Retail Brands Should Shift to a Sustainability-Centric Business Model to Stay Competitive Now & in the Future

With increased exposure to issues pertaining to both the supply chain and climate change, consumers are more aware of how retailers are reacting, which is why it's incredibly important for brands to move to a sustainability-centric business model now.
Retail Brands Should Shift to a Sustainability-Centric Business Model to Stay Competitive Now & in the Future

The world is changing. Supply chains used to be something few people cared about –an opaque necessity operating behind the scenes so that consumers could dress in the latest fashions. 

In the past, when consumers bought a new pair of sneakers, they likely considered style, fit, and price. And if they were like most people, they probably didn’t consider whether the people who made their sneakers were being paid fair wages and had safe working conditions, or whether they came from a plant that was massively polluting its surroundings with toxic chemicals. 

But fast forward a year – a year in which there’s been more time to contemplate what’s important in life, and a year in which we’ve seen increasing evidence of climate change – and things have certainly changed. Consumers care far more about the origin and environmental impacts associated with what they buy. 

Today, supply chains dominate the news cycle, making headlines due to events like the massive disruption at the Suez canal, where $9.6 billion worth of trade was prevented in the six days of it being blocked. 

Climate change is front-and-center as well, extreme weather events like droughts, flooding, and rising ocean levels not only affect the bottom lines of global brands, but they can be devastating to the residents of the affected areas. 

With increased exposure to issues pertaining to both the supply chain and climate change, consumers are more aware of how retailers are reacting, which is why it’s incredibly important for brands to move to a sustainability-centric business model now.

With responsibility for about 8-10 percent of global carbon emissions, and almost 20 percent of wastewater, the fashion retail industry is a big contributor to climate change and plays a large role in taking responsibility for creating restorative change. Consumers, regulators, and investors alike are waking up to these facts and are demanding that brands take responsibility for their entire footprint; it is no longer acceptable to be oblivious to the practices of suppliers beyond tier-I. 

Compliance, Transparency, and Transformation

In this world of accountability, brands are being pushed on three fronts: compliance, transparency, and sustainable transformation.

In terms of compliance, brands are facing a growing number of global and local rules, regulations, and trade laws. Failure to comply can lead to large fines or loss of revenue. For example, retailers and brands can end up with products stuck in U.S. customs if they cannot prove that their t-shirts do not include cotton coming from the Xinjiang area in China, due to risks of widespread human rights violations and forced labor.

Even without the regulatory demands for compliance, brands would need to make changes, as activist organizations, consumer watchdogs, and consumers themselves are demanding transparency – the practice of being open and honest about product origin and ESG impact. 

While it may be tempting to market your products as ‘sustainable’ – as a growing number of consumers prefer to buy sustainable products (40 percent in the US, 49 percent in the UK, 60 percent in France, and 82 percent in Metro China – brands will lose consumer trust and future revenue (as well as face large fines) if they cannot provide the substantiation. And many cannot: in 2021, the International Consumer Protection and Enforcement Network (ICPEN) found that 40 percent of environmental claims made by brands could be misleading.

Sustainable transformation is the only way forward to stay competitive amidst the new regulations and the consumer demand for transparency. What previously was a focus area for sustainability pioneers a few years ago is now fast becoming a necessary factor to stay relevant, especially as the younger, highly conscious Gen Z consumers grow up. 

Estimated to spend over $3 trillion in 2030, a six-fold increase vs. today, appealing to Gen Z’ers will become crucial to not only grow – but to survive. And this requires real, proven sustainable behavior, as Gen Z’ers say sustainability is more important than brand name when making a purchasing decision.

The Path to Sustainable Transformation 

Brands can leverage supply chain traceability to embark on or speed up their sustainable transformation – because the reality is that there can be no sustainability without traceability. Only with transparent supply chains can retail brands truly understand the impact of their actions, both on the environment and people, and know-how to take the right actions to make meaningful change. 

Think about it: a large brand in any industry will most likely have hundreds or thousands of suppliers spread across the globe. Imagine how tricky it is to understand them all, let alone keep track of performance and impact. 

It’s no surprise that the solution lies in digitalization, a vertically integrated stack of technologies that collects and generates data about a brand’s myriad suppliers, verifies it, and enables deep analysis and insights-based action. It enables brands to understand their current and ever-changing sustainability performance, as supply chains are living things that evolve almost daily. It also helps discover and manage risks when disruptions occur, which the last couple of years have shown they inevitably will. 

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