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Sustainability

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Setting Sustainability Goals in Retail

Establishing performance goals is a key ingredient for a successful retail sustainability program. Sustainability goals signal commitment, provide strategic direction, and stimulate innovation. As with all business functions, well-articulated goals can drive progress, excite internal associates, and engage stakeholders.​

Keys to Successful Goals in Retail

There are several important elements for developing and achieving retail sustainability goals: focus on material topics; set science-based, absolute, and long-term goals; publicly articulate and track goals; align with business goals, and quantitatively link to profit goals.

Material topics. There is a current trend away from incremental goals on a long list of topics, and instead channeling efforts into ambitious, long-term goals for a small number of material topics. Many retailers are taking up this trend, or even leading it outright. Retail's most important topics arise within its supply chains, far beyond its direct operations. With vast, complex supply chains, it is highly efficient to focus on topics where retail can drive large scale changes, such as responsibly sourced commodities, eliminating certain chemicals from consumer goods, or reducing emissions from electricity and fuel.

Science-based targets. The retail sector ranks fourth in the number of companies that have signed on to set science-based targets for greenhouse gas emission reductions. Setting science-based targets is an explicit acknowledgement of the need for business to: operate within certain environmental boundaries (such as emissions that limit global temperature rise to 2°C) and social foundations; consider longer timelines; and take a broader understanding of value creation.

To select material issues, Gap Inc. assesses the importance “to society and our interested stakeholders” and relevance “to Gap Inc.’s scope of operations and ethical commitments.” At Best Buy, material issues are those at the intersection of where “stakeholders want Best Buy to lead” and the issues “that significantly affect our business.”

To set science-based (also known as context based) targets, companies set targets “aligned with the level of reductions science says is necessary to prevent the worst impacts of climate change.” The group Sciencebasedtargets.org—which aimed to enlist 100 companies to set greenhouse gas reduction targets based on the latest climate science, and now has 160 companies signed-up—supports companies with a series of guidance documents and tools.

Retailers committed to establishing such targets include H&M, Marks and Spencer, Woolworths, and Kingfisher. Industry collaborations and leadership initiatives increasingly emphasize science-based targets, such as the We Mean Business coalition of 589 companies and investors.

Public goals. Improving reputation and increased consumer loyalty are among the top benefits for companies that publically report on their sustainability goals. These benefits are particularly important for retail. Starbucks, for example, recognized the link between sales and consumers' access to information on its sustainability initiatives. The company ensures baristas can speak knowledgably about its ethical sourcing program and other commitments. The number of retailers publicly reporting on sustainability goals, per the GRI guidelines, increased twenty-fold between 2001 and 2013. Seventy-five percent of S&P 500 companies report on sustainability today, a sharp increase from twenty percent in 2011.

Ambitious, long-term goals. Companies with more ambitious goals achieve the largest impact reductions, yet have a lower rate of success (below sixty percent, relative to pragmatic goals). Given the potential for greater impact reduction, meaning, and positive attention, aspirational goals are finding a place in retailer's strategies—from powering an entire company or supply chain with renewable energy, to farming methods that restore the land and the climate, to others still. As RILA's Leadership Model illustrates, many retail leaders have set aspirational goals. Kroger, for example, committed to move all retail locations toward zero waste. While companies may face short term investment barriers when instituting long term goals, there are benefits to meeting commitments. According to the CEO of the fish processor Espersen Group, the initial loss of some of its supply when it committed to use only legally caught fish was outweighed by its ability to demonstrate that it was a trusted supplier to customers such as Tesco and McDonald's.

Link to profit goals. Business objectives often link directly with sustainability goals on water, energy, and sustainable product sales, among others. Guidance from the 43 companies in the UN Global Compact LEAD group recommends linking each sustainability goal to revenue generation, productivity, or risk management. Flooring manufacturer Mohawk reports progress on its 2020 goal to reduce water intensity "because water conservation initiatives… also contribute to expense reduction—a key business strategy."

How Do Retailers Set Sustainability Goals?

Identifying material, high priority topics is a critical first step. Retailer's goals address the supply chain, product attributes, and even business practices such as innovation and employee engagement.  Sustainability goals set by thirty of the largest retailers touch on one or more of seventeen topics. Most goals focus on climate impacts and energy use, with goals on food and agricultural impacts second in popularity. One-third of goals focus on the retail supply chain, while retail operations were the focus of two-thirds of the goals. Ninety percent of the retailer goals analyzed were absolute, with only a small proportion of relative or intensity-based goals.

Specific IssuesSupply Chain Functions
Energy & Carbon reduction
Waste generation
Water usage
Sustainable ingredients
Packaging
Purchasing policies
Supplier training
Social compliance
Tracing the supply chain
Efficient transportation
Business PracticesProduct Attributes
Employee engagement
Sustainable Innovation
Green buildings
Product take-back
Selling certified sustainable products
Nutritional content of products


Sustainability Goals by Focus Area Graph

RILA offers guidance and important considerations for retailers when setting sustainability goals:

  1. Benchmark with retail peers and non-retail leaders on topics, ambition, and time frame;
  2. Establish a council to develop goals, ensuring the Board of Directors and company executives help develop, endorse, and are accountable for the goals;
  3. Link sustainability goals with business goals and focus on cost savings or revenue generation to ensure goals resonate with each business function’s operations;
  4. Plan for transparency to maximize favorable attention and to reduce reputational risks if goals are not met on schedule.

As one example of how to achieve goals, Alcoa’s business units each create a roadmap—an outline of what they must do today to succeed on a particular goal by 2030. This helps to break long-term goals into actionable steps, and help align the organization. Alcoa’s roadmaps include “known technologies, unknown technologies that still need to be invented, and the capital costs and the operating impact of getting to the goals.”

At Alcoa, to demonstrate commitment and enable accountability, business units report progress on sustainability goals during quarterly briefings for the CEO and Executive Council.

Leadership Steps for Setting Sustainability Goals

To enable retailers to benchmark their goal setting, RILA and the CRC’s Retail Sustainability Management Leadership Model includes a specific dimension on sustainability goals:

Goals​

Initiating​

  • Annual goals based on cost saving only
  • Basic sustainability goals that are benchmarked against peers​

Progressing​

  • Short- and long-term sustainability goals, mostly focused on operations
  • Efforts in place to benchmark sustainability goals against peers​

Excelling​

  • Identifies absolute reduction goals for most of the material risk categories (i.e., energy consumption, water, waste/recycling, sourcing, consumer education)
  • Routine and comprehensive benchmarking efforts in place to prioritize focus areas​

Leading​

  • Defines comprehensive, aggressive, and cross-functional goals addressing all material risk categories
  • Goals address most aspects of sustainability
  • Includes separate goals focused on supply chains, products, sourcing, and marketing​

Transforming​

  • Uses global and local context of environmental conditions and aligns with science-based targets to set appropriate goals
  • Quantitatively links profit goals with sustainability goals​

Additional Information

Some relevant resources, case studies, and collaborative opportunities are listed below. RILA’s Sustainability Executive Program provides more resources on governance and executive engagement.


Resources

Educational tools

Case Studies

Retailer deployment examples

Get Involved

Collaborative opportunities & other resources

Visit www.rila.org/sustainability for more tools and resources.​

Last Update: 8/30/2016 8:35:32 AM