5 Forces Driving Sustainability in Retail

Green Landscape

Organisational environmental, social and governance (ESG) policies – a collection that I like to define simply as “sustainable business practices” – mark an increasingly important driver of overall success. That’s especially the case in the retail industry, where ESG considerations range from sustainable distribution to recruiting strategies to packaging decisions.

Business leaders’ performance on ESG mandates can be a career-maker, or a career-breaker, according to research by my company, KPMG. In our 2021 CEO Outlook, more than 70 percent of respondents indicated that “CEOs will be increasingly held personally responsible for driving progress in addressing social issues.” In our 2020 CEO Outlook, 65 percent of top executives reported that managing climate-related risks will play a pivotal role in determining how long they retain their jobs (more on that here). 

Tax leaders in the retail sector should take note and keep a close eye on the forces driving ESG commitments, including:

  1. Consumers: Buyers are increasingly interested in, and well informed about, corporate ESG impacts and practices. Many are making purchasing decisions based on ESG-related perceptions. These often extend beyond sustainable products to scrutiny of packaging, logistics, sourcing, labour conditions and other supply chain activities.
  2. Employees: ESG practices can serve as a talent magnet, or a substantial recruiting and retention risk.
  3. Regulators: Global business regulators are rapidly adopting and recalibrating ESG-related requirements. In 2015, the Financial Stability Board (FSB) – an international body that monitors global financial systems – created the Task Force on Climate-Related Financial Disclosures (TCFD) to recommend how companies should disclose climate-related risks to financial stakeholders. Since then, the TCFD has published and steadily revised disclosure guidelines concerning greenhouse gas emissions. In the U.S., the SEC seems likely to issue ESG reporting requirements in 2022.
  4. Investors: Banks, pension funds, asset managers, insurers and other investment institutions are requiring businesses to demonstrate sound ESG practices and to apply the ESG recommendations issued by global bodies such as the TCFD. As metrics and reporting practices mature, ESG data will play a larger role in the investment decisions that asset management firms make.
  5. Industry leaders: Business norms are shifting and it is likely that ESG developments will exert a growing influence on your competitors and peers. In 2019, the Business Roundtable updated its definition of the corporation’s primary purpose from “maximising shareholder return” to serving a broader range of stakeholders, fostering diversity and inclusion, and protecting the environment by embracing sustainable practices. The statement was signed by more than 180 CEOs of the largest companies in the U.S.

Tracking these drivers will help retailers’ tax departments to put in place the right skills, processes and technologies to respond quickly and effectively to ESG risks and opportunities. 

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Blog Author

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Brett Weaver

Partner, KPMG Global Value Chain Management

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Brett Weaver is the partner in charge of the KPMG global Value Chain Management (VCM) practice and a member of KPMG Global Tax Policy Steering Committee. Brett brings value to clients by delivering VCM services that enable businesses to transform their tax operating model and supply chain design. Brett also assists clients in developing of their tax policy strategy and engaging directly with policymakers around the globe. He authors KPMG public positions on many aspects of global policy proposals and represents the firm in public consultations. He has worked closely with clients and policymakers on the development of rules addressing the tax challenges of the digital economy and rules aimed at increasing tax compliance.

A Retailers Guide to ESG & How It Intersects with Tax

Join us to learn how ESG uniquely impacts the retail landscape and learn key insights that can help you futureproof your tax strategy with ESG in mind.

Two hands performing an e-commerce transaction using the customer's phone. Flowers are visible around the shop and in the customer's arms, which is presumably what they are purchasing. The shopkeeper is partially obscured by a green plant in the foreground