Green tech: retail’s sustainable makeover

A new set of consumers, which includes Gen Z, means new and evolving demands for consumer businesses, who need to future-proof themselves in order to meet them. This is causing consumer goods manufacturers and retailers to heavily invest in both digital and sustainable transformation, as detailed in our ‘Sustainable, smart and synchronised: using technology to accelerate the ESG transition’.

Both transformations can work in tandem to mutually complement one another as they remain ahead of the field in strategic importance for the companies that fall within the consumer sector. Indeed, our latest C suite barometer highlights that over 50% of UK companies have budgeted costs to implement their sustainability strategy and reporting, whilst around two thirds of C-suite executives are boosting investment in IT systems and digitising internal operations.

Sustainability, an investment towards the future           

In the ever-evolving landscape of business trends, sustainability currently stands paramount, expected to shape strategies over the next decade. Despite concerns about the buzzword nature of sustainability, its roots run deep, affecting various aspects of company operations. With rising inflation and a cost-of-living crisis, people were expected to naturally move away from sustainable products in order to spend less. Surprisingly, the current data seems to be supporting the opposite with consumers leaning towards greener options. Indeed, the data demonstrates how only 5% of consumers are labelled as apathetic when it comes to buying sustainable products, whereas roughly 95% show a deep commitment to buying sustainable items. The percentage only increases when looking at the younger generations who will be personally impacted by climate change in the coming decades.

There are also considerable market opportunities for companies embracing sustainability at the core of their strategies, with a McKinsey report finding that over 60% of respondents would pay more for a product if it were sustainable. Indeed, data from our C-suite barometer reveals the prominence of sustainability on corporate agendas, with UK leaders viewing a new or revised sustainability strategy as a top priority for the next few years. A business case towards change has been one of the main results of both the growing trend of public disclosures as well as ethical considerations.

In addition, sustainability initiatives like the Task Force on Climate Related Financial Disclosures (TCFD) are now providing information to investors on what steps companies are taking to ensure transparency in their operations and governing processes, as well as to mitigate the risks of climate change. Still, a real opportunity can be found by those companies who are looking at integrating sustainability in their core strategy, rather than only referencing ESG as an afterthought. If the former is the sustainability journey a company wants to pursue, a holistic approach will need to be adopted. This will comprise of a review of supply-chains, packaging and logistics while also analysing where companies are sourcing products and raw materials from. Of course, discussing changes to the company’s strategy and defining areas to develop and grow to become more sustainable cannot be done in silos. It will need to be a collaborative and cross-department process, which will need to include marketing, R&D and finance to name a few.

TCFD reporting, and disclosures, will be the minimum requirement for consumer goods and retail companies to be viewed as more ethical in the eyes of the new generation. The reports will need to be supported by an optimised marketing strategy which effectively conveys the steps taken to differentiate the company from the rest. A product’s packaging and label are good examples of what could be optimised and used as a tool to drive sales growth in the long term by adding more details on how the item is positioned. A reason for this is that less and less consumers will go to the effort of looking onto a company’s website to find their annual reports or sustainability credentials.  

Making an easier consumer experience using digital technology

In tandem with sustainability comes the transformative power of technology, which encompasses artificial intelligence (AI), as well as predictive analytics tools. Improving sustainability across sourcing, production and distribution is only one of the benefits that marketing and consumers will experience thanks to these tools. Another benefit is around the use of technology to help create a more effective shopping experience, better catered to the needs of the customer. An example of this can already be seen on a smaller scale with the targeted marketing strategies implemented on social platforms, like Facebook, X and TikTok, where content is tailored to individual preferences in order to offer a personalised experience. The aim is to show potential customers the most relevant products for their needs which they can then proceed to click on and buy later. Segmentation is a key step in the process which divides people based on the reference data collected on what and how they consume products. The result is twofold. On one side it renders the marketing effort a lot more efficient. On the other, it revolutionises the entire buying experience by making it intuitive and targeted, overall facilitating convenience for the customer. Convenience, coupled with price and speed are priorities for today’s consumers, which is why companies are investing on the creation of slick websites and efficient process to meet expectations.

Companies striving to imbed sustainability in their core strategy encounter diverse obstacles that can interfere with its smooth integration into operational frameworks. Digital transformation, a crucial factor in this evolution, intersects with cybersecurity due to the prevalent reality that every company faces or will face hacking incidents. Investment in technology is unequivocally a top priority for C-suite executives who view it as an economic catalyst for their business, and express confidence in their ability to navigate new technologies and manage cyber risks.

Due to the pandemic, changes have been put in place that extended beyond sustainability goals, reaching into the realm of ensuring supply chain security. While significant shifts altered the supply chain landscape, these changes were primarily aimed at securing supplies rather than addressing sustainability concerns.

In the current business landscape, companies are increasingly leveraging digital solutions to enhance efficiency. By adopting digital interim processes, optimising digital footprints, and strengthening controls related to system configuration, businesses can reduce manual inputs and streamline their operations. This not only leads to a more efficient control environment but also contributes to cost-effectiveness and provides greater assurance to board members and C-suite executives.

Finally, businesses face the challenge of striking a balance between sustainability, AI-powered personalisation, and the practical factors of cost and convenience to meet the varied requirements of individual customers. The intersection of these trends represents a dynamic period in which companies must adeptly navigate a multifaceted environment to remain receptive to evolving consumer expectations.

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