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What will drive retail sustainability in 2015?

Business-model innovation has been identified as a top priority for retail sustainability professionals in 2015.

When GreenBiz first asked me to contribute on this subject, I immediately thought to turn to RILA’s Retail Sustainability Report. The latest report, released last year, summarized results from a survey of retail sustainability professionals’ priorities. They were asked for their priorities at the time, as well as their expected priorities two years later — in 2015. The priorities reported to increase the most between 2013 and 2015 included a focus on water and chemicals of concern; product design, use, take-back and disposal; and business model innovation.

These priorities are telling; underlying them are trends driving profound changes in the retail industry. In retail, technologies such as the Internet, social media, mobile devices, RFID and 3D printing already are changing the game. Demographic shifts in the U.S. and abroad are affecting how retail thinks about business, products and employees. Data access — about consumers, stores, supply chains, suppliers and products — is enabling a whole host of new business models, tailored offerings and opportunities to be transparent about operations and product attributes. And constraints of both natural and human resources contribute to a deeper focus on supply-chain transparency and the need to answer questions about products — what’s in it, where does it come from and how is it made?

Through each trend is a thread of sustainability. When sewing them together, companies are beginning to see that sustainability can be a powerful tool to address these profound changes, developing strategies to effect the triple bottom line by ensuring the financial sustainability of the business — given new competition, emerging business models and changing consumer demands — as well as the sustainability of natural and human resources that all retail products and supply chains depend on.

So while energy reduction, recycling, reporting, consumer awareness, employee engagement and other tactical issues will remain a core focus for retail sustainability professionals (the 2013 Retail Sustainability Report did not identify one issue that will lose focus), the biggest shift we will see in the profession next year will be toward sustainability strategies that directly align with these retail and societal megatrends.

H&M's Garment Collecting program claimed more than 3,000 tons of used clothes in 2013. (Photo: screen capture of H&M's video "The Break Up")

We already see solutions emerge to the priorities uncovered in the 2013 report.

Water and chemicals of concern

Interestingly, these are the only two newer priorities for the industry that are directly related to environmental issues; the others address business issues. To address both water and chemicals of concern require a lifecycle approach because water and chemicals are primarily used in stages of the supply chain that the retailer, typically, does not directly control. For food products, for instance, the primary use of water is in the farming and food-production process — two lifecycle stages outside of the retailer’s responsibility.

Retailers are already taking the lead on chemicals of concern through working groups such as the Green Chemistry and Commerce Council, individual action and collaboration, and chemicals reporting. Now that momentum is building, we can only expect that this focus on chemicals will grow.

Product design, use, take-back and disposal

While product design, use, take-back and disposal separately were addressed in the 2013 Retail Sustainability Report, it is more interesting to take them together. Retailers indicated that every lifecycle stage will be addressed in 2015, from the initial product design through the product’s end-of-life.

Again, we already see some action on this. Organizations such as the Outdoor Industry Association, the Sustainable Apparel Coalition and the Sustainability Consortium are developing tools to measure and identify the highest priority issues — such as water, energy, chemicals of concern — in product supply chains. Myriad tools already are being used to assist product designers in identifying more sustainable material and production options. And take-back programs are already underway at several retailers, especially for electronic products. In 2015 we can expect to see more companies addressing more of the lifecycle stages of products to reduce the footprint of the complete system.

Business model innovation

Given the megatrends driving the industry to change, RILA’s Retail Sustainability Initiative, together with non-profit Forum for the Future and sponsors Target and Unilever, opened a conversation about retail’s future and the implications of strategic decisions being taken. We call that dialogue Retail Horizons. It already has created tools to explore change to reframe sustainability in retail.

One critical learning has emerged: for retailers to continue to be successful far into the future, it is critical that they innovate outside of the mapped territory of operational and supply-chain efficiencies, in order to tackle business-model innovation. In fact, this was identified as a top priority for retail sustainability professionals in 2015.

New retail business model experimentation is already underway. Some initiatives may prove to reduce the companies’ environmental impact while growing the business. Developing new revenue streams from servicing products — so that they last longer — taking back products (here is another example) for reuse or recycling, offering more sustainable product lines, or even sharing (rather than purchasing) products, can lessen a company’s environmental impact. And changing the mix of products that companies sell also can drive societal benefits.

In 2015 we can expect to see even more companies focusing their sustainability efforts on innovation designed to drive company growth while reducing environmental impact. In other words, sustainability increasingly will be seen as a strategic necessity, inspiring and managing profitable change across the enterprise.

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