1

Iceland stopped using plastic bags at its store in Hackney, east London

Walker explains how the group is conducting a number of trials across its stores as part of its move to reduce its plastic consumption – “many of these are unsuccessful but occasionally we get a success”, he adds.

These successes include trialling the first plastic bag-free store in the London Borough of Hackney, which resulted in the permanent rollout of paper bags in the store, he says.

Tesco is also striving to remove not just plastic but all non-recyclable and hard-to-recycle materials from its packaging. If it cannot remove it entirely, Tesco will reduce it to an absolute minimum.

As part of this, the retailer is exploring new technologies to make sure things such as film lids and pouches can be recycled.

By the end of 2019, Tesco will have eliminated the hardest to recycle materials from own-brand products, removing over 4,000 tonnes of materials from 8,000 lines. The grocer is working with branded suppliers to do the same.

Tesco wants to move excess packaging from both own-brand and branded products and has briefed suppliers that, from next year, the size and suitability of packaging will be assessed as part of category reviews and ranging decisions.

Tesco chief executive Dave Lewis says: “From next year, we will assess packaging as part of our ranging decisions and if it’s excessive or inappropriate, we reserve the right not to list it.”

Going plastic-free

Despite recent progress from some of the big retailers, Sutherland says the pace of change has been too slow.

“There is still a huge amount of headline-grabbing and rhetoric and not a lot of real measurable action behind it – particularly with the larger supermarkets,” she says.

“The change to date has come from some of the more affordable supermarkets such as Co-op, Budgens and Iceland. That’s really rewarding because being able to buy your food with a clean conscience should not be an affordability issue.”

A Plastic Planet worked on a 10-week fast track project with the Thornton’s Budgens store in Belsize Park, London, taking 2,000 product lines plastic-free over the period.

This store now has 3,000 plastic-free product lines and has become a “live open-source lab”, which means it tests different kinds of plastic-free solutions there.

For many products, plastic packaging was replaced by old-fashioned looking paper bags made from cellulose, a structural component of the cell walls of green plants. Meanwhile, for the store’s 300 different cheeses, a new wax packaging had to be developed.

Sutherland says sales and profit grew 4% as a result of the initial trial and there has been zero increase in food wasted during the project, which had been cited by retailers as a common problem of packaging-free produce.

Budgens Belsize Park

There has been zero increase in food wasted during Budgens’ plastic-free project

The shrink wrapping around a cucumber, for example, extends its shelf life for around 14 days.

As Andrews notes: “A lot of plastic and packaging is used to protect the product, particularly in the case of food. If it’s not protecting that product, it could potentially cause a greater environmental impact, since food waste gives off much greater greenhouse gas emissions and is a much more damaging contribution to climate change than the packaging alone.”

This point is demonstrated by the likes of Iceland which, after running a similar packaging-free trial in one of its stores, saw a 20% increase in food waste and a 25% drop in sales as loose produce and alternative packaging failed to resonate with shoppers.

However, Iceland will continue to experiment and is rolling out a new plastic-free initiative across more than 30 stores later this year, focusing on pre-packed produce rather than loose items, in response to customer feedback.

It is not alone in attempting to eliminate plastic from its stores.

Waitrose is trialling a packaging-free store, called Unpacked, which focuses on selling refillable items.

It launched the pilot at its Botley Road shop in Oxford this June, taking more than 200 products out of packaging such as fruit and veg, laundry detergents, and wine and beer, to “test how customers might be prepared to shop differently”.

It has since rolled it out to three additional stores.

Plastic alternatives

Waitrose is also exploring using plastic alternatives for packaging.

The supermarket is trialling the use of wasted food for its packaging, says Waitrose & Partners’ head of corporate social responsibility, Tor Harris.

“What’s really exciting here is where we can use a waste product from the supply chain to actually develop a packaging format that is natural and compostable. One of the examples we’ve already got on the market is a tomato punnet made out of the tomato vines that get stripped off the plants.”

Waitrose tomato punnet packaging

Waitrose is trialling packaging made from food waste

Elsewhere, Waitrose is exploring how it can use hard-to-dispose-of scampi shells to create a plastic-looking film. “There’s some really interesting stuff going on that is tackling the packaging and the food waste problems at the same time,” she adds.

Lush is also trialling using sustainable materials for packaging. It has launched a cork tin range in partnership with not-for-profit group Eco Interventions. Rooted in Portugal, the packaging programme, is also teaching locals how to regenerate their native cork forests, which are under threat from poor farming practices.

 

The problem with online parcels

Unsurprisingly in the world of ecommerce, packaging is also a particular blight.

Research by management consultancy Bain & Company has shown that having something delivered to your home is less efficient than going to a bricks-and-mortar shop.

There are multiple reasons for this, says Bain partner Casey Taylor. The fact that ecommerce requires additional packaging is the first and most obvious.

Parcel to ship

But additionally, customers tend to avoid large multiple-item baskets and buy more individual items and even if they do take the time to order items all at once, shipments are often dispatched separately.

There are a number of things happening in this space says Taylor, including the implementation of many more box sizes that are better suited to specific items and therefore use less packaging.

Suppliers are also using different primary packaging – the original box the product comes in – to reduce excess material.

Ecommerce giant Amazon has run its Frustration-Free Packaging programme since 2008, which now includes 750,000 products. That means the packaging of these products is made of 100% recyclable materials and products are shipped in their original packaging rather than put in additional boxes.

Amazon tests products in its packaging lab in Seattle and identifies steps that manufacturers can take to improve their packaging while making sure products are protected when shipped.

An example of this is the tie-up between Amazon and toy company Hasbro, who collaboratively designed new packaging to hold Hasbro’s Baby Alive toy.

“With Baby Alive, we reduced the amount of material used by over 50%,” Hasbro packaging engineer, Jacquie Patterson, said on an Amazon blog. “And we reduced the overall size of that package by more than half by switching to Frustration-Free Packaging.”

These strides are delivering encouraging results for Amazon, which as of December 2017, has eliminated 215,000 tonnes of packaging material and avoided 360 million shipping boxes.

However, the online giant faced criticism earlier this year for its new range of padded plastic envelopes, which its website admitted are “not widely recycled across the UK”.

Elsewhere, online fashion brand Asos says its packaging is “as environmentally friendly and sustainable as possible”.

An Asos spokesman said it had “invested a huge amount of time and resource” into developing mailing bags that are “now thinner and come in a wider range of sizes so packaging fits better, creating less waste and carbon emissions”.

He adds: “As well as increasing the amount of recycled content in our plastic packaging, currently at more than 25%, and switching to widely recyclable plastics, we’re doing lots to reduce the amount of plastic we use.”

However, it is smaller retailers that are leading the field in reducing plastic packaging. Fast-fashion retailer Pink Boutique started using mailing bags from sugarcane last year. The bags are chemically identical to regular plastic and as well as being renewable, sugarcane captures and stores CO2, making it carbon-negative.

Fellow fast-fashion retailer Little Mistress has also adopted sugarcane for its plastic bags.

Focus on fashion

Of course, plastic and packaging are not the only issues facing the retail industry. As Walker notes: “Plastic is a brilliant gateway issue that has engaged and mobilised millions of people in this country [but] it probably isn’t the biggest environmental issue this planet faces.”

For the clothing industry, further problems stem around its throwaway fast-fashion culture.

H&M Conscious

Brands such as H&M have introduced organic and recycled ranges

Statistics from the House of Commons Environmental Audit Committee found the UK sends 235 million items of clothing to landfill each year.

This waste has prompted major brands such as H&M and Zara to start recycling clothing.

In fact, Zara has pledged to only sell sustainable clothes by 2025.

Asos too is “increasing its uptake” of recycled fibres across its ranges. The etailer has also introduced a ‘responsible’ filter on its website, which only brings up items that are made from sustainable materials.

One of the early adopters of recycled clothing was outdoor clothing brand Patagonia, which in addition to making clothes from recycled materials, has been using a technology that recycles soda bottles and unusable manufacturing waste to make polyester fibres since 1993. This then goes into the brand’s Capilene baselayers, shell jackets, board shorts and fleeces.

Primark’s approach

Value fashion chain Primark, meanwhile, has been doing a lot of work to improve sustainability across its supply chain, with a particular focus on improving its farming of cotton (its most used fibre and a focus for other retailers including Marks & Spencer), according to the group’s director of ethical trade, Katherine Stewart.

“From a social and environmental point of view, we know understanding the supply chain is really important because quite a lot of the environmental impact is in the creation of the fibre and fabrics that are being used,” she says.

Primark 2

Primark wants to be more transparent about how its clothes are made

“We wanted to really understand what was going on in our supply chain, so we put a big focus on getting transparency and making sure we know where our product is coming from and then really digging in to find out what the issues are.”

Primark pledged in August to train 160,000 cotton farmers in India, Pakistan and China in environmentally friendly farming methods by 2022.

The announcement is part of the retailer’s 2013 sustainable cotton programme, which has a long-term aim to use 100% sustainable cotton in all its product categories.

Stewart says organic farming methods, which do not involve pesticides, traditionally result in lower yields.

By contrast, Primark has trained farmers in different organic farming techniques, such as companion planting – growing two or more crops or using natural fertiliser, which results in higher yields. Some farmers in India have experienced a 200% increase in income since enrolling in the programme.

Transformative tech

Technologies such as blockchain are also being mooted as a possible way to boost supply chain transparency, though this is very much in its infancy.

Nonetheless, a case study from Walmart demonstrates the possibilities available to retailers when branching out into the world of tech.

The US grocer introduced a blockchain-based traceability system in partnership with IBM to track its food from farm to store.

The idea behind the trial was that when an outbreak of a food-borne disease happens it can potentially take weeks to find its source.

Better traceability would allow companies to act faster, which it says could protect the livelihoods of farmers by only discarding produce from the affected farms.

As a result of the blockchain system, Walmart can now trace the origin of over 25 products from five different suppliers and is planning on rolling out the system to more product categories in the near future.

Elsewhere, retailers like Selfridges are trying to reduce their operational environmental impact by buying 100% green electricity or using new technologies to make their shops more sustainable.

“Refurbishments provide us with the opportunity to update and increase in-store efficiencies, such as replacing lighting with LEDs and improving cooling systems,” explains Selfridges director of sustainability Daniella Vega.

“We aim to use FSC or recycled timber in all new building projects and have worked with upcycled plastic content on our most recent store installations.”

She says Selfridges’ sustainability business model revolves around three areas: products and materials; new ways of working; and culture change.

Targets include removing palm oil from its own-label products (an ingredient which Iceland also stopped using in its own labelled products in December 2018) and making at least 50% of the products it sells better for people and the planet by 2022 by creating products that use less water, are vegan or were manufactured in the UK, for example, as part of its Buying Better, Inspiring Change scheme.

2. Creating the right culture

Sustainability innovations, supply chain shake-ups and trials need buy-in, investment and – critically – the right culture and processes in place to make them a success.

Setting targets is an important first step in driving a business towards more sustainable goals. As Taylor puts it: “You manage what you measure” – a mantra that all of the retailers spoken to for this report seem aligned with.

Setting targets

For Selfridges’ Vega, setting targets are essential to delivering change: “We absolutely believe that all businesses need to work towards ambitious targets to deliver the scale of the change that is needed.”

An example of this on a wide scale, she says, is Selfridges’ decision to sign up to the industry-wide G7 Fashion Pact in August, a new initiative that aims to create a more sustainable future for the fashion industry.

selfridges

Selfridges has signed up to the industry-wide G7 Fashion Pact

The pact focuses on action in three essential areas for safeguarding the planet: stopping global warming by achieving zero greenhouse gas emissions by 2050; restoring biodiversity; and protecting the ocean through initiatives like removing single-use plastics.

Vega says Selfridges has its own set of measurable targets: “When it comes to products, initiatives like our Buying Better labelling scheme are instrumental in helping signpost the sustainable attributes of the products we sell and to help customers make more sustainable choices.”

For example, in addition to removing palm oil from all its own-label products, Selfridges has committed to removing exotic animal skins by February 2020.

Still, there’s a recognition by Vega that these targets must be backed up by decisive action – a point Taylor echoes, adding that: “Targets for the sake of targets aren’t absolutely necessary but they do prompt management discipline and a measurement habit.”

She adds: “One of the most helpful parts of stating a target is the fact that you have to understand the full impact you’re having on the environment and that audit and measurement is the first step that many retailers need to take to understanding what really does drive our impact.”

Clearly, there are a number of factors at play when it comes to successfully driving change through a business, including its ownership structure.

Family-run Iceland is a case in point. As Walker notes: “In the early 2000s, my dad, who started the company, was the first retailer in the world to remove genetically modified ingredients from our own-label products and that was driven by a personal conviction that they were Frankenstein foods.

“More recently we have focused on issues like palm oil where we think we can really disrupt things and we can do that because we are a private business and we’re family-controlled.”

A long-time member of Greenpeace, Walker adds that sustainability is “among the higher things in my personal agenda” – something which also undoubtedly plays a role in shaping the culture that runs throughout the business.

Like Selfridges, he believes setting targets is an important component to delivering change, so too, he says, are setting KPIs.

“Business sustainability and environmental sustainability are inextricably linked. Making a difference involves colleagues with different skills and roles pulling in the same direction. For that reason, we are increasingly setting KPIs for teams and individuals, and this has to be the way forward for any company that is advocating change,” he says.

He says it has “galvanised teams” within the business by creating plastic-free champions, which he says have created “a passionate, cross-functional group” that work with him and their 300 own-label suppliers to fulfil their plastic pledge.

Sustainability and profit

When it comes to sustainability, the elephant in the room for many retailers is increased cost.

KPMG UK head of consumer markets Linda Ellett says: “It’s easy to flinch at the initial cost of implementing more sustainable practices within retail and consumer businesses, especially with margins under intense pressure from those consumers who have binged on a diet of discounts for a number of years now.

“But KPMG research recently found that shoppers would actually be prepared to pay an average of 8.5% more for more environmentally-friendly products. Indeed, two-thirds (67%) of consumers said they care more about the environmental impact of the goods they buy today, compared to five years ago.”

“Admittedly, consumer best intentions and the reality of their actions might not always marry up, but with growing negative sentiment around the likes of fast fashion, non-recyclable plastics and unethical working conditions, the trajectory towards more sustainable retail is certainly picking up pace.”

However, one fashion retailer we spoke to was dubious that their shoppers would pay more for sustainable products. “They want products to be sustainable but they don’t want to pay extra for it,” she says.

Primark’s Stewart describes how the group’s cotton programme required a “significant investment” but the cost has not been passed on to the consumer. A pair of conventional Primark pyjamas, for example, cost the same as those made with sustainable cotton: £6.

Minimising costs

Rather than pass cost increases onto shoppers, the fashion retailer says it is their responsibility to minimise cost increases by challenging buying and supply chain teams.

This highlights the importance of getting buy-in for sustainable retail from across the entire business, including commercial departments. Tesco has made sustainability a KPI to incentivise commercial teams to do all that they can to make products sustainable.

Ellett points out that some sustainable practices can bring margin improvements.

“Just think of those consumers who now bring their own reusable containers or bags into store, removing that cost from the retailer. The initial transition might be costly, but the longer-term benefits far outweigh the short-term pain,” she says.

Accenture Strategy managing director Harry Morrison highlights that consumers now expect retailers they shop with to be sustainable and are prepared to shop elsewhere if brands are not. “Tolerance for outdated practices is waning and the environmental challenge is highly visible. Consumers today are demanding that retailers take more responsibility in terms of reducing their use of plastics, improving their impact on the environment, responsibly sourcing goods and treating workers fairly. ”

It helps too that the investor community is becoming increasingly interested in sustainability. As one source at a major retailer notes: “There has been a 100% change in the last year where the community of investors are asking about ESC (environmental, social and corporate) issues and wanting quite a bit of detail about them.

“They’re noticing that customers care about these issues and they know there’s going to be a huge transfer of wealth from the baby boomers to their children, with those consumers having a huge amount of buying power.”

Andrews says: “Investors are taking a real interest in that because it’s going to affect business continuity. Investors are now thinking, ‘Is this business that I’m investing in now, going to be still functioning in 30 years’ time or does a business really need to start taking action now to make sure it’s futureproofing?’”

3. Sustainable models to take inspiration from

With a large amount of focus placed on the major retailers, it’s easy to miss the work that’s being done by emerging companies, some of which are building their entire business models around sustainability.

Everlane

US fashion retailer Everlane’s business model is based around “radical transparency” and sourcing sustainable materials from ethical factories at fair prices, it says.

Everlane

This starts with the cost. Everlane gives a breakdown on how much it costs to make its clothes. Its modern loafer, for example, is made up of $18.25 in materials, $29.16 in labour, $1.47 in transport and $4.75 in duties, totalling around $54. Everlane sells these loafers for $168, it claims other retailers would sell the same product for $270. 

It says: “We believe our customers have a right to know how much their clothes cost to make.”

The company is pushing back on today’s fast-fashion culture, with a “designed to last” motto, claiming its “not big on trends. We want you to wear our pieces for years, even decades, to come.”

Everlane has also opened “the world’s cleanest denim factory”, which recycles 98% of its water, relies on alternative energy sources, and repurposes by-products to create its jeans — minus the waste. It uses 0.4 litres of water in its denim, compared with the 1,500 litres of water used in standard production.

Allbirds

Founded by New Zealand former football player Tim Brown and renewables expert Joey Zwillinger, Allbirds centres on using natural materials to create footwear.

The company says its materials are “meticulously designed to be the most environmentally sustainable they can be”.

Allbirds

It started with iconic trainers the Wool Runner, made with a sustainably sourced merino wool upper and an insole made from caster bean oil.

Allbirds spent three years developing a sole made from SweetFoam, a material made from sugarcane rather than the petroleum-based foam that makes most soles, which launched last year.

It has made the recipe for SweetFoam open-sourced and available to the rest of the industry so that other brands can incorporate it into their products.

Its two key ingredients, wool and eucalyptus fibre, are not only renewable but also hold design benefits. The wool makes for lighter shoes and eucalyptus fibre has a cooling quality that makes them more wearable during summer.

The direct-to-consumer business is now valued at $1.4bn

Farmdrop

UK firm Farmdrop delivers fresh local produce to shoppers’ doorstep.

Farmdrop

Founded by former JP Morgan equities trader Ben Pugh, who worked on Ocado’s IPO, Farmdrop picks farmers who use sustainable methods to grow, rear and make their products and pays them more than major retailers.

Farmdrop gives producers 70% of the retail price, rather than the 30% traditional supermarkets pay.

It sells more than 2,000 products, from free-range meat, fruit and vegetables, ready meals to household essentials, and has more than 35,000 customers across London, Bristol and Bath.

Customers order via a website or app, the producer gets their orders via an app, batches them up and sends them to Farmdrop, which then delivers them in an allotted hour timeslot.

The majority – 85% – of home deliveries arrive in electric vans powered with renewable energy.