Sustainability Is What’s Keeping Retailers Awake At Night

The National Retail Federation, or NRF, held its annual Big Show live and in-person at New York City’s Javits Center a little more than a week ago. As you can imagine, the conversations were remarkably different this year than they were two years ago, the last time the conference was held live. The main topic on everyone’s mind in January of 2020—pre-Covid—was “how can we compete with Amazon?” This year, there was a great deal of focus on inflation, the labor market, and supply chain. 

But the most intriguing topic that kept coming up again and again was sustainability and how to navigate the various opportunities and challenges it presents.

It should come as no surprise that the concept of sustainability has been driven primarily by the consumer. Yes, Patagonia and a few other brands have been pioneers in this field and should get the credit they deserve for representing the gold standard in conscious consumerism. Yet it’s the consumer—specifically the Gen Z consumer—who has taken the sustainability conversation to the next level. One of First Insight’s recent reports found that the Gen Z consumer has outsize influence on not only their Gen X parents but even their Boomer and older grandparents when it comes to finding alternative, more sustainable shopping formats. By 2030, Gen Z will represent 27% of the world’s income, surpassing Millennials by 2031. This generation votes with their wallets for brands that support their own values and causes. Brands and retailers today are clearly paying attention.

Here are some takeaways from the various conversations on sustainability:

There is a large amount of confusion on what sustainability is or means to Business Leaders and Consumers alike.

Many of the leaders have different interpretations of what “sustainability” actually means and how it affects their organization. I have found that the disconnect is primarily generational. Boomers, Gen X, and Millennials believe that sustainability means products made from sustainable, recycled, or natural fibers and materials. Gen Z assumes that the use of sustainable materials is a given, with their definition expanding to include sustainable manufacturing. Retailers and brands will need to be on the same page as Gen Z in order to remain competitive. But, having said all of that, both groups miss the broader definition of sustainability and how it ties to ESG (Environmental, Social and Governance) goals.

Sustainability is no longer a nice to have—it’s table stakes – and you can’t greenwash it away.

A number of brand startups at NRF have at their core a sustainability ethos, such as banning single use plastics, or using only recycled materials, or making products that are themselves fully recyclable. We know that consumers today across all generations expect retailers and brands to be more sustainable.  Packaging is a very obvious place to start for many brands. Reducing the amount of waste that goes into packaging should be a priority at every retailer and brand since it is often the first point of contact between a consumer and the brand itself. Almost every consumer we have spoken to recently believes that online shipments contain an excess of packaging materials. Getting this right will not only be good for the planet and the retailer’s or brand’s image, but it will also save them money in the long run.

Everyone knows greenwashing is bad.

For those unfamiliar with the term, the Cambridge English Dictionary defines Greenwashing: to make people believe that your company is doing more to protect the environment than it really is. In a world that is connected like never before, and to the Gen Z and Millennial consumers that place a high value on transparency and authenticity, greenwashing is a very bad thing.

Unfortunately, many companies are so afraid of being accused of greenwashing that they just don’t talk about their sustainability efforts at all.  

When surveying consumers across all generations, the majority believe that retailers are sufficiently transparent about their sustainability efforts. Listening first to the voice of the customer by testing marketing messaging in advance of campaigns can help mitigate accusations of greenwashing.

Sustainable products pricing—why should it cost more?

Many established brands and retailers I have talked to openly wondered whether or not consumers would pay more for sustainable products. A recent report found that the majority of consumers would pay more for sustainable products. Yet the better question is “why should sustainable products cost more?”  Sustainable business practices should save money in the long run. We have seen first-hand the reduction in waste and cost that comes by testing 3D rendered products with consumers before production. This highly sustainable practice means that retailers and brands aren’t left with excess inventory that must be put on sale or—worse—sent to landfills. It also eliminates the need to make, ship and destroy thousands of samples.

Concern for the planet, businesses’ carbon footprints, and over-production are all here to stay, and will only become more important in the coming years. It’s critical to offer transparency on sustainability strategies and achievements as well as to overhaul the design and manufacturing process and reduce waste. It’s good business, and it feels good, too.