Data from the Deloitte Global Powers of Retailing 2023 report estimates that the retail supply chain currently contributes up to 25% of greenhouse gas emissions (GHG) globally.
“This staggering number cements the need for retailers to embed sustainable initiatives into supply chain operations”, states the report, and cites other major focal points that need to be addressed including “eliminating waste from the value chain”.
Retailers — from grocers to sellers of fast-moving consumer goods, fashion, speciality stores and more — are getting the message. An estimated 73% of Consumer Industry CxOs have increased investments in sustainability over the last year, according to the Deloitte 2023 CxO Sustainability Report.
Customers and regulators are also expecting companies to be more environmentally-forward. Various ESG mandates, such as reporting standards issued by the International Sustainability Standards Board, are being considered by Asia Pacific jurisdictions and are likely to be implemented in 2026. Singapore’s carbon tax will also be raised fivefold this year. With all these measures, there is ever more pressure for businesses to reduce their carbon footprint in the coming years.
IT has long held the promise of being an ESG enabler. However, there is a major hurdle for these larger retail companies to reach any ESG goals. Their supply chains, manufacturing, stores and deliveries are hugely complex, vulnerable to disruption and as in so many industries, data silos cause lost productivity, inefficiencies, and missed insights.
Traditional systems are not designed to support the open, transparent flow of information, resulting in data being inaccessible across the organisation. The retail industry needs to reset its approach to data gathering and movement.
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Back-end IT’s role in ESG
Retailers need an IT architecture that is as event-driven as the external events disrupting their business so that they can collect, analyse and action the data in real time.
Every retail transaction creates data — be it the product purchased, price, customer name, or what items are out for delivery and on what truck. Software developers call that transaction an “event”.
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Real-time streaming of these events across an organisation is a fundamental tenet to sustainable success. It ensures the continuous processing of real-time data directly as it is produced to give retail organisations complete visibility over all stages of the value chain and to cut wastage, make sustainability decisions, and not compromise their bottom line.
In retail terms, this could apply to stores, IoT applications, e-commerce platforms, and warehouses – regardless of the system, cloud or protocols involved. The result is a business-wide web of event brokers (or “event mesh”) that is dynamic, open, simple and available everywhere, ready to cope with disruptions, and ready to ensure ESG commitments are tracked and attained.
By becoming more event-driven and leveraging event-driven architecture (EDA) as the underlying platform, retailers can take major strides forward to proactively address their ESG impact in the following key areas of their business.
Optimise transportation/emissions
The Southeast Asian e-commerce retail sector is thriving and the region’s digital economy is expected to double its GHG emissions by 2025 — a startling figure of environmental cost. For such businesses, there are ample opportunities to better leverage real-time data to improve transportation emissions and route efficiency. Think cross-border and same-day deliveries where trucks generate emissions from fuel to ensure that parcels are delivered on time and to where they should be.
E-commerce aside, any type of truck returning to base from scheduled delivery drop-offs either empty or partially full making low-stock journeys contributes to eco-inefficiency. Trucking (particularly in Thailand, the Philippines, and Indonesia) can be unproductive due to the prevalence of long-distance, one-way deliveries which result in trucks often driving on the road empty.
From an immediate perspective, sensors on a truck can monitor fuel emissions, which then get uploaded to the cloud. Applications connected through EDA will then monitor and analyse the data to deliver the greenest route, which is also most likely to be quicker, to drivers in real time. This lessens emissions while optimising delivery and fulfilment times, resulting in time and cost savings for companies.
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Better control over scheduling and stocking
By event-enabling their entire delivery operation, the retailer can view in real-time every truck, see the distribution of a global supply chain such as stock availability in other regions, and model alternative scenarios to fulfil orders via other viable routes or delivery mechanisms.
This ability to re-route on-the-fly is a key missing ingredient to both fulfilling ESG and customer expectations. With event-driven architecture underpinning operations, retailers can capitalise on up-to-date data to make meaningful scheduling decisions and react much faster to any changes in supply or demand.
Food waste control
Perishable products are on the clock from the moment they enter the retail value chain, right down to the final hours they spend on the shelf. The introduction of e-price tags has helped set the stage for grocers to monitor inventory and adjust prices of batches of inventory on-the-fly to optimise sales and reduce the likelihood of goods wasting away on shelves or counters.
But monitoring stocks in “batch” limits actionability. What if we could monitor at the precise item level? Radio Frequency Identification (RFID) has evolved in recent years to where today these chips can feed more granular data about the item – when it was shipped, received, restocked, how long it’s been on the shelves, etc.
This data grants grocers a goldmine of real-time information that, if harvested properly, can best mitigate stock going to waste, using measures like timed price reductions. This perpetual “state of freshness” applied at the item level goes a long way to not only eliminating food waste but also helping safeguard store profitability.
Addressing overstocking at source
From a broader supply chain and inventory management perspective, access to real-time, granular details can also help to analyse sales and inventory patterns to optimise when and how much to order, ensuring the right amount is in the store to meet the consumers’ needs.
For example, sales of certain products such as mandarin oranges may skyrocket during the Lunar New Year festive season but drop once celebrations are over. Adjusting order patterns accordingly will help mitigate stock going to waste in stores.
This also works upstream in the supply chain, with these insights pushed back to suppliers to help optimise production. For instance, it can help farmers better plan how much to grow, and when, so they aren’t stuck with oversupply.
Greener retail buildings
Given that grocers have a wide physical store footprint across their countries, there are direct opportunities to reduce in-store emissions from an energy and utilities perspective. According to McKinsey, to lower these emissions, retailers could seek to improve the energy efficiency of stores with LEDs; more efficient heating, ventilation, and air-conditioning motors; and battery energy storage.
For grocers, refrigeration in stores is a particular emissions concern and will require efforts to identify and manage refrigerant leaks and, in extreme cases, the complete overhaul of store systems. So, there are clearly big gains for large-scale physical retailers to monitor cooling, heating and electricity levels in stores and adjust according to optimal usage.
Vision for the future
Stores today cannot do those at a granular level. In the future, we see a world where you can pre-emptively adjust a store’s “climate” based on weather, customer traffic flows and other factors to help keep emissions low and minimise carbon footprint.
Longer-term, information insights can help to monitor the overall health of a building and score real-time emissions against goals/projections, enabling retailers to adjust and take action based on data-driven insights. EDA will play a significant role here in linking key events to deliver the required data insights needed to track this granular performance.
In sum, turning the tide on ESG in retail means linking applications and devices across environments and geographies. This is where an IT foundation underpinned by event-driven architecture is critical to capture and stream events in real-time across all channels — from the macro supply chain right down to the store level.
Ush Shukla is a distinguished engineer at Solace
