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Is carbon-neutral realistic for retail supply chains?

26 June 2020

Andy Mulcahy, founder, Post-Economic Institute, asks is it realistic for retail to aim for carbon-neutral operations in the supply chain?

If you’ll excuse the pun, the trading ‘climate’ in which retailers are operating is currently undergoing profound change. Sales growth, offline and online, has been subdued for over a year now and, while there are potentially a number of factors influencing this drop in performance, the issue of retail’s environmental footprint has to be considered a prominent one.

Exactly to what extent it is impacting shopper behaviour is hard to quantify reliably. The environment / climate change / sustainability / plastic waste etc are headline news almost every day, so it is being driven into shoppers repeatedly. Does that mean people are factoring these into purchase decisions they make, either consciously or unconsciously? It may take a little while for that to happen at any great scale, but it seems reasonable to expect, given that strong media focus, that a more apparent shift may become noticeable at some point over the next 2-5 years.

The impact on retailers is already far clearer; they – and indeed any business involved in the fulfilment of retail operations, particularly delivery and logistics companies – are under extreme pressure to improve their environmental footprint. The buzz term around this is the need for businesses to become ‘carbon-neutral’; but how realistic an aspiration is that?

A non-ideal starting point
The recent momentum behind environmentalism can most logically be traced to the Blue Planet II series, which aired in December 2017 and showed the extent to which plastic waste gets dumped in the sea all over the world. Although there has always been some degree of focus on the environment, this served to push it to the top of the media agenda, where it has stayed ever since; it has even subsequently intensified, arguably.

This has served to catch the retail industry on the hoof somewhat. None of this can have come as a complete surprise to most involved in retail; they have known for a long time that there is a lot of scope for improvement in that area. The reason it hasn’t received sufficient attention to make meaningful progress relates to the sheer number of issues retailers have had to deal with in recent years. It’s not so much that they didn’t want to bring through improvements, it’s that it never seemed to break into the top three on the list of priorities.

About the Institute
Retail is still based around selling more stuff, continuously. If sales are up, things are generally considered healthy.

But simply having a model that rewards selling more stuff all the time actually feels a bit archaic today. The promise of having so much data available is that we could sell the right stuff to the right people at the right time – the old retail mantra – which should invariably mean selling less stuff, just more efficiently.

The Post-Economic Institute has been set up by online retail expert Andy Mulcahy to instigate debate around what kind of system is appropriate to underpin an infrastructure characterised by connectivity, AI and continual data tracking.

It focuses on retail to illustrate why using economics as the primary means for determining and assessing value in human activity is no longer valid in the digital connected age. It further argues that the values of capitalism are obsolete and looks to establish new, post-economic and digitally-focused methods for determining value.

It receives no funding and has no affiliation with any other groups; it exists purely to bring a fresh perspective to debates on how to evolve business to make it appropriate for the 21st century.

Now that they are receiving so much pressure, from so many directions, to suddenly make significant progress, many are not well positioned to do so quickly. Any change like this tends to incur cost, at a time when sales volumes are subdued, and even those who had already been making strides are now finding they need to massively accelerate their programmes. 

The simple fact, however, is thus – retail is, by its very nature, a resource, waste and emission heavy area of business. What’s more, the potential panaceas that get touted – automated / electric vehicles, biodegradable plastics or environmentally-friendly packaging alternatives – all seem rather far from technical readiness or mass adoption; retail doesn’t feel like it’s well positioned to overcome these challenges convincingly yet.

The problem with being ‘better for the environment’
So with retailers so firmly in the cross-hairs, what should, indeed what can, they do? The biggest problem with answering this question is that, wherever retailers choose to place their focus, there is an incredibly complex calculation that has to be done to determine whether any changes they make truly constitute being ‘better for the environment’.

For example – it would seem fairly straightforward to make that claim if they removed plastic from some packaging and replaced it with something that sounds like it should be an improvement; a substance that is renewable, sustainable, recyclable etc. But – just because it has become ‘better’ at the point of interaction with the customer (ie, the packaging has a more environmentally-friendly feel), it doesn’t necessarily translate to the overall process being better.

This is because we have to look at the end-to-end impact of making any changes to supply and distribution. Renewable / sustainable / recyclable sound like they should be obvious aspirations, but if it means massively increasing the production of certain materials to facilitate that shift, it may work out to be so resource-intensive in upstream processes that any claims to be ‘better for the environment’ might be lost; potentially even reversed entirely.

So something that may seem to be very positive, on initial consideration, can actually turn out to be counterproductive. And, what’s more, because of the strong media focus on improving environmental performance, any claims made in this area are likely to come under heavy scrutiny.

Sell better…which means sell less
All this can create a sense that retailers and logistics-providers are damned if they do and damned if they don’t. And having an expectation, given the complexities listed above, that retail businesses can become carbon neutral might be completely unrealistic. 

For products to find their way onto retail shelves, virtual or otherwise, the base materials have to be mined and processed, then moved around the world, put together and supplied to distribution centres and warehouses. Each of those steps involves emissions, waste and resource usage; it’s the nature of it. If we measure the environmental impact of that from start to finish, it’s very hard to see how the volumes can continually accelerate and grow, with a constant drive to do everything faster, while neutralising that impact at the same time.

When we think about it in those terms, it becomes apparent that traditional retail business logic is turned on its head. We continue to measure success by increasing sales volumes, reacting to perceived customer demand and using revenue as the determiner of value.

Logic in a business environment that has a far sharper focus on the environmental impact of trading activity suggests that selling less, more accurately is the model to which we should aspire. At present the financial markets would react badly to that model; it’s unthinkable as an approach because the system of value is harder to understand.

And yet – all the technology exists for us to measure everything that happens and start to work out how non-economic value can be attributed to various outcomes. Given the current state of retail, it seems the right time to ask whether another way, more attuned to the 21st century, might be possible; or even preferable.