Over the past few years, Australian supermarkets have made significant progress in improving their environmental footprint by implementing company-wide sustainability policies. Much of this change can be attributed to advocacy groups voicing public concern about issues within the retail sector that are driving widespread behavioural change.
This form of consumer activism has given rise to the ethical shopper by pushing retailers to consider new initiatives to improve their business practices and prioritise energy efficiency, sustainable packaging, food waste and ethical sourcing.
While a lot of work is still to be done, Australian retailers, including the grocery sector, are putting the foundations in place to advance plans and promote themselves as environmentally conscious organisations. By taking a leadership position, they are also encouraging other sectors to step up on a range of other broader issues, such as labour conditions, supplier conduct and manufacturing.
Impressively, Australian retailers are becoming global industry icons, with the World Benchmarking Alliance recently ranking Coles number two out of 62 food retailers worldwide for sustainability. It also emerged that only 26 per cent of the 350 companies assessed in the global food and agriculture sector are setting holistic time-bound targets as part of a sustainable development strategy.
Retailers have now measured the impact of their sustainable policies and, through data noticing improvements in customer perception, their business model costs and benefits to the environment. In 2020, NYU Stern‘s Sustainable Market Share Index identified ‘sustainable actions pay off, and a positive link exists between environmental, social and governance (ESG), and financial performance.’
The growing influence of consumers
The retail sector has made exciting progress globally and locally as it strives to create meaningful and sustainable change. Many of the initiatives that will begin to roll out in stores over the coming months and years will directly respond to the demands from consumer activists who are helping to drive a shift in shopper behaviour. This has led to a growth in ethical shopping, with everyday consumers now more empowered than ever to make sustainable choices, including consciously choosing where they shop. Some changes will be visible and starkly felt, while others will occur behind the scenes, impacting across the supply chain process.
So, what’s next for consumer activism and the rise of the ethical shopper? Following are five emerging trends that are starting to make their presence felt.
- Renewable energy: while the focus to date has been to conserve and reduce energy usage, some retailers are now pledging to adopt renewable energy to demonstrate their ongoing commitment to climate change. This will ultimately enable retailers to operate within a carbon-neutral economy. Coles has set a target to achieve 100 per cent renewable energy by the end of FY25 and net zero emissions by 2050. This will require working closely with energy suppliers to ensure a smooth transition. Aside from Coles, The REenergise 2020 Corporate Renewable Snapshot found that retailers had almost doubled the clean energy commitments of any other industry with 1146MW of wind/solar; enough to power 533,021 homes and create 2,063 clean energy jobs.
- Circular capabilities: investing in the circular economy in areas such as waste management and recycling will help protect the planet and our economy. Circular capabilities include sharing, leasing, reusing, repairing and recycling existing items for as long as possible. German retail giant Schwarz Group which owns Lidl and Kaufland is leading this trend after announcing it is expanding its investment in circularity capabilities for its waste management, packaging and recycling business.
Most recently in Australia, Woolworths launched a system across Tasmania where customers can bring their own containers to the supermarket’s deli, meat and seafood counters. This is paving the way for other initiatives to address the ongoing battle of reducing the amount of plastic packaging and carry bags while encouraging reusable coffee cups.
Meanwhile, Coles is undertaking organisational change into its manufacturing processes to meet this concept of circularity capabilities by improving its packaging sustainability framework criteria and R3 packaging strategy of ‘redesign, recycle and reimagine’, which aligns with the national 2025 targets. Awarded for its initiative, Coles has developed an education and development webinar series to help Coles Own Brand suppliers improve their understanding of packaging sustainability.
- Improving corporate governance: retailers are developing stronger alignments with social values by formalising the way they conduct themselves and ensuring they are living up to their responsibilities. By balancing economic and social goals, retail boards increasingly alignwith government, investors and consumers to drive change through reform, policy, advocacy and public pressure. In Germany and Portugal, two leading supermarkets sought to promote intercultural cooperation by launching an initiative to better integrate migrants into the workforce.
- Ethical treatment of suppliers: there is growing concern amongst consumers about retailers exerting undue influence on suppliers. When it comes to fresh produce and provisions such as milk, there has been vocal support from Australian consumers to ensure farmers are compensated with a fair price for the value of their product. When supermarket wars resulted in private-label milk prices reducing to $1 a litre, there was an outcry from farmers that highlighted the growing interest in the cost to suppliers. As a result, supermarkets reviewed their prices and established codes when dealing with farm gates on the pricing of milk to ensure the sector was viable. Most recently, in November 2021, Woolworths announced a price rise of its private-label milk, citing ‘farmgate milk prices have increased significantly over the past two years’ and they’re forecast to continue rising in the season ahead. When retailers exert pressure to reduce prices paid to suppliers, it puts the pay and conditions of employees at risk. While many retailers are signatory to the Australian Competition & Consumer Commission’s ‘Food and Grocery Code of Conduct’ that outlines dispute resolution, good faith, and negotiating price rises, supermarkets such as Woolworths have recently hired an arbiter to oversee the group’s compliance with the recently strengthened code. The role will help to foster fair, transparent, and mutually beneficial partnerships to improve relationships between retailers and suppliers.
The retail landscape is changing beyond price and product availability into a full review of the operations of a store and where its products are sourced, paid for and manufactured. Australian retailers will have no choice but to continue to finesse their approaches and identify trends that emerge from the government while addressing increasing customer demand to improve society and their role within that.
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