Product-Led Innovation Driving Sustainability in Retail

Retailers benefit both from their own sustainability efforts and those of the merchandise partners they buy from, turning positive social and environmental impact into brand value. As consumer education around climate science and the impact of the products they use grows, shoppers are increasingly favoring retailers with sustainable offerings over those whose products and business models are more harmful to the environment, or who fail to take climate action and set sustainability goals. Brands and retailers are meeting this behavioral shift by embracing sustainable business practices across every element of the product journey, finding that their positive impact can drive efficiencies and secure long-term value and customer loyalty. 

Taking a holistic approach to environmentally friendly practices has quickly become the new business standard, as consumers, government regulators, and sustainability experts alike call for more operational transparency and accountability. Many brand manufacturers are rethinking and retooling their supply chain and manufacturing processes to be more efficient in terms of sourcing and production waste, as well as taking a hard look at their overall impact on natural resources. Alongside this, businesses are making the informed decision to review their product development pipeline and consider alternative natural materials and designs that enable easier repair, recycling, or upcycling of core components to keep them in use and out of landfills.

Leading organizations see environmental initiatives as a compelling competitive advantage, a view which is mirrored and reinforced by shopper behaviors, and companies are embracing eco-friendly initiatives as opportunities to create better products, streamline their operations, and deliver value at every stage. The way a company sets its material sourcing strategy and the level of transparency in its product supply chain can influence supplier behaviors such as reducing carbon emissions, using renewable energy and clean energy, or halting exploitation of cheap or even slave labor. This approach requires long term planning, better cross-departmental and partner communication and a shift in systematic thinking to replace the linear way that products have traditionally been conceived, produced, and disposed of. 

The emergent circular operational approach views both the product and the customer relationship as a continuous lifecycle with shared responsibility throughout. Practically speaking, this translates into companies using education to help their customers and suppliers adopt better behaviors and take incremental actions to achieve larger collective results, along with finding innovative ways to keep both products and their packaging in circulation longer to reverse the effects of yesteryears’ disposal culture. 

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Deep Dive with PSFK’s latest report… Product-Led Sustainability in Retail

In this report, The PSFK research team has identified six key trends behind innovations in sustainable retail, bringing them to life with recent examples from the marketplace. From source to sale and beyond, a diverse range of companies across sectors are prioritizing product-based sustainability efforts to unlock new opportunities and drive competitive differentiation through a strengthened relationship with both their customers and the planet. 

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HOW ENVIRONMENTAL CONSCIOUSNESS IS CHANGING CONSUMER PERSPECTIVES AND BEHAVIORS

Citing a growing concern for the planet, Gen Z and Millennial consumers are increasingly interested in participating in eco-friendly business models, and expect their favorite brands and the products they produce to play a role in reversing climate change. 

53% of total consumers say they are more concerned about the environment today than they were a year ago, but that rises to 60% among consumers 18- to 35-years-old.
“Pandemic Intensifies Gen Z Passion For The Planet.” Media Post, 2021 

64% of Gen Z say they will actively boycott brands if they are doing nothing to help reverse climate change.
Regeneration Rising: Sustainability Futures. Wunderman Thompson, 2021 

To address environmental issues, differentiate themselves from competitors, and drive customer loyalty, companies are climate-proofing their supply chains by investing in sustainable impact strategies from sourcing to delivery. 

51% of supply chain professionals expect their focus on “circular economy strategies” to increase over the next two years.
Close the Loop to Create Future-Fit Raw Material Strategies, Gartner, 2020

Sustainable supply chain investments can add 12% to 23% to value chain revenue.
How to Embrace Sustainable Supply Chains to Secure Long-Term Value. EY, 2021

Sustainable business models, from resale to upcycling to buy-back programs, not only build ongoing customer relationships beyond an initial purchase, but are also generating greater value per item for both consumers and companies. 

In a survey involving 750 senior executives at various consumer product and retail organizations, 77% of company leaders said sustainability initiatives have increased consumer loyalty. In addition, 69% said these programs increase brand value, while 63% indicated they boost total revenue.
How Sustainability is Fundamentally Changing Consumer Preferences, Capgemini, 2020

Secondhand Market is Projected to Double in the Next 5 Years, Reaching $77B
2021 Resale Report, ThredUp, 2021

For companies, powering a green experience begins at design by ensuring products are being concepted, sourced and produced with ideas of resale, repurpose and reuse in mind. 

“As a designer, I think it’s the biggest compliment for your designs to have an afterlife. To me, that is luxury. And I take it into consideration from the beginning of the process. The timelessness of the design, how it’s made, what materials are used to produce it- it is all part of our ethos at Stella McCartney. We invest a lot to make sure that our products are made to last rather than end up in a landfill.”
Stella McCartney. Founder, Stella McCartney

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KEY TRENDS DRIVING SUSTAINABILITY THROUGH PRODUCT-LED INNOVATION

High-Yield Low-Impact Sourcing
As brands look to source more sustainable materials for use within their products and packaging, many are seeking alternatives not from nature but from science. In much the same way that meat and dairy substitutes are being engineered, companies are turning to lab-grown replacements for a range of materials from textiles and leathers to cement and insulation. By creating novel and necessary components under controlled conditions, these processes can produce greater yields with less variance, while preserving limited natural resources and reducing the impact of carbon-intensive and chemically harmful sourcing methods.

Ecovative, which runs the world’s largest mycelium leather foundry, has signed an agreement with international multi-brand fashion company Bestseller and PVH Corp for the companies’ brands, including Tommy Hilifiger, Calvin Klein and Vero Moda to integrate the sustainable leather alternative into different product lines. Mycelium, or “mushroom leather,” is a patented material grown from fungi that replicates the appearance and feel of leather, while outperforming it in strength and durability. The “leather” can be grown in pieces to the specific shape and size required by a designer, eliminating the need for cutting room waste. Because the cost of mycelium leather is comparable to that of mid-range of animal-based leather, it provides an attractive option outside of its sustainability benefits from both a performance and economic perspective.

Vendors & Solution Providers
AMSilk
Ecovacative
Evolved By Nature 

Transparent Supply Chain
By combining blockchain, product passports and AI, brands and retailers are taking control of their end-to-end supply chain, providing a cleaner and more traceable picture of items’ availability and location, and consumers with greater transparency into the sourcing processes and origination of each item and its components. 

Rebecca Minkoff is launching a fashion transparency tool with help from Resonance called One.Code. The new platform will allow shoppers to learn about the garment they're purchasing through information on carbon emissions, fabric and water usage, who made the garment, and more. Additionally, One.Code displays all of the energy and resources saved through utilizing Resonance's sustainable production model. 

Vendors & Solution Providers
Provenance
Everledger
Storybird 
Resonance

Packaging-Free Retail
Packaging is a huge source of landfill waste, and even with better recycling efforts the onus still falls on consumers to properly discard their products’ packaging materials and components. To help combat this issue, some supermarkets and brands are experimenting with package-free formats and customer-provided-container refill stations, effecting change and consumption habits one shampoo bottle or bag of coffee at a time.

The grocery store, called Ethikli, will offer not just environmentally conscious products, but actual foods where shoppers can bring their own jars, bags, and containers and refill them with everything from coffee beans to vinegar. The store’s main focus will be on dry goods like beans, rice, nuts, seeds, flour, spices, and other sundries, but Ethikli will also provide refrigerated items and ethically sourced vegan home goods like laundry detergent, face and body soaps, shampoo, conditioner, reusable paper towels, yoga props, pet toys, and baby supplies. 

Zero Waste Promotions
When food expires, businesses are left with huge losses and consumers pay an unnecessary price. At the same time, 2.5 billion tons of food goes uneaten around the world each year. New platforms are helping companies proactively reduce their grocery waste by alerting them when foods near their expiration date and matching the products to prospective buyers, so that these goods can be sold or consumed more quickly, cutting down on waste from both sides of the supply chain.

The Full Harvest B2B platform and digital spot market helps farms and farmers sell their imperfect and surplus produce and products. The platform uses a matching algorithm to pair food buyers with food sellers, and also includes an audit and verification process so buyers can match their exact needs with available rescued produce to minimise rejection. The company’s rejection average is 1% to 2%, compared to an industry rate of nearly 10%. Full Harvest works with big names in the food and beverage, processor and grower industries, including Danone North America, SVZ and Tanimura & Antle.

Zero Waste Promotions: Vendors & Solution Providers
Flashfood App 
Too Good To Go 
Full Harvest 

Post-Ownership Pre-Design
As conversations around sustainability, eco-conscious practices and climate continue to grow in importance, leading brands and retailers are considering the post-purchase impact of their products. Particularly within hard good categories like home furnishings and consumer electronics the gated and linear approach that focused on single ownership, cost-prohibitive repairs and planned obsolescence is being replaced by a more open and modular approach. Under this new circular model, companies are considering product designs and aftermarket processes to empower owners to fix, upgrade or repurpose their products for a lifetime of use. 

Technical outdoor apparel and equipment maker Arc’teryx has long had its ReBird product repair service available to customers via a mail-in program, but the retailer is now committing to bringing the service to its physical stores. The first brick-and-mortar location to offer the service will be the brand’s 8,000-square foot flagship in NYC’s SoHo neighborhood, and Arc'teryx plans to bring at least two more ReBird locations to North American by next year. 

Vendors & Solution Providers
Sojo
Massproductions 

Born-Again Merchandise
Secondhand retail was once the domain of thrift stores, boutique consignment shops or peer-to-peer sales but consumer interest in vintage shopping, rentals and other models has encouraged retailers to resell their own products directly. Retailers creating new ‘circular-economy’ programs to take back lightly-used items from customers (often offering a credit or reward in exchange) and cleaning and refurbishing a curated selection of those items to be resold in-store or online for a discounted price. 

Burberry, the UK’s biggest luxury brand, is launching a new circular fashion partnership with My Wardrobe HQ to allow for the rental and resale of its products. The selection includes handbags, coats and accessories, and is available to rent on My Wardrobe HQ for 4, 7, 10 or 14 days. Burberry will be providing the bulk of the available inventory, with additional authenticated donations coming from the brand’s VIP clients and the My Wardrobe HQ community. Prices will range depending on the length of the rental, and if customers want to keep an item they’ve rented, there is the option to buy it. The initiative fits into Burberry’s sustainability strategy. 

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Deep Dive with PSFK’s latest report… Product-Led Sustainability in Retail

In this report, The PSFK research team has identified six key trends behind innovations in sustainable retail, bringing them to life with recent examples from the marketplace. From source to sale and beyond, a diverse range of companies across sectors are prioritizing product-based sustainability efforts to unlock new opportunities and drive competitive differentiation through a strengthened relationship with both their customers and the planet.