Net zero strategies & progress in retail

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Lodewijk Nell | Partner | Brundtland Consulting | mail me |


 

 

 

 

 

 

 

 


Pascal Snyman | Sustainability Consultant | Brundtland Consulting | mail me |


South Africa’s retail sector is optimally positioned to drive emission reductions through net zero commitments. This can be achieved by its significant influence through conducting direct engagement with its suppliers for extensive emissions reductions impact throughout its value chain.

A recent analysis of the net zero commitments of 29 retail sector companies listed on the Johannesburg Stock Exchange’s (JSE) revealed some progress, several general and sector-specific challenges, as well as actionable best practices implemented by the environmental leaders in the retail sector.

With the global urgency to combat climate change becoming increasingly clear, net zero commitments have gained prominence as a compelling catalyst for climate action and corporate responsibility. This is seen through more companies that are proactively pledging to achieve net zero emissions.

The retail sector is a key driver for impactful climate initiatives due to its significant influence, as it directly engages with the public and bears substantial emissions responsibilities spanning from production, logistics, packaging and energy consumption.

Progress in the retail sector

To understand the progress of the retail sector in this regard, our team assessed the net zero commitments of 29 retail sector companies listed on the JSE.

The findings revealed that only 24% of the reviewed companies have publicly disclosed net zero climate commitments. However, of the companies with net zero commitments within the JSE’s retail sector, 86% have already disclosed their emission reduction strategies. This reflects a growing trend of transparency, proactive engagement and a collective push towards a more sustainable future.

In addition, the assessment uncovered general and sector-specific challenges, as well as actionable best practices implemented by the environmental leaders in the retail sector.

General and sector-specific challenges

To prevent unfounded net zero claims, the South African Green Finance Taxonomy established specific criteria. This means that to be considered genuinely net zero, company initiatives must meet essential requirements.

These include:

  • having a credible plan to achieve net zero emissions;
  • measuring and transparently reporting emissions;
  • implementing a holistic approach across all emissions scopes encompassing the full value chain;
  • collaboration with stakeholders for robust strategies, collective support, and innovation; and
  • actively implementing measures to mitigate and adapt to climate change.

A company’s commitment to net zero hinges on meticulously aligned targets that resonate with scientific consensus and global climate aspirations. This means setting ambitious emission reduction targets aligned with limiting global warming to 1.5°C. By embracing time-bound science-based targets and engaging with reputable initiatives like the Science Based Targets Network (SBTN), companies can amplify their credibility and accountability.

Currently, only 10% of the JSE’s retail sector has emission reduction targets aligned with the Science Based Targets initiative (SBTi), which indicates a need for increased commitment and action in the sector. However, the JSE’s retail sector shows promise, as 14% of reviewed companies commit to aligning and setting SBTi targets within the next two years, signalling a growing awareness and proactive stance on emissions reductions.

Similarly, transparent and accurate reporting, aligned with frameworks like the Task Force on Climate-related Financial Disclosures (TCFD), also inspires confidence in stakeholders.

The current alignment of approximately 48% of JSE’s retail companies with TCFD reporting recommendations highlights a vital area for improvement in terms of climate-related financial reporting practices. Enhanced alignment, transparency, and performance within the sector are needed to effectively navigate the complexities of climate-related financial disclosures.

Retailers also face sector-specific challenges, as they operate in a complex value chain with various materials and regions involved, due to the diverse nature of product portfolios and extensive supplier networks. In fact, the National Retail Federation’s (NRF) Retailers Reaching for Net-Zero guidance reported that up to 98% of a retailer’s emissions occur outside its direct operations.

As the final players in the value chain before products reach end customers, retailers face the challenge of limited operational control over the emissions stemming from the production of goods. This necessitates diverse emission reduction strategies like supply chain engagement, efficiency enhancements, widespread adoption of renewable energy, operational streamlining, and strategic carbon offsetting.

Many companies are improving supply chain emissions data collection and transparency only. A greater impact can be achieved through combining improved data collection with assisting suppliers in reducing their emissions.

Best practices findings

Companies within the retail sector have harnessed various strategies to work towards ambitious net zero goals.

These strategies encompass:

  • Energy efficiency optimisation: Implementing energy-efficient measures to curtail emissions from operations.
  • Renewable alternatives: Transitioning to renewable energy sources at key facilities like warehouses, factories, and other operating locations.
  • Optimised logistical planning: Streamlining transportation processes to minimise emissions associated with distribution.
  • Supply chain collaboration: Collaborating with suppliers to identify efficiency enhancements and opportunities for recycling, thereby reducing environmental impacts.

Best practices observed from the retail companies examined underscore the paramount importance of supplier engagement in emissions reduction. These practices primarily revolve around optimising value chain efficiency, through enhanced packaging and logistic considerations.

Prominent examples include:

  • Phasing out single-use plastic bags and crate liners.
  • Embracing biodegradable or recyclable fibre-based trays, napkins and cutlery.
  • Supporting local community recycling initiatives.
  • Embracing the circular economy concept.
  • Clear labelling for reusable, recyclable, or compostable items which can guide consumer choices.
  • Setting packaging targets and commitments for reducing plastic waste in the value chain.

These practices offer valuable blueprints for other companies starting their net zero journeys. By adopting these strategies, businesses can pave the way for innovation, transformation and progress within the sector while contributing to a more sustainable future.

Driving transformative change in the retail sector

In the ever-evolving landscape of sustainability, net zero commitments stand as a resolute force propelling climate action and sustainable practices.

While strides have been made in South Africa’s retail sector, there remains room for refinement in terms of commitment, disclosure, alignment with science-based targets, and robust monitoring.

Ambitious emission reduction and net zero targets will drive transformative change within the retail sector and signal commitment to combat climate change and create a sustainable future for all stakeholders.


 



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