Earlier this month, McKinsey released an article titled Climate sustainability in retail: Who will pay? which highlights the growing number of retailers making climate commitments and looking to reduce emissions throughout their operations and supply chains. Along with these commitments come the rising costs associated with new staff/roles to manage this work, carbon taxes, investment in infrastructure, and more. Due to this, it is estimated that “…retailers could see increases of at least 10 to 15 percent in their annual capital budgets and up to 8 percent in cost of goods sold (COGS) in select categories.” While improving energy efficiency and switching to clean energy could help offset some of these costs, a net cost increase is still expected for the retail value chain.
When it comes to bearing the cost of decarbonization and potential sources of funding, retailers will have to consider the roles of different stakeholders including vendors and suppliers, governments, investors and more. Despite the scale of work needed, there are many initial steps that retailers can take such as including decarbonization in procurement discussions, testing green products, engaging key investors, developing and leading industry partnerships, and more.
To better support members in this area, RCC is launching an ESG and Climate Action Committee with our first meeting scheduled for June 15th. Key areas of focus include:
- Scope 3 supply chain management;
- Environmental, social and governance (ESG) and greenhouse gas (GHG) reporting; and
- Government policy and incentives.