Understanding ESG and How to Build On It 

Retail companies invest in integrity. As conscious consumerism gains global momentum, more retailers and consumer packaged goods (CPG) suppliers now take their environmental, social, and governance (ESG) efforts seriously. That’s because today’s informed consumers—and investors—care about and watch what companies are doing to protect people and the planet. ESG policies matter in retail, as we increasingly prefer to buy from companies that do the right thing and use their industry influence for good.

Purpose-led brands stand out for their principles, as:

• 80% of global consumers demand sustainability, social responsibility, and transparency from brands and retailers.¹ Overstreet, Kim. Macro Trends Impacting Consumers, Retailers, and Product Manufacturers in 2021. Packaging World. March 31, 2021.
• 66% of Americans say their social values shape their shopping decisions.² Brown, Pamela, Tiffany Burns, Tyler Harris, Charlotte Lucas, and Israe Zizaoui. The rise of the inclusive consumer. McKinsey & Company. February 8, 2022. 
• 44% of consumers choose to buy products from companies that align with their values.³ Overstreet, Kim. Macro Trends Impacting Consumers, Retailers, and Product Manufacturers in 2021. Packaging World. March 31, 2021.
• 32% of global consumers will buy from brands that support social and political issues that align with their values.⁴ Evans, Michelle. Three Ways The Future Retail Store Will Change. Forbes. December 1, 2021.
• 27% will boycott brands that do not.⁵ Evans, Michelle. Three Ways The Future Retail Store Will Change. Forbes. December 1, 2021.

Let’s see how global retailers and CPG brands show ESG leadership as power shifts to the people. 

Environmental stewardship

As climate change and retail’s war on plastic make global headlines, these companies are taking action to protect the environment.

Reducing packaging waste

• Amazon uses machine learning and computer vision to optimize the amount of packaging it uses for the products it ships. Over the past six years, these innovations have reduced per-shipment packaging weight by 36% and eliminated more than a million tons of packaging.⁶ Berthiaume, Dan. Amazon reduces packaging waste with machine learning. Chain Store Age. January 5, 2022.  
• CVS Health, Target, and Walmart founded the Consortium to Reinvent the Retail Bag, which focuses on developing sustainable alternatives to the ubiquitous single-use plastic bag.⁷ Zboraj, Marian. Walmart, Target, CVS Health Unite to Reinvent Retail Bag With In-Store Pilots. Progressive Grocer. August 2, 2021. Cross-channel leaders like Albertsons and Dollar General have also joined the initiative.⁸ Bradbury, Rosie. Dollar General joins ‘Beyond the Bag’ initiative to reduce plastic waste. Retail Dive. February 8, 2021.
• Walmart is testing reusable shopping bags as part of its direct-to-fridge delivery service, InHome, as part of a pledge to reach zero waste in its own operations in the U.S. and Canada by 2025.⁹ Repko, Melissa. Walmart tests ways to ditch single-use plastics, as climate advocates urge the retailer to go faster. CNBC. February 15, 2022.  
• Iceland committed to be the U.K.’s first plastic-neutral supermarket by recycling plastic waste equivalent in weight to its plastic footprint. The chain also intends to eliminate its private label plastic consumption.¹⁰ Qureshi, Waqas. Iceland announces commitment to be the UK’s first plastic neutral supermarket. Packaging News. November 4, 2021.
• Tesco is testing a zero-waste shopping service, which lets shoppers buy goods in reusable packaging, which they can return to stores to reduce plastic waste.¹¹  Russon, Mary-Ann. Tesco zero-waste trial launches at 10 stores in England. BBC News.

“Retailers in 2022 will need to … establish their environmental, social, and governance credentials or lose business.”¹² Guy, Oliver. Retailers need to prove their sustainability cred to grow sales. RetailWire. January 27, 2022.

Oliver Guy, Senior Director, Industry Solutions, Software AG

Certifications help shoppers go green

• Amazon helps consumers support environmentally friendly products and brands by highlighting 31 certifications covering more than 75,000 products linked to its Climate Pledge Friendly program, including EWG Verified, Regenerative Organic Certified, The U.S. Environmental Protection Agency Safer Choice, and Animal Welfare Approved.¹³ Douglas Moran, Catherine. Amazon expands products sold under sustainable labeling program. Retail Dive. July 13, 2021.
• Walmart launched a new online shopping destination called Built for Better to make it easy for shoppers to find brands and products that align with their clean living and sustainability values. Certifications like Energy Star Certified and Rainforest Alliance Certified make eco-friendly brands and products stand out.¹⁴ Douglas Moran, Catherine. Walmart simplifies shopping for eco-friendly and healthy products. Retail Dive. September 23, 2021.

Sustainable energy and transportation

• Albertsons made the first commercial 100% zero-emission grocery delivery using an electric-powered truck and refrigerated trailer to transport goods.¹⁵ Redman, Russell. Albertsons marks milestone with 100% zero-emission truck delivery. Supermarket News. May 28, 2021.
• Amazon plans to completely power all of its business with renewable energy by 2025— five years ahead of its initial target.¹⁶ Pardilla, Ambar. What Amazon’s Climate Pledge means, according to experts. NBC News. June 17, 2021. Also, Amazon bought 100,000 electric vehicles to use in cities like San Francisco and Los Angeles, with plans to expand to 14 more cities this year.¹⁷ Pardilla, Ambar. What Amazon’s Climate Pledge means, according to experts. NBC News. June 17, 2021.

Sustainable brand advantage

A green leader, Burt’s Bees encourages consumers to return their used personal care and beauty product packaging for recycling. The brand uses an average of 50% recycled materials in its packaging, all of which is recyclable. Since 2010, Burt’s Bees has sent its operational waste to composting, recycling, and waste-to-energy facilities rather than landfills.¹⁸ Burt’s Bees: Are They Clean & Sustainable? Better Goods. December 6, 2021.

Social justice

The following retail companies stand out for how they treat people, from their workers to diverse consumers.

Diversity

• Best Buy will spend at least $1.2 billion with businesses owned by Black, Indigenous, and other people of color by 2025, allocated to supplier diversity, advertising, and media.¹⁹ Lubbers, Payne and Bloomberg. Best Buy commits to spending $1.2 billion with minority-owned businesses by 2025. Fortune. June 24, 2021.  
• Sephora created a dedicated space on its website to showcase Black-owned brands and their products. The site also lets shoppers filter search results for Black- and BIPOC-owned brands.²⁰ Brown, Pamela, Tiffany Burns, Tyler Harris, Charlotte Lucas, and Israe Zizaoui. The rise of the inclusive consumer. McKinsey & Company. February 8, 2022.  
• Target is adding 20 more Black-owned or -founded brands to its assortment and committed to spend $2 billion with Black-owned businesses by 2025. In the beauty category alone, Target has increased its Black-owned and -founded assortment by 65% since 2020.²¹ Wilson, Marianne. Target in new beauty push. Chain Store Age. February 4, 2022.
• Ulta Beauty is investing $50 million in diversity, equity, and inclusion (DE&I), including diversifying its product range, and improving DEI representation internally and across the beauty industry.²² E. Kohan, Shelley. Ulta Beauty Invests $50 Million In Its DEI Initiatives For 2022. Forbes. February 3, 2022.

“Forty shades [of foundation] became the new standard”
due to Fenty Beauty’s leadership in welcoming all complexions.²³ Fetto, Funmi. How Fenty Beauty Changed The State Of Play In The Industry. Vogue. April 6, 2020.

Vogue

Brands embrace social activism

• Dove Men+Care fights for racial equity and boldly launched a #FathersDayTaken campaign to honor the thousands of Black fathers who died due to racism and violence. To support Black families who have lost a loved one, the brand established the Fathers Taken Fund with a $1 million investment.²⁴ Fromm, Jeff. From Cause Marketing To A Greater Mission: How Dove Created A Business Model On Purpose. Forbes. February 4, 2021.
• MAC Cosmetics extended its legacy as a caring brand by donating $10 million to 250 global organizations to support vulnerable communities during the pandemic. It also invested resources, products, and £100,000 ($133,250 U.S.) to local organizations to advance equality, inclusion, and justice in the U.K. and Ireland.²⁵ Peters, Alex. MAC Cosmetics pledges £100,000 to equality and inclusion in the UK. Dazed Digital. October 16, 2020.
• Tony’s Chocolonely is a Dutch chocolate brand whose mission champions slave-free chocolate. The brand informs consumers about slavery issues related to chocolate production, as well as its own corporate actions to end child and slave labor.²⁶ Faelli, François, Jean-Charles van den Branden, Jenny Davis-Peccoud and Magali Deryckere. The Sustainable Brands in Your Future. Bain & Company.  December 11, 2020

Responsible governance

These companies show how principles and ethics guide their corporate decisions.

Economic influence

Consumers and investors now pay closer attention to global affairs and how they affect corporate decisions. In Canada, the Liquor Control Board of Ontario (LCBO)—one of the biggest alcohol procurement groups in the world—announced it was pulling all alcohol produced in Russia from its store shelves the day after Russia invaded Ukraine.²⁷ Ontario tells LCBO to pull all Russian-made products from store shelves. CBC News. February 25, 2022.  

Irresponsible governance

In a precedent-setting decision, Illinois judges unanimously ruled that Hobby Lobby violated state law in Illinois by denying a transgender woman employee access to its women’s bathroom in the store where she worked. The decision applies statewide to every transgender individual and every public bathroom.²⁸ Ennis, Dawn. Hobby Lobby Loses 11 Year Fight To Block Trans Woman From Bathroom. Forbes. August 15, 2021.

Meanwhile, fast food chain Chick-fil-A promised to stop making charitable donations to anti-LGBTQ organizations—yet its owner, Dan Cathy, continued to make donations as a private citizen. His contributions to efforts to stop the Equality Act from becoming law sparked controversy.²⁹ Kirkland, Justin. Chick-fil-a’s Owner Is Newly Connected to Anti-Equality Act Donations. Esquire. June 3, 2021.

Risk management

To protect holiday shoppers’ interests amid global supply chain disruption, Mastermind Toys placed overseas orders six to eight weeks earlier than usual. Early procurement helped to mitigate delays and protect product availability. The retailer also used air freight to ensure key items were on shelves on time.³⁰ Krashinsky Robertson, Susan and Matt Lundy. Canadian retailers take to the skies to mitigate holiday supply chain woes. The Globe and Mail. October 22, 2021.

Purpose is profitable

As ESG emerges as a 2022 retail priority, more retailers and CPG brands are leading with their conscience. Taking concrete steps like the ones listed here transforms ideals into reality in the retail industry. Genuinely aligning with consumers’ values like sustainability and diversity helps companies demonstrate integrity to earn consumers’ awareness, trust, and loyalty.

How does your company show ESG leadership? 

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