Two Key Take Aways for Retailers on EU Commission’s Sustainable Product Initiative
How prepared is your business for the future? Adoption of an agile mindset and promotion on change is one way. Though with all the unknown to come, there is a mayor challenge that will form our coming decades. This concerns how we will tackle sustainability, especially regarding environmental aspects on keeping the global rising temperature below +1.5°C and become net-zero on carbon emission by 2050. It is also important to grasp that sustainability is a broader theme and sometimes hard to concretize. In accordance with UN 17 Goals on Sustainable Development
In the last decade we have seen a variety of efforts in this domain, and it is becoming increasingly more evident that the transformation is accelerating. This also shows in our CGI annual strategic client interviews: both business and IT leaders and especially those leading in producing results from their Digital Transformation tell us sustainability has risen and become one of the highest priorities on their organizations agenda. This is a trend that we see growing across business segments, where leaders in Europe indicates Sustainability being higher compared to other regions. Specifically 57% of Retail executives and 69% of Consumer goods executives questioned in the VOC 2021 , states that environmental sustainability is key for their organizations to create future value for their customers. The reason for European leaders ranking Sustainability higher compared to other regions, can be due to the increased legislative efforts by the EU and a higher degree of customer knowledge and demand.
Take Away 1: Keep up with Legislative Change
On March 30th 2022, the EU commission adopted an updated proposal on environmental sustainability through their Circular Economy Package. This package includes their Sustainable Products Initiative (SPI), which incorporates key aspects on more extensive regulations on Ecodesign of products as well as a introduction to a Digital Product Passport (DPP).
While there are existing rules on the design on some products today, this initiative incorporates a wider range of products such as textiles, furniture, paints and other retail directed products. These rules covers product-specific requirements on how designs needs to be durable, reusable, upgradable and reparable all to aim for longevity of products and foster circularity. In combination to the Ecodesign, the proposal includes adoption of Digital Product Passport (DPP), which will enable product-related information to flow transparently through the full value chain from supply chains, authorities and to end consumers. This accessible information sharing will not only empower end-consumer to more easily review the degree sustainability of the product but also increase the efficiency of repairability and reusability of products.
The main objectives behind the initiative is to transform linear business models to circular and to make sustainable products the new norm within the EU.
Take Away 2: Learn from initiative across industries to make the change…
All business are somehow affected by new regulations on sustainability and forced to change their way of doing business. This can especially be said for the Retail & Consumer Goods industry which has greatly benefited by the general overconsumption of the world. This creates incentives for new strategies to be developed, on how to stay relevant in the future to come. For strategies on sustainability to be successful, it is important they are set in a longer perspective, incorporating collaboration and transparency between stakeholders throughout the full value chain.
“The transformation to go from a deeply rooted linear model to a circular model will take time, effort, knowledge and investments.”
More businesses are starting to seeing the cost benefits of circular models
Adoptions of take-back schemes and circular models within retail are already here. The denim brand of Nudie Jeans Co has built much of their success on a circular model where they offer free life time repairs of their product and discounts on a trade-back scheme with garments. Though this circular model has limitations of locality to the brands physical store, efforts like this are becoming more and more common. Generally they are acted on in smaller scale alongside the larger linear operations. Challenges resides on how to make the circular model the “new normal” and how to make these included all the sustainable aspects of environmental, social and economically beneficial. With prices of raw material steadily increasing and the processes of reusing materials being more efficient, companies are starting to seeing the cost benefits of circular models.
Business are looking for best fit new digital tools to handle the new requirements.
In alignment with the new regulations of Digital Product Passport and increased consumer demand on transparency, a need for trustworthy and secure digital solutions is indisputable. Multiple initiatives on increasing transparency and consumers sustainable impact is already existing and more are being launched. As example Rabobank recently launched their Carbon Insights , which allows their customers to track their CO2 emissions related to their purchases. In this way they aim to empower consumers to change their purchase patterns and become more eco-friendly. With this initiative and many others like it, there is a key pain in getting the correct data on the actual emissions. Today many of the calculations on emissions are set as estimates as it is difficult to collect, share and validate the data through out the value chain. The aspect of disparate data can be improved by a set of standards made collectively by the industry and authorities. For new standards there will be enforced obligations on reporting, to make these reporting activities more efficient new digital tools needs to be aligned to handle the required insights.
So what is your next step? When enhanced regulative frameworks gets adopted, the global prices on natural resources are soaring and the customer demand is changing, it is the eleventh hour for any organization to accelerate their sustainable efforts and circular transformation.
To start this journey we recommend to focus on aligning strategy and awareness on topic. Secondly, building digital infrastructure that enables enhanced reporting and measuring. Finally automate processes and through data discoveries achieve new sustainable business opportunities and circular models. Feel free to contact me to discuss!
In these transitions we here at CGI are a capable and experienced partner in both digital transformation and on how organizations can develop innovative strategic alignment through design thinking. Bringing the best of CGI as well as our own experience in Sustainability