The recent news that one of the world’s largest investors (the state of New York’s pension fund) will sell many of its fossil fuel stocks in the next five years should be a wakeup call to any business not currently thinking about sustainability that it’s time to start.
For organisations that don’t have sustainability or social responsibility baked into their DNA, it can seem like a distraction from the fundamental work of running a profitable business. But as more investors, employees and customers look to companies’ values before deciding whether to support them, it’s clear that the two are not mutually exclusive.
Many retailers have already started to realise this. Because people tend to think about the things they buy as an extension of themselves, they are more likely to consider the values of their favourite retail brands than the values of their internet provider. And it seems that COVID-19 has accelerated this trend.
According to a recent survey conducted by McKinsey, helping low-paid workers in factories in Asia and reducing negative impacts on the environment were two of the top three actions that consumers wanted fashion brands to take to help society deal with the impact of COVID-19, ahead of reducing prices and dealing with stock shortages.
As younger generations gain more purchasing power, these kinds of responsible business practices will only become more critical to retail success going forward.
What does it mean to be a responsible retailer?
One of the challenges of becoming a more responsible business is defining what responsible means. You’ve probably come across organisations that describe themselves as being sustainable, net zero, for purpose, impact driven, or part of the circular economy. Is any of that responsible? Is all of it?
While there’s no single definition of the phrase responsible business, it’s generally understood to encompass environmental, social and governance (ESG) factors.
According to Investopedia, ESG includes how a company performs as a steward of nature; how it manages relationships with employees, suppliers, customers and the communities where it operates; and its approach to leadership, executive pay, audits, internal controls and shareholder rights.
Many investors are already considering ESG when evaluating companies for potential investment, and it’s clear why. According to Accenture, companies with strong ESG principles outperformed their conventional counterparts in the first quarter of 2020, even as the outbreak of COVID-19 sent markets crashing.
At the same time, many retailers have started publishing annual reports outlining their goals and progress in these areas. It’s not only an effective way to hold the business accountable, but also a useful way to communicate the definition of responsible retail to outside parties.
How do you become more responsible?
For businesses that want to become more responsible, it can be hard to know where to start. There are no quick fixes when it comes to problems like sustainable packaging – even steps in the right direction can yield a host of unintended consequences. At the same time, the fear of consumer backlash against greenwashing can be paralysing.
It might be helpful to remember The Iconic’s mantra – progress not perfection – and then follow the advice of many retailers that are already on a journey to becoming more responsible, which is just to start.
According to Accenture, there are six clear steps retailers should take now to become more responsible. Here are some examples of Aussie retailers that are already doing it.
- Work to eliminate waste and CO2 emissions at every stage of the value chain – from raw materials to processing to transportation and end-of-life-use
- Example: Flora & Fauna measures and offsets 100% of its carbon emissions each year by planting trees with the nonprofit Greenfleet.
- Actively procure more sustainably sourced and produced materials e.g. via global sustainability standards and explore options for using more recycled materials
- Example: Country Road has recently shifted to sourcing more of its merino wool from Australian farmers that do not engage in mulesing, making many of its knit items more sustainable and ethical on multiple levels.
- Seek to improve the transparency of the supply chain and be transparent about how, where and in what conditions their products are made
- Example: Elk launched its inaugural Transparency Report in 2019, which includes detailed information about its Tier 1-4 suppliers.
- Explore circular business models
- Example: Upparel was founded to tackle the textile waste problem. It’s a subscription sock company that also gives customers a way to responsibly dispose of used socks, so they can be broken down into their raw materials and upcycled into new products, instead of ending up in landfill.
- Collaborate with global initiatives to ensure workers are paid and treated fairly across the value chain and champion inclusivity
- Example: Through its factory in Cambodia, Outland Denim provides employment opportunities to people who are vulnerable to trafficking, not only guaranteeing them a living wage, but also valuable skills and training.
- Help customers make informed choices about what they buy and how to prolong the usability of their purchases
- Example: A.BCH understands that wearing garments longer is one of the most effective ways to reduce their carbon footprint, which is why it provides detailed care and washing instructions on its website.