How Can Retailers Maximize Sustainability Without Sacrificing Profitability?

Are you facing the dilemma of balancing sustainability with profitability in your retail business? We've got you covered. This episode is a powerful dialogue with seasoned retail experts - Lisa Taylor, Brandon Rael, Mark Self, Jay Fiske, and Scott Benedict, as we navigate through the complex interplay of sustainability and profitability in retail amidst challenging economic pressures. We delve into the potential of the resale market in providing cost-conscious consumers with affordable sustainability. Stay tuned to unearth practical strategies retailers can implement to harmonize cost savings with sustainable practices.

Our discourse on sustainable retail doesn't end there. We have the pleasure of featuring tech guru and business veteran Jay Walker, who enlightens us on how automation and AI can champion the reduction of carbon intensity and boost cost efficiencies. Here's your chance to learn about digital twins, AR, and AI as groundbreaking technologies in minimizing waste in product design and manufacturing. This is a call for retailers to seize the opportunity of consumers' growing consciousness of sustainability and shed light on the value of efficient processes.

As we round up this captivating discussion, we bring you actionable takeaways for embracing sustainable business practices. With Scott Benedict's wealth of retail experience, we delve into sustainability from the customer and operational perspectives. We'll guide you through the trending refurbished products and the 'right to repair' movement, and explore how companies can ingeniously maximize sustainability without denting profitability. Hold on to your seats as we cast an optimistic eye on sustainable innovation in the retail industry. Be part of the journey to discover how the retail industry is bracing up for the balancing act of sustainability and profitability.

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Transcript

Speaker 1: 0:12

Hello and welcome Good day to everyone. We've assembled a panel of industry experts and we're going to have a great conversation today. The theme of today is sustainability. We had an article on our website the title was how Could Retailers Maximize Sustainability Without Sacrificing Profitability and turned into a really great online discussion in the comments from our Brain Trust panelists and in this call we've got several of them here. So to kick it off, I'm going to give a little introduction of each of the panelists and then we'll jump right into the topic. So first off, we have Lisa Taylor, director of Retail Consulting at TPC. She has masterfully merged retail expertise with data-driven strategy and has spearheaded key initiatives at Aftec Solutions and Best Buy throughout her career. So really excited to have you on.

Speaker 3: 1:15

Great Thanks for inviting me, Chase.

Speaker 1: 1:17

Next I'm going to bring on Brandon Rale. Brandon has strategy and operations in his background. He's been part of pivotal transformations for Fortune 100 retailers and wholesalers. He's a top retail influencer and a Brain Trust member. Happy to have you, brandon. Thank you for the opportunity. Chase, looking forward to this conversation. And then Mark Self familiar face. He's an executive advisor and the current CEO in his own company. He helps early-stage companies to success. Many years of retail experience and always great insights. Thanks for being here, mark. Thanks for having me. So, to kick it off, I wanted to just find it right over to Brandon here. What are your thoughts on this topic of sustainability versus profitability?

Speaker 4: 2:07

I think there are. Thank you, chase. There are competing forces here. We're seeing the rise of concern and more consciousness from consumers on the importance of sustainability and the environment and their impact with their chopping decisions. At the same time, the consumer is faced with very disruptive economic forces. There is rising inflation, cost-living crisis. Now we're seeing the housing crisis emerge again Just the overall cost of living and all the geopolitical and macroeconomic headwinds that we're experiencing, especially in the US market.

Speaker 4: 2:41

Yeah, there's still an interest in sustainability. There's still an interest of what impact do we have as consumers to play a positive role on contributing to the decrease of the carbon footprint that each person has? So, as we know, sustainability requires more premium processes and products and manufacturing, so there is an increased cost associated with increased retail costs to the consumer. I think the spirit and the ambition and the intent is there from the consumer, but the challenge is just the limited budgets and strap wallets that people have now with all the inflate of all the inflation and cost-living crisis we have. So I think we can open up for conversation.

Speaker 4: 3:24

I think the big thing we're seeing in the US is the rise of the resale market. The companies like ThreadUp and Rent a Rungway are leading the cause here. If you look at the US fashion market, only for resale it's going to increase 15% or 16% this year to about $14 million, and then the expectation is the next couple of years it should be forecasted to reach $24 billion, and then there are about three or four times the amount of brands that are actually interested in starting a resale program. So that might be the avenue in liabilities, economic disruptions, where we can see a lot of consumption happening and making a positive impact. But I'd love to hear at least your thoughts and Mark as well on the topic.

Speaker 3: 4:08

Yeah, I think that's a great call out as you think about all the current pressures right now that everyone has economically. Anytime we can couple cost savings and along with sustainability, you're going to see success. Best Buy, as an example, has begun expanding the number of outlets. They have, taking those open box products, bringing them to stores specifically, so providing that avenue for people to really still get what they need without sacrificing quality but at a lower, reduced price, and keeping those things out of landfills and reducing that carbon footprint. So I think it's a really good call out. Anytime you can do couple of those two things together, you're going to see a bit of success.

Speaker 5: 4:53

From my perspective, sustainability is an important topic. However, we need the merchants, brands and retailers need to be careful that it doesn't turn into another form of virtue signaling. It's great when something can get reused and repackaged and resold and someone saves some money that way. However, if it comes down to I'm just saving landfill, that's a good thing. Everybody understands it's a good thing. However, it doesn't necessarily translate into greater profits or a better value proposition for the consumer.

Speaker 5: 5:35

So there's a lot of different stratifications of sustainability and I think simplistically, from my standpoint, it seems a little bit like organic foods. You pay a dollar for a banana that's grown organically versus 25 cents for one that's not, and yet they both taste the same. I don't know. That's a difficult consumer choice to make, assuming you have the money to pay the dollar for the organic banana. So there's a lot of ways forward here. I know that high-end merchandise and even in some ball things, racing cores like Formula One teams are starting to grade themselves on sustainability. So it's a I like the progress that we're seeing in the industry. However, for it to be fully adopted, from my perspective, there needs to be a stronger and stronger value proposition outside of. We're just saving stuff from going to the dump.

Speaker 4: 6:36

Yeah, those are great points, Lisa and Mark. I think there are another challenges the extremities. We've seen the rise of Sheen and H&M, zara, early dominant forces of fast fashion, and just the value and the lower costs associated with buying products from these fast fashion retailers. It's hard to avoid the attraction of that and that completely contradicts all the sustainability conversation we're having now, because these clothes are disposable fashion, which it's inherently creating more challenges and the landfills getting filled up more. So these two competing forces are there and in the middle is a consumer who's challenged to make the budget last and the cost living increases. What can retailers really do here? I mean it will take economies of scale and more efficient ways to make sustainably sourced products, providing that transparency and around sourcing and procurement to the consumer that's more conscious of where the clothing is coming from. There's that consumer who may be the upper end, but the middle, the lower end consumer, has to rely on Sheen and H&M to do the constraints, but it's very challenging.

Speaker 1: 7:45

I'm hearing a gap between what people want to support or purchase. In that Nielsen IQ study that was in our article, 78 percent of consumers say that a sustainable lifestyle is important to them. But then there are all these other challenges in price. I'm hearing quality price, different options that just go well. I believe in that, but it's too cheap to resist buying from fast fashion Amazon, alibaba, aliexpress type of products.

Speaker 3: 8:22

Yeah, definitely. I think Mark really called it out earlier when he said it's really about that value proposition equation on both sides. What does the consumer actually value? How much are they willing to pay for that? What's the value to them and the product that you're offering, as well as for the business? They need to make money. They're in here to make a profit. So making sure that that works on both sides and you can increase it and think of it in creative ways is how we're going to get to furthering our sustainability goals for the future and keeping these things out of landfills and making it work for everyone.

Speaker 4: 8:59

Yeah, I think we're seeing a lot of other ends of the spectrum of retail. You see LVMH there's sustainability initiatives that are very invested in this space and where they're in source from.

Speaker 4: 9:10

We're seeing near sourcing now or manufacturing taking place in Central America, mexico, even the US, I think. Yesterday Columbia Sportswear announced that they're doing this partnership with the Central American manufacturing company. I'm not sure how well it ties to sustainability, but it may lower the cost of serve and may lower the retail prices to the supply chain efficiencies. But like you said, jase, the intent is there, the ambition, the hope. We want a better world. We want to see less mass fires across the country and all these environmental challenges we're having. But how can we do it? It's affordable and of high quality for its consumer, who is really challenged in this economy.

Speaker 5: 9:51

I think there's a lot of ways to kind of parse out the data too. For example, it costs whatever $4 for a gallon of gas and that takes you in a normal car 25 miles. Okay, so that's a trade-off that most people aren't going to walk 25 miles to save the $4 and to say, hey, I didn't use a gallon of gas. We were, as economies, we're used to what we're used to, and that's one of the many things I was thinking about early in the conversation when I was talking about the value proposition. There's got to be a value proposition or else it just becomes a word salad of virtuosity. One thing that I want to point out that's on my mind is I remember several years ago that Patagonia started making materials with recycled plastics and I remember thinking that's incredible, that's awesome Over on Timber Bottom. I don't know if it's any good or not, but I loved the concept. But that doesn't necessarily translate into a better planet or a lower carbon footprint.

Speaker 5: 11:04

One of the points on the discussion board was asking me about my Formula One comment, and Georgianne made a very good point. She said that Formula One may be trying to measure its carbon footprint. However, they just tore out a bunch of mature trees for a race in Las Vegas and there's a lot of different. To her point, there's a lot of different lanes here. That's the track and I'm not a shill for Formula One, just seeing the show people but the track is different from the team. So you've got to somehow merge all this together so that it's affordable, and I think, personally, from my perspective, we're a long way from it being affordable.

Speaker 4: 11:48

Yeah, I think to your point, Mark. There's a lot of challenge with legislative nature. The government hasn't necessarily mandated sustainability practices in the US market yet, whereas the maturity curve is way ahead of us in the EU and other parts of the world where it's mandated, expected, and I mean perhaps until that day, whether it's two or three, four or five years from now. Then the affordability factor will come in, as companies have to scale up these sustainability initiatives and lower the cost of service and provide value, whether it's private labels or lower price goods that are more sustainably sourced because they're required to by the government. That might be the spark that changes things. Yeah.

Speaker 3: 12:29

I think it depends on the product and the industry that you're in and to definitely avoid that idea of virtue signaling. People are aware now of greenwashing and what that means, and if you're looking for a sustainable product, you need to be truly helping the environment. One example is I'm not sure if anybody's familiar with the shoe company Rothy's, which makes all their tennis shoes out of recycled plastic bottles and they're a little bit higher priced than some others, but the value in that you can wash them, they last forever, they're very comfortable. So there's really a good or the consumers are really good value proposition. Right, these shoes are going to last me a long time.

Speaker 3: 13:11

I'm doing something good for the environment because they are made out of recycled plastic. And one of the more interesting products that I've recently seen was Windex is doing a refill concentrate. So you get it's like $5 or something for a two pack where you can just refill your bottle. They're not adding all that extra water, so supply chain costs for them. They're saving that and then for the consumer, you just buy it once, keep refilling it, Net, net. You're saving money and you're also, again, you know, doing a little bit for the environment in that regard.

Speaker 5: 13:51

There's a to play off of that point at least. There's a store up the street from where I live and it's an independent one store, one door front, called Mindful Merchant, and they allow you to bring to the example your soap containers and refill it, and then you pay just for the refill. It's wonderful, except I don't want to sound like a curmudgeon but there's no one ever in there. So it's a great concept. I love the concept. But then you run into branding. There's so many things to figure out here to bring a proper value proposition to us as consumers that I think we're going to kind of take very small steps going forward. There's not going to be any kind of evolutionary change, and I see Jay has joined us, so I'll be quiet and let Jay chime in.

Speaker 6: 14:43

Hey, sorry, thanks everyone for your patience. A little technical fun this morning, yeah, no, I think there are a number of different opportunities that we see from our angle. We're at Powerhouse Dynamics is a technology company centered around reducing energy consumption in multi-site retail operations, and there's so much low hanging fruit when you look at how these built environments are created and operated. We have the sort of fundamental culture of the desire to eliminate waste in its many forms. It can be equipment running unnecessarily in off hours, equipment that is being poorly maintained and therefore consuming a lot more energy, and also having a shortened life and ending up in the landfill prematurely. So from that perspective, I think there continues to be an immense opportunity for better visibility, automation and control to eliminate these kinds of and forms of waste.

Speaker 6: 15:47

That the premise of an either or between sustainability and profitability I think is is false. It's an and. When you eliminate waste, you're typically helping both. If you're doing it in a thoughtful and intelligent way, you're helping both. Right, you're helping to achieve a reduction in carbon footprints, and typically that goes in hand in hand. At least four practices that are sustainable, both in terms of the carbon sense of sustainability and in terms of just business practices are going to improve those operations.

Speaker 1: 16:21

Bottom lines you know, jay, you have a unique perspective and I didn't get to introduce you, but you have many over 20 years of experience in tech and business and as a leadership and powerhouse dynamics. You know there is a unique perspective here and so far we've mostly been talking about the challenge of consumers paying for the premium right, we talked about the price of bananas. You go organic or conventional. You know it takes somebody who's either health, health conscious or ethically conscious to make that choice, to buy the premium. It's not always the case that the more sustainable product is is is a higher price. But I hear from your perspective. I am curious. There's a lot that retailers can do behind the scenes is from an operational standpoint. These are this isn't just, you know more efficient lighting in the store. This is kind of the whole infrastructure behind retail. What kind of perspective could you bring to the table here from from from that angle?

Speaker 6: 17:35

Yeah, no, it's a great, it's a great question. I think that there there will be some, some, some portion of the market that will pay, gladly pay a premium for products that are produced with lower carbon intensity, more sustainable manufacturing practices, labor etc. And that's all well and good. You know, when we first started powerhouse dynamics more than a decade ago, we had a very sort of sustainable centric pitch saying we're going to reduce carbon footprint and that's wonderful, and some retailers got it, loved it, kind of glommed on to that because they had some mission around that it kind of goes hand in hand with folks willingness to pay a premium for sustainable products. But the bulk of the market you kind of got this, you know, glossy eyed, lack of response, and so we shifted to say well, it's, it's, yes, sustainability is good, but let's just talk about the bottom line. So we're always looking for ways to drive cost out, and that tends to be things that kind of go hand in hand with inefficiencies in operations, which then, coincidentally, drives the carbon intensity of these businesses in the downward trajectory. So it's not really from an interest.

Speaker 6: 18:55

You know, we have a unique perspective. We think a lot about the built environments, we think a lot about mission critical equipment, all this stuff that just kind of hums along in the background you you never really pay attention to until something's wrong with it. And then of course you know it's adversely affecting customer experience etc. And you want to resolve these kinds of things. But there is.

Speaker 6: 19:15

You know, from just the nuts and bolts of running brick and mortar businesses, there's a tremendous opportunity to run the facilities in a more intelligent fashion, with connectivity, with automation and now with AI kind of running.

Speaker 6: 19:28

On top of that, yet even more capability to reduce the stress on the electrical grid, reduce the overall carbon intensity, extend the life of equipment, ensure high performance, etc. So I, yeah, I, you know again, we're, we're working with any and all kinds of retailers and multi site food service operators. Some of them have a very sort of sustainable strategy with the products that they serve and the kinds of customers that they're pursuing. But most don't right, these are nuts and bolts. You know fast food, restaurants, convenience stores, specialty small box retail, and you know again, there is a there's a tremendous opportunity there for improving sustainability without having to be so, you know, without necessarily shifting to say we're going to, you know, all of our plastic where is going to be plant based or things like that, because you know some of the technology is there and others will take some more time to mature, I think, before it can get sort of to mass appeal.

Speaker 3: 20:31

I think you bring up a great point because, as Chase mentioned, we were talking, you know, really from a consumer standpoint, but I one of the things you see on a day in and day out basis are pictures of people taking pictures behind stores. You know of all this food waste and all you know products. They spray painted so no one can use the pajamas or whatever product it is, and so I think sustainability is also key in thinking about ordering and making sure you're using all of these AI and different tools at everyone's disposal these days to do it properly and accurately, so you aren't running into this situation where people are dumping things behind buildings and such, because the consumer will eventually find out, you know, and then there are consequences to that. So, yeah, we do a lot of work in that space as well, very critical to sustainability practices.

Speaker 5: 21:22

I think that's a really good point, Lisa. Informed consumers are going to find out. Different stratifications of consumers aren't going to find out and if the price part forgive me at if the price is right they're probably not going to care you got. We have an opportunity as an industry to educate the value of the processes that Jay and other people are trying to make more efficient.

Speaker 4: 21:50

Yeah, I think what Jay brought up is really the opposite perspective. The other end is really the upfront. You know the operational efficiencies, the cost of service, so significant duplications, redundancies, the sheer waste of if you consider the product development and manufacturing side and the conceptual design of the parallel industry generates millions and millions of tons of waste annually. There are innovations out there.

Speaker 4: 22:16

I worked with with clients around digital twins and leveraging AI and leveraging AR, where you could not have the manufacturer physical samples any longer or significantly less than before and actually produce a high quality sample and product and just reduce the waste in the front end. And always capabilities are out there. It's a matter of actually leveraging them and reducing the need to develop physical designs. The same can be applied to the store level for grocers, for retail stores, for department stores and leveraging digital twin to see energy use across the stores and the refrigeration units within the supermarket are running 24 hours a day. So there's multiple ways to address the challenges of facing sustainability and carbon footprints. This goes to the front end. Like Mark and Lisa have mentioned, is the back end, the front end, the customer, where you have to have an informed consumer that can make a mindful decisions phase, to what they know. So it works both ways.

Speaker 6: 23:18

What's encouraging? Yeah, thank you, brandon. What's encouraging to me is, if you look at the annual reports of some of the largest retail chains in the world today versus what you might have read, say, 10 or 15 years ago, it's remarkable and so encouraging to me that nearly every single one has carbon reduction goals X-Prenel 30% by 2030 and 100% by 2050. You see, actually the 100% by 2050,. I know there's a lot of there's federal goals around that as well, but it's that's hard to do, but they're putting it down in writing and they're committing to this, to shareholders, to consumers, and that touches everything.

Speaker 6: 24:01

Obviously from my very specific lens of the built environment, the brick and mortar side, but it touches on product design and supply chain logistics around their operations. It's an incredibly exciting opportunity. There's going to be a lot of businesses, I think, built and thrive to support these kinds of goals. There's going to be a lot of innovation and transformation of business, but it's it is. You never saw that With. Maybe. Companies like Patagonia, of course, have been outliers on this for a long time, but now most mainstream multi-site operators are publicly stating some pretty darn aggressive and, from my perspective, highly encouraging goals to achieve over the next 20 to 30 years.

Speaker 5: 24:50

I want to touch on packaging just very briefly Again. I think there's so many opportunities for brands like, say, apple, to reduce waste with packaging, and yet here I am, I've got my little iPhone, I'm talking to you on a MacBook, and there was an experience around unwrapping all that stuff within the packaging. Companies like Apple have an opportunity where I mean, would you I think I would, I'd feel ashamed enough but just go in and pick up your iPhone, as opposed to have the unbundling experience, and then you just throw that beautiful box away. There's packaging opportunities that are probably going to be at odds with the marketing desires of different brands, because there is a marketing thesis around the beautiful box that your Apple products come in.

Speaker 5: 25:47

I'm sitting here. I drink copious amounts of Starbucks tea. Every single time it's a new cup. Well, you know what? I order it on a mobile order, so I go in and pick my thing up. I like that. I don't like throwing the things away, though. So how do you? How do you? There's, there's going to, I think, to your point, jay, we're going to see an evolution here. Yeah, I know, but exactly exactly. I can't do that. I can't reuse it. I'm selfish. No pun intended on my last name. I go in and I want to pick up the thing and I don't want to sit there and wait and watch them. Watch them make it. So I think there's some really good shifts here. I'm encouraged also your point but I think it's going to be kind of a long, slow road.

Speaker 1: 26:32

Just a quick intro, scott Benedict over 20 years experience of retail. He's worked with some of the biggest, including Walmart, and you know I've had personal conversations with him and I needed him to be on this call, so I'm really happy. So we're talking about all kinds of things, about sustainability, and we've covered a lot about, from the consumer perspective will they pay for it? And then from the operational perspective, you know, managing orders more effectively, managing ways, all that kind of thing. And then you know, scott, you have, unless Jay had something on that last point, do you want to go to Jay real quick? And then back to Scott?

Speaker 6: 27:17

Oh, I had a related thing, kind of just from a personal experience, on the packaging comment, and just buying refurbished tends to have less packaging and I'll say it related to that. Another exciting trend that I'm seeing is the whole right to repair movement and that, you know, is a pretty also very encouraging that there seems to be a shift in, maybe maybe slightly away from this disposable culture to, hey, you know, full lifecycle, cradle to cradle design of consumer products and electronics combined with the right to repair. You know, I just swapped out the batteries in my very old nest, you know first generation nest thermostats. I probably will get another three or four years of life out of them. I've attempted to swap out the battery in an iPhone, although my my fine motor skills aren't quite good enough for that. But these are also, I think, related to packaging and consumer electronic met whole experience where I am seeing much more of a trend of refurbished and right to repair, which will also, I think, drive a lot of sustainability into the overall kind of consumer products realm.

Speaker 4: 28:28

Earlier on in the discussion for you, jay and Scott, join me to my conscious consumerism. I think as much as it's all about the businesses being transparent and changing the processes and their and their and go undergo the transformation. It's a transformation the consumer mindset, having Gen Z children and Munch and Alpha child. I mean it's their growing world where they're conscious of their first decisions. There I mean there's awareness of the environment, awareness of sustainability, esg, perhaps things that we weren't as conscious of. It was about mass consumption society of of how much you know you can consume and and we still want that. But there's balancing out and it's a I think it's a much cultural society change on the other end and there's also again we talked about all the forces like inflation, cost-living crisis, is housing crisis? Is that impact our shopping decisions? So this is a lot of conflicting forces out there and we just discussed how companies have the fine ways to be creative. But, yeah, certainly interested, we have to say Scott as well.

Speaker 2: 29:28

Well, I think when, jason, I first talked about this topic, one of the things that really drove my passion about it is the premise, the question that retail wire is asked, which is can you maximize sustainability without sacrificing profitability? And I think the answer is absolutely. Not only is it yes, but in some cases it enhances profitability, and I got to see that as Walmart and Sam's Club, when I was there, adopted sustainability because it wasn't just something to manifest itself in product. It manifests itself in the operation of the business and I'm confident you guys have probably talked about that before I joined on. But if you look at examples like the fact that a Walmart or Sam's Club gets paid to haul away their recyclable materials in other words, instead of paying someone to pick up their cardboard and their shrink wrap and that sort of thing, somebody pays them to come get it so it's actually a profit enhancer. They've gone through in a lot of stores and not only put in skylights to reduce electrical usage, but also installed LED lighting which costs less to operate than the building costs less to operate because of those sustainability measures. So I think the question is does it sacrifice profitability? And the ability to know it enhances it, I think in the operational side certainly on the on the purchasing side number a former buyer what we found is that, yes, in the early days there was a tendency that a more sustainable product or more sustainable product had a higher cost associated with it. But I think retailers broadly have an opportunity to leverage consumer interest there to try and drive those prices down. And I think we sit here today where the price premium for more sustainable products is not as high as it was when a lot of companies started that journey, perhaps around 2005, 2006, somewhere in that area.

Speaker 2: 31:43

In some cases non sustainable products have actually in the marketplace. The lighting categories might go to, example, to where it's hard to find an incandescent light bulb on a shelf anymore, that most light bulbs are LED. The price premium for them is pretty reasonable now and the story in the packaging and the product is is that, hey, it saves you electricity in your home over the course of time. And then in the category of buyer for electronics, particularly in televisions and computers, there's now messaging as most TVs are our LED technology of how much the energy usage is in a typical year, and it's it's a rounding error, it's, it's next to nothing. Well, tvs to TVs, and some early plasma TVs were electricity hogs, quite frankly. And so now that message that hey, there's a savings to you for some of these products has to be sure, now, there's, there's.

Speaker 2: 32:49

Obviously there's products on the shelf, particularly in the food area organically grown or raised eggs or some meat product. There's still things that have a premium out there and and and. Over the course of time, if those premiums come down, obviously it'll become more main, mainstream. But I think that's the thing. When the question by chasing the team first got asked is is can you, can you go there without sacrificing profitability? I think the answer is absolutely yes. Will a consumer pay a premium? Well, don't make them. Figure out a way to not make them pay a premium, or make that a very reasonable premium that they can find savings on otherwise. And that's, I think, how, from a retailer's perspective, how you address that issue.

Speaker 1: 33:42

We're all just speechless. That was.

Speaker 2: 33:46

I know I could be profound, but I didn't think I was. That I don't know.

Speaker 4: 33:49

We're over the levels of topics, scott. I think it's. There's so many facets and so many challenges and it's I think it's going to be an evolution of the consumer mindset, but also an evolution of how companies operate and they have to undergo their own disruptions. Like Jay mentioned, there's so many capabilities and innovations that can leverage to reduce the carbon footprint. There's digital twins, there's automation, there's AI, there's AR.

Speaker 4: 34:14

Just how do you do it in a way that's cost effective? Reduced the cost to serve, you know, enable people to make more decision and drive more efficiencies by making a high quality product that represents a brand. So it's far more complex than it looks at the surface from many angles, and I think I mentioned earlier, once they become more legislative and it's more mandated by the government, then I think we'll see more efficiency, slash lower prices for sustainably produced products and perhaps even organic foods. We all feel the pain every time you go to the food store in this environment where the bill is 34% more than it was a couple of years ago. So it's going to be a crawl, walk, run. It's not going to be overnight thing to move to sustainability in a profitable way.

Speaker 5: 35:00

I want to politely challenge the legislative and regulatory observation I mean these. If it were that easy, we'd just regulate eating and everything would be great. But the governments don't always they ever have really a profit motive in mind. So I'm skeptical of that route. I like the encouragement perhaps, but if you just say, hey, by 2030 every car has to get a hundred miles per gallon, well, we've seen. I think we've seen some examples where the automotive industry just figures out a game that they asked in Martin's case. They build a little smart car and they don't sell any of them and now the average miles per gallon goes up because of that one car in their lineup. So I think well intentioned regulation has to be merged with what's really going to work from a economic and business standpoint.

Speaker 4: 35:57

I think, mark, to that point the consumer will speak. The consumer has such an influence. The market will dictate what companies need to do, but if conscious consumption is on the rise and it is with an emerging Gen Z and Gen Alpha who are much more conscious of their shopping decisions, and then sustainability that will drive the change. We need, not just to your point, not just legislative. I think it's a dual path of that legislation plus the market will dictate how things go.

Speaker 2: 36:24

Yeah Well, mark, also I think that legislation can come about in two ways. It can be restrictions, but it also could be incentives incentives that are a positive or a negative. So things like there's a lot of states in the Southwest who are going to have to build more power production capability if both consumers and businesses don't adopt solar panels and wind and some of these other things, and so they put out their incentives that retailers I know in many cases are taking advantage of, either as they refurbish buildings or as they build new buildings, to say, hey, if I fill my roof with solar panels or take advantage of other renewable sources, actually there's an incentive or a savings story there that helps make that more palatable. So legislation can be used a couple of different ways. Yes, it can be restrictive, but it also can be provide incentives to do the thing that we'd like to move people towards, and those incentives then lower the cost to operate for businesses like retailers, whether it's a store or distribution center or whatever. That can help the process along as well.

Speaker 6: 37:42

Right, yeah, just to provide a little more color, scott, on that, since I'm the energy nerd on the panel here. There's a concept called demand response which you probably are familiar with or you're touching on that in many unregulated utility markets. It's a fascinating idea. It's been around for a while. It's mostly been hitting large industrial facilities. It's making its way now into retail because the technologies are finally there to allow these kinds of programs, and so demand response is driven by the concept, or maybe the epiphany from utilities that it's actually cheaper for the utility to pay you as an energy consumer to use less energy than it is for them to try and build a new power plant, the transmission and distribution lines, the power plant itself. These are massive investments.

Speaker 3: 38:34

That's very similar if you think of retailers who are willing to keep your return because it's cheaper for them for you to hang onto it than for you to mail it back, take it to the store, whatever, so it's more carrot than stick sort of situation in saving costs wherever you can.

Speaker 2: 38:53

Well, if Jay doesn't make it back. I think one of the other things that I've seen also is that in the current world scenario, one of the great traffic drivers to a retail store is a fuel station, is a gas station. So many grocers, so many mass merchants and others have fuel stations that if you apply that logic to an EV based world, where instead of fuel stations being a traffic driver to a retail store now charging stations could be a driver, there's a benefit, a marketing benefit and a traffic driving benefit. If you've made the investment in putting a charging station in there, you're going to draw that consumer to your store as a point of differentiation, much the way fuel stations have done today. Most retailers don't make a ton of money off the fuel station. It's really if you come and get gas from them. The chances you're going in the store are statistically much higher than if not. But let me have you made that point, jay, finish your point.

Speaker 6: 40:08

Well, I'll just extend your buying beer at this convenience store analogy to you. Know the positive market mechanisms can be used to drive sustainability. I know I was getting a little bit nerdy on the energy today, but anyway, the point is, utilities figured out, it's cheaper to pay consumers, so businesses to turn things down or turn things off and reward them for that when the grid is stressed. It doesn't happen every day. It happens, you know, in the middle of August when things are super hot, hey can you knock your thermostat back by a degree or two to take a little bit of relief and take a little bit of load off the grid. They get paid handsomely for participating in these programs and now there's technologies out there that allow the aggregation of this load reduction for the retail market to broadly participate in these kinds of things. Anyway, this is a dynamic where the utilities benefit because it's more profitable for them to pay the retailers instead of building new power plants and infrastructure. The retailers benefit because typically they can implement these programs with little to no impact on consumer experience and it's just free cash in their bank account. So it's a wonderful example of market dynamics. So the same idea put in the EV charging station you're going to sell a lot more beer and candy bars, so everyone wins.

Speaker 6: 41:30

So I will just acknowledge retail Brick and mortar. It's a really tough industry. Margens are thin. I know as someone who is supplying technology for the purposes of energy reduction. The metric that we see is if this thing doesn't pay for itself in well, under two years you've lost interest, and that's without any kind of incentives etc. So you've got to find opportunities like that where you've got these win-win from basic cut of market dynamics. Yes, they're reducing energy consumption, but the investment they make to get the energy reduction is paying for itself in 15 months, and those are the kinds of things that we're seeing really sick. I mean, it's certainly the model that's working well for powerhouse dynamics and those are the kinds of initiatives that really have traction because it's just good business sense. In the same way, I think the EV chargers are good business sense.

Speaker 1: 42:24

Well, this has been such an insightful conversation. We are at time here. I just want to thank everyone for being here. This is how I think some of the best ideas are formed and sculpted. I'm trying to think of the word where iron sharpens iron. These are smart minds and different perspectives. So I've covered a lot of ground and I'm hesitant to do this, but does anyone want to pick your favorite out of today's conversation, any one takeaway or one solution that you would like to pursue or push?

Speaker 5: 43:05

I'm going to stop to Jay's earlier point. I'm going to stop ordering mobile drinks from Starbucks.

Speaker 6: 43:11

I think Starbucks can fill this up for you. Yeah, and I'm going to go for one of those.

Speaker 5: 43:15

I'm just going to make my own tea and then Starbucks right there. So I've just done a small bit for the environment.

Speaker 1: 43:24

There you go.

Speaker 3: 43:25

The problem is we have 400 of those reusable cups and 400 reusable bags, so it's just kind of transferred itself into a different way, not necessarily sustainable, I would say.

Speaker 4: 43:40

Yeah, I think, to tie it back to point Chase, I think purpose led technological innovations and investments in capabilities such as digital twins and integrating AI into the mix and automation, the joint more sustainable operations, is a big part of the conversation and we're at Jay's doing and others are doing it's really instrumental and I get the publicity that the front end gets with the customer experience and the products. But the cost to serve and operational cost and the near sourcing is required and sustainable practices to lower the cost Our big part of the conversation that doesn't get the attention it deserves. So it's these are the conversations that we've had with retailers and brands and manufacturers that it's going to be a lot more prominent in the next couple of years to make sure the prices are actually reasonable for a consumer who has sustainable mindsets.

Speaker 3: 44:31

Yeah, with these razor thin margins that they're working off of. I think it's so critical for retailers to look at how their business practices are affecting their overall sustainability and making sure they're very conscious about ordering, Very conscious about their waste and really looking at the business across and to end and see where they can create efficiencies. And technology is going to continue to drive that and help us improve overall and then really secondarily getting that messaging out and informing consumers. You know there is value in this, in what you're doing, and you can make a difference in making sure that value prop is on both sides.

Speaker 6: 45:09

And it's a case. Since you asked for takeaways, I just would say one high level takeaway is my continuing very strong sense of optimism. You've got a lot of smart folks here, you know, thinking about this and working on it. There's a lot of really exciting trends that we're seeing in the industry itself. That will think it will take some time, right, to get all the way to carbon neutral by 2050, but you know, there, because it's complicated, there's just so many different aspects to it. But you know that, in combination with some really exciting trends, you know right to repair the circular economy. These kinds of things, perhaps a little bit less material centric, you know experience for Gen Z and younger, you know, point me to a very optimistic place.

Speaker 2: 45:58

It's a marathon chase, not a sprint. It's an agreement that over time, and to use innovation from a sustainability lens where it presents itself both in product and the operation of the business. So I think that's my key takeaway.

Speaker 1: 46:14

It's really good. Appreciate it everyone. Thank you all for being here and thanks to everyone listening.

Speaker 2: 46:19

Thanks everyone.

Speaker 3: 46:20

We'll see you on the next one. Thank you, have a good day, bye.