Ainhoa Ye, MSc in Operations & Supply Chain Management student, and Trinity Business School Winner in the CoBS 2023 Student CSR Article Competition, contends that the time has come to tackle climate crisis through the crucial role of retail in leading the way towards a new era of profitable and regenerative businesses by redesigning their supply chains and business models.
Regeneration at the Core of Profitable Retail Businesses and Supply Chains by Ainhoa Ye.
As human beings, we are wired to care, learn, and create. Whether we are nurturing a life, pursuing a passion, or building a business, we feel a sense of pride and satisfaction when we make progress and achieve desired outcomes. However, despite this, we often support businesses that prioritize profit over the well-being of marginalized communities and the health of our planet. This raises the question: have we lost our way?
As much as companies are trying to become sustainable in every aspect, it is not enough. In this article we place retail companies under the spotlight to highlight their crucial role in leading the way towards a new era of profitable and regenerative businesses by redesigning their supply chain and business models.
Sustainability goals are not enough for regeneration
Picture this: Imagine yourself running a profitable business where the only trail it leaves is a positive impact on customers, communities, and the Earth. Although it may sound utopian, this is what defines a regenerative business and it is what companies should aim for, since sustainability goals are simply not enough.
According to a study carried out by Uniting in Science and the World Meteorological Organization, greenhouse gas emission reduction pledges need to be seven times higher to meet the Paris Agreement’s target of limiting global temperature increases to 1.5 degrees Celsius above pre-industrial levels. Moreover, the United Nations Secretary-General, Mr Guterres warns that the analysis indicates “we are still way off track” and we will soon be in “uncharted territories of destruction” if we continue to ignore climate change and its devastating consequences (United Nations, 2022). In 2022, there were frequent extreme natural disasters related to global warming, some of which had the highest human, economic, and environmental costs among the long list of worldwide catastrophes, including Hurricane Ian in the US and Cuba, severe droughts in China and Europe, and massive floods in Pakistan and East Australia (World Economic Forum, 2023).
Unsustainable practices have led us to the tipping point of climate change. However, this is not the time to become desensitized, but rather act before the damage becomes irreversible.
Generating positive handprints
Retail brands across all industries are working hard towards achieving better environmental, social, and governance (ESG) practices (McKinsey Sustainability, 2022). Whether it’s fashion, food and beverage, or e-commerce, companies are innovating to achieve net-zero carbon emissions through circular economies, renewable energy, eco-friendly materials, and more.
For instance, Azurmendi Restaurant, located in Larrabetzu, a small Basque town, is housed in a bioclimatic building that blends into the natural environment and utilizes resources such as sunlight to reduce the need for artificial lighting and generate solar energy. Moreover, rainwater is collected to irrigate their greenhouse, which features over 400 local plant species, or for use in the WCs. (Azurmendi Restaurant, 2020)
However, regenerative business takes things a step further by aiming not just to break even in terms of carbon emissions, but to generate a positive handprint. Dyllick and Hockerts (2002) emphasized this idea and stated that calculating carbon footprints can be time-consuming and expensive, but in contrast, monitoring positive impact is simpler and more visible. Two actions can result in forming handprints: shrinking or avoiding footprints that would have otherwise occurred and creating positive impact (Harvard University, 2015). Regeneration essentially requires a reversal of the current system, where resources are consumed and waste is produced, and instead implement a system that consumes existing waste and produces resources (CHEP, 2021).
There are several businesses that currently employ regenerative methods in their operations. An example of this is the partnership between Patagonia and their cotton producers, where they have implemented regenerative agricultural practices to maintain soil health, which in turn increases productivity and the ability to absorb carbon dioxide from the atmosphere (Patagonia, 2023). Another example is On Running that works closely with its partners and has introduced a circular subscription program of running shoes made of carbon negative and bio-based materials (On Running, 2023).
Retail brands across all industries are working hard towards achieving better environmental, social, and governance (ESG) practices (McKinsey Sustainability, 2022). Whether it’s fashion, food and beverage, or e-commerce, companies are innovating to achieve net-zero carbon emissions through circular economies, renewable energy, eco-friendly materials, and more.
For instance, Azurmendi Restaurant, located in Larrabetzu, a small Basque town, is housed in a bioclimatic building that blends into the natural environment and utilizes resources such as sunlight to reduce the need for artificial lighting and generate solar energy. Moreover, rainwater is collected to irrigate their greenhouse, which features over 400 local plant species, or for use in the WCs. (Azurmendi Restaurant, 2020)
However, regenerative business takes things a step further by aiming not just to break even in terms of carbon emissions, but to generate a positive handprint. Dyllick and Hockerts (2002) emphasized this idea and stated that calculating carbon footprints can be time-consuming and expensive, but in contrast, monitoring positive impact is simpler and more visible. Two actions can result in forming handprints: shrinking or avoiding footprints that would have otherwise occurred and creating positive impact (Harvard University, 2015). Regeneration essentially requires a reversal of the current system, where resources are consumed and waste is produced, and instead implement a system that consumes existing waste and produces resources (CHEP, 2021).
There are several businesses that currently employ regenerative methods in their operations. An example of this is the partnership between Patagonia and their cotton producers, where they have implemented regenerative agricultural practices to maintain soil health, which in turn increases productivity and the ability to absorb carbon dioxide from the atmosphere (Patagonia, 2023). Another example is On Running that works closely with its partners and has introduced a circular subscription program of running shoes made of carbon negative and bio-based materials (On Running, 2023).
Change is not always easy
Nevertheless, the transition to fully regenerative businesses will not come without its challenges. Change is not always easy, even if imperative. Forward thinking is always accompanied by risks associated to novelty and unknown unknowns. In highly competitive markets like retail, it is those who innovate that manage to be in the lead.
Nonetheless, there is a plethora of issues that might hinder progress to shift to this model and develop regenerative capabilities in the supply chain such as increased costs, financial constraints, inconsistencies in the concept of regeneration as companies differ across sectors, conflict of interests, and lack of trust or knowledge, among others.
Regeneration and the key role of retail companies
The transition to regenerative business requires a holistic collaboration from governments, institutions, suppliers, businesses, consumers among others, but it is retail companies that can drive this change.
First, retailers have control over their business model and the power to reinvent themselves and reconsider priorities reflected in their values, mission, and vision which usually work towards the triple bottom line – that is, economic, environmental, and social sustainability goals.They should leverage their innovation capabilities to provide products that are designed to be high quality, recyclable and leave a positive impact, instead of selling high carbon emitting goods that follow a linear concept of “take, make, dispose”.
With this clear purpose of creating positive impact, retail companies can decide to source responsibly. By collaborating with suppliers who share similar values, they can cultivate an environment of cooperation and trust, facilitating the development of end-to-end supply chains that promote regeneration. For instance, those who rely on agricultural and animal commodities can start by building partnerships with certified farmers who are committed with animal welfare, enriching soil, preserving biodiversity, responsible use of chemicals and water treatment or procure from suppliers who empower communities and make efforts to improve standards.
Furthermore, retailers are in direct contact with consumers and bear a significant responsibility to change their behaviour. Increasing transparency and effective marketing strategies that explain the advantages of regenerative products can encourage customers to make informed decisions and be willing to pay a higher price. Nevertheless, it is crucial to clearly communicate the environmental benefits of the products to avoid any scepticism or perception of greenwashing, as highlighted by Cronin et al.’s (2011) research.
Collaboration: The path to regeneration
Whether it is via incremental changes or radical innovation, retailers must design new methods to strengthen collaboration among all tiers, which is key to create a net positive system aiming at triple regeneration. Increasing communication, investing in technology, sharing knowledge as well as risk among supply chain stakeholders are essential to achieve the common goal: delivering high value products and services consistently to customers in a net positive way.
Collaborative environments can be enhanced by building transparency and efficient traceability of regenerative products along the supply chain. This can be achieved by utilizing artificial intelligence and blockchain technology, which ensure the authenticity of data. Furthermore, as customers’ awareness of responsibly sourced products continues to grow, they are more likely to feel inclined to make purchases and become co-owners of the positive impact being generated. Thus, there are numerous opportunities for retailers to exploit.
Moreover, collaborative and regenerative supply chains offer an additional advantage of enhancing its robustness and resilience. A healthier system will be less vulnerable to disruptions, regardless of the field, whether it’s agriculture or the supply chain itself.
Kaizen, Co-opetition and Resilience
In addition, retail businesses should engage in continuous improvement. Establishing indicators can aid in measuring progress, although they are seldom used in both academic and practical contexts when it comes to regeneration (Howard et al., 2019). An example of an index is monitoring the amount of workshops in the supply chain to share successful regenerative practices. Businesses should think of competition not like a zero-sum game, but rather as co-opetition. Fighting climate change is a common goal that needs synergies in companies and among private and public institutions to catalyse the transition to make regenerative business models the new norm.
Additionally, conducting regular lifecycle assessments to evaluate the product’s performance can help track progress, optimise the creation of value, and decrease its carbon footprint along the supply chain stakeholders.
Triple regeneration, slowly but surely?
It is disheartening to see the yawning gap between sustainability pledges and reality, as well as the impact of climate change – more extreme and frequent natural disasters – not to mention deforested land and polluted landscapes due to unsustainable business activity.
One of the major players who can address this issue then, are retailers. They can build an end-to-end supply chain that aligns with the core values and shared aspiration of all links to become a regenerative model that generates positive handprints.
When implementing a regenerative model, retail businesses can overcome challenges like uncertainty, increased costs, and lack of trust or knowledge, through strong collaboration with the complete supply chain. This can be achieved if transparency and traceability are increased by implementing innovative technology.
All in all, profitable regenerative business models have triple regeneration benefits that enhance social and environmental stewardship as well as supply chain resilience, and there are many significant opportunities that retailers can leverage. But more importantly, they must engage in paving the way to regenerative models and set new industry standards. Maybe soon, businesses and consumers will be able to look back and feel proud of the positive handprints they have contributed to. Now, the next matter is, how can they replicate the amplifying phenomena of the bullwhip effect to make regenerative businesses become the norm and raise the urgency of developing and adopting regenerative practices to restore deforested land, heal exploited communities, and achieve sustainability goals?
For a full list of references used in this article, click here.
Useful links:
- Link up with Ainhoa Ye on LinkedIn
- Read a related article: The new UN decade on ecosystem restoration
- Discover Trinity Business School
- Apply for the MSc in Operations & Supply Chain Management.
Learn more about the Council on Business & Society
The Council on Business & Society (The CoBS), visionary in its conception and purpose, was created in 2011, and is dedicated to promoting responsible leadership and tackling issues at the crossroads of business and society including sustainability, diversity, ethical leadership and the place responsible business has to play in contributing to the common good.
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- Stellenbosch Business School, South Africa
- Trinity Business School, Trinity College Dublin, Ireland
- Warwick Business School, United Kingdom.
