We all know that the customer should always be at the heart of any retail business – and increasingly, those customers want sustainability. Half of New Zealanders think it’s important that retailers take environmental and social sustainability seriously, while 85% say they are prepared to change their shopping habits to be more sustainable, according to a recent Retail NZ survey.
Many retailers care about sustainability not just because it’s what the customer wants, but because they too want to make a difference. It’s also a key way to hire talent – many Kiwis now expect their employers to operate more sustainably in the same way they’d expect the businesses they purchase from to do so.
However while some of the larger retailers have budget to invest significantly in sustainability, it can often be difficult for the smaller retail businesses to know where to start.
“But that doesn’t mean retailers should just give up,” explains Justin Martin, BDO Retail Sector Lead. “While many businesses have been accused of greenwashing in recent years, there are plenty of ways to engage in sustainability in a meaningful yet manageable way.”
Packaging the number one concern for NZ consumers
The same Retail NZ survey found that overpackaging and non-recyclable packaging is the number one concern for New Zealanders, and this is a key area where consumers are making changes to the way they shop. This is particularly important if you’re operating an online shopping or delivery component. Many customers believe it’s just not okay to receive goods covered in plastic anymore. Fortunately, there are a lot of compostable, biodegradable and paper packaging items to choose from in New Zealand.
While these options can be slightly more expensive than traditional plastic packaging, it’s important to factor in that you may be more likely to build customer loyalty if you are using more sustainable options. If you do decide to go for a more expensive alternative, you can always factor this into your postage and packaging costs, making sure you explain to your customers the change and why you’re doing it. You could even give them the option of whether they would like a more expensive eco-friendly packaging or traditional plastic – in the same way that airlines now give customers the option to pay extra to offset the carbon emissions of their flights.
Another quick win is to consider emailing receipts instead of printing them off. Thanks to online shopping, people are much more used to receiving receipts online, and this also gives you an opportunity to ask the customer if they want to be added to your mailing list as well.
Sustainable supply chains
Thinking slightly bigger, your supply chain is a key area where you can reduce waste and improve sustainability. Many larger retailers are already working with their suppliers to cut out plastic packaging, and this is something you can look at in your own supply chain.
You may also wish to consider switching to locally-made and sustainable products. This will also have the added bonus of simplifying your logistics – an important factor to consider as we face continued global supply chain disruption. Modern slavery is also a key consideration in any sustainable supply chain audit.
It's also worth measuring your business’ emissions. This doesn’t have to be an expensive and complicated task. The NZ Government has created an emissions calculator specifically designed for small businesses. Measuring your carbon emissions is the first step to making meaningful reductions.
Adopting a sustainability mindset
There are a lot of small actions you can take which will have a big impact – and for Divya Pahwa, BDO Retail Advisory Associate Director, part of this is just having a sustainable mindset:
“Sustainability is about going beyond profitability – it’s about your purpose and vision. BDO client Nisa, which was set up to provide employment to refugees coming into New Zealand, is a great example of a social enterprise which is focused not just on profit but on broader ESG (Environmental, Social & Governance) aims. Another good example is Everybody Eats. They purchase ingredients from retailers that are approaching expiry and then cook them in their Auckland and Wellington restaurants, inviting customers to pay what they feel – helping to both avoid food waste and support local communities.
It's all to do with mindset, and thinking outside of the box to help achieve your retail business’ vision.”
Financial considerations underpinning your sustainability aims
It’s important to understand the financial implications of any changes you might make. While switching to more efficient practices can often save you money, some actions may cost a little more in the short-term. It’s important to understand how this will impact your cash flow and margins, and what you may need to change in your pricing to accommodate this.
Likewise you need to take your customers on the ESG journey also, and this is an opportunity to build even stronger bonds with them. “Consumers are excited about sustainable retail and it’s important you harness that, incorporating it into your conversations with customers and in any communications,” explains Greg Harford, Chief Executive, Retail NZ. “It’s not greenwashing - it’s about being transparent about what you’re doing and where you know you need to improve.”
When embarking on your ESG journey, it helps to have advisers around you who understand your business and the unique local conditions you operate in. Reach out to BDO’s specialist retail advisory team today to find out how we can help support you as you achieve your sustainability goals.