Carbon Neutrality: Key to decarbonisation

Environmental responsibility is one of the most important concerns of proactive retailers. Customers perceive their brand differently based on their actions, which has a significant impact on purchase decisions. 

As decarbonization approaches, retailers should understand how costs can be distributed throughout the value chain to prepare.

COP26 served as a reminder of the uphill battle to meet the world's decarbonization commitments by 2050. A sustainable climate solution requires the participation of every industry, which means every industry must mobilize. Despite its late arrival, the retail sector is on its way to catching up. There were only a few major retailers with science-based carbon reduction targets in 2016. Within five years, more than 65 global retailers set such targets, and the number is growing steadily.

global warming

Getting ready now: What retailers can do

To lay the foundation for a decarbonization strategy and assess potential funding sources for the transition, retailers can take some no-regrets actions that can lead to success.

Integrate sustainability into consumer research. A deeper understanding of consumer sentiment is needed to develop pricing strategies and research products, including how expectations will evolve and how shoppers would pay a premium for sustainable products. Various segments of consumers should be tested for their actual intent to purchase alongside real-world pricing experiments.

Try green products. Decarbonized products should be developed by private-label teams, as well as products with lower-carbon supply chains and tests on consumer adoption and pricing power. It may be easier to negotiate future sourcing agreements if you partner with vendors who produce similar products. In addition, retailers should test the positioning of green products to see what might resonate with consumers and drive adoption.

Decarbonization strategy and planning. Providing climate updates to institutional investors can be done through a dialogue between retailers and their boards. Decarbonization timelines may be shared by investors who prioritize ESG efforts. The green bond market remains a premium market, so this should be a priority.

Developing industry partnerships. Getting individual suppliers to decarbonize their supply chains would benefit even the largest global retailers. Providing a guarantee of order quantities to participating suppliers could be achieved in the near-term as a result of industry associations setting common standards. Green product suppliers would be able to offer competitive pricing with this approach since they bear the costs of green products.