Five Reasons for Retailers to Go Green

The world is becoming more environmentally conscious, and retailers are no exception: Everyone from big-box retailers to mom-and-pop shops are getting “greener.”

Multinational retailers like Tesco, Kingfisher, Starbucks and Safeway have made public pledges to promote environmental stewardship by boosting energy efficiency, offering sustainable products, eliminating waste and reducing greenhouse gases. Retailers large and small are adding solar panels and wind turbines to their warehouses while expanding their range of sustainable products.

It’s worth the investment. Retailers that integrate customer-focused initiatives throughout their business have a greater number of loyal customers and outperform their competitors, according to an IBM study of 19,000 consumers.

There are many reasons why retailers should consider increasing their focus on “going green,” including:

Developing more loyal customers. A recent report from The NPD Group, “Green 2008: Consumer Attitudes and Behaviors,” found that more than half of consumers surveyed consider themselves extremely or very interested in environmentally friendly products. Women (57 percent) appear to have a stronger interest in “green” products than men (47 percent) and are more likely to pay a higher price for eco-friendly products.

Further, product origin, as well as ingredients and content, matter more to women shoppers. For example, are products organically grown? Hypo-allergenic? Tested on any animals?

Conserving energy makes dollars and sense. Some retailers are working to minimize the energy needed to heat, cool, light and operate the equipment in their stores and data centers. For example, U.K. Co-op launched a program that lets POS devices sleep at night, reducing CO2 by 722 tons and saving an estimated £120,000 per year. Other retailers are supplementing power by using local generators, allowing them to offload power from the grid when it is under stress or more expensive.

Grocers and hypermarkets closely monitor the temperature and power usage in coolers, freezers and other temperature-controlled environments in the store to ensure the equipment is working properly and not expending too much energy. They also are able to better manage spoilage with this automated monitoring. Based upon a defined set of thresholds and dashboards, retailers can better manage their store environments and reduce energy consumption by up to 30 percent.

Building a sustainable supply chain. Companies see the link between a “greener” supply chain and improved efficiency and visibility; non-retailers are already reaping the benefits. General Motors, for example, recently reduced disposal costs by $12 million by establishing a reusable-container program with suppliers, and Commonwealth Edison saved $25 million through more effective resource management.

To reduce their carbon footprint, suppliers are using bio-fuel, diesel and hybrid options to transport goods from warehouses to stores. In addition to energy efficiency, a sustainable supply chain also links products to their point of origin, improves product quality by ensuring that shipping practices are monitored and facilitates efficient and speedy recalls.

Developing smarter packaging. From Sam’s Club stores reshaping their milk cartons so that they can stack more cartons on each truck to purified water companies remolding their bottles to be lighter weight, companies are investing in smarter packaging methods. Similar to their European counterparts, U.S. retailers now urge shoppers to purchase cloth or plastic bags and deduct as much as five cents per bag when customers re-use them on return visits.

Becoming more socially responsible. Companies are under increasing pressure from governments, advocacy groups, investors, consumers and even prospective employees to make their operations, products and services more socially responsible. A recent IBM study of 7,500 CEOs found that companies doubled their focus on environmental issues in the past two years. More important, the study found that retail CEOs plan on increasing their investment in corporate social responsibility by 49 percent over the next three years.

For retailers, “going green” means operating more efficiently, especially by controlling energy use. It also means sourcing products that are sustainable, thus giving shoppers the opportunity to support brands that they trust and feel good about.

The bottom line: Social responsibility and “going green” are not disconnected from building customer loyalty, improving revenue and managing costs. Retailers need to recognize social and environmental initiatives for what they are — smart business.