Retail supply chains are being scrutinized like never before. In 2022, Kohl’s and Walmart were fined $2.5 million and $3.5 million respectively by the U.S. Federal Trade Commission for falsely claiming that a range of products were made from bamboo when they were actually made from synthetic fibers. In recent years, brands such as H&M, Decathlon, IKEA, and Coca-Cola have also been caught making unsubstantiated or false claims. Such cases are a harbinger of the tougher ESG regulatory climate we can expect to see going forward, as the number of green or sustainable products grows. TradeBeyond’s latest Retail Sourcing Report, 2024 Supply Chain Sustainability Trends looks at the growth in ESG legislation, alongside other global trends in retail sustainability.
While the report shows how Europe is leading the drive toward sustainability reporting and compliance, other regions and important consumer markets such as the U.S. are also implementing legislation covering greenwashing, emissions reporting, and other ESG domains. Going forward corporate sustainability requirements will make it much harder for companies of all sizes to mask the impact of their operations and make false sustainability claims.
Given that the retail sector contributes roughly 25% of global greenhouse gas (GHG) emissions, there is no doubt that sustainability should be a top priority, especially for the fashion and textile industry. According to various estimates, the carbon impact of the fashion industry ranges from 4% (McKinsey and the Global Fashion Agenda) to 10% (U.N.) of total global carbon emissions. TradeBeyond’s report highlights many of the challenges and opportunities that retail brands are facing in their push for sustainability.
One retail sustainability challenge that TradeBeyond covers in greater detail is product returns. According to the NRF, in 2023, returns accounted for 14.5% of all U.S. retail sales. Certainly, the growth of e-commerce during the pandemic contributed to this trend, but customer-centric return policies, particularly Amazon’s, bear responsibility.
Other retail sustainability challenges covered in the report include the growing threat of single-use plastics. Despite stronger ESG legislation and bans on single-use plastics in some countries, plastic production and consumption continues to grow. The report highlights that less than 10% of all plastic is recyclable and the fashion industry alone accounts for 60 million tons, or 20% of global plastic production.
On the bright side, TradeBeyond details how leading retail brands are creating innovative solutions to not only solve but prevent existing problems. These include sustainable design, innovative materials and packaging, and a slow-fashion movement to counter fast fashion.
The most innovative brands are doing everything from measuring and reporting on emissions, utilizing renewable energy, and replacing organic and synthetic fibers with inventive, sustainable materials. They are also rethinking packaging and building communities to extend the life of their products.
Technology is also playing an instrumental role in the shift toward sustainable retail supply chains. Platforms such as TradeBeyond’s suite of end-to-end supply solutions provide tools which enable retail brands to collaboratively design and source more sustainable products. These tools integrate with suppliers and with third-party databases such as the Higg Index and WRAP to measure the social and environmental impact of products from the earliest stage of development.
Also, with the growing focus on traceability, TradeBeyond’s AI-powered chain of custody solutions help companies document the origin of raw materials and ensure compliance with global due-diligence regulations while identifying and mitigating supply chain risks.
This report highlights how society is at a critical crossroads, where solutions in the form of more sustainable materials, innovative technology, and greater oversight are either in place or are being developed to build sustainable retail supply chains. Consumers, businesses, and governments now must embrace these solutions.
By Lilian Bories, Chief Marketing Officer for TradeBeyond.