Climate risk is reshaping retail in 2024. Here's what you need to know:
- Definition: Climate risk = ways weather and environmental changes disrupt retail operations
- Key impacts: Supply chain disruptions, store damage, changing customer habits
- Numbers to know:
- 83% increase in global climate disasters (2000-2020)
- CA$2.4 billion in Canadian severe weather losses (2020)
- 58% of European shoppers consider climate impact when buying food
How to tackle climate risk in retail:
- Assess your risks (supply chain, stores, customer behavior)
- Use climate data and prediction tools
- Adopt ESG tracking software
- Set clear sustainability goals
- Work with suppliers to cut emissions
- Be transparent with stakeholders
Bottom line: Ignoring climate risk is no longer an option. Smart retailers are turning challenges into opportunities by rethinking operations and embracing sustainability.
Weather-Related Risks in Retail
Weather's throwing a wrench in retail operations. Let's look at how it's shaking things up in 2024.
Supply Chain Risks
Extreme weather isn't just a nuisance - it's costing retailers big time. Here's the scoop:
In 2023, California, Nevada, and Utah got soaked. Result? Shipments dropped 20% to 30%. Then Canadian wildfires hit, delaying Chicago and New York deliveries by up to two days. Some areas saw a 75% drop in shipments due to poor visibility.
Europe's not immune either. In 2022, soybean production fell 12% due to weird weather. That's bad news for more than just vegans - it impacts everything from animal feed to processed foods.
Evan Gold from Planalytics puts it straight:
"Weather is the most local impact in terms of what we do on a day-in and day-out basis and therefore, it impacts retailers."
So what's a retailer to do? Here are some smart moves:
- Mix up your suppliers. Don't rely on just one climate-vulnerable area.
- Use tech to predict problems. Companies like Everstream are helping retailers spot trouble before it hits.
- Stock up. Sometimes, extra inventory can save you when supplies get cut off.
Store and Warehouse Risks
It's not just about getting stuff to stores - it's keeping those stores running when Mother Nature throws a fit.
In 2022, heat and drought in southwestern China nearly doubled vegetable prices. Imagine trying to keep grocery shelves stocked and prices reasonable in that mess.
But it's not all bad news. Smart retailers are adapting:
- Going green: Warehouses are cutting energy use with LED lights and smart systems.
- Powering up: Some companies are installing solar panels or using wind power to keep running when the grid goes down.
- Getting organized: Better inventory management means less wasted space and energy.
Here's a wake-up call: warehousing pumps out up to 11% of the total greenhouse gas emissions in logistics. That's a lot, but it also means there's room for big improvements.
Bottom line? Weather risks aren't going away, but smart retailers are turning problems into opportunities. By rethinking supply chains, using tech, and toughening up operations, they're not just surviving - they're gearing up to thrive in a changing climate.
Business Changes Due to Climate Rules
Climate regulations are shaking up retail in 2024. Here's how these changes are hitting businesses and what it means for you.
Changes in Customer Buying Habits
Shoppers are going green, and stores need to catch up. Check this out:
- 62% of Gen Z wants sustainable brands. That's neck-and-neck with Millennials and way ahead of older folks.
- Secondhand shopping? It's HUGE. 83% of Americans are into it now. Even Baby Boomers are jumping on board, with a 56% bump in the last two years.
- Some folks might pay up to 60% more for eco-friendly stuff. That's a big deal for pricing.
So what's a retailer to do? Go green or get left behind. Take Francesca's, for example. They teamed up with thredUP for "forever francesca's", recycling over 20,000 clothes. Now customers can shop secondhand and trade old clothes for store credit.
It's not just about what you sell, either. Kroger found that 45% of shoppers want discounts for bringing reusable bags. It's an easy way to push sustainable habits and cut packaging costs.
Following Climate Rules and Costs
New rules are hitting retailers right in the wallet. Here's the scoop:
Carbon pricing is catching on. In early 2021, 28% of European companies were using it internally. The UN wants a minimum of $100 per metric ton. That's going to hit everything from making stuff to shipping it.
The EU's got a new reporting rule coming in 2024. If you're making over €166 million a year, you've got to report on your environmental impact. Only 20% of companies are ready. Are you?
And don't forget about your suppliers. For fashion retailers, up to 98% of their carbon footprint can come from their supply chain. That means big changes in who you work with and how.
These aren't just annoying rules. They're changing how business works. Nike's set 29 sustainability targets for 2025, aiming to cut greenhouse gas emissions by 70% in their facilities.
The price tag? McKinsey says retailers might see a 10-15% jump in annual capital budgets and up to 8% more in cost of goods sold for some categories. That's not pocket change.
But it's not all bad news. These changes are opening up new doors. Green bonds are becoming a hot way to fund sustainability projects. And companies that get ahead of the game are seeing perks in brand reputation and customer loyalty.
How to Check Climate Risks
In 2024, checking climate risks is a must for retail companies. Here's how to do it right:
Finding and Rating Risks
To spot and measure climate risks in retail, follow these steps:
1. Identify potential threats
Look at your whole operation - from supply chains to store locations. PG&E, after filing for bankruptcy due to climate change, did a deep dive into climate risks. They focused on things like wildfires that could damage their power lines.
2. Use climate hazard screening tools
These tools help you see current data and future projections for climate issues. The EPA has a worksheet called "Assessing Your Project's Climate Risk" for a quick risk check.
3. Engage stakeholders
Get input from different departments and partners. Unilever found risks to their farm supply chains by working closely with farmers and suppliers.
4. Quantify the impact
Put a dollar value on potential losses. The World Economic Forum says the global economy could lose 10% of its total value by 2050 due to climate change.
5. Prioritize risks
Focus on the biggest threats. For retail, supply chain problems are often at the top of the list. In 2023, extreme heat and flooding caused major supply chain issues, with some areas seeing a 75% drop in shipments due to poor visibility.
Getting and Checking Data
Good climate data is key for risk assessment. Here's how to nail it:
1. Use specialized software
Climate risk management software can speed up data collection and boost accuracy. Tools like SafetyCulture (starting at $24/user/month) offer real-time monitoring and analytics.
2. Tap into multiple data sources
Don't rely on just one source. Mix it up:
- Internal data from your operations
- External data from climate agencies
- Supplier information
- Industry reports
3. Implement data validation
Double-check your data. As one ESG data expert puts it:
"Validating the data is always worthwhile, and doesn't necessarily require a full audit."
4. Create a centralized data hub
Keep all your climate info in one place. It makes analysis and reporting way easier.
5. Stay up-to-date
Climate conditions change fast. Keep your data fresh. Sphera's Supply Chain Risk Management (SCRM) Software scans billions of news articles and data sources to give real-time alerts to supply chain pros.
6. Consider using automated platforms
Tools like Climatta can make ESG compliance data collection a breeze. They centralize sustainability data and analyze carbon footprints without manual input.
The goal isn't just to collect data, but to turn it into action. Amy Barnes, Head of Climate & Sustainability Strategy, sums it up:
"The success of these steps rests upon effective collaboration across business functions, including risk management, supply chain, sustainability, strategy, and people."
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Using ESG Tools and Systems
In 2024, retailers are using advanced ESG tools to handle climate risks and sustainability. Here's how these tools are changing ESG practices in retail.
Tools that Track ESG Data
ESG software helps retailers manage their sustainability efforts. These tools make it easier to collect, analyze, and report data.
Climatta is like TurboTax for ESG compliance. It:
- Automates data collection
- Centralizes sustainability info
- Analyzes carbon footprints automatically
This automation is key for retailers with multiple stores and complex supply chains.
CoreLogic's Climate Risk Analytics offers:
- Climate modeling based on historical data
- Hyper-local risk assessment
- Insights from UN climate reports
These features help retailers assess climate risks in detail.
Maplecroft's Climate Risk Data provides:
- 300+ local hazard indices
- 190+ risk indices (climate, environmental, political, social)
- Data on 16 specific climate hazards
This data helps retailers assess risks across their operations and supply chains.
Making ESG Reports
ESG reporting is now a must for many retailers. The EU's Corporate Sustainability Reporting Directive (CSRD) requires more companies to provide detailed ESG data.
Retailers are using specialized tools for this. Convene ESG offers:
- Automated data collection from stores
- Disclosure mapping aligned with global standards
- Customizable templates for narratives
A Convene ESG client said:
"With Convene ESG, companies can control the entire reporting process without manual data collection, and are 'assurance-ready' and compliant with changing requirements."
SAI360 goes further, allowing companies to:
- Keep a register of ESG risks and opportunities
- Review and assess risks regularly
- Automate ESG compliance
- Stay updated on global ESG standards
When choosing an ESG tool, consider:
- Data coverage
- Ease of use
- Scalability
- Integration capabilities
The goal is to turn data into insights. As Amy Barnes, Head of Climate & Sustainability Strategy, says:
"Success depends on effective collaboration across business functions, including risk management, supply chain, sustainability, strategy, and people."
Making Plans and Taking Action
In 2024, retailers are stepping up their game to tackle climate risks. Let's look at how they're creating and implementing effective plans.
Reducing Climate Risks
Smart retailers are taking real steps to lower their climate risks:
Set big energy goals
Salesforce nailed it. They aimed for 100% renewable energy by 2022 but hit it in 2021. They didn't stop there – they reached net zero emissions and launched Sustainability Cloud 2.0.
Shake up the supply chain
Walmart's Project Gigaton is huge. They're working with suppliers to cut supply chain emissions by one billion metric tons by 2030. That's like taking 211 million cars off the road for a year!
Go all-in on sustainable tech
IKEA's Forest Positive Agenda is protecting forests worldwide. It's not just good PR – it's smart business. Companies with responsible supply chains can boost revenue by up to 20% while cutting costs by up to 16%.
Make energy efficiency a priority
Ford is leading the way in Europe, making it one of their first carbon-neutral regions. They're showing that even old-school industries can make big changes.
Plan for climate change
Starbucks is thinking ahead. They're investing in climate-tough coffee plants and teaching farmers sustainable methods. It's about protecting their product and their people.
Spreading the Word
Getting everyone on board is key. Here's how to do it:
Get employees excited
Make sustainability part of your company's DNA. Over 70% of job seekers want to work for eco-friendly companies. Use this to attract the best talent.
Talk to investors
Be open about your climate plans. A whopping 89% of big investors now look at ESG data when deciding where to put their money. Show them you mean business.
Keep customers in the know
People care more than ever about climate change. In 2021, over a third of adults in Great Britain were worried about it. Use your green efforts as a selling point.
Use smart tools
Platforms like Climatta are making ESG compliance a breeze. They help gather sustainability data and crunch carbon footprint numbers without all the manual work. It's like having a sustainability expert on speed dial.
Be real and celebrate wins
Don't just talk about goals – show your journey. Share the good and the bad. As one ESG expert puts it:
"Building a culture of awareness and focusing on sustainability will benefit your organisation in more ways than you can imagine."
Key Points to Remember
Let's recap the main takeaways from our retail climate risk guide for 2024:
Be transparent about climate risks. Evaluate your risks thoroughly and share the results. It's not just good practice - it's becoming a must-do. As one ESG expert puts it:
"Investors want to know how companies might handle non-financial changes in their environment."
Cut energy use. It's a win-win: lower costs and better sustainability. Simple changes like LED lights and better HVAC systems can make a big difference.
Work with your suppliers. Their emissions count as yours. Take a page from Walmart's book - they're aiming to slash supply chain emissions by a billion metric tons by 2030. That's like taking 211 million cars off the road for a year!
Set clear, science-based goals. Many retailers are doing this for their Scope 1 and 2 emissions. It shows you mean business and gives you a clear plan.
Use tech to your advantage. Tools like Climatta make ESG compliance easier. They gather data, keep sustainability info in one place, and crunch carbon footprint numbers without the manual work.
Keep it consistent. As Abigail Ingalls from Breckinridge says:
"Retailers need to consistently boost revenues through competitive pricing and customer loyalty while keeping costs in check."
Don't just do one-off green actions. Make sustainability a part of everything you do. It's not about having one eco-friendly product - it's about making your whole company green.
