Why Retailers Are Falling Way Behind With Their Sustainability Goals

Boston Consulting Group (BCG) released the results of a new study today that sheds light on how well global retailers are doing at meeting established goals for addressing sustainability. The results suggest a great deal more work is needed.

The company polled 37 major retailers around the world, including those in the grocery and fashion categories, as well as homeware and electronics, with revenue totaling $1 billion to $500 billion.

It found that among those companies, more than half had not set any sustainability key performance indicators (KPIs) across their businesses to measure progress. And less than 20% were on track to cut their Scope 3 emissions (which includes suppliers) by enough to meet the targets set by the Paris Agreement in 2015 for limiting the rise in global temperatures to 1.5 degrees.

In a statement, BCG further noted that some companies are stuck at the “sustainability basics” and are only meeting the minimum requirements from investors or government regulators.

The consultancy suggested that more companies need to prioritize sustainability targets and embed it in the core of corporate strategy, decision making and value creation. It also recommended embracing digital technologies that improve transparency, and encouraged more interaction with suppliers and collaboration with industry peers.

When it comes to sustainability among footwear retailers and brands, the issue has gained significant momentum in the industry within the last year, according to Andy Polk, SVP at the Footwear Distributors and Retailers of America. “There are still some [companies] who haven’t really started, but I’d say the majority is now trying to find a way forward,” he said. “We have a willingness and critical mass to work on these issues.”

Over the past year, many leading shoe manufacturers and retailers in the U.S. have begun to share the results of their environmental impact reports and set goals for reducing carbon emissions and their overall impact on the planet.

Recently, Nike Inc. provided an update to its progress to be net-zero by 2050. Meanwhile, Crocs Inc. has set a target of 2030, Brooks Running is aiming for 2040 and Tapestry Inc. (parent of Coach, Kate Spade and Stuart Weitzman) is also looking be net zero by 2050.

On the retail side, Neiman Marcus Group shared its first Environmental Social Governance Report last month. Among its key targets, NMG aims for a 50% reduction in its scope 1 and 2 emissions by 2025 (from a 2019 baseline), and this year it will perform a scope 3 study to better assess its path to a net-zero carbon impact.

While, as noted by BCG, setting sustainability KPIs is an essential first step in the journey, FDRA’s Polk cautions that companies need to be realistic in their goals — or they could face consequences.

I think it highly unlikely many companies across the retail spectrum are hitting their targets,” he said, pointing out that leadership may be setting goals without having a thorough understanding of the technology and capabilities of their workforce. “Who is setting the targets and the KPIs? Is it from the top, or is the workforce empowered to push themselves and set their standards and KPIs with the C-suite.”

Polk also emphasized that footwear developers face steeper challenges than other product categories, so retailers need to take that into account when establishing their environmental goals. “Footwear is on a different journey and needs its own targets, versus clothing or toys or furniture, etc.,” he said.

And, Polk noted, the consequences of falling short could not only impact the planet, but also morale within a company. “If leadership declares a goal that is not realistic, good workers will leave the company,” he said.

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