An extended version of this article can be found on the K3 website.

Today, all retailers carry a huge “responsibility”. But one of the sectors most obligated to act is fashion. When it comes to sustainability, fashion retail is often called out for its environmental impact, and it’s one of the sectors with the steepest sustainability mountain to climb.

K3 – an organization we work with and a leading global supplier of integrated business systems to fashion businesses, retailers, manufacturers and distributors – recently commissioned research of over 400 fashion and retail decision makers to understand their familiarity with, and attitude towards, emerging trends and technologies that will shape the future. The study found that, despite sustainability being one of the most dominant topics across the industry, many brands are still grappling with the subject and are struggling to build a compelling business case.

Below, I’ve poured over the datapoints to provide my perspective and add some insights to K3’s industry intelligence.

Data point #1: 53% of fashion and retail decision makers said they were unfamiliar with the circular economy.
My take: This statistic surprised me – given the loud and clear signal from the market around the demand for a commitment to sustainability and ESG. It might sound obvious, but the fastest way to raise awareness among retail decision makers is to show them the commercial impact of circular economy and sustainability initiatives – specifically when it comes to key metrics like sales, cost reduction, customer satisfaction and workforce retention.

For example, consumers are leaning in to green brands – a recent Accenture study found that 81% of shoppers plan to buy more environmentally friendly products over the next five years. Today’s customers want to live, work and shop sustainably – demonstrating increased affinity to retailers who value and commit to green initiatives. Meanwhile, employees want to work for conscious organisations – over a quarter would be willing to take a pay cut to work for an organisation committed to the environment.

Data point #2: 35% of respondents said they believe low consumer interest will be a barrier to the circular economy becoming more commonplace.
My take: This contradicts the broader trends we’ve seen elsewhere. Overall, consumers are leaning in to environmental and social issues, and they’re choosing to shop from brands that showcase their commitment to a responsible retail model.

Another recent Accenture research revealed that 64% of US shoppers are already buying from brands with an environmental commitment and values. Moreover, more than half of consumers agree that coming out of the pandemic, they’ll continue to make more sustainable food choices.

Data point #3: 32% of fashion and retail decision makers believe that costly returns is another barrier that will inhibit the circular economy.
My take: The impact of returns on the circular economy isn’t surprising. What is surprising is that according to this research only around a third of retail decision makers have recognised that returns are a key barrier to the circular economy.

There’s no denying that returns currently present (and will continue to present) a challenge for retailers – both the pressure on margins and the impact when it comes to waste and carbon emissions from last mile logistics. Retailers have sought to address this by charging for returns. This is probably a sticking plaster at best.

Instead, they need to reconsider and refresh their operating model. For example, traditional D2C organisations are now opening their own stores, manufacturers are sharing space and supply chain networks, micro-fulfilment and dark stores act as a distribution point with little-to-no storefront. By embracing new models and providing greater fulfilment flexibility, retailers can mitigate some of the impact returns have on the circular economy.

Data point #4: 1 in 4 fashion and retail decision makers also believe that a lack of appropriate technology will severely limit the implementation of circular practices.
My take: Predictably, one of the big hurdles when it comes to embracing the type of modular technology platforms that can drive a circular economy programme forward is cost. And right now, cost control is critical. But being sustainable and optimising costs aren’t mutually exclusive. Circular economy programmes are often innately economical – they deliver efficiencies. So, the investment you make in the technology platforms designed to deliver on your circular economy ambitions can also drive cost efficiency longer term – and the technology investment can pay for itself.

I’d highly encourage you to go check out K3’s latest report to learn more about the data I’ve discussed above.

And if any of the challenges above sound all too familiar to you, get in touch with the Avanade team today – we’re here to help you jumpstart your sustainability journey.