WHAT ARE BRANDS IN THE UK & EUROPE DOING TO REDUCE THE CLIMATE IMPACT OF THEIR STORES?

In reaching their sustainability ambitions, how are retailers led by ESG, shoppers, or investor appetite? It is fair to say that the response to date has been a mixed bag, with plenty of retailers striving to make positive progress, but a distinct lack of activity from others. Progress seems often correlated with the motivations of their consumers, whose priorities vary depending on which retail category they are purchasing and the price point they are willing or able to pay.

Data from the British Retail Consortium indicates that the 70 UK retailers signed up to their Climate Action Roadmap have cut their carbon emissions by 49% since 2005, ahead of the 25% target the industry had set for the period. Carbon emissions in retail stores dropped by 46%, while store delivery emissions fell by 84% during the same period. Retailers signed up to the roadmap pledge to decarbonise their stores by 2030, their deliveries by 2035 and for their supply chain to reach net zero by 2040. This is clearly a positive step forwards, particularly for their store estate because it is largely in tune with the needs of major landlords to reduce the impact of their estates.

Retailers can play a central role in helping shoppers make the transition to a low carbon lifestyle. The largest brands need to lead by example to help inform, educate and motivate other retail occupiers to travel on the same course. There are lots of excellent initiatives, but the industry needs to be careful that ‘greenwashing’ via modest consumer friendly projects doesn’t overshadow the further work that needs to be done at every level. Food and product sourcing and cost of living are having a major impact on retailer profitability and focus, which could waylay the intentions of some brands to make progress in improving their green credentials. Here we outline some of the initiatives seen in different retail categories.

Almost 10% of the UKs BREEAM certified retail stores are from the ‘Big Four’ grocers (Tesco, Asda, Sainsbury’s & Morrison’s), with a further 13% from Waitrose stores and 6% from discounters Aldi and Lidl. In all, 7 major supermarket chains account for 28% of BREEAM certificates, highlighting the benefits of owner occupation for retailers driving sustainability within the retail buildings they trade from. However, these certifications only account for 0.5% of supermarkets (and excluding convenience stores) so in reality it remains a largely insignificant proportion of the market that is BREEAM rated.

Which? has ranked Lidl and Waitrose as the most environmentally-friendly grocers in the UK. The consumer group analysed eleven of the country’s largest brands on their greenhouse gas emissions, food waste and use of recyclable plastics. Lidl scored highly for its reduced greenhouse gas emissions and single-use plastics policies, whilst Waitrose was rewarded for using the least amount of plastic for the number of items sold.

Frozen food grocer Iceland scored lowest of the grocers assessed, which was attributed to the amount of power required to run the retailer’s freezers. Energy usage from refrigeration offers a considerable challenge for all grocers, but particularly for those relying disproportionately on chilled goods. So, does this make the Which? survey a fair comparison? Iceland buys 100% renewable electricity for all its UK sites and when optimal to do so is replacing its refrigerators with units that consume 30% less energy than older equipment and use more natural refrigerants and cleaner gases. Clearly, the embodied carbon within existing refrigeration units mean that it isn’t as simple as throwing the old ones away if they are still operational.

Iceland’s sustainability charter shows that beyond the challenges faced around chilling food, the chain has been making inroads in reducing its environmental impact across its operations and supply chain. DEFRA administers energy reduction targets on Iceland’s depots via Climate Change Agreements that have been exceeded each year since 2015. The brand is signed up to the BRC Climate Action Roadmap and a signatory to the Courtauld Commitment 2030, which brings together organisations across the food industry with the shared target of reducing absolute greenhouse gas emissions by 50% by 2030. The grocer has committed to being net zero by 2040 and published in its latest Carbon Report that in 2020/21 its Scope 1 & 2 carbon emissions had reduced by 74% against its baseline year of 2011/12; equivalent to an annual reduction of 184,000 tCO2 e, despite growing sales by 36% and adding 181 (net) stores over the same period.

Iceland’s data indicates only 4.5% of their emissions are operational carbon (Scope 1 & 2) and that a considerable challenge needs to be done both up and down stream with suppliers and customers to bring down the 95% that are within Scope 3. This will include other forms of environmental impact such as packaging. The supermarket has also committed to remove all own label plastic packaging by 2023, but will largely rely on the will of its other suppliers to make this a realistic proposition over the entire product range.

What the Which? ranking fails to incorporate into its index is the vision, breadth and ethos that now sits within Iceland’s corporate backbone. Iceland’s Managing Director and self-proclaimed ‘corporate activist’ Richard Walker states that he only took the helm of the family business because he felt he could balance the objectives of environmental and social impact with profitability and business growth1 , avoiding growth in one area that limits another; he has subsequently received an OBE for his environmental campaigning. Iceland do not claim to have figured out how to solve all the issues within their supply chain, but are pragmatic, transparent and wide reaching in their approach in a way that arguably makes them one of the more environmentally ‘friendly’ grocery chains to date. Critically, the brand believes that these objectives can remain affordable and accessible to all customers and not just more affluent ones.

IKEA has one of the most comprehensive sustainability strategies within the retail sector and is also refreshingly honest and frank in its outlook, objectives, achievements and failures; identifying pinch points and opportunities from sourcing all the way through to the way in which customers use and dispose of their goods.

IKEA plans to transform into a circular business and be Climate Positive by 2030,

Given its global reach, IKEA’s sustainability targets provide an important benchmark for other brands to emulate, not least because of its transparency and willingness to admit the more challenging aspects of going green across the supply chain. The last 5 years have seen global revenues increase by 15% and climate footprint per sales unit reduce by 8%, which raises an interesting dilemma in how a business continues to grow revenues while reducing impact. IKEA seem unthreatened by the idea that longer lasting products that are part of a circular economy having either been made from recycled materials, or reused or recycled after their useful life, will win the trust of consumers and support rather than inhibit growth.

Fashion production releases 10% of the world’s carbon emissions, is responsible for 20% of all water pollution worldwide and by 2030 the annual global waste from textiles is estimated to reach 148million tonnes. With regards to sustainability, BCG believe a third of the fashion industry is yet to take any action. Business of Fashion Sustainability Index has shown that the sustainability credentials of the world’s top fashion brands have actually declined since 2021. The thinktank Planet Tracker has warned that the fashion industry has a “serious misinformation problem”, with companies relying on zombie data to badge products as sustainable and environmentally friendly. Green washing is said to be rife, with valid and important sustainability innovations being used to mask otherwise environmentally or socially damaging activity.

H&M’s Garment Collecting programme, which encourages consumers to drop off any unwanted clothes in-store in exchange for a voucher, is the “largest in the world” since being rolled out globally in 2013. In 2019 alone, the scheme collected 29,005 tonnes of unwanted clothes and textiles; equivalent to 145million t-shirts. Additionally, customers in 24 markets can now shop second-hand garments through Sellpy, of which H&M Group is a majority shareholder.

However, while the brand offers several more sustainable options, the majority of its clothes aren’t eco-friendly and given the global scale of their operations this means considerable potential for further increases in waste and global emissions. It should be emphasised that H&M isn’t alone with this dilemma and is making some inroads. The introduction of the Green Machine developed with the H&M Foundation may prove a game changing technology for the fashion industry, if it can be implemented at scale, as it enables low energy ‘clean’ recycling of multiblended materials that could otherwise not be reused.

For the buildings they operate and the products and materials used within them, H&M’s aim is to reduce CO2 e emissions from operations by 56% by 2030 and all store interiors designed to be reusable, repairable or recyclable, from 2021. Currently, 31% of interior materials shared via their online sharing tool are reused.

In partnership with ARUP, H&M is assessing the lifecycle impacts and life expectancy of store formats with an aim to establish a carbon emission baseline (average kgCO2 e per m2 ) for the brand’s shops. These activities should give a clear picture of the climate impact and priority action areas for their stores. Other initiatives include partnering with Biomason and Unilin, who supply lower climate impact store tiles, recycled wood fibre boards and more sustainable use of concrete to reduce embodied carbon in building materials. 92% of waste handled in H&M distribution centres was recycled or reused in 2020.

Zara has similar challenges with its products as H&M and has developed its own roadmap on the path to being net-zero by 2040. This includes 50% of products to be part of their Join Life range and moving to 100% renewable energy by 2022, 100% zero-waste and 100% reduction in single-use plastic by 2023, plus 100% sustainable textiles and materials by 2025. According to its sustainability statement, all stores are ‘eco-efficient’, meaning they consume less energy and water than conventional stores and have to work within standards outlined in their Eco-efficient Store Manual. All wood, paper and bags used in store are from sustainable sources and FSC or PEFC rated. Shops are working towards LEED certification status and new stores being designed to have a lower environmental impact.

While most of the large fashion brands, or indeed global brands in other retail sectors, are undertaking a range of initiatives, what isn’t clear is how many of these initiatives are being applied across multiple geographies and whether they are being truly implemented at scale.

With stores in more than 10 countries, Patagonia is recognised as one of the most sustainable global fashion brands, with almost 90% of materials recycled, organic, or ethically sourced. Their transparency into the supply chain has helped them be credited to have “a sustainability strategy devoid of greenwashing”. It demonstrates how it is possible to be ‘greener’ at scale, although the products they sell are not cheap or suited to all consumers. Providing goods that are both ‘affordable’ and ‘green’ remains one of the fashion industry’s biggest dilemmas.