Navigating retail's sustainable revolution as ESG shapes the industry's future

As the retail regulatory landscape continues to develop at pace and affordability and sustainability remain important for consumers, ESG poses a variety of opportunities and challenges for those in the retail and consumer market.

In its latest edition of Retail Compass , international law firm RPC, examines the emergence of ESG as a pivotal force shaping the industry's future. With brands continuing to be put under the reputational microscope, those who remain consumer-focused and establish themselves as agents for positive environmental and social change will see the benefits.

Partner in RPC's Retail & Consumer group, Ciara Cullen, remarks: "Sustainability and ethical practices are increasingly influencing consumer purchasing decisions. Many shoppers now prefer brands that demonstrate clear commitments to environmental stewardship, fair labour practices, and social responsibility. As part of our commitment to helping retail and consumer brands navigate changes in regulation and consumer behaviour, Retail Compass provides an overview of the key developments accelerating the shift to a more sustainable, transparent, and socially responsible business model."

• The rise of eco-conscious shoppers: Recent social and political developments have generated increased public interest in sustainability, ushering in a renewed focus on social responsibility. 64% of global consumers are very or extremely concerned about environmental sustainability [1] and green credentials, including purpose and social impacted-related stories, present an opportunity for retailers to not only build customer loyalty, but demonstrate a commitment to meaningful change for both customers and its workforce.
• Game-changing regulation: The UK and EU are leading the charge when it comes to sustainable regulatory developments, including the incoming EU Eco-design Regulation for Sustainable Products and EU Deforestation Regulations. The Competition and Markets Authority's (CMA) Green Claims Code along with Europe's Green Claims Directive presents a real impact for retailers and brands, with potential fines of 4% annual turnover for businesses guilty of greenwashing as the CMA has predicted that 53% of claims in marketing today are misleading or potentially greenwash [2]. Mandatory retailer 'Scope 3' carbon reporting is also driving transparency and incentivising customers to make sustainable switches using data about the climate impact of products. This is a change initiative that can grow revenue whilst also cutting carbon.
• Tech transformation: In the rapidly evolving digital landscape, technology and innovation, including AI and blockchain, is enabling retailers to transform the customer experience. Shoppers will have shortcuts to find businesses and products that fit their particular needs and values helping them to identify more sustainable brands and products. These changes in interface will also impact investors and employees.

"ESG is a strategic imperative that extends beyond compliance or marketing," adds Cullen, "It impacts every aspect of how retail and consumer companies operate, innovate, and stay competitive in an ever-evolving market. For example, we're seeing younger workers, particularly millennials and Gen Z, seeking out employers whose sustainability and social values align with their own. Strong ESG practices will not only enable retail and consumer brands to establish positive brand reputation and build trust with consumers and stakeholders, but it will also help attract and retain top talent to propel business growth."

The autumn edition of Retail Compass addresses how brands can deliver on ESG beyond compliance, reporting, and risk mitigation as well as trends in consumer behaviour, what's happening at a regulatory level, and the key considerations for businesses exploring technology such as AI.

[1] Bain Consumer Lab ESG Survey (2023)
[2] Neilsen