3 Steps to a Sustainable Future for Retailers
A tip from this article was featured in Total Retail's 50 Best Retail Tips of 2018 special report. You can access the full report, which features tips covering nearly every facet of running a successful retail business, here.
For many retail organizations, sustainability remains a financial hurdle to overcome rather than a solution to cut costs. Retailers face an uphill battle to increase already razor-thin profit margins amidst a rapidly changing industry, and, as a result, sustainability has taken a back seat for some.
While a strong economy and online growth have improved retail sales, many companies continue to struggle. U.S. store closures are expected to increase to more than 12,000 locations in 2018, an increase of 33 percent from 2017. Beyond traditional retailers, grocers, which is consistently ranked one of the least profitable retail verticals, are now challenged to compete with big-box retailers and e-commerce giants.
The stakes are high to create an inviting atmosphere in-store, push inventory and streamline the supply chain, but retailers could be throwing money away when they solely prioritize sales and ignore sustainability. When implemented effectively, sustainability initiatives generate a strong return on investment.
Some sustainability pioneers have served as an example of this success. Target, for example, is the largest adopter of on-site corporate solar power and added 43 MW to its facilities in 2017.
New, long-term strategies for efficiently managing resources and reducing costs, while minimizing operational impacts, make sustainability more accessible today. The following three tips will encourage retailers to rethink their business strategy and put sustainability to work for the bottom line:
- Find value from unseen data. In the age of big data, retailers have benefited immensely from consumer insights and innovative marketing tools. They also have an opportunity to quantify building and equipment performance more precisely, whether it be in a warehouse or a brick-and-mortar location. The rise of advanced, yet affordable, control systems for lighting, HVAC, refrigeration and other operational infrastructure can help retailers generate more reliable and accurate data. Additionally, data can be derived not only from the use of connected control systems, but also from utility bills to understand and optimize resource use across energy, water and waste. When data from these often-overlooked systems is centralized and analyzed, resulting insights will inform critical business decisions and aid in establishing realistic sustainability goals for the organization.
- Don’t assume one and done. While resources in the retail industry are limited, sustainability projects (e.g., implementing control systems) are not effective if they're executed once and then forgotten. Sustainable operations require continuous monitoring to understand how equipment and resource requirements can adjust over time and impact other business processes. Once a performance benchmark has been established, organizations can determine whether efficiency improvements are as simple as adjusting maintenance schedules for building equipment and turning down the thermostat two degrees, or as big as transitioning to a distributed energy model and renegotiating contracts with supply vendors. Wal-Mart, for example, as of 2016, powered 25 percent of its operations with renewable energy, with plans to double that by 2020. This strategy combined with a goal to cut energy consumption in its stores by 20 percent is estimated to save Walmart $1 billion per year.
- Understand the demand. As retailers begin to take a hard look at energy consumption data and historic utility bills, they should also look for opportunities to reduce consumption costs by reviewing electrical demand trends. Some retailers with numerous rooftop AC units may be accustomed to switching them all on every morning at the same time. As the motors require the most power at start-up, the dramatic spike in power demand can result in penalties from the energy provider. Digital interval meter data helps identify demand response opportunities and operational performance improvements by providing visibility into power spikes. Setting each system to power on at staged intervals minutes from each other could easily reduce the peak load and mitigate penalty charges. Lighting also provides opportunity for electrical demand management. Dimming controls, whether automatic or manual, can allow facility operators to reduce lighting loads during periods of the day when demand is high or sunlight can be harnessed to supplement lighting loads.
Retailers are under enormous pressure to reduce overhead costs. While sustainability and energy efficiency programs may seem daunting to implement, they're often the quickest projects to pay back. Almost immediately following implementation, these projects have the potential to drive down operating costs by 2 percent to three percent across a facility portfolio. Setting sustainability goals through accurate benchmarking can enable retailers to achieve impactful energy efficiencies and resource optimization. These initiatives must also extend beyond one corporate office to make a real difference on the environment. When like-minded organizations partner across the supply chain and with environmental groups, real progress will be made to conserve valuable resources.
Ross Dillon is the senior energy manager at ENGIE Insight, a sustainability and energy management company.
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