This month, 197 nations came together at COP30 in Brazil to once again drive international momentum for climate action. Discussions around sustainable trade are continuing to move from theory to enforcement, with Border Carbon Adjustments focusing on the carbon cost of producing imported goods and the Corporate Sustainability Due Diligence Directive (CS3D) looking at the human and environmental impacts of supply chains.
The yearly conference has already seen world leaders pinpoint the role of the retail industry, launching the Fashion Industry Charter for Climate Change at COP24 to achieve net-zero emissions within the textile, clothing and fashion industries by 2050.
In recent years, the retail sector has become warped by ultra-fast fashion giants like Shein and Temu. Their model, built on impossibly low prices and an ethos of high-volume and disposability, has created an immense threat for sustainability goals and these companies have relied on exploiting trade gaps to ship single items cheaply across borders.
But with the de minimis exemption abolished by the U.S. administration this summer, and hints from the UK Government to close a similar tax loophole in the Autumn budget, controls are tightening. The opacity that has enabled them could soon become their fatal vulnerability, with DHL Express seeing billed weight bound for the U.S. fall by 32% compared to the same quarter last year. With regulations demanding product-level emissions information and deforestation-free traceability, data will become a crucial watchdog.
This is a wake-up call for the entire industry. Consumers are demanding sustainability and more active strategies towards a circular economy, so retailers will need to keep up to retain a competitive edge. But how can businesses do it?
Understanding the execution gap
According to EY, 66% of UK businesses have developed transition plans to manage climate risks. Yet research from Manhattan Associates reveals a critical gap between corporate sustainability goals and the operational ability to meet them. Although 57% of leaders in the UK say they have full CSRD (Corporate Sustainability Reporting Directive) reporting, only 28% say sustainability performance is a factor in operational planning.
There’s a clear disconnect between the corporate support for sustainability and the reality of supply chain operations on the ground… Many businesses are still operating with systems that can’t provide the necessary insight and visibility.
commented Pieter Van den Broecke, EMEA Leader of Supply Chain Strategies, at Manhattan Associates.
With 87% of retailers anticipating that sustainability compliance challenges will intensify, digital strategies must be able to keep pace. The fundamental challenge is data transparency. Without a unified data infrastructure, businesses cannot measure their carbon footprint, optimise routes, or demonstrate compliance effectively.
Building circularity through efficiency
At its core, sustainability should encompass a true commitment to eliminate unnecessary waste. This means driving efficiency in every mile travelled and every space filled. Thinking about reverse logistics is essential when it comes to returns processes, for instance. Products need to be routed intelligently so they can be restocked at a nearby store or sent to a distribution centre based on real-time data about demand, proximity, and carbon cost. Instead, most retailers funnel returns to a single central warehouse simply because they lack the unified data infrastructure and intelligent inventory processes to make smarter decisions.
The movement of goods is becoming increasingly circular…. So, continuing to think about it in a linear way doesn’t make sense. Uniting transport, warehouse and order management systems is an essential facilitator for the future of retail, giving businesses the power to actively and intentionally improve the sustainability of their operations at the root of their services – systematically removing waste and (importantly) carbon from their supply chains.
says Van den Broecke.
Using data to improve customer trust
With the regulatory environment shifting beneath the very foundations of fast fashion, it opens up an opportunity for retailers to turn visibility into a key part of customer experience and brand trust. For instance, giving customers control over processes like modifying orders before shipping or cancelling shipments before they hit the road.
Mastering these logistics processes isn’t just good for customers; it also gets products back to being sellable faster, and good for the planet meeting new compliance rules and avoid falling short of environmental commitments. The COP meetings are an annual and essential reminder that industries need to lay the groundwork for an intelligent, circular economy. We must not forget that retailers and consumers also have a big part to play in enabling and demanding that positive change too.
