A shift towards sustainability and growing consideration of Environmental, Social, and Governance (ESG) policies and practices are affecting the retail industry. Environmental and socially-conscious Millennials and Generation Zs are influencing shoppers to seek out brands that demonstrate they are taking part in the movement. Consumers are beginning to ask questions about sourcing material, sustainability efforts, and community impact. As consumers set the environmental and social agenda, the retail industry is responding in order to win their business. ESG criteria is increasingly used by investors and REITs to judge which companies to back.
According to Accenture’s Annual Holiday Local Shopping Survey, consumers are becoming increasingly concerned about whether brands support social and environmental causes. Jill Standish, Senior Managing Director and Head of Accenture’s Global Retail Practice, says, “We have entered the ‘era of responsible retail,’ where consumers are becoming more environmentally and socially conscious and will increasingly turn to brands that not only talk about responsibility but demonstrate it through their business practices.”
As reported by the survey results, 47% of shoppers in the United States believe that is very important for brands to demonstrate environmental awareness when it comes to deciding which brands to shop during the holiday season. The percentage is even higher in larger cities.
The Importance of Sustainability
Sustainability is not just about solar panels and electric cars. Sustainability is about being socially responsible, environmentally aware, and to affect positive social change. Shoppers want to see clear evidence of a brand’s sustainability and impact, and investors and retail industry professionals are catching on. It is becoming apparent that when a company implements sustainable practices, they are not only helping the environment and future generations but also improving business.
Retail investors want to know about a brand’s sustainability efforts, community engagement work, social action initiatives, and environmental practices. Organizations like GRESB have emerged to assess the Environmental, Social, and Governance (ESG) performance of companies in order to advise potential shareholders seeking socially responsible investments.
The following statistic, provided by GRESB, illustrates the importance of ESG to investors and how that is affecting business operations: In 2009, 19% of participants collected energy data. In 2019, it’s 98%. GRESB certification and ranking is becoming important as brands realize the financial impact of corporate social responsibility.
According to a Morningstar report, 2018 saw a 60% increase over the previous two years in ESG fund launches. As measured sustainability becomes a statistic in the eyes of investors and large retail companies, the financial impact of implementing ESG practices is massive, especially considering the rise in socially responsible investing.
ICSC Research Connections Conference
Sustainability was a hot topic at this year’s ICSC Research Connections Conference in Miami, Florida. Several speakers presented information regarding the importance of sustainable practices and how their companies are responding to investors’ demands. Corporate sustainability is the new buzzword, and companies are spending time and money to increase their social and environmental impact.
Retail chains and shopping center landlords are making large strides in their sustainability initiatives. Brixmor, a landlord with 420 shopping centers totaling over 730 million square feet of gross leasable area, presented their efforts to convert their properties’ lighting to purely LED light bulbs, install electric vehicle charging stations, and to provide on-site renewable energy.
Macerich, one of the largest owners, operators, and developers of major retail real estate in the country has ranked #1 on the GRESB Benchmark for the North American Retail Sector for the past 5 years. Inspired by investors’ response to ESG and the ability to affect a more sustainable future, Macerich declared their long-term goal of generating zero energy waste, near-zero emissions, zero water waste, and zero landfill impact.
Chick-Fil-A announced an initiative to serve local communities and the environment with leftover food. Their Shared Table program seeks to provide leftover food to shelters, soup kitchens, and charities. A growing number of Chick-Fil-A franchises have also started composting their waste. The compost is shared with local farms and gardens, providing nutrient-rich soil to local business.
The retail industry is responding to demands for a greater focus on ESG policies and initiatives in order to win consumers’ business and the investment that follows. Many efforts to create a more sustainable business model cost a substantial sum up-front, but in the long run, ESG initiatives attract REITs and consumers that provide capital and publicity in exchange for corporate responsibility.
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