Sustainability in the Retail Supply Chain: Taking Practical Action

Tomas Novotny

Sustainability Expert

14 Apr 2025

About 6 mins

Consumer awareness of the environmental, economic, and social impacts of products and companies has become increasingly important. This guide explores how retailers can take meaningful action to improve sustainability across their supply chains.

The retail industry’s carbon footprint

The retail industry plays a crucial role in both the global economy and environmental ecosystem. With worldwide sales projected to exceed $37.9 trillion by 2030, understanding the industry’s environmental impact is essential.

Retail accounts for approximately 25% of global greenhouse gas emissions, with the vast majority originating from the supply chain.

Where emissions occur

98% of retail’s carbon footprint comes from its extended value chain (Scope 3)
Only 2% of emissions are directly controlled by retailers (Scope 1 & 2)

Breaking this down further:

65% from products and services purchased by retailers
20% from store operations and company vehicles
10% from store electricity and heating
4% from shipping products
1% from end-of-life product disposal

The regulatory landscape for sustainability is evolving, with directives like the Corporate Sustainability Reporting Directive (CSRD) mandating comprehensive tracking and reporting of environmental impacts.

It’s worth noting that the implementation dates for CSRD and Corporate Sustainability Due Diligence Directive (CSDDD) have been moved back and they no longer apply to as many companies as initially proposed. While regulations are subject to review and delay, the importance and value of sustainability management and reporting remains critical. Regardless of shifting timelines, consumer and investor expectations continue to drive the need for robust sustainability practices.

The risks of non-compliance include regulatory fines, reputational impact, loss of market share, and failure to meet stakeholder expectations. Regulations like CSRD and extended producer responsibility (EPR) are particularly important for retailers due to their wide reach covering packaging waste, textiles, and food waste.

Why sustainability matters to retail

With 1.8 billion people joining the global consumer class by 2025, consumer expectations around sustainability continue to rise.

Gartner research found that sustainability metrics in investment plans will be standard practice for CFOs by 2026, with 30% of total debt capital markets funding directed towards ESG initiatives.

McKinsey & Company data further demonstrates the likelihood of consumers demanding even greater sustainability from brands, emphasising eco-friendly production, renewable energy use and closed-loop supply chains.

Transparency in sourcing, production and corporate practices has become a baseline expectation, with brands demonstrating ethical practices rewarded with consumer trust and preference.

Practical steps for retailers

1. Implement thorough due diligence

Environmental due diligence helps identify, manage and mitigate impacts associated with the retail industry. The Sedex platform enables retailers to:

Engage with suppliers systematically
Embed structured due diligence processes
Gather data to identify organisational impacts and risks
Inform target-setting decisions
Monitor performance
Assess risks
Mitigate environmental impacts

2. Conduct life cycle assessments

Life cycle assessments evaluate the environmental impact at each stage of a product’s existence, providing essential data for decision-making. This practical approach helps retailers understand their full environmental footprint beyond their direct operations.

Environment doesn’t have any stand-alone carbon labelling, aside from broad key elements that exist for data analysis and target setting, like Scope. Metrics actively help set targets. Sedex supports data collection through ESGeo to inform target setting and performance tracking.

Benefits of life cycle assessment include:

Identifying high-impact areas for improvement
Reducing greenwashing risk by verifying sustainability claims
Enabling responsible sourcing decisions
Enhancing consumer engagement
Optimising logistics and distribution
Improving end-of-life management

3. Collaborate with suppliers

There is a general lack of ESG maturity in supply chains – which is one of the main reasons why more than 300 companies have been dropped from Science Based Targets initiative (SBTi).

Effective collaboration includes:

Setting clear expectations when engaging with your suppliers, offering tangible, realistic examples of what you expect
Providing necessary support and resources
Building better relationships that create robust, resilient supply chains
Breaking down silos between different entities

It’s always best to focus on the first point, be clear about your expectations, and why it’s important for them to engage with you.

4. Focus on ethical sourcing and green packaging

With demand for post-consumer recycled plastic packaging expected to increase threefold by 2030 (while supply may only double), according to McKinsey analysis, retailers must prioritize sustainable packaging.

Extended Producer Responsibility regulations and the Packaging and Packaging Waste Regulation have introduced mandatory recycled content targets:

2030: 10–35% (depending on material type)
2040: 25–65%

To create a more sustainable packaging strategy:

Assess and optimise your full packaging portfolio
Integrate sustainability principles into design processes
Establish new value chain partnerships
Build internal capabilities

5. Embrace circular economy principles

Beyond recycling, retailers should explore:

Implementing product recapture programs
Developing zero-waste manufacturing
Designing products for disassembly and recycling
Investing in R&D for eco-friendly materials
Reducing reliance on traditional plastics

The advantages of embracing the circular economy include cost savings, meeting consumer demand, and environmental benefits.

6. Reduce fuel consumption

The transportation of goods represents a significant environmental impact. By optimising logistics and transportation, retailers can:

Reduce operating costs through more efficient routing
Decrease carbon emissions by implementing electric or hybrid delivery fleets
Improve customer satisfaction with more reliable delivery timeframes
Meet regulatory requirements for emissions reduction
Enhance brand reputation through visible sustainability commitments

Practical approaches include:

Electrification of logistics
Driver education for efficiency
Pre-planning transportation to reduce waste
Optimising delivery routes and methods

7. Set ambitious, achievable targets

Once you understand your impacts, set targets that are:

Focused on priority areas
Specific and measurable
Verifiable and transparent
Regularly reported against
Aligned with your overall business strategy

Targets are vital – they provide accountability and a clear path for progress while demonstrating your commitment to stakeholders.

8. Own your impacts through transparency

Retailers need to be transparent about their supply chain to maintain stakeholder trust. This means:

Regular public reporting on progress
Acknowledging challenges alongside successes
Demonstrating commitment to continuous improvement
Providing confidence that you’re taking commitments seriously

The business benefits of sustainability

Sustainable initiatives deliver tangible business value:

Enhanced brand reputation: According to Nielsen, 81% of global consumers feel strongly that companies should help improve the environment
Improved customer loyalty and trust: Accenture research shows that 62% of consumers want companies to take a stand on sustainability
Greater operational efficiency: Companies with strong sustainability practices have operational profits higher by up to 60% than their competitors
Reduced regulatory risk: Proactive sustainability measures help avoid costly compliance issues
Competitive advantage in the marketplace: Harvard Business Review reports that companies with strong sustainability programs outperform their peers financially

Whether minimising waste, rethinking supplier relationships, or reimagining business models, creating a sustainable supply chain sets retailers apart from competitors.

Sedex offers comprehensive tools to help retailers map, identify, assess and mitigate social and environmental risk throughout their supply chain, enabling businesses to meet the growing expectations of consumers, investors, and regulators alike.

Need support in achieving your sustainability goals? Contact Sedex today to discover how our platform can help you navigate the challenges of creating a more sustainable retail supply chain.