Retail in the Midst of Sustainability Evolution
In the retail world, sustainability as a topic of discussion and a way of doing business continues to evolve as retailers of all sizes work to tackle an issue that daily seems to grow in complexity.
While topics such as product packaging often lead the discussion about sustainability, especially among consumers, those inside the business know that the effort is far more than having a box, bottle, or other type of container be recyclable or compostable. What’s clear is that sustainability is now part of every conversation that retailers have about everything, from the first steps of product development to placing items on the shelf.
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“I’ve worked with many retailers at this point, and each is on their own step of the maturity journey when it comes to sustainability,” says Christina Lampert, director of growth and innovation at HowGood, a sustainable food-rating company based in Brooklyn, N.Y. “We’re seeing an evolution from talking only about sustainable packaging to putting more of an emphasis on broader retail sustainability goals.”
Smart Agriculture
Whole Foods Market, for example, is continuing to double down on the core of its sustainability program, according to Caitlin Leibert, the Austin, Texas-based grocer’s VP of sustainability. She notes that the company is focused on several initiatives, among them making its stores more energy efficient, donating millions of pounds of food to those in need to reduce food waste, and expanding its support of smart agriculture.
The focus on smart agriculture is a newer development for retailers such as Whole Foods and this issue, observes Leibert, is putting more focus on such things as organic, biodynamic, regenerative, and the way that products are grown and food is sourced.
“We’re an active participant in the food system and it’s our responsibility to understand how the food that is on our shelves is raised and grown,” she says. “Having invested heavily in organic in the early years, I think we’re at a point now where we recognize the challenges that impact climate and nature and how agriculture plays such an important role.”
Leibert notes that recent studies show that between 20% and 30% of greenhouse-gas emissions come from agriculture, which is directly affected by changes to the climate.
“As climate advances and we have more catastrophic weather events, that is impacting the food system as a whole,” she adds. “It’s sort of a circle, as both of those things are impacting each other.”
The evolution as it pertains to sustainability at Whole Foods is an example of how a retailer can take control of this issue over time and branch out into new segments related to the topic. HowGood’s Lampert notes that private label assortments enable retailers to assess product assortments, analyze where a majority of the sustainability impact is coming from and innovate in such a way as to have a positive impact on the environment.
“Private label gives a retailer more control over carefully selecting raw materials and working with product suppliers to understand exactly how and where products are being sourced,” she explains. “This allows them to move so much faster than the national brands.”
The Packaging Piece
Part of the discussion related to sourcing and raw materials includes packaging, and there remain several challenges to improving the containers that hold various products now on retail shelves. Dawn Nowicki, VP of marketing with Lake Forest, Ill.-based packaging supplier MRP Solutions, says that the conversation about product packaging is also evolving.
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“One of the bigger transitions I’m seeing is telling the whole story around sustainability rather than just focusing on the life cycle of a product,” she notes. “This includes more companies highlighting their efforts related to greenhouse gases and the steps taken to decarbonize.”
One of the big challenges that continues to face product packaging is proper disposal by consumers. While many products are said to be recyclable, only a small percentage of used packaging is recycled.
“Right now, the U.S. is very fragmented,” admits Nowicki. “Europe is ahead of us pretty dramatically, and Canada has also put in some government mandates that are helping drive recycling.”
When working through the many challenges relating to sustainability, keeping an eye on the needs of consumers is a growing factor in the conversation. Younger consumers — Gen Z and Millennials — show a much stronger interest in shopping sustainably than their Generation X and Baby Boomer counterparts.
While a growing number of consumers say that they’re willing to pay more for products that are eco-friendly, how much more money they’re willing to fork over remains a constant question without a clear answer.
Robert Beagan, director of sustainable growth platforms with Sayreville, N.J.-based packaging supplier Sabert, says that retailers have to determine what their customers are willing to pay for a product that has the right level of sustainability.
“You can’t not recognize the preferences of consumers,” asserts Beagan. “You’re starting to see more consumers align their purchases with their own sustainability goals. Even though many consumers are willing to pay for more sustainable products, in uncertain economic times that doesn’t always hold true.”
Communication is Key
Leibert says that Whole Foods’ shoppers are more aware and informed about their purchasing decisions, which makes communication about its sustainability efforts to consumers vital.
“We want our customers to feel confident that simply by shopping at Whole Foods, they’re helping support the things that we believe in,” she notes. “Knowing our customers are better informed, we’re doing what we can as a retailer to reduce greenwashing. It’s not good enough to say a product ‘is the best in the world.’ We have to give them more information about the product.”
While managing costs is vital, sustainable products can also help grow sales. Lampert points to research from the NYU Stern Center for Sustainable Business showing that products marketed as sustainable grow on average twice as fast as conventional products.
“We know that products that are marketed as sustainable have a higher price premium as well,” she says. “Given the competitive price advantage store-brand products have, this is something [retailers] could capitalize on.”
