Exercise-4

Sustainability The New Mantra Theory into Practice 2 Worldwide, most sectors have awakened to the ramifications of the environmentalism boom, which is the result of heightened public awareness of climate change and energy efficiency. The tsunami in late 2004, the hurricanes that devastated the US Gulf Coast in 2005, the increase in temperatures in summer, the melting of icebergs have all played a significant role in increasing awareness of this serious threat. Businesses across the world are developing strategies to sustain themselves in the wake of climate change and are adopting a two-pronged approach to combat it. First, by working towards developing a low carbon landscape. Businesses have undertaken efforts to optimise the carbon efficiency of existing assets (infrastructure) and products to comply with mandatory or voluntary compliance on greenhouse gases abatement. Moving forward with stricter GHG targets, there will be a growing demand for new low carbon solutions and products. Industries have taken steps to understand how they can modify their existing products and reposition them to ensure their sustainability in the market. Retailers have also started working on these lines. JC Penney became the first retailer to attain the Energy Star for a retail store thereby reducing the carbon footprint of its operation. Going beyond, it has continued to measure and track energy performance of its 1,000+ stores. It has also achieved a Designated to Earn the Energy Star recognition for the new stores. Khols Department store has earned the Energy Star for superior energy performance for over 160 stores. Second, by building new low-carbon businesses. In tandem with the efforts mentioned above, there is a move to develop new radically-effective low-carbon solutions. Retailers across the world have also awakened to this change. Large retailers such as Tesco, Wal-Mart, Kohls, Office Depot and many more have adopted green strategies and realised the significant benefits accruing from them. Green initiatives include, among others, green buildings, efficient consumer delivery systems, efficient lighting systems, the use of renewable power such as solar, wind and biomass and promotion of green products. Retail is one of the sectors where pricing is a key factor. The consumers response to discounts and special prices is of great importance. Specifically, Indian markets are very price-elastic. This has been proved by success stories such as that of Big Bazaar. In such a price-sensitive market, operational costs are therefore of prime importance. Green retail is all about optimum utilisation of resources and reduction of operational costs, while reducing the adverse environmental impact. A recent survey conducted by a global research firm compiled around 23,000 consumer responses in 17 countries across five continents. It revealed that the vast majority of respondents from developing countries believed in the threat emanating from global warming. It also revealed that a large number of consumers in developing countries were willing to pay more for green products. The 1|Page

EduKart.com

Exercise-4
study paints a unique situation for retailers in developing countriesthat consumers in these regions are willing to pay marginally more for green products. The survey highlights the possible cost benefits accruing from green initiatives from which successful and sustainable business models can be developed for retailers. This is a promising opportunity for new organized retailers in India who are in their development phase. They can set up optimized green supply chains, which should help them to enjoy cost benefits and perhaps offset their later investments that could be costlier. In addition, this would reduce the impact of their products on the environment. A green infrastructure would also help to save on operation and maintenance costs. The marginal initial investment required for green buildings normally has a payback period of two to four years. Apart from operational savings in the long term, retailers will also get an additional advantage: Their green corporate image among their consumers. This could help them attract and retain new consumers and build consumer loyalty. Cost and consumer perception are the two most important factors in the retail business. Both can comply with green retail norms, as the survey reveals. This is a promising deal for new retailers. The Bureau of Energy Efficiency in India has categorized the retail sector as an energy-intensive industry. The government of Indias national action plan on climate change, released on July 30, 2008, aims to boost energy efficiency and put stricter regulations to reduce the demand for energy. Moving ahead of these regulations may help new retailers generate substantial benefit accruing from them. With the current economic situation, more and more retailers have realized that sustainability is the new mantra. Greening the supply chains and reducing environmental footprint of the stores result in lower operational expenses. This also adds to the green image the consumers are seeking for. The European retailers have formed The Retail Forum as part of EU Action Plan on sustainable consumption. Also the synergy of environment and economic viability has given rise to new businesses. For example, Re-feel, has captured a unique market of re-filling cartridges making it economical and environment friendly at the same time. The move at the right time has helped it to secure 65 retail stores across India. Going forward retailers who adopt sustainable business practices would sustain themselves in business with higher profitability and greater consumer loyalty. Chaitanya Kalia, Partner, climate change and sustainability services practice, Ernst & Young.

Source: EduKart.com http://www.financialexpress.com/news/green-retailing/491898/0

2|Page