What SDG and ESG Mean for Corporate Sustainability Initiatives

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In the race to net zero, how does the nearly $5 Trillion retail industry keep itself alive while also supporting the Sustainable Development Goals set out by the United Nations? Many small to medium retailers mistakenly believe that these goals are just for the global players like Nike, Adidas, and Lululemon. Whatever their size, by advocating for more sustainable business practices,  retailers are setting themselves up for future success by building brand equity.

First, a quick refresher on the difference between Sustainable Development Goals (SDGs) and Environment, Social Impact, and Governance goals (ESGs). SDGs are the overarching framework that were developed as part of the Paris Climate Agreement and the recent COP26. The seventeen goals are ways that countries around the world can contribute to a better planet, such as eliminating poverty and hunger, providing access for all to quality education, fostering good health, supporting gender equality, and consuming and producing responsibly. ESGs are the ways that companies can measure how well they are doing to support these goals.

Myriad opportunities exist for businesses to thrive while also doing their part to improve the world. In fact, our recent report with the Baker Retailing Center at the Wharton School of the University of Pennsylvania compared retail CEOs' and consumers’ perceptions of shopping habits, purchase behavior and influences driving sustainable purchase decisions. Results identified a significant disconnect between senior retail leaders and consumers when it comes to sustainability in retail. The report found:

  • Consumers are willing to pay more for sustainable brands and products than retailers expect.
  • Consumers value sustainability over brand name, the opposite of what retailers expected.
  • Consumers shop for sustainable brands out of a greater concern for the environment than retailers believe.
  • Consumers are more motivated to utilize recommerce shopping formats out of a concern for the environment.
  • Consumers overwhelmingly believe that ecommerce purchases come with an excess of packaging.

Gen Z, the demographic cohort born between 1997 and 2012, are influencing their Gen X parents to be more attuned to sustainable shopping. By 2031, Gen Z will have surpassed Millennials in income, making them the most powerful demographic retailers need to win over. Because Gen Z members value diversity, sustainability, and transparency more highly than any generation before them, it’s imperative for brands and retailers to invest in ESG goals today if they want to be in business tomorrow.

What tools can brands and retailers use to help them achieve meaningful ESG goals?

  • Artificial Intelligence: Marrying machine learning with predictive analytics is one way to reduce a brand’s footprint and drive sustainable progress. When companies make smarter decisions based on multiple data points--including historical buying patterns and voice of the customer data—overproduction can be reduced which, in turn, has a knock-on effect of creating less waste.
  • 3D Digital Samples: Utilizing technology to iterate on and improve the design process before manufacturing means that physical samples don’t need to be produced and then discarded. This is just another technological improvement on the old way of doing business that is less wasteful which has the added benefit of improving speed to market.
  • A supply chain deep dive can reveal many opportunities for optimization which can improve a brand’s impact on the environment while also increasing profitability
  • Assortment Optimization Software: understanding where gaps are in assortments, or where substitutes can be made, prevents the wrong products from making the final cut.
  • Identifying new sustainable packaging materials—and figuring out how to use less packaging overall—will be better for the environment and less expensive for the brand. It also has the added benefit of serving as good ESG PR for the brand by making a better impression on the end consumer.
  • Voice of the Customer: understanding concerns from all stakeholders, including those of employees, is critical to achieving ESG goals. Listening to employee feedback as well as providing ongoing education can turn them into advocates for change and provide better communication with consumers.

sustainability  ESG  SDG