SEE

Forget the eco-label and sustainability certifications: retailers need to adapt their impact strategy to modern consumers

08/02/2024

The world of retail has fundamentally changed. The age of mass consumption, next-day delivery and fast fashion has brought the true environmental impact of retail to light. Brands have fought harder to differentiate and prove their legitimacy in the sustainability space, whilst reducing their impact on the planet. Now, the tides are turning and the credentials themselves are met with an even more discerning set of consumers. 

In today’s shifting retail market, modern consumers, led by the preferences and values of Millennial and Gen-Z shoppers, are increasingly sceptical of eco-labels and sustainability certifications.  These popular certifications, once a proud representation of environmental and social stewardship, are now often being increasingly seen as marketing tools rather than genuine reflections of corporate commitment.  For the modern consumer, these certifications need to be more than just a badge of honour. Retailers need to drive more sustainable, impact-driven behaviours with transparency and accountability. That demands a change in retailers’ approach to impact strategies, instead focusing on more tangible actions to resonate with modern consumers. For example, research by KPMG shows that 54% of consumers have stopped buying certain brands based on perceptions that those companies could be exaggerating or misrepresenting their environmental efforts in marketing.

Problem and Context

We took this thinking a step further. Primary research we conducted talking to a representative group of merchant perspectives on this issue demonstrated that nearly 90% of respondents pursued certifications believing it aligned with their brand’s core sustainability values or could enhance their brand image. However, the impact on other business aspects was much less clear. Only about half believed these certifications made customers more likely to buy or set them apart from competitors.  Less than a quarter of respondents thought they gained strong network or affiliation benefits, and less than 5% of respondents thought that their certifiers helped promote their brand or that certification resulted in raising new investment or increased stakeholder satisfaction.

This insight is supported by third-party research. A study in MDPI’s “Sustainability” journal found that sustainability certifications do not necessarily translate into increased customer sales or an improved financial outlook (MDPI, 2021). Likewise, research in “Business Ethics: A European Review” indicated that these certifications might attract a niche market but have limited influence on the broader consumer base’s purchasing decisions (Wiley Online Library, 2021).

Moreover, there’s a misconception that certifications lead to higher employee satisfaction or retention. In reality, employees, like consumers, are driven by active, tangible actions that demonstrate a company’s commitment to sustainability.

Actions

We encourage retailers to reassess the return on investment from the wide range of certifications that are available in the market, making sure that they track back to their company values and consumer interests, and instead focus on initiatives that have a tangible impact, both in terms of environmental and social contributions, and in creating real value for its stakeholders. 

Here’s how: 

  • Redefining Sustainability Beyond Certifications: Retailers should think about sustainability as a journey, not simply a destination marked by a certification.  This includes for example introducing sustainable practices as a core product feature that evolves and improves over time.  Storytelling is also a crucial component in this journey – it’s less about reciting carbon stats to your customers and more about explaining the how and why.
  • Collaborative Efforts for Sustainable Impact: Engaging in collaborative projects with non-profits and other business groups can lead to innovative approaches towards environmental and social improvements. Impact-led sales (for example charity-linked products) have proven to improve key sales metrics such as increases in average order values and reduce cart abandonment.
  • Align Initiatives with What Customers Care About: Retailers should prioritise transparent communication to inform consumers of their impact efforts.  This strategy fosters two-way communication – often we find that a merchant’s view of brand identity in this area does not initially align with the values of its customer base.  For example, the retailer may have broad global ambitions in improving climate, only to find out that its customers resonate more deeply with local community projects. Talk to your customers!
  • Leveraging Technology for Sustainable Transformation: Technology can play a crucial role in advancing sustainability efforts. From supply chain improvements to AI-enabled data optimisation to digital, targeted community building, retailers should explore ways that technology can help their sustainability initiatives become that much more efficient.

The findings from Fana’s research and other studies highlight the need for retailers to move beyond traditional eco-labels and sustainability certifications to a more holistic understanding of their impact and reputation. Modern consumers demand authenticity and tangible actions that demonstrate a real commitment. Per a 2021 GlobalData survey, 70% of shoppers are more compelled by sustainability improvements they can directly observe such as package-free products vs claims based on certification programs. Retailers should adapt their strategies to focus on telling a compelling story that aligns with the values of their customers.  Collaborative efforts with non-profit organisations and innovative technologies can help merchants improve the return on investment in their sustainability initiatives, and position retailers to meet and exceed the expectations of a conscious and discerning consumer market.

Scurri