How Can Retailers Maximize Sustainability Without Sacrificing Profitability?

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Sustainability is becoming a big business, and retailers are paying attention. While shoppers aren’t necessarily ready to open up their wallets for the costs associated with more sustainable goods, retailers are experimenting with other ways to reduce their carbon footprints without shrinking the bottom line. Resale and the wider “circular economy” are the current biggest drivers, but retailers should be on the lookout for other options as well.

A November 2022 NielsenIQ study found that 78% of consumers say that a sustainable lifestyle is important and another 30% are more likely to purchase products with sustainable credentials. However, businesses switching to more sustainable options have found that customers are reluctant to purchase these products when they cost more or look inferior to other options, according to Reuters.

The circular economy aims to reduce the cost of producing and transporting new goods without raising the price of goods or sourcing materials that have a different look. A major driver in this area is resale, which has created a global market that is expected to grow to $350 billion in sales by 2027, up from $177 billion in 2022, according to thredUP. Brands ranging from REI to Coach have already launched resale programs, and the popularity of these programs is expected to continue growing.

Retailers are also experimenting with rental options, allowing consumers to use items multiple times and, in some cases, selling them to a permanent owner. Rent the Runway pioneered this practice in apparel, and Lowe’s and The Home Depot rent out power tools and other equipment to do-it-yourself enthusiasts.

However, resale and rental are only a small part of retail overall, and companies need to understand what separates a successful sustainability initiative from a failed effort. One important element is to not overestimate the importance of sustainability. A majority of consumers do take sustainability into account when making purchases, but only 3% to 6% actually view it as their top “driver of choice,” according to NRF.

This is where the disconnect between the importance of sustainability and actual purchasing decisions lives. Deloitte noted that considerations like quality, price, and availability remain top drivers even as interest in sustainability grows, which means sustainability alone doesn’t drive most purchases.

Companies looking to get ahead of the next sustainability trends without hurting sales should look for ways that shoppers can choose to minimize their own carbon footprint without increasing costs, especially for those who aren’t willing to pay a premium. Deloitte highlighted carbon offsetting as an important development in this space.

Walmart Canada has worked with EcoCart to calculate how much carbon a given e-commerce footprint produces and offers carbon-neutral delivery options to shoppers. Not every consumer chooses to take this extra step, but EcoCart estimates that 60% of customers among its retail partners have used its tools, according to TechCrunch.