Retail finds its conscience

Why ESG needs to be a benchmark for your business

Concerns around sustainability, climate change and ethical working practices have had a real and lasting impact on the ecommerce and retail industry over the past 12 months. It’s no longer enough for businesses to be making the right noises on these issues – rather they must be seen to be part of the solution. And the pressure to do the right thing is coming from all sides – not just governmental and corporate expectations, but also those of the consumer themselves.

Customers are beginning to realise that the emphasis on a ‘lowest price at all costs’ approach to retail has a knock-on effect ­both to the environment and to the workforce. Corporate responsibility is now a bottom line expectation from consumers who will happily take their business elsewhere if they perceive a brand to be treating the planet – or its employees – badly.

What do we mean by ESG?

ESG stands for Environmental, Social and Governance. It refers to the three factors that need to be taken into consideration in ensuring the sustainability and ethical standing of any business. Up until relatively recently, these issues might often have been thought of as secondary. But since the ‘People, Planet and Profits’ (PPP) concept was introduced in the 1990s, people have come to understand that focusing on people and the planet isn’t simply a ‘good to have’ supplement to profit – it’s a necessity to making it. For any commercial entity to be sustainable economically, it also has to demonstrate sustainability in terms of use of natural resources and energy. Equally, social responsibility is just as important: this means everything from committing to employee rights and a minimum wage to fighting prejudice in terms of gender, race, age, disability or sexuality.

Fashioning a change

By way of a case study, let’s look at one industry that doesn’t have the greatest track record in minimising waste and promoting inclusivity: fashion. Its historic crimes against sustainability make for a sizeable charge sheet: from burning unsold and counterfeit product to promoting unrealistic ideals about body size, fashion has a lot to answer for.

With consumers more enlightened about climate change and sustainability, retail has been pressured into reducing their impact on the environment (the industry accounts for four percent of the world’s greenhouse gas emissions alone). But there are signs that the times are changing. The clothes designer Christoper Raeburn has long been a champion of reducing waste, improving recycling options and extending the shelf-life of products… while minimising their environmental footprint. ‘We don’t talk about sustainability,’ Raeburn points out. ‘We talk about our responsibility and obligation to make better choices.’

This refreshing approach has seen Raeburn move from the fringes of the fashion elite to an influencer right at its heart – working with high profile, mainstream brands including Selfridges, Timberland and more to promote a better approach to all aspects of production.

Just as encouraging is the way established fashion labels have distanced themselves from the cliché of aloof, out-of-touch world of luxury to admit where they’ve got things wrong and commit to putting them right. Take for instance, Ralph Lauren, whose response to the issue of inclusivity has been admirable – admitting that showing diversity in their advertising campaigns is empty unless it is also reflected behind the scenes too and making a public statement that ‘We have made commitments to deeply examine bias – including looking critically at the structures and practices inside our company’.

Selling the right choices

While this may seem the right thing to do, it is also a business necessity. Laura Phillips, Senior Vice President of Sustainability at Walmart, points out that, not only do they try to lead by example, but also by financial efficiency. For example, between 2005 and 2015, by implementing simple solutions to reduce energy waste and emissions on their delivery supply chain, Walmart saved over US$1 billion.

‘That’s really the sweet spot – where you can demonstrate the cost savings,’ says Phillips. ‘Suppliers are more incentivised by seeing a great return on that investment.’