Sustainability in Consumer Products, Retail & Distribution (CPRD) – the India story so far…

In the last decade, the retail market in India has undergone a significant transformation and has seen remarkable development. The retail industry is highly resource-intensive, drawing heavily on energy, water, and natural reserves. It is also a major contributor to economic growth and is vital as a distribution channel for food, water, and lifestyle products.

India is the fourth largest retail market in the world and is projected to reach approximately $2 trillion by 2032 from $690 billion in 2021. The Indian retail market recovered from pandemic lows and grew 10% YoY from $630 billion to reach $690 billion in 2021. The retail sector contributed approximately $800 billion to India’s gross domestic product (GDP) in FY2020 and employed 8% of its workforce (35+ million). It is also expected to create 25 million new jobs by 2030.

The Indian e-commerce industry is expected to cross the $350 billion mark by 2030, growing at a compounded annual growth rate (CAGR) of 23%. India’s digital economy is expected to touch $800 billion by 2030 and the total value of digital transactions, which stood at $300 billion in 2021, is projected to reach $1 trillion by 2026.

Growing awareness on Sustainability

Consumers in India are becoming increasingly conscious of the environmental and social impact of their purchasing decisions; and they are consequently becoming more concerned about this impact. This concern has led to an upsurge in the demand for eco-friendly products and eco-labelling based on widely accepted standards. Leading global retailers understand the strategic significance of Sustainability and the vital connections between their core businesses, supply chains, and the natural environment.

Indian retailers have realized the growing importance of improving efficiency in energy usage and have switched to renewable energy sources (such as wind, solar, etc.) for the generation of electricity (already many schemes have been provided by local/central governments in India). There is a surge of focus on green logistics (or green supply chain) by Indian retailers and smaller players, which is a more sustainable option for shipping and logistics (and also cost savings, in the long term). This trend is gaining popularity in the e-commerce segment where electric delivery scooters/rickshaws are used for last mile delivery.

The movement for green supply chain has gained pace in India with multi-national corporations (MNCs), such as DHL, Maersk, DB Schenker, investing heavily in it. Many fast-moving consumer goods (FMCG) companies and retailers are cultivating products that are sustainable and directly sourced from organic (or local) farmland or producers.

Sustainability initiatives in India

Perhaps the best example of a cohesive sustainable initiative in India is that the central government (as well as the respective state governments) is banning single-use plastic and laws have been put in place to prohibit its use across many states in India.

Organizations have adopted Sustainability as an integral part of their business strategy. One of the fashion retailers in India ‒ Arvind ‒ has invested in technologies such as indigo foam dyeing of denim, which uses 90% less water as compared to conventional dyeing technologies. They source sustainable cotton through regenerative organic farming, thereby reducing the negative impact of cotton farming.

Supply chain management is one of the fundamental aspects of the retail sector. This incorporates seamless ways of product delivery, controlled inventory, production, sales, and product distribution. Organizations are evaluating the different scopes of emissions with a substantial impact on the overall carbon footprint.

FMCG giant Hindustan Unilever Limited (HUL) implemented the “Load More, Travel Less” strategy, clubbed with increased efficiency of processes, reduction in the count of trucks (by using bigger truck types), and reduction in distance travelled. This helped the company reduce CO2 emissions from logistics network by 60%.

Partnerships and innovations for Sustainability

SIG, a global packaging company, has entered the Indian beverage packaging industry with circular packaging solutions. SIG India’s initial clients in the country were ITC and Coca-Cola India. Their Indian clients now include Amul, Dabur, Varun beverages (PepsiCo bottler), Haldirams, Milky Mist, and Godrej Creamline. Over the years, the company has developed Signature 100, the first aseptic carton pack made entirely of renewable plant-based materials.

At Maersk, electric vehicles (EVs)have been leased from Bangalore-based advanced battery technology start-up ‒ Log9 Materials. And these EVs will primarily be addressing the mid-mile distribution network between Maersk warehouses and customers (warehouses/stores). Furthermore, it aims to have 50 EVs in its fleet by the end of 2022.

A few case studies of organizations with mature Sustainability status​ are mentioned below:

Key challenges in implementation

Bringing the real Indian Consumer Products & Retail (CPR) sector under the Sustainability umbrella:

A majority of the data-points available refer to Sustainability initiatives at large Indian corporations. However, small and medium-sized enterprises (SMEs) employ the largest workforce in India and can have a tremendous impact on the Sustainability efforts of the country. Thus, in Indian CPR space there needs to be a focus on the transfer of responsibility across the value chain from the agricultural producer (sourcing) to SMEs (distribution and store operations).

Ensuring Indian consumers follow through on sustainable promises with their wallets:

The mindset of Indian consumers is changing with 87% being concerned about sustainable packaging and 56-59% being willing to pay more for it. Large-scale adoption of sustainable products, often more expensive, is a greater challenge in a cost-sensitive emerging economy such as India. Even globally, although 65% consumers say they want products with Sustainability claims only 26% follow through with their wallets (2019, Harvard Business Review).

Greenwashing:

India needs to develop and implement comprehensive standardization to ensure products are sustainable throughout the lifecycle and not just marked so. Use of new technologies such as Blockchain, to this end, is still nascent.

Recycling for real:

There has been a significant focus on making products and packaging potentially recyclable at end-of-life, however full benefits will accrue only when consumer awareness and facilities for segregation of waste aredeveloped. This is a potential problem area for India, since it is an unorganized sector.

Sustainable Reporting Framework

India’s Sustainable Development Framework: To support companies in their Sustainability missions, the Confederation of Indian Industry’s (CII’s) center of excellence (CoE) – the CII-ITC CoE for Sustainable Development (CESD) – was set up in 2006 as a not-for-profit, industry-led organization. It helps businesses incorporate Sustainability as a part of the corporate agenda through innovative ideas and solutions in India and globally. By partnering with industry, government, and civil society, CESD has pioneered industry engagement in environment management systems, biodiversity mapping, Sustainability reporting, integrated reporting, and social and natural capital valuation in India.

Other such Indian or global standards and frameworks include:

Global Organic Textile Standard (GOTS):

This is the worldwide textile processing standard for organic fibers, which includes ecological and social criteria backed by independent certification of the entire textile supply chain. It has a Certified Suppliers Database which lists certified Indian suppliers.

ECG Framework:

This is a framework for understanding and measuring how sustainably an organization is operating. ESG is an acronym for Environmental, Social, and Governance. The ESG framework helps stakeholders understand how an organization manages risks and opportunities around Sustainability issues. ESG has evolved from other historical movements that focused on health and safety issues, pollution reduction, and corporate philanthropy. ESG has changed how various investment and capital allocation decisions are made.

Energy Star:

Energy Star (trademarked ENERGY STAR) is a program run by the  Environmental Protection Agency (EPA) and the Department of Energy (DoE) of the United States of America (USA), and it promotes energy efficiency.[4] The program provides information on the energy consumption of products and devices using different standardized methods. The Energy Star label is found on products across more than 75 different certified product categories, homes, commercial buildings, and industrial plants. In the USA, the Energy Star label is also displayed on the Energy Guide appliance label of qualifying products.

Integrated Reporting (IR) Framework:

This framework has been developed by the International Integrated Reporting Council (IIRC). The Integrated Reporting framework is now jointly part of the Value Reporting Foundation along with the Sustainability Accounting Standards Board (SASB). Integrated reporting combines material information about an organization’s strategy, governance, performance, and prospects such that it reflects the commercial, social, and environmental context within which it operates.

Conclusion

India is the fifth-largest economy in the world and the Retail and FMCG sectors are in the top five in the world (based on scale of economies); moreover, the Indian retail industry is also one the largest producers of greenhouse gases. Consequently, Sustainability needs to be at the epicenter of India’s FMCG/Retail/Logistics business strategy, for India to achieve its Sustainable Development Goals (SDGs); this needs to be done while maintaining a fine balance between building a robust economy and improving the lives of citizens. Both Indian consumers and producers have an equal responsibility in fueling the country’s economic growth and safeguarding its environment.

Sources:

1. https://indiacsr.in/sustainability-reporting-and-gri-framework/https://eka1.com/blog/sustainability-frameworks-101/
2. https://www.esgthereport.com/the-top-sustainability-frameworks-for-organizations/#What-are-Sustainability-Frameworks
3. Sustainability in Retail: The Benefits of Integrated ESG Data (indianretailer.com)
4. Indian Retail Industry Analysis Presentation | IBEF