The Retail Industry Carbon Emissions Blindspot: What's Not Being Counted?

Profitable Net Zero Strategies

The Retail Industry Carbon Emissions Blindspot: What’s Not Being Counted?

Decreasing greenhouse gas (GHG) emissions, namely carbon emissions, is not a new goal for retailers. However, many global corporations are struggling to obtain and utilize scope 3 emissions data effectively.

Upcoming mandatory reporting requirements are exposing a lack of accurate, end-to-end emissions data across the entire retail value chain, says Suzi Gulin-Warren, senior client partner at Publicis Sapient.

In 2024, the retail industry will need to invest in measuring their indirect GHG emissions to meet reporting requirements, satisfy shareholders and inform consumers—which won’t be an easy task.

What do retailers need to get there?

The technological infrastructure to evaluate sustainability data
A platform to connect emissions data to underlying operations and the business model
Collaboration within retail sectors to create emissions measurement consistency

"Reliable data is at the heart of sustainability. Understanding the data today is imperative to defining your future plans."

Suzi Gulin-Warren, Senior Client Partner at Publicis Sapient

The importance of carbon emissions data in the retail industry

In 2023, many retailers invested in downstream efforts to decrease scope 3 emissions, i.e., indirect emissions from retail suppliers, transportation partners and customers. New resale platforms, increased recyclable packaging and supplier tracking were amongst some of the most popular projects. The sense of urgency for these efforts is only increasing for 2024.

In the retail industry, scope 3 emissions can represent more than 90 percent of total GHG emissions. In the retail industry, scope 3 emissions include emissions from product suppliers, procurement, delivery and consumer waste. An example of scope 3 emissions for retailers is coal and natural gas burned to dye and treat clothing fabric.
Scope 1 emissions are GHG emissions produced directly by the business. For retailers, scope 1 emissions include GHG emissions produced from company-owned facilities, like stores or manufacturing plants, as well as company-owned vehicles. An example of scope 1 emissions for retailers might be refrigerants in a grocery store.
Scope 2 emissions are emissions from the purchase of electricity, steam, heat or cooling. In the retail industry, scope 2 emissions include energy and utilities bills for all owned facilities and vehicles. An example of scope 2 emissions for retailers might be the electric bill for a storage facility.

Decreased carbon emissions create higher shareholder value

Strong sustainability performance leads to better access to capital and new markets for retailers in the future, which could lead to higher profits as your cost of capital goes down, says Sudip Mazumder, retail industry lead at Publicis Sapient. In fact, companies with superior ESG performance perform better financially and are valued higher in the market compared to industry peers.

Carbon emissions reporting mandates are almost here

At the same time, mandatory emissions reporting is looming on the horizon, across several regions.

The Corporate Sustainability Reporting Directive (CSRD): requiring scope 1, 2, and 3 greenhouse gas (GHG) emission disclosures starting in 2025 from retailers operating or incorporated in the EU.

The Climate Corporate Data Accountability Act (CCDA): requiring scope 1 and 2 GHG disclosures in 2026, and scope 3 disclosures in 2027 from companies with total annual revenues of $1 billion that operate in California.

However, many retailers are still behind on their scope 3 emissions reduction goals. What’s holding them back?

“From bio-degradable packaging to resale platforms to carbon offsetting, retailers have a lot of sustainability strategies to choose from. But what differentiates retailers that are gaining the advantage with consumers and investors is that transparency and accountability, which comes from auditing and accurate data.”

Sudip Mazumder, Retail Industry Lead, Publicis Sapient

The top carbon emissions challenges in retail

Carbon accounting, or greenhouse gas accounting, is incredibly challenging for retailers as the heart of the data comes from suppliers.

The top three challenges for measuring scope 3 impact:

The data gathering process is still manual
Retailers can’t connect supplier data to operations
There’s data inoperability between suppliers and retailers

Reporting and tracking GHG emissions across the supply chain requires a robust, cloud-based data collection and management solution that can connect to your corporate network in a secured manner ideally via APIs.

If retailers invest in this technology now, they’ll not only be prepared to accurately disclose scope 3 emissions, but can also collaborate more efficiently with other industry sustainability leaders to generate and analyze data for shared suppliers and drive remedial behavior if necessary.

A new approach to carbon management for retailers in 2024

To reduce their emissions, retailers need to invest in a sustainability data backbone. This is a centralized repository for all of a retailer's emissions data. The data can be used to track emissions, identify opportunities for reduction and report to regulators.

A centralized data repository can help retailers to:

Automate the data gathering process: A sustainability data backbone can help retailers to collect and track emissions data more accurately and securely. This is important for meeting regulatory requirements and for making informed decisions about how to reduce emissions.

Connect supplier data to operations: A sustainability data backbone can help retailers to identify opportunities for emission reduction across operations. This can be done by analyzing the data to identify areas where emissions are high and where there are opportunities for improvement.

Ensure data operability between retailers and suppliers: A sustainability data backbone can help retailers to collaborate with their suppliers and educate customers to reduce emissions. This can be done by sharing data with suppliers and customers so that suppliers can work towards reducing emissions throughout the supply chain and customers can understand how their actions like frequent returns have a negative environmental impact.

For example, the Sustainable Retail Action Group (SRAG) is an industry association that brings together retailers from around the world to share best practices on sustainability. SRAG has developed several tools and resources to help retailers track and reduce their scope 3 emissions, including a data-sharing platform that allows retailers to share data on their emissions with each other.

Walmart and Target have already partnered with the Sustainability Consortium to develop a common framework for measuring and reducing scope 3 emissions. This framework is being used by hundreds of retailers around the world to track and reduce their emissions.

“The importance of sustainability in business is growing rapidly, comparable to the rise of digital technology just decades ago. Sustainability should be integrated into standard business practice and become everyone's responsibility. By prioritizing sustainability, organizations can not only reduce their environmental impact but also create long-term value, risk reduction and resilience. Therefore, it is essential to view sustainability as a fundamental aspect of business operations and prioritize it accordingly.”

Suzi Gulin-Warren, Senior Client Partner at Publicis Sapient

Top retail sustainability trends and recommendations by sector

In order to achieve success with net-zero emissions targets and sustainability projects, a sustainability data backbone is essential.

Once your data backbone is in place, these are the top retail sustainability initiatives to consider in 2024, across sectors:

Department store retailers

Secondhand resale platforms: Apparel retailers are experimenting with technology to provide new avenues for consumers to donate and reuse products, creating a circular economy. Retailers that can automate the authenticity and wear identification using artificial intelligence will create cost-savings and generate a competitive advantage in this growing market.

Supply chain tracing: As retailers test and learn with alternate supply chains for a circular economy, blockchain and IoT technology will be crucial to help in tracking and measuring the carbon emission across the supply chain.

B2B and specialty retailers

Ethical sourcing: 71 percent of consumers in a Publicis Sapient survey said it’s essential to know where products are sourced from. Ensure raw product materials are not only designed for durability and longevity, but that they are also ethically sourced.

Incentivized recycling: Partner with business customers for large-scale, incentivized recycling programs as part of a circular supply chain.

Grocery retailers

Food waste AI: Introduce AI and ML to implement better inventory management, offering discounts so that they can get items that are getting close to the expiry date off the shelf or partnering with food banks and other organizations to donate their products.

A sustainability data backbone is an essential tool for retailers who want to reduce their emissions. By investing in a sustainability data backbone, retailers can make significant progress towards a more sustainable future with a net-zero retail strategy.

Contact Suzi Gulin-Warren and Sudip Mazumder to begin tracking carbon emissions across your retail supply chain in 2024.

Sudip Mazumder

Industry Lead, Retail North America

Suzi Gulin Warren

Senior Client Partner

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