Many companies had been planning to go carbon neutral. Then came Covid-19

Before the coronavirus outbreak, reducing carbon footprints and addressing other environmental issues had been a key focus of some companies’ plans.

But will being carbon neutral still take centre stage in a post COVID-19 world?

H&M, Pandora and the shift to renewable energy

To become climate positive, the new CEO of Swedish fast fashion retailer H&M Helena Helmersson said the brand needed to change the way its products are made and enjoyed. 

“It will require us to rethink how we operate,” Helmersson said. “We will have to develop new technologies, new business models, new processes and a new type of customer relations.”

H&M said about 70 per cent of a garment’s climate impact arises during the manufacturing process itself. Making fibres, processing materials, dyeing and fabricating requires a lot of energy.

“We make tough demands on our suppliers, and we also help them to switch from fossil-based to renewable energy sources such as wind and solar,” said H&M press officer La Elf.

“For example, we are currently implementing energy efficiency programs throughout our supply chain in close cooperation with our business partners.”

Elf added that H&M also puts pressure on, and collaborates with, governments and authorities.

“This is a way to create positive changes beyond our industry.”

Helmersson said having once been the head of sustainability in the company, she is putting sustainability at the heart of how the business operates.

“I know the importance of environmental protection, people empowerment and industry transparency to build a sustainable business,” Helmersson said. “These areas are not only close to my heart but very much part of my business perspective.”

Global jewellery retailer Pandora has said it will source 100 per cent renewable electricity at its two crafting facilities in Thailand by 2020, and by 2025, it will be carbon neutral in its own operations.

This includes emissions from Pandora’s crafting facilities, owned and operated stores, distribution sites and offices.

“Addressing climate change is one of the greatest challenges facing the world today, and as a large global company we have an obligation to contribute to the necessary solutions,” said company CEO Alexander Lacik.

“Responsible business practices such as recycling of materials and waste have always been part of Pandora’s way of operating, and we now commit to ambitious targets to reduce our carbon emissions and help drive sustainability in the jewellery industry.”

Electric forklifts, bikes and Zoom

Nicola Relph, owner and operator of New Zealand-based online retailer Adulttoymegastore, said some of the measures they have implemented to reduce their carbon footprint include limiting travel as much as they can and using Zoom to hold online meetings.

“Our ‘Drive Less’ approach is important to us,” Relph said. “We’re looking at an audit of our small team to see how much travel we are doing by car, bus, train and plane – inside and outside of work so we can see if we can further bring down that number of kilometres! We also car pool and do ride-shares.”

Relph said she has also looked closely at energy usage in the head office and warehouse.

“We are currently renovating our headquarters and we’re investing in making sure our office has a lot of natural light and insulation so we can use less power. We are switching to light emitting diodes lighting in our new office.”

Using electric forklifts is one of the measures fellow Kiwi retailer Ecostore has undertaken to be a carbon-neutral company.

Much like EV cars, these forklifts have no emissions, are quieter, require less maintenance and generally have a longer life than internal combustion engines. By recharging the battery during off-peak times these forklifts have less impact on the grid.

In 2014, Ecostore also switched its packaging to plastic made from sugarcane, saving almost 4500 tonnes of carbon emissions, the equivalent of a car driving the length of New Zealand 8500 times.

Currently, 90 per cent of Ecostore’s plastic is made from sugarcane and refill bottles are 10 per cent post-consumer recycled made from New Zealand milk bottles.

The company is working to have its packaging be made from 100 per cent renewable or recycled content by 2025.

Using electric vehicles is also one of Domino’s Pizza Enterprises’ initiatives to reduce carbon emissions.

“One of the major initiatives Domino’s has taken to reduce its carbon footprint, is the increase of using electric vehicles in our delivery fleet,” said Nick Knight, Domino’s Australia and New Zealand CEO.

“This isn’t just here in Australia, but globally. Domino’s is increasingly using electric vehicles to reduce the environmental impact of our delivery fleet,” Knight said. “Not only do electric vehicles reduce carbon emissions, but they are also quieter.”

Knight said electric vehicles add additional benefits for franchisees – they’re typically less costly to operate, and require less ongoing maintenance than petrol or diesel vehicles. Domino’s has already taken tangible steps to increase their use globally. In Australia, Domino’s is working towards carrying out more than two million deliveries each year on electric bicycles.

Economic crisis derails progress

But the clean economy has been hit hard by the coronavirus outbreak, impacting investments in renewables and the electric vehicle industry.

In China, the world’s largest market for EVs, passenger car sales dropped last month. BYD, Shenzhen electric vehicle maker, sold 5,501 cars last month, which is down 79.5 per cent.

In February, Volkswagen’s Anhui-based electric vehicle partner JAC sold 11,550 units, down by 63.4 per cent.

Electric vehicle maker Nio Inc delivered 707 cars in February, down 12.8 per cent.

According to a Bloomberg New Energy Finance forecast, demand for global solar is expected to drop 16 per cent this year which would mean that 2020 would be the first down year for solar capacity addition since at least the 1980s.

Emily Salter, an analyst at GlobalData, said sustainability was a buzzword of 2019 and would have continued to increase in prominence in 2020, but the global outbreak of the coronavirus pandemic will bring this progress to a halt.

“Making changes to materials, logistics and production processes to improve the sustainability of products and operations will slow, as sustainability is no longer top of retailers’ and consumers’ agendas,” Salter said.

“This is due to long-term adjustments being costly and many non-food retailers will be financially unstable as they emerge from this crisis after a significant period of low or no sales.”

H&M’s head of Sustainability Anna Gedda said, however, that the company’s long-term vision around sustainability plays an even more crucial role in facing the challenge of COVID-19.

“It will be more important than ever to continue our journey towards a circular economy and sustainable consumption while creating prosperity through job opportunities,” Gedda said.

H&M has temporarily closed its stores globally, posting that the second half of its first quarter sales were negatively impacted by the outbreak of the COVID-19 virus, particularly in China.

H&M’s net sales increased by 8 per cent to SEK 54,948 million (A$89.48 million) in the months from December 1, 2019 to February 29, 2020. In local currencies, net sales increased by 5 per cent compared with the same quarter the previous year.

Excluding the markets that were most affected during the quarter by the situation linked to the coronavirus Covid-19, the H&M group’s sales increased during the quarter by 7 per cent in local currencies.

Online sales increased by 48 per cent in SEK and 44 per cent in local currencies. Gross profit increased by 10 per cent to SEK 28,034 million (A$45.656). This corresponds to a gross margin of 51.0 per cent (50.0).

Online sales in March 2020 saw a 17 per cent increase in local currencies. Digital sales channels remain open in 47 of the group’s 51 online markets.

In China demand has gradually started to recover. More or less all of the group’s stores have now re-opened and sales have gradually increased.

Helmersson said the strong improvement in profit in the first quarter shows that customers appreciate their assortment and that their transformation work is having a good effect.

“The outbreak of coronavirus and the extraordinary public measures taken to reduce the spread of the virus have put people, communities and companies in an exceptional situation,” she said. “The safety of our employees and customers is our highest priority and we are cooperating fully with the authorities.”

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