Supermarkets are a ubiquitous fact of urban life, despite the rise of farmers markets, boutique providores and online shopping.
In any new estate where a retail hub is planned, a supermarket is generally the anchor tenant. And there’s an increasing trend to put a small supermarket on the ground floor of massive apartment developments in the interests of social bump space and ground floor activation at the street frontage.
But like any other building or business, supermarkets are having to get with the sustainability agenda. Whether it’s consumer pressures over packaging, the ethical dimension of eggs and pork or wider trends around the low-carbon transition, there are a cluster of issues descending on the sector that could impact the social licence of laggards in the sector.
Energy efficiency – coming ready or not?
The Commercial Buildings Disclosure review has raised the possibility of energy efficiency ratings disclosure being extended to retail centres. The review canvassed public submissions in recent weeks, and it will be interesting to see what the response is to the idea.
As part of the whole transition to a low-carbon built environment and given the proven effectiveness of mandatory ratings in delivering reduced energy use and the corresponding carbon emissions, it seems a wise idea from a sustainability point of view.
Data from pitt&sherry in the review’s issues paper showed the retail sector currently accounts for 36 per cent of built environment energy use.
The report also shows that there has already been substantial uptake within the sector of NABERS ratings, which are currently optional.
The review is being undertaken by the Centre for International Economics and is slated to report to the federal government in the second half of this year.
While Coles and Woolworths have both been undertaking a variety of energy-efficiency activities in some of their stores including lighting upgrades and HVAC tuning, the independent grocery chains don’t have to be left behind in the push for better performance.
The Master Grocers Association, an industry association that includes small independent franchise chains such as IGA and Foodworks, established an Energy Efficiency Information Project last year.
MGA details the energy budget of the average supermarket and where the opportunities are for making savings on energy use.
It recommends the installation of energy management systems, to ensure stores are making cost effective investments in improving energy efficiency.
The big ticket item in terms of energy use is identified as refrigerators and freezers, which account for between 60 to 70 per cent of supermarket electricity use.
Improving efficiency and reducing loads will not only likely save on bills but also reduce the chance of equipment failure.
HVAC accounts for around 20 per cent of the energy spend, lighting around 15 to 20 per cent, hot water heating around four per cent and electrical appliances including registers, IT and security systems comprise most of the balance.
Challenges faced by small supermarkets, particularly franchises, include lack of staff with time to drive and oversee energy efficiency improvements; low margins that make hiring a consultant challenging; and in many regions a scarcity of subsidy programs and support such as are available to larger energy users in the commercial and industrial sectors.
Supermarket social licences in the spotlight
Dr Leeora Black, Principal Risk Advisory at Deloitte Australia, says that every organisation needs a social licence, whether it is explicitly called that or considered in terms of reputation or social standing.
Industries and businesses need to “earn the public’s acceptance and approval” and engage with the issues specific to their operations.
In the case of supermarkets, issues such as fair wages and penalty rates, environmental impacts including waste, the energy-efficiency of operations, relationships with suppliers such as the dairy industry and ethical considerations such as modern slavery in the product supply chain are all important.
“All of [those] issues challenge the social licence,” Black says.
The extent to which an individual business responds can either strengthen or weaken them in the public eye.
Black says supermarkets also need to be paying attention to the “rise of the conscious consumer”.
Conscious consumers are looking at a broad range of issues around “how things are made” including whether they are free of animal cruelty and labour abuses, and free of negative environmental impacts.
These are “social licence issues”, and Black says there will always be new issues emerging that can affect an organisation’s standing in the community.
“The social expectation of the role of business in the community continues to ratchet upwards.”
That means staying in business and retaining market share and investor confidence requires continually ensuring the organisation has the required level of acceptance and approval.
The concept of social licence is not just a set of principles. It is possible to use a verifiable metric that can be assessed in a similar manner to a customer or employee satisfaction survey.
Black encourages all companies to start measuring their social licence and notes that some leading-edge companies already measure aspects of it.
Employee wellbeing, for example, is measured by some, or environmental initiatives might be engaged in and tracked.
The Modern Slavery Act reporting requirements that come into effect this year and requires companies with turnovers of $100 million or more in Australia to deliver reporting, will affect major supermarket chains.
Black says that as the reports will be both lodged and available from a government platform, they are unlikely to be an influence at the consumer level. However, they will be of interest to investors and non-government organisations.
She says it is also likely such reporting will have an impact on the behaviour of the reporting companies themselves.
Imagine a product-level GRI in your hand
One game-changer on the way could be technology applications that enable consumers to scan a product barcode with a smart phone and access information, including any environmental certifications, social responsibility information and other details. Something like a Global Reporting Index [GRII] at a product level.
This could be an advantage for retailers in terms of being able to communicate with customers and “make a bigger impact”, Black says.
It would need to be adopted by manufacturers to work, as it would be embedded in the packaging barcode – similar to the labelling system being proposed for aluminium composite products by the Building Ministers Forum.
Black suggests another way to introduce a similar level of granular CSR information at the point of purchase, would be for the retailers to incorporate it into the barcodes on shelf labels.
Watch this space!
So what do consumers care about?
Black says the issues really front of mind for consumers right now include animal welfare, and the big questions of “where does my stuff come from and how is it made?” in terms of the social and environmental impact of products.
She says the nature of the issues that impact on consumer decision-making will continue to evolve. Social movements will drive some change, as will young people, who are the “weathervanes of the future”.
Climate change absolutely needs to be on the radar.
The recent heatwave experience, for example, should have the retail sector thinking about what will happen if we have more heatwaves going forward.
Shopping centres are seen as a safe sanctuary from heat, so the questions then become, what are the responsibilities of shopping centres in the face of heatwaves?
Supermarkets should also be considering practicalities such as how climate change and heatwaves might affect the location of warehousing, planning for new centres, or logistics and transport.
These are among the things that may need to be “rethought to adapt to a carbon-constrained world,” Black says.
Waste is another area where the sector is stepping up to the challenge.
China’s decision to no longer take certain types of waste from Australia was “a huge wakeup call,” Black says.
“Like climate change it is an issue that can drive the social licence, depending on the response.”
Black observes that the waste issue appears to have a “greater sense of immediacy” than climate change, because it is “something you can physically see.”
Plastic is not fantastic
The issue of one-use disposable plastics bags has probably given supermarkets the most airtime of any issue in recent months. Interestingly, while Coles and Woolworths both appeared to agonise over the decision to stop handing consumers junk bags for free, it has been part of the Aldi chain’s value proposition from the outset, with no discernible consumer blow-back.
Director of the Boomerang Alliance, Jeff Angel, told The Fifth Estate that plastic pollution is now a mainstream issue.
“Consumers may have previously not given much thought to what they were buying, now they are,” he says.
He dismisses the consumer backlash against the Coles and Woolworths “bag ban”, saying there’s a lot of “trivial shouty complaints” in social media.
The supermarkets themselves, which appeared to dither and re-think the move, he says are “obsessed with minute movements in market share.”
This focus on the weekly, monthly or quarterly bottom-line can be counterproductive in terms of sustainability.
Angel says that dealing with plastic pollution needs a long-term strategy – so not one reacting to the previous week’s turnover figures.
Not acting has its price tag.
“The moral high ground is now held by those wanting to take action,” Angel says.
There is also a groundswell of NGO and consumer groups wanting to take action including the Boomerang Alliance and One Million Women. IMW has recently been campaigning hard on in-store packaging also, such as the styrofoam tray and cling wrap that generally comes with organic produce in Coles or Woolworths.
The Alliance also recently took aim at the most recent set of freebies Coles has on offer. The plastic collectible toys prove once again that “the retailer places profit ahead of environmental concern” and “represents the retailer’s continuous disregard for sustainability”.
Angel says that if more thought had gone into the promotion, the toys could have represented an “environmental win” by being manufactured from recycled plastics and promoted as such.
Overall, when it comes to waste the pressure from consumers means “supermarkets have lost control of the agenda.”
What is now needed, beyond actions by individual retailers is an over-arching set of regulations, like the European Union’s recent one-use plastic ban list, Angel says.
“We need a list of priorities [in terms of plastic waste].”
Regulations need to “enforce some form of stewardship” because there is broad consensus among the Australian population that the waste issue needs to be tackled.
The federal government needs to enact this type of legislation “very quickly”.
“A comprehensive regulatory approach is needed.”