Retail supply chain sustainability issues highlighted at Manhattan Exchange 2023

Editor’s blog: What I learned about sustainability at a retail supply chain conference in Cannes

Last year at Manhattan Associates’ Manhattan Exchange event, in Berlin, I came up with the term ‘retail supply chain sustainability starts with efficiency’.

The concept of greener retailing begins with doing all the things you already do, but better and more efficiently, with limited wastage, seemed like a good mantra. Whether it be avoiding returns, shipping at maximum capacity, or selecting the quickest or most optimal transportation route that reduces mileage, there are so many things retailers can do to improve efficiency and therefore reduce their carbon footprint.

“Don’t come back with an empty lorry,” said Ann Sung Ruckstuhl, Manhattan Associates’ chief marketing officer, at this year’s Exchange event in Cannes, France. Her comments supported my mantra but she also recognised greater work is required to lean into more sustainable practices.

Schneider Electric has topped several lists of green-thinking businesses in recent years and was recognised in 2023 as number one in Gartner’s annual Supply Chain Top 25 ranking for the efficiency and robustness of its value chain. Its global director for logistics sustainability, Marcus LeMaster, talked at Exchange about shortening the supply chain.

“It’s not just road miles in the final delivery – we talk about driving out miles globally,” he explained.

“When you talk about reducing miles, look at your entire end-to-end supply chain. How is that product moving? Look at all the pieces.”

In the months since Berlin, I’ve added transparency of operations to the list of what I deem to be retailer requirements if they are to even begin saying they are sustainable. No-one can make big claims without being able to back those assertions up with facts; hard evidence.

Much of what Manhattan Associates offers in terms of warehouse and transport management services, and end-to-end visibility of supply chain operations, all plays towards supporting retailers in these goals of efficiency and transparency. The company is also starting to highlight “green carriers” in its transport management solutions for retailers, and offer “customer controlled fulfilment” options providing a period of grace for consumers to cancel or amend an order to try and get their selection right first time and avoid costly and envioronmentally-unsound returns.

Advancements to its returns management tool within its Manhattan Active Omni platform reduce shipping costs and improve the sustainability of a return by optimising a product’s return path and inventory placement based on assortment and current stock levels, according to Brian Kinsella, senior vice president for product management at the company.

LeMaster said: “Reducing the miles is an end-to-end process and this is where the tech and data come in.

“You need to have the digitisation and have the data – whether it’s in control towers or your systems – to then be able to do the analytics on it and say ‘this is where my opportunity is going to be?’”

As a Manhattan media partner, Green Retail World was in Cannes to observe the retail supply chain industry and consumer thinking in terms of sustainability. The focus of the event was on new technology and innovative partnerships fuelling and supporting more sophisticated supply chains, but as the event drew on, more and more greener retailing ideas cames to light.

I’ve tried to summarise all my greener retail supply chain-related findings, below, and I think there are some positive and negatives to share…

Consumers deprioritising sustainability

A study published just as Exchange kicked off showed consumers are less likely to prioritise green products when making a purchase than they were last year. That was a somewhat sad start to the proceedings, but it’s arguably no surprise as we continue to battle the biggest cost-of-living crisis in generations.

Some 45% of consumers surveyed consider sustainability an important factor when choosing where to shop, which was down from 50% last year.

That consumers are prioritising low cost over sustainability when shopping makes sense in a tough inflationary economic environment.

But I don’t think it’s good enough to shrug our shoulders and simply say it’s a matter for a different time. As was mentioned in one of the breakout sessions at the chic Hotel Martinez venue in the south of France, decarbonisation and limiting the heating of the planet is “the most serious challenge us as a civilisation has ever confronted”.

So, where are the chinks of light when it comes to addressing this in the retail supply chain?

Different demographics have different views

Firstly, it must be emphasised there is a difference of opinion among consumers.

According to the Manhattan survey, younger generations are more likely to consider a retailer’s environmental/sustainability efforts compared to older consumers, with 55% of 18–24-year-olds reporting it as a top or important consideration for them.

Some 17% of the 24-35 age bracket went further still and said they would actively avoid retailers if they were not environmentally conscious, compared to only 10% of over-55s saying they would boycott these same brands.

In addition, more than 20% of older shoppers said sustainability was not important or not even a consideration when they choose where to shop.

Natalie Berg, retail analyst and founder of NBK Retail, said: “It just shows the very different needs [of consumers] and it’s very important for the retailer to understand their customer.”

The research pointed out how Mexican and Brazilian consumers were the most likely of all nationalities to prioritise sustainability in their shopping behaviour, while people from New Zealand and the Netherlands were at the other end of the scale.

Little bit of carrot, little bit of stick

According to the research, when asked what was the most important factor in terms of delivery, most people said convenience. Only 8% cited the environment.

Berg said: “I think it’s because there is no awareness of how their actions impact retailers – there’s no transparency.

“For a lot of consumers there’s a disconnect between what they say they want and how they actually behave – we all want to feel we’re making greener and environmentally-conscious decisions but at the same time we don’t want to sacrifice convenience.”

How do we change consumer mindsets and create more transparency around sustainability?

Berg suggested it is “a little bit of carrot, little bit of stick”, adding retailers such as Zara, H&M, and Uniqlo charging for returns are examples of the stick, placing a charge on people for not getting their purchase correct first time. As for the carrot, Berg pondered whether retailers can find a way to incentive greener delivery choices or more sustainable product choices through rewards initiatives and the like.

Supply chain is where the big impact can be made

Supply chain, including manufacturing, is estimated to account for 60% of global emissions. That is according to various reports, including one from Accenture and United Nations Global Compact.

“If you want to start at a place where you have the biggest impact on carbon emissions and environmental impact you start at the supply chain level,” said Ruckstuhl.

“We feel not just a moral responsibility but a scientific and wider responsibility to do something about that.”

Maybe retailers need to be putting details about sourcing of materials at the product description page even though consumer demand for that info is not a priority. As we’ve debated, everyone is different – and that info will be hugely valuable to some people and may result in a greener transaction.

Legislation is moving in a direction where this could be mandatory in the not too distant future anyway.

Is the price of being greener actually that much higher?

Research from the World Economic Forum and the Boston Consulting Group from 2021 shows it is possible to decarbonise major global supply chains with readily available technologies at low end-to-end costs for consumers. The study debunked the myth that sustainable is always way more expensive.

Although the aggressive inflationary environment since that study was released means everything is more expensive now, the research is a good source with which to argue the case for offering greener products and services. Analysing the top eight global supply chains that account for more than half of global greenhouse gas emissions, the study found decarbonising end-to-end would result in a 1% to 4% increase in end-consumer costs in the medium term.

“We’re talking about €1 for a €40 pair of jeans that a consumer may have to pay extra to buy something that is sustainably sourced and shipped,” said Ruckstuhl, who argued: “I think the consumer can tolerate that.”

And as for additional costs to operations? Sebastien Lefebure, managing director for France and southern Europe at Manhattan, said the sustainability question among the retailers he and his team serve each and every day is increasingly tied into what makes the best business decision financially.

There’s that retail supply chain sustainability starts with efficiency message coming in again!

Transitory time; you’ve just got to start…

You just have to get started with sustainability strategy – that is the bottom line for retailers. And Schneider Electric has been great at prioritising and focusing on sustainability, therefore it offers those in commerce an example of the way forward.

“It’s the culture in the organisation,” LeMaster noted.

“It’s actually built into our purpose, mission strategy, leadership values inside the organisation. Even our mission is to power all to make the most of energy and resources – it’s what we go out to do every day and it’s in our DNA as a starting point.”

In 2021, the company’s long-term sustainability strategy was launched and “everyone” in the company is aligned towards it. It is a common talking point among all members of staff, and the senior team continue to educate both young and old employees alike.

Getting ambitious targets in place around upstream emissions from suppliers and downstream from end customers is a core part of the process, and then different people in the business are aligned to each goal and have a responsibility to lead the charge towards achieving it.

“I’m accountable for the improvement in our transport decarbonisation journey,” LeMaster revealed.

“This is a very large and complex topic. The point is to really start somewhere, understand what it is we need to address what are the targets we need to set and what are some of the low-hanging fruit.”

There is the Schneider Sustainability Index, too – a five-year list of targets from 2020-25, which makes up a meaningful part of the internal company bonus plan for people in the company.

This is what gives Schneider the focus. The sum of the parts add up to the overall ambitious aims – and, if what LeMaster said is true, great progress is being made in working meeting carbon reduction goals at the business.

Lots of retailers have mapped out similarly ambitious plans, but this should provide food for thought for organisations that haven’t yet set substantial decarbonisation targets across their retail supply chain. Schneider offers a noteworthy template, and I was pleased to get a chance to see and understand the nuts and bolts of the strategy while on the French Riviera this week.

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Ben Sillitoe, editor, Green Retail World (@bsillitoe)

[Image credit: Green Retail World]

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