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For now, as SAP research shows, the sector has some way to go in matching rhetoric with tangible progress on sustainability. Comparing AI analysis of earnings call transcripts with S&P Global’s ESG scoring system, SAP has found that, while retail industry executives are talking a lot about sustainability, this is not matched by their ESG performance.
In some cases, companies may not have recognised recent shifts in consumer behaviour, says Mr Doucette. “They may have raised prices once when they tested a sustainability product and it didn’t work, and they have it in their heads that consumers won’t pay,” he says. “So changing the narrative is part of what we need to do.”
However, even retail companies that have fully embraced sustainability commitments face a daunting set of challenges in managing their social and environmental footprint –and often there are no silver-bullet answers.
Mr Doucette points to efforts to replace virgin plastic in packaging. Although many companies, he says, are investing in developing bio-resin-based flexible films, they have not yet overcome technical hurdles, such as whether the packaging can be printed on, at a cost acceptable to consumers.
And while others are exploring chemical recycling of plastic, Mr Doucette points out that “nudges are needed” to get municipalities to establish collection infrastructure and consumers to behave differently. In addition, he warns, it remains unclear which of several methods of chemical recycling will have both the right cost profile and the right environmental footprint.
Company size may influence the sustainability challenges retail brands face. For large enterprises, for example, the complexity of their supply chains makes achieving transparency extremely challenging. Companies often have products manufactured by thousands of suppliers in many different countries. Ensuring that these suppliers meet social and environmental standards is a daunting task.
Ms Morais cites the fashion industry. “You have various layers,” she says. “It may be that some of the suppliers you are working with are delegating work to other suppliers and those suppliers may be delegating to other suppliers.”
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