Retailers must adapt logistics and last-mile delivery strategies to reduce Scope 3 emissions, a new report has found.

GlobalData’s ESG (Environmental, Social, and Governance) in Retail and Apparel report suggests that companies “should insist” that logistics partners and direct suppliers move to renewable energy and fleet electrification.

Scope 3 emissions made up an estimated 89% of retailers’ total emissions in 2022, according to the report, which also notes that they “can be particularly difficult to measure and control, especially for retailers with outsourced suppliers or manufacturers”.

Defined as the indirect emissions generated by business operations, Scope 3 emissions in retail include the emissions of suppliers in the manufacture, transportation and distribution of products. They also include emissions generated by consumers in the use of products.

Scope 3 emissions differ from Scope 1, which are a company’s direct emissions, and Scope 2, which are the company’s indirect emissions from the purchase of electricity, steam, heat or cooling.

Brands must abandon “throwaway” culture

The report suggests that, to reduce value chain emissions, “retailers must shift from the throwaway consumer culture and adopt a fully circular economy.” This would mean designing products with durable materials and reconsidering retail systems to remove all waste.

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GlobalData’s 2023 consumer survey suggests that consumers want to see a bigger shift towards ESG in retail, and the sentiment towards second-hand shopping – which would support efforts to create a circular economy – was positive. When asked how they planned to shop, 12.3% planned to start second-hand shopping, while 22.4% wanted to continue doing it and a further 20.2% wanted to do it more frequently.

A booming resale sector also offers opportunity for brands looking to develop circular approaches to business. The report notes that “the resale market experienced extraordinary growth throughout the pandemic, rising by 114.6% to $164.4bn between 2017 and 2022 … This was driven by persistent high inflation leading to squeezed discretionary incomes, fuelling the demand for inexpensive apparel.”

Consumers are keen to support local and independent businesses, with 33.5% of respondents saying they would never buy from abroad. Another 20.3% intended to do it less, and 9.4% planned to stop entirely.

Cleaner systems

The report also suggests two other key priorities: the procurement of energy from renewable sources and fleet electrification.

It recommends that retailers should consider investing in solar and wind energy, including on-site solar projects, green energy projects and off-site sources.

To clean up Scope 3 emissions generated by delivery, the report suggests the “use of electric vehicles for shorter delivery journeys, especially last-mile deliveries,” as well as better infrastructure at workplaces to enable employees to use and charge EVs.

Most retail and apparel majors now have net zero targets, but targets around Scope 3 emissions are lagging. Inditex, Amazon and Best Buy intend to reach net zero across Scope 1, 2 and 3 emissions by 2040, whilst Gap, H&M, Lowe’s, Ikea, Adidas, Target, Tesco, Fast Retailing and LVMH have the same target for 2050.

However, some retailers have only committed to net zero targets for Scope 1 and 2 emissions. These include Alibaba, TJX and Walmart. Others have no net zero targets at all, including Kroger, Primark and JD.