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IADS Press Release: Seizing opportunities in evolving sustainability regulations

press September 2023 Press release

Driving change: EU’s accelerating sustainability regulations echo IADS White Paper’s call for putting theory into action to create new business opportunities and get ahead of the curve.

Regulations such as Corporate Sustainability Reporting Directive (CSRD), EU Deforestation-Free Regulation (EURD), and the EU Green Claims Directive are changing the way that retailers foundationally operate, raising a lot of uncertainty but equally creating potentially profitable opportunities. This is why now is the time for retailers to move from theory to action and try out new ideas. As these European regulations are coming hard and fast and should be a foretaste of what will come to the rest of the world, it is best to catch the wave early to get ahead of regulations than to struggle to keep up, especially not knowing what next big disrupter is coming.

Knowing that fashion and retail businesses are in the midst of a functional change driven by regulation, IADS’ latest White Paper was about ‘Reinventing department stores through sustainability’. This exclusive study unveils how the definition of sustainability across stakeholders in retail remains vague and ill-defined and how government involvement has shifted the focus from direct carbon impacts and green energy (Scope 1 and 2 Greenhouse Gas emissions) to indirect emissions (Scope 3 Greenhouse Gas emission). 

Several themes developed in the IADS White Paper were confirmed during a recent IADS member meeting from June 2023 pulling together Sustainability Directors, which allowed to identify a series of key takeaways useful for any retailer willing to move forward.

Of all stakeholders, the C-Suite is best placed to solve sustainability’s financial conundrum

Involving the C-Suite means that there needs to be some kind of link to profitability and company performance, if not simply imposed by regulations. A good strategy to get the C-suite involved is through financing agreements which grant businesses low-interest loans to enable them to invest in energy efficiency and digital transformation. IADS members that have already taken advantage of this financing option have reported that it is a great way to optimize the business and create more efficient operations that will in turn make the business more sustainable

Retailers are taking on responsibility for Scope 3 emission tracking without being properly equipped

Retailers are put in the middle of consumer demand and product supply; therefore, they are taking on a lot of the responsibility from regulators as to how consumers purchase, the materials used in the makeup of products, and the working conditions of labourers. IADS members shared that Scope 3 tracking initiatives such as double materiality assessments, which have been enforced by recent regulations, are hard to comply with as retailers are having to rely on various data sources and need to piece together information from a number of tools and providers. Such methods are not sustainable for long-term business goals and regulatory expectations.  

Current traceability tools are not mature enough to meet regulatory requirements

Traceability goes hand-in-hand with Scope 3 emissions tracking, but it has proven difficult to follow. Advanced technology such as blockchain and various traceability startups are starting to entice retailers to adopt such new practices as they promise to address many challenges a retailer faces. But there is a lot of hesitation around pulling the trigger on these solutions as there is no clear leader in the market and the overall process still relies heavily on data inputs from humans which leaves room for error or incomplete fields. This is why there has not been mass adoption of a given solution among department stores for the time being.

Getting ahead of regulation is the key to success

As retailers start to anticipate the upcoming impacts of regulations, it is important for them to start acting now, even before it is mandatory. IADS members that already started to act on new reporting standards have found that they have more time to ask questions and lead the conversation on how such exercises will be achieved. One way they have been successful has been to work directly with consulting firms and audit partners that already know their business and have completed other types of regulatory activities (like financial reporting) in the past.

Communication is important to consumers and greenwashing should be carefully avoided

When it comes to sharing sustainability efforts with consumers, it is not simple: consumers begin to feel exhausted from over-communication and greenwashing must be avoided at all costs. A number of IADS members have turned to conducting surveys to better understand what their customers expect and understand from sustainability labels and communications that are being placed online and in stores. What they have learned is that just because a customer is buying a product that is labelled sustainable, doesn’t mean that their motivation for purchasing the item was due to the fact that it is an item that is considered ‘greener’ than an alternative and maybe they purchased it for other reasons. This complicates the story even more for retailers and makes proper communication on sustainability initiatives even more important.

Sustainability goals and initiatives cannot be achieved alone

Groups such as the Sustainable Apparel Coalition (SAC), Amfori BSCI, and EuroCommerce are setting the foundation to create standards within the entire supply chain so the proper information can be gathered, and uniform expectations can be defined. Such global standards will be the key to progress in the industry. 

Sustainability leaders across global department stores are struggling with the same issues, and the biggest topic that needs to be addressed is how to follow Scope 3 emissions and make traceability tools standardized. At the moment there is not a single retailer or technology provider leading the pack and offering an all-encompassing solution that addresses all reporting requirements of new regulations. It will be interesting to watch but it will be important to note which retailer will be the influencer that sets the path for the rest of the industry. Collaboration and idea sharing among global players is the secret to advancement, making associations like the International Association of Department Stores a key piece of addressing the unknown in this changing landscape. 

The IADS White Paper is available here.

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Read the full press release, in French, below:

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