Inside Retail: Why did you create the roadmap and who was involved?
Paul Zahra: The reason why we’re focusing on sustainability is [that] recent research we received told us that consumers are three times more concerned about sustainability and climate change than they are about Covid. That set off alarm bells for us. So we then went into action around putting a sustainability committee together from our members.
The leading retailers that have contributed to the roadmap have been Kmart, Bunnings, Officeworks, The Iconic, Coles and Myer. They’ve been really deeply involved, and we sought the expert advice of the British Retail Consortium, which is our equivalent in Britain. They gave us the framework and we did some one-on-one interviews with them. We also used subject matter experts from the National Retail Federation, which is the US equivalent [of the ARA], the Business Renewables Centre Australia, and the Business Council for Sustainable Development. We’ve been really consultative, but we also wanted to make sure we brought in the experts to help us put the roadmap together.
IR: And you published the roadmap on the heels of COP26, which is great timing, with awareness of climate change being so high right now.
PZ: It was also strategic because if I reflect on the last couple of decades, the digital disruption came at most retailers without a lot of planning, and they’ve been scrambling ever since. Covid corrected that because it brought all the retailers that were not on top of the digital transformation into place. I certainly see sustainability and climate change being the biggest next disruptor for us, and as the head of the ARA, I really want to lead an industry plan to make sure we’re a little bit more organised this time.
IR: The data makes it clear that consumers care about this, but what does the data say about how climate change will affect retail operations?
PZ: If you think about the bushfires that we experienced just before Covid in this country, there was a harsh reality of what impact climate change has on business and how disruptive it can be. But equally, it comes down to retailers wanting to do the right thing, and it comes back to people, profit, planet. We’re achieving in the profit space, retailers know how to make money, but the people and planet piece is where the biggest opportunities lie. There are definitely some retailers that have led the charge. You only have to look at some of the ASX-listed companies to know that they’ve done particularly well, and I call out Coles and Woolworths specifically because there’s been some great work done by the large supermarkets in the space. It goes from the product that they’re selling right through to the way products are refrigerated. It has broad touchpoints. It’s not specific to any area, it goes across the board.
IR: What do you see or hear from ARA members as being the biggest roadblock to reaching net zero?
PZ: It depends where they are in their strategy. Smaller members with a single shopfront will have different challenges than larger national members with a complex supply chain. Regardless of size and scale though, the biggest barrier for most retailers is not knowing where to start and not understanding the different levers they can pull to achieve net zero emissions. And that’s one of the reasons that we actually developed the roadmap – to help retailers understand what they can do to get started, but also keep moving towards net zero.
IR: That makes sense. Not everyone would have a chief sustainability officer in their business.
PZ: Definitely not. Ninety-five per cent of ARA members are small to medium-sized businesses, so this is really about bringing them on the journey. In the larger companies, of course, they’re resourced, but equally, they’re at different levels. Part of the consultation process was to align the large retailers and where we need to be by a certain point.
IR: What changes can retailers make that will give them the most bang for their buck in terms of reducing their carbon footprint?
PZ: The things that I think that are most important, where you get a tick on the sustainability piece and you get a tick on cost, are things like investing in LED lighting and other energy-efficient measures – that to me is a no-brainer – and switching to renewable energy as soon as possible. There are still many retailers that haven’t done that. And the third thing for me would be around working with suppliers and supply chain partners who have made a commitment to achieve net zero emissions. There are certainly lots of suppliers that are on this path, and learning from them is really important. So I think those three options will help to reduce the environmental impact of [your] products, and also could help to reduce costs.
IR: How do you grapple with the contradiction between the aim to grow your business year-on-year and the need to reduce your carbon footprint? Should retailers ultimately be trying to make less stuff?
PZ: It’s something I often think about. I don’t think that sustainability and growth are mutually exclusive. There are other ways of achieving growth, it just might mean that the business model needs to change. A good example is the significant growth we’re seeing in the rental market in fashion. This whole move from a millennial point of view to subscriptions and not owning everything is an opportunity for growth in one category, but a decrease in another. There’s a huge market in secondhand goods that’s not currently being leveraged, there’s a huge market in repairs that’s not currently being leveraged. Growth can still be achieved, but in different ways. And I think that’s what sustainability is about. It’s got to be sustainable growth.
We’ve grown up with that throwaway society, and I think those times are changing. I never thought in my day that anyone would ever go and rent a frock or a suit, rather than owning it, but that’s what we’re seeing with GlamCorner launching their concession in David Jones. People are saying, ‘I don’t need to buy an outfit that I’m going to wear once and throw it away.’ There are categories that will grow significantly that will certainly offset the categories that are in decline.
IR: Do you see rental, resale, and repairs one day making up the majority of the retail market?
PZ: I think it will head that way, that’s why we’re seeing in department stores around the world now having a rental option. Department stores are unique in as much as they see a downturn before anybody else, and they see an upturn before anybody else, but they also see trends before anyone else. The reason being is that it’s generally a highly educated and affluent customer [shopping in department stores]. Selfridges is now selling secondhand goods and they’ve actually put in a rental market, so there’s definitely a move towards those types of categories.
I actually think we’re living through a transition where sustainability is becoming a key driver of sales and profit growth, not to mention customer loyalty and brand health. It’s partly generational, but not always, that people are aligning themselves to brands that have purpose and values. That trend has really kicked off through Covid – maybe because we’ve had to use the time to reflect a little bit more around where we’re spending our money – but there’s certainly that aspect happening. And for that reason alone, we’ll see people voting with their dollar.
IR: COP26 saw developed countries put forward plans for how they’ll reach net-zero emissions by 2050. Do you also think retailers need to be thinking about reducing their carbon footprint because soon it will be a government requirement?
PZ: Ultimately, that’s where it will land. Unfortunately, we do see business leading this change. That’s not abnormal. If you think about marriage equality, that was led by business, it wasn’t led by government, and that was a significant, controversial change. Diversity and inclusion, same issue. Often, with these contentious issues, we see them being business-led, and ultimately, the government gets there. Often, legislation is a laggard to what’s happening in the community, and I think this is one of those things. Even now, government language and rhetoric is becoming much more accepting of climate change and sustainability requirements.
But even if we see emission-reduction targets being legislated, that’s only part of the equation. What we saw at the UN climate change conference in Glasgow was that governments are focused on targets and commitments, and the heavy lifting about how we achieve those aspirations will largely fall to business and industry. The government will set the target, but they won’t be doing any of the work. It’s up to business to get there. Our roadmap helps answer the questions that retailers might have about what to do and when.
As the local accelerator for the UN-backed Race to Zero – and we’re the first industry [association] to be the local accelerator – we’ll be able to connect our members with the best practice resources they need to set and achieve their own ambitious targets. The roadmap is there, but we want people to achieve it sooner, rather than later. It goes out to 2050, but of course, some of our own members will get there by 2025 and 2030, and that’s something to celebrate.
We’ve launched a sustainability page on our website that gives some really quality information, and we want to add to that. We plan to grow this as we learn, because there’s a lot of learning to be had by all of us. We certainly don’t say we’re the expert, but we want to lead the change.