How the Retail & Consumer sector is responding to the growing demand and regulation for decarbonisation

Key Take-aways

1. There is a growing trend of favouring environmentally friendly products.
2. Businesses are responding by focusing on decarbonisation efforts that are marketable and visible.
3. Clear commitments to carbon neutrality by 2040-2050, with partway targets by 2030 are being set, with sector-wide targets increasingly being agreed upon.
4. Legislation sets to increase transparency and reporting.
5. The progress on decarbonisation of the sector is promising.

The retail industry is a major carbon contributor; it’s responsible for 40% of EU emissions, with much of it occurring within the retail value chain. Decarbonising this sector is crucial to achieving the Paris Agreement’s targets. As consumer awareness and support for regulation grow, they create a positive feedback loop encouraging businesses to decarbonise for both commercial and environmental benefits.  

While factors such as price, design, and availability still play a major role, environmental aspects may be the decisive factor once consumers have to make a final decision between two or more products. A 2022 report suggests that 87% of consumers in Sweden choose products from companies perceived as sustainable, up 10% from two years prior. Similar trends are seen in the UK and US, with 76% (BCG) and 78% (McKinsey and NielsenIQ) respectively stating sustainability as important to them and expecting brands to do their part.

Consequently, businesses are focusing on decarbonisation efforts that can be conveyed to the consumer. This includes using renewable energy in production and improving circular capabilities by encouraging consumers to repair or return products to the retailor.

Businesses are also voluntarily showcasing sustainability efforts in reports and plans, exceeding legal requirements. Increasingly, consumer-facing companies are committing to carbon neutrality by 2040-2050, with European sector organisation EuroCommerce, targeting a sector-wide 50% reduction of greenhouse gas emissions by 2030 and net-zero by 2050, aligning with the UN’s “Race to Zero”. Some EuroCommerce members, like the one in Sweden, set even more ambitious goals, aiming for global environmental benefits of Swedish companies to surpass their emissions before 2040.

Key legislation encouraging decarbonisation and increasing transparency

Several key legislations are already in place, with many more on the horizon, to ensure that strict goals and targets for decarbonisation exist. These laws also provide transparency requirements that allow the public and regulators to monitor these measures. This is particularly noticeable in the EU with its Green Deal and Fit for 55 legislative packages. These legislations can be categorised into three types: 1) Waste, Emission & Recycling, 2) Supply Chain, and 3) Reporting & Transparency.