European retailers upping sustainability efforts for a better environment

30 July 2018 Consultancy.eu

Current retail models – cradle to the grave consumption – are increasingly incompatible with the environment. Consumption methods and supply side production must change to meet environmental goals and challenges, according to retail sustainability experts who recently convened at a conference on circular economy adoption. 

As part of efforts to support the transition to a more sustainable economy, the European Commission, Eurocommerce and the European Retail Round Table joined forces nearly a decade ago to launch the Retail Forum. The Forum today advises governments and organsiations on how they can introduce more sustainable business models, including circular economy principles, into the retail value chain, from production through to consumption.

The network operates against a backdrop of growing call to action. As it stands, the world faces considerable problems in relation to human produced waste – for instance, around 50 million tonnes of electronic waste was produced last year, plastic waste in the oceans is projected to hit 250 billion tonnes by 2025, while up to a third of all edible food was thrown out. These issues are costly to society, both in terms of loss of revenue as well as environmental and human harms. 

Retail – an industry which represents around 11% of the EU’s GDP – is a key part of this ‘waste economy’. The sector has in recent years shown growing appetite for change, with major retailers launching programmes that for instance ramp up recycling efforts, improve emissions operations and focus on improving their end-to-end carbon footprint. To date, around 180 commitments have been made from some of Europe’s largest retailers, including Ikea, Marks and Spencer, Metro Group and Auchan Retail, to support the case for a better environment. 

European retailers upping sustainability efforts for a better environment

Valentina Romagnoli, an expert at Ramboll, remarked; “For example, retailers aim to phase out single use plastic bags, use more sustainable materials and help customers make more sustainable choices.” 

Retailers are supported in their endeavours by EU policies, which aim to provide key guidance and directives to reduce environmental and social harms.

A circular economy

During the Retail Forum’s most recent conference, circular economy was the main topic of discussion. Circular economic practices and principles are aimed at reducing the need for virgin materials, recycling, reusing, durability and reducing needs.

“Some progressive retailers are already working on new solutions to increase circularity, by means of research projects in partnership with universities and research institutes,” said Romagnoli. 

Much of the discussions between the participating experts headed towards the impact of plastic waste, one of the largest environmental concerns in the sector.

As it stands, up to 500,000 tonnes of plastic enters the oceans from the European Union, of which around 300,000 tonnes is microplastics – while a small part of the global total, the waste creates a host of issues for marine life. However, much of the 49 million tonnes of plastic ends up as solid waste, or is exported to third world countries, down the line causing rise to unwanted externalities.

The EU is committed to reducing plastic waste, with a target of all plastic packaging being recyclable by 2030. Retailers play a key part of this wider puzzle, as plastic is an integral material in their wider supply chain. Efforts on the supply side will be key to reducing the use of plastic – as well as wider circular economic changes to goods and products.

To keep track of progress on its environmental agenda, the Retail Forum has engaged with two external parties – engineering consultancy Ramboll and the Austrian Environmental Protection Agency – to monitor retailers’ voluntary commitments and other actions outlined. 

Romagnoli: “As store visits are part of the monitoring process we can see that the level of commitments and targets are very high.”

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Europe's energy efficiency services market to reach €50 billion by 2025

02 April 2019 Consultancy.eu

The growing climate change awareness as well as improvement to technology have lifted the market for energy efficiency in Europe to almost €25 billion. Growth will accelerate in the coming years, with the market set to double to €50 billion by 2025. The landscape remains fragmented however, according to a new report.

Climate change mitigation remains a key priority for much of the world – failure is noted as one of the world’s biggest risks going forward. Efforts to meet the Paris Agreement target of no more than 2.0°C warming by 2100, with a strong preference for 1.5°C, mean that transformations of various industries remains a priority. While reductions in the use of fossil fuels is a key part of wider moves to reduce global emissions, improvements to the efficiency of energy produced is a second avenue of improved energy outcomes.

Analysis regarding the improvement to energy efficiency for Europe show that considerable gains will need to be made over the coming decades to meet the region’s commitments. While governments have been keen to push for improvements in the space, companies too have sought to improve their energy efficiency, both to reduce long-terms costs as well as meeting their own goals related to reducing their carbon footprints.

EES is set to become a key European market

In a new report by Roland Berger, the authors analysed the market for energy efficiency services and products (EES), aimed at improving the energy efficiency of buildings, physical assets and business processes. In Europe, the most in demand service is engineering, focused on mobility technology, building technology and process technology, with the total market value estimated to be around €9.5 billion. Contracting, focused largely on energy supply, generates market volumes of €6.6 billion, followed by consulting at €5.2 billion.

As Europe ramps up attempts to reduce the energy waste in many of its systems, demand for services is set to rise significantly in the coming five to six years – at a CAGR of 8% across the various market segments. The market volume is projected to jump from €26 billion to almost €50 billion in the period up to 2025, in the process becoming a "key market in the European industrial landscape.” Software is forecast to enjoy the highest increase in demand, at a CAGR of 14% for the period, followed by engineering at a CAGR of 9%.

Businesses ownership remains split

While the consulting firm has projected strong growth for the market in the coming decade, various challenges for growth are also noted. This reflects the market’s diffuseness and fragmentation, and its relatively competitive nature, as well as the technical difficulty and sophistication of the space. While there are a range of companies focused primarily on developing propositions in the EES space, many established companies are also creating solutions for the space as a diversification strategy of their core propositions.

Fragmentation is the highest in the software industry, where around 60% of total EES activity stems from non-EES focused companies. The consulting segment is the most mixed, with 70% of companies operating in the space having a business focus within and without the industry. Contractors tend to have the strategic focus on the energy efficiency services market, at 70%, followed by operations-focused companies at 60% and engineering focused companies at 50%.

M&A intensity

The fragmented picture in part reflects the effect of acquisitions that are not well aligned with wider business processes and outcomes. Over the past five years around 100 deals were made in the space. Energy services specialists are the keenest to invest, according to Roland Berger, at 38% of the total, followed by utilities at 16% and investment funds at 11%. However, the researchers note that in many instances the deals were not well matched to the buyer’s wider business model, or were experiments in the segment, which sometimes created risks on their current business model.

For players to succeed in the market, the authors have three pieces of advice. “Players can succeed by following a few relatively straightforward principles. They must build a compelling business case for their customers, using levers such as digitalisation and cost of delivery. They must pursue smart growth through mergers and acquisitions, taking great care not to kill off the entrepreneurial spirit of their newly acquired firms. And they must ensure that they themselves have the right internal setup, with the required flexibility to accommodate strong growth businesses.”