Power Retail and the Purpose Agents launch third annual Sustainability Report highlighting new expectations around sustainable retail, government regulations and where we go from here…

As cost-of-living pressures and the retail crisis continue to soar, both consumers and businesses alike are reassessing their investment in sustainability. While both groups believe it’s important, affordability and profitability are the current motivating factors of all parties, with sustainable elements being renegotiated and higher expectations coming down on businesses.

Power Retail, a leading source for Australian e-commerce news, data and insights, has for a third year joined forces with The Purpose Agents and Shippit, to publish a 33-page spotlight report that reveals consumer sentiments around sustainable retail in 2024 and companies leading the charge on sustainability initiatives, despite this challenging time in the industry.

Significant findings from the spotlight report (as highlighted in the slide below), include:

• 47%, a 1ppt increase from last year, prefer to shop with retailers that are open about their sustainability practices.

• 45% of customers have not been swayed by sustainability practices in the last six months. With cost-of-living pressures high, consumers may be prioritising affordability over sustainability for now.

• The percentage of customers who actively shop for recycled or recyclable items has declined to 24%, possibly due to scepticism about how effectively these items are actually recycled.

Commenting on these findings, Power Retail’s Head of Data David Fear says, “Retailers should integrate sustainability into their business models rather than offering it as an added cost, as 55% of customers are willing to pay more for sustainable products, though this willingness has plateaued—indicating that consumers increasingly expect sustainability to be a standard practice.”

He adds, “With 69% of consumers feeling like the retail industry creates too much waste, and 51% saying they are more likely to shop again with a retailer practicing sustainability, highlighting that transparency, waste reduction, and balancing sustainability with affordability is now essential to build customer trust and loyalty.”

So, where do businesses stand in 2024? In a recent survey of 250 Australian business leaders conducted by SAP, 40% stated that they struggle to prove the return on investment on their sustainability initiatives, also citing issues like lack of funding, expertise, and environmental impact strategies. That said, 60% of executives who are committed to it expect a positive financial return on their sustainability investments within the next five years. In short, it’s all about the long game.

With sustainability in the sector so in flux, Power Retail asked retailers and solution providers to share their experiences and sustainability initiatives to further understand their efforts in driving a positive impact for people and the planet, especially amid cost-of-living pressures, and how the current economic climate is influencing their sustainability work.

The retailers and solution providers highlighted in the report include ELK, Wild Earth, Lush, Boody, Coolzy, Naked Wines, Green Friday, Shhh Silk, LVLY, Okanui, Decathlon, Reebelo, Seamless, Vinnies, , i=change, DECJUBA, Skutopia, Good360, and Greener for Business.

“This year’s spotlight is all about highlighting the retailers utilising innovative solutions and initiatives to contribute to a more sustainable industry,” says Rosalea Catterson, Editor at Power Retail. “Retailers of all sizes are represented, showing that everyone can make a difference through social impact, circularity, and many other impactful areas.

“Waste reduction and stewardship are big themes in this year’s Sustainability Spotlight. From the rising popularity of resale to new government regulations, there is an evolving expectation coming from both customers and the regulatory side for retailers to make more sustainable decisions.”

As we close out 2024 and head into 2025, here are the top five predicted trends in sustainable retail and the companies doing it right.

1. Low Impact Materials:

While some consumers are becoming dubious about recycling, retailers producing products with low impact materials that come from renewable, abundant or circular sources are becoming more popular.

Two brands dominating this right now are global skincare and cosmetics company Lush, and Australian underwear and clothing brand Boody.

Forty-eight percent of Lush's product range is produced with no packaging to reduce plastic waste, having invented bath bombs, shampoo bars, solid massage bars and more to eliminate the need for packaging. In 2024 Lush also introduced its Prevented Ocean Plastic concept, in which they use collected and recycled plastic from Indonesian shores as packaging materials.

Meanwhile, Boody’s products are seamless - reducing fabric waste, and made from organic bamboo, which is the fastest-growing and most versatile plant in the world. The bamboo is grown without fertilisers or pesticides and requires four times less water than cotton. The company also reduces water consumption by reusing and recycling rainwater to grow their bamboo.

2. The Rise of Resale

As a reaction to both cost of living pressures and an increased awareness of environmental responsibilities, many consumers are turning toward second-hand clothing and products. 

Vinnies has experienced an over 50% increase in total funds raised and a 56% rise in customers, due to both cost-of-living pressures and changing attitudes. Nationwide, op-shops divert over a million tonnes of waste from landfills and save around 880,000 tonnes of CO2 emissions each year.

CEO Toby O’Connor noted, "The rising cost of living has driven more Australians to our stores. By choosing second-hand, they are not only saving money but also reducing their environmental impact."

3. Stewardship

Product stewardship acknowledges those involved in designing, manufacturing and selling products have a responsibility to ensure those products, materials and related services are managed in a way that reduces their environmental and human health impacts throughout the life cycle and across the supply chain.

Sports and outdoors retailer Decathlon is taking on their product stewardship responsibility by offering a second life for their products, preventing them from going to waste. Last year, they launched a “Second Life” department in all stores. All customer returns, damaged packages, and everything not in a sellable condition but can still be used is repaired, repriced and displayed in stores.

4. Social Impact

A recent stat from Deloitte Access Economics commissioned by Good360 Australia reveals that in Australia, a staggering $2.5 billion of unsold household goods are wasted annually in the retail sector.

At the same time, 1 in 8 Australians are living below the poverty line according to the ‘2023 Poverty In Australia Report’, with the cost-of-living crisis placing increasing pressure on people already struggling, and even more people finding it hard to get by.

Good360 specialises in the facilitation and distribution of surplus goods from businesses to a network of more than 4,000 charities and disadvantaged schools nationwide. This strategic approach not only extends the life of these products at their highest value but also significantly reduces overall wastage while saving considerable financial resources for charity and schools to spend on their community missions.

5. New Government Regulations

With incoming government regulation setting a new benchmark for environmental impact reporting and management, Australian businesses are poised for a significant shift in how to approach sustainability. Aligning with global efforts to drive transparency and comparability of corporate performance, the Australian Sustainability Reporting Standards (ASRS) have now been passed as of September 9, 2024, and will embed sustainability into companies’ core financial reporting.

For retail, these regulations present challenges and opportunities. Non-compliance could result in penalties, requiring companies to adapt their processes and become extremely knowledgeable of their operations and supply chain. However, this is not just about managing regulatory risk, but an opportunity to measurably drive positive environmental change, and build long-term resilience. With the first phase of companies set to start reporting from January 1, 2025, preparations need to start being made now.

To read the complete report please visit: https://powerretail.com.au/resources/sustainability-spotlight/