Green is the new black

Some 28% say greener practices such as offsetting carbon emissions and offering sustainable packaging do not influence them to shop with a retailer, while only 14% find out how sustainable a retailer is before they shop with them. 

We are, however, in the early stages of an environmental awakening in British society and that arguably means consumers don’t actually fully know what they are looking out for to measure sustainability status.

More retailers are now listing ESG plans and, for many, these contain details about reducing emissions throughout the supply chain. Consumers do take slightly more notice of organisations that publish ESG scores and ratings, our research finds, with 21% saying they have come across these scores and that it influences where they shop.

It is sustainability targets, however, that hold greater weight with consumers. The majority (63%) say they would be more willing to shop with a retailer or brand that has made a public sustainability target or pledge. 

In January, for example, fashion retailer New Look published its sustainability strategy update highlighting its commitment to become “climate positive by 2040” and to reduce greenhouse gas emissions from products by 50% by 2030.

The plan is wide-ranging and includes efforts to improve transparency within its supply chain by publishing full visibility of tier-one and tier-two suppliers by the 2023 financial year and full visibility of its cotton, viscose and polyester supply chains to tier three.

New Look, like several other retailers such as Tesco, Kingfisher, John Lewis and Sainsbury’s, has also committed to setting science-based targets, which are sustainability-related goals following a framework from the Science Based Targets initiative, which is working with the private sector to help businesses monitor and reduce their carbon footprint. 

New Look chief executive Nigel Oddy says: “At New Look, we have a responsibility to our people, employees and wider society to embrace and accelerate the change needed to reduce our environmental impact.”

However, many consumers want change faster. Of those Retail Week surveyed, 61% believe retailers need to be bolder in their sustainability targets, with pledges for 2030 and 2040 not soon enough in their eyes. 

Indeed, an August report published by the Climate Crisis Advisory Group, (CCAG) an independent collection of scientists from around the world, warns that reaching net zero greenhouse gas (GHG) emissions by 2050 is now “too little too late”, despite the Paris Agreement setting the net zero target for this date as a way of limiting global warming to 1.5°C by the end of the century.

Sir David King, chair of CCAG, says: “We must revise global targets beyond net zero and commit to net negative strategies urgently.”

According to the group, the route to net negative is societies doing more than just offsetting carbon emissions to ultimately reverse the damage caused by GHG. To do that, it said, nations need to triple their emissions-cutting pledges urgently, scale techniques to remove GHG from the atmosphere and investigate safe methods to repair parts of the damaged climate system.

Naturally, retailers setting 2050 net zero strategies will have to start developing ways to accelerate their plans, finding new ways to reduce carbon usage, remove GHG where possible and find ways to repair historic emissions in line with wider CCAG and society goals.

Sustainability = a springboard for customer loyalty

Consumers may want sustainability from retailers but they don’t want to pay a premium for it. 

Just 22% say they are willing to pay extra for a sustainable product, compared with 42% who aren’t. Of those 22%, they are most willing to pay more for food and groceries (18%), followed by clothing (12%). 

Significantly, though, almost a fifth (23%) say they would be willing to pay more for a sustainable product if they receive future rewards or incentives for doing so.

This finding presents a real opportunity for retailers to drive consumer loyalty and the sustainability agenda simultaneously, and some retailers are already playing to this.

In May 2021, Ikea launched its buy-back initiative offering up to 50% of the original price in credit for consumers who engage in its furniture recycling scheme. H&M has for some time offered loyalty points for more eco-conscious shopping behaviour, such as choosing the most sustainable items in its range.

How consumers perceive greenwashing

Greenwashing – the use of misleading, vague or false claims about sustainability in an effort to attract consumers – is increasingly the subject of scrutiny by advertising watchdogs.

In September 2021, the Advertising Standards Agency (ASA) and the Competition and Markets Authority (CMA) announced they were ramping up efforts and resources to ensure adverts and marketing were not environmentally misleading. The CMA has also published a Green Claims Code, helping businesses to check their environmental claims are genuine. This code has a checklist of statements, including that the claim doesn’t exaggerate its positive environmental impact or contain anything untrue – whether clearly stated or implied.

Food brands such as Alpro and Oatly were among the first businesses to fall foul of the new eco-related guidelines, with ASA saying the environmental claims these businesses listed in their 2021 adverts could not be substantiated or were phrased in a misleading manner.

Greenwashing affects a retailer’s reputation and ultimately its bottom line, but how forgiving consumers would be of it varies.

Of those surveyed, 28% say they would never shop with the retailer again if it was found to be claiming untrue sustainability credentials, but others would give them the chance to bounce back if positive action was taken.

Half say they would be willing to go back to a retailer that had been called out for greenwashing if they reacted proactively and publicly committed to making changes. This is in comparison to the 26% who say that, even if a retailer later took a proactive approach, they should still be “cancelled” for greenwashing.

Boohoo bounces back

Boohoo is a prime case in point here. In 2020, the fast fashion group vowed to change its supply chain after allegations of malpractice and poor working conditions in factories. 

It has since invested significant time and effort into improvements and vowed to be more transparent. Sir Brian Leveson, the retired judge who led the Leveson inquiry into the activities of the media, was appointed in 2020 to oversee its supply chain overhaul. 

Sales continue to grow at Boohoo, showing consumer sentiment for the company has been largely unaffected in the longer term by the very public criticism that resulted from its own independent review of its supply chain. Some of its internal changes have actually improved its reputation in the eyes of consumers. YouGov research in 2021 shows that it was among the companies making the biggest leaps in reputation after it linked a £150m bonus scheme to changes in factory conditions.

Legislation tightens

While consumers may be willing to forgive greenwashing for the time being, as awareness grows around the industry’s impact on the environment it may become more difficult to excuse. And any transgression is likely to become public knowledge with the regulatory environment also tightening.

The government published a new Green Claims Code in September. It potentially impacts any company that puts forward claims of positive environmental impact in relation to its products or services, and the CMA has flagged textiles, fashion and fast-moving consumer goods as priority industries for scrutiny. 

Further to this, the plastic packaging tax comes into effect in April 2022, which incentivises the use of recycled material in production by taxing packaging with less than 30% recycled plastic manufactured or imported into the UK (including on goods that are imported).

The electricals sector has also faced major changes, with the government introducing Right to Repair rules last year, which legally require manufacturers to make spare parts available, and the Take-back rules, which require a retailer to remove and recycle a customer’s old product when they buy a new like-for-like appliance.

Meanwhile, the Environment Act 2021, passed in November, contains reforms that will impact retailers, such as air quality legislation.

The best policy retailers can adopt for the planet is to focus on developing more environmentally friendly goods, services and operating models. Businesses that do this will, in turn, be more likely to win customer loyalty and therefore improve their bottom lines.

When talking about sustainable fashion, it needs to be recognised that the term is something of an oxymoron, given the statistics around the industry’s environmental impact. 

The global fashion industry, including the production of all clothes people wear, contributes between 3% and 10% of global GHG emissions, according to official communications from United Nations in 2019, based on various scientific studies. In the UK, 2020 data from the British Retail Consortium revealed that retail is now one of the country’s biggest contributors to global warming, with 80% higher GHG emissions every year than all road traffic. 

The large footprint is down to fashion’s long supply chains and energy-intensive production, with the industry cited as consuming more energy than the aviation and shipping industry combined.

Yet many fashion brands are not capable of capturing and sharing details around their material sourcing and extended production supply chain. Infor’s Behrenfeldt says this is “down to tier four (raw materials management and fabric production) – where in fact a large portion of the environmental impact sits”.

“In addition, fashion brands need to also gather data on the environmental impact of transport and distribution. This requires technology to gather data internally and from supply chain partners,” she adds.

Retail Week’s research shows that consumers do recognise the environmental cost of fashion. Of 15 industries considered, fashion is ranked the fifth-worst by consumers, behind industrial, transport and logistics, energy and utilities, and agriculture, forestry and mining.

So, there’s no hidden secret here – consumers are actively engaging with a fashion industry they know has a significant carbon footprint. In fact, only 15% of consumers say fashion supply chains are an important purchasing factor for them.

And it seems consumers don’t want to make a (fashion) statement. The overwhelming majority (73%) have never spoken out about or criticised a fashion retailer’s sustainability credentials, whether on social media, in the form of a protest or by contacting the retailer directly.

Of those that say fashion supply chains do influence their purchases, reasons given as to why the manufacturing of fashion goods troubles them include: “I worry about sweatshops but it seems hard to buy from somewhere that doesn’t use them” and “I worry about fast fashion and also whether workers are being treated and paid fairly”.

There are also concerns around “child labour”, “slave labour”, “cheap quality” and “lots of waste”, while others state: “I can’t stand fast fashion”.

Yet a significant proportion of consumers don’t want to have to pay a large premium for more sustainable fashion. Almost a quarter (23%) say they would not be willing to spend more, while 17% and 27% say they would only be willing to pay less than 5% more or 5-10% more respectively. Only 2.3% of consumers would spend 50% more

If consumers aren’t willing to fork out for the costs involved in building sustainability into the supply chain, how can retailers make it pay?

New old fashion

A range of new challenger fashion companies are entering the space, looking to change consumption patterns in the sector and balance bottom lines. 

The emergence of platforms such as Rent the Runway (RTR) in the US and, on smaller scales, Hirestreet and My Wardrobe HQ in the UK have elevated rental fashion in the eyes of consumers. These businesses tout themselves as antidotes to fast fashion, suggesting that renting rather than buying items helps get more use out of products and extends garment lifecycles.

With 116,833 active subscribers (up 78% on 2020), RTR has gone on the offensive this year, with fast fashion in its sights. Having listed on the Nasdaq in 2021, reporting sales growth of 66% year on year to $59m at the end of 2021, it launched a punchy 2022 campaign calling on people to rent not buy, using emotive social media messaging.

Its official Twitter account said: “It’s time to break up with fast fashion. All of the red flags are there. It’s harmful to the environment. It’s addictive. It rips off designers. Renting with RTR gives you all of the things you love about fashion – with no guilt.”

Elsewhere, reusing and recycling clothes is en vogue, with platforms such as Depop, Vinted and Poshmark driving sales off the back of preloved and vintage fashion. Depop’s popularity was underlined in June 2021 when Etsy acquired the business for $1.6bn after Depop’s 2020 gross merchandise sales and revenue totalled $650m and $70m respectively.

In January, Decathlon launched a rental offering for skiwear in partnership with online rental platform Hirestreet, while several luxury brands have launched initiatives asking  their customers to return unwanted items to give them a fresh lease of life with new owners. Mulberry and Alexander McQueen, for example, have partnered with secondhand luxury online platform Vestiaire Collective to resell used products, while luxury group Kering invested a 5% stake in Vestiaire Collective in 2021 to further highlight the rising power of the secondhand market.

This is the circular economy in action. Indeed, 58% of consumers Retail Week surveyed say they have purchased clothing from a secondhand fashion website or charity shop in the past 18 months, with a third indicating that they purchase from these retailers on a regular basis and a quarter saying they now shop secondhand occasionally.

Is slow fashion winning the war?

Although fast fashion is under attack, we have to stop short of heralding the dawn of slow fashion. When it comes to consumers configuring their own clothes as a one-off, only 28% say they have done this in the past 18 months and just over a quarter (26%) say they have bought fewer clothes in an effort to be more eco-friendly over the past 18 months.

The pandemic has led to people buying fewer clothes, with lockdowns and working from home, rather than environmental concerns, being the reason 34% of consumers say they have been purchasing less. 

Interestingly, though, the majority are taking more care of their clothes – with 58% saying they have recycled, repaired or reused more clothes than normal in the past 18 months. However, in the context of a growing number of recommerce opportunities and general consumer thrifting trends, we can’t assume this directly relates to eco-friendly practices.

So, the message for retailers here is that consumers are adopting more sustainable thinking and are increasingly keen on rental and reuse, but that doesn’t mean they don’t want to buy new items, too. 

Success in the next decade will come to those who get the balance right – a choice of options is key to keeping consumers happy, while making greater efforts to be more circular and ensuring what is sold can also be returned at the end of its lifecycle.

Have we reached peak stuff?

Recent trading statements from fashion retailers including Marks & Spencer, Next and Primark show encouraging clothing sales across the all-important second half of 2021, suggesting consumers are not falling out of love with buying garments just yet. The phrase ‘peak stuff’ is more concept than reality, it would seem.

Yet there is no denying that consumers want some way to shift their unwanted fashion wares. The rise of preloved fashion websites shows that, but so too does the emergence of clothing take-back schemes in stores up and down the country. Superdry’s Give Back initiative, in association with Oxfam, incentivises customers with vouchers and competitions for donations, while Snow & Rock offering discounts off the next shop when consumers donate old stock are just two examples.

Degrowth is also being discussed as a potential solution to fashion’s waste problem. It  refers to businesses reducing product volume in accordance with predicted demand to eliminate overproduction. The concept sees businesses take ownership of the problem, rather than calling on consumers to buy less and wear clothes for longer. 

Ralph Lauren revealed at COP26 that it is actively trialling this concept, whereby it fuels “financial growth through degrowth of resources”. According to The New York Times, Ralph Lauren “discovered it could decouple production from profits, so that even as the company made less stuff it was able to make money – largely by maximising its understanding of sell-through. It ended up with less wasted product that had to be downstreamed to outlet stores.”

While degrowth may take some time to filter through the fashion industry, it marks a shift in the norm that could guide future fashion retailers’ strategies.

There is a lot of uncertainty among some consumers as to which retailers are performing best in sustainability. Significantly, over a third (35%) of consumers say they either “didn’t know”, “couldn’t think of one” or were “not sure” which retailer was the most sustainable.

This could be a matter of phraseology, of course – as mentioned before, everything leaves a footprint. Or they could fall into the third of consumers who are not particularly concerned about a retailer’s ESG strategy, as mentioned in chapter one. 

Having worked with a number of fashion brands, Behrenfeldt says one way some companies are trying to tackle this uncertainty is “by providing insights on the sustainability rankings of brands (for example, the agency SB Insight and others), which makes it easier for the increasing number of consumers who are concerned about sustainability to see how a brand is performing when making their buying decision”. 

She says “this is driving many brands and retailers to relook at their end-to-end supply chain to reduce waste and improve sustainability credentials to differentiate their brand”.

These retailers and brands that are making efforts to be better, and greener, are capturing customer attention.

Consumers named their top five most sustainable companies in the industry as H&M, Nike, Primark, M&S and Amazon. Primark and Amazon’s inclusion in the top five list is intriguing considering very public criticism aimed at these companies in the past, so below we take a look at how each of these businesses has been working to become more sustainable in the eyes of consumers.