Sustainability at the supermarket: retailers not tapping their full potential

Policy makers must create conditions that cast environmental protection as a competitive advantage

The food retailing sector is taking action to promote environmental protection. Examples include store organic brands, a larger selection of vegetarian and vegan products or energy efficiency increases in their food outlets and business offices. On the whole, the companies studied could make much greater use of their influence and scope for action, says a recent study by the German Environment Agency (UBA). The main potential for improvement lies in the areas of product range, food waste reduction and raising consumer awareness. UBA President Dirk Messner said: “Companies in the food retail sector can exert a great deal of influence - both on production conditions and on consumer behaviour. This creates opportunities for action and responsibility. Some companies are already taking the lead and have set ambitious goals for climate and forest protection. However, the potential is far from exhausted and the corporate sustainability strategies are still weakly established. There is a lot of talk about environmental protection and sustainability, but when it comes to purchasing products, pricing or advertising, for example, we often see the opposite. This is also a matter for policymakers: they must create the appropriate framework conditions so that active and consistent environmental protection becomes a competitive advantage for companies.”

The study systematically assessed the environmental commitment of Germany's eight major food retailers (ALDI Nord, ALDI Süd, EDEKA, Kaufland, Lidl, Netto Markendiscount, PENNY and REWE) in the areas of supply chains (purchasing and cooperation with suppliers), own locations and consumption (interaction with consumers). It evaluated 22 areas of activity, 43 indicators and 112 sub-indicators each on a scale of 1 (no practice) to 5 (best practice). The average mark given to each company is between 1.6 and 3.

The companies score rather well especially in reporting on environmental targets as well as energy efficiency improvements in the shops and production sites. The eight supermarkets also score well in terms of environmental campaigns and awareness-raising measures. For example, the companies use industry standards and certifications for raw materials such as cocoa, coffee or palm oil and work on setting science-based climate targets or targets for deforestation-free supply chains. Other positive examples include: actions and campaigns to reduce food waste, especially in the fruit and vegetable sector; the large range of organic foods for sale (62% of organic food sales are transactions in conventional food retailing); numerous pilot projects on climate and environmental protection, e.g. on the presentation of environmental costs in sales prices; and the increasing range of plant-based alternative products.

The companies are either not using their scope for action at all or only insufficiently, especially in the areas of product range design and consumer awareness. Product range design refers to the (sustainable) purchase of products and raw materials. Consumer awareness action includes measures in the area of shop design, product placement and advertising to motivate people to make more environmentally friendly purchases. For example, there could be a stronger focus on environmental protection in the product range by not offering products that are particularly harmful to the environment, such as goods that are shipped by air. Not enough is being done in the area of advertising either. For example, animal products that are harmful to the environment are advertised much more strongly than more environmentally friendly plant-based alternatives.

The study recommends that the retailers set up a more systematic management of sustainability. This should be done by defining consistently verifiable environmental sustainability targets, investing in better data and linking sustainability management more closely with general management, purchasing and commodity group management.

There is also a need for action at the political level. UBA recommends a policy mix of financial incentives - for example, realigning VAT on food along ecological criteria and through regulatory measures. These include, for example, internalising external costs. This means the environmental costs of production, such as air pollution or climate damage which have so far been borne by society would be priced in. In addition, minimum standards need to be introduced for the purchase of raw materials, such as palm oil or soy, or certain particularly harmful types of fishing should be completely banned. Finally, policy makers should set the framework for transparent and more comparable sustainability reporting by companies.

Study details

The study was done by the Swiss Research Institute of Organic Agriculture (FiBL) with the support of Systain Consulting. To evaluate the environmental performance of the food retailers, the project team developed a scientifically based evaluation system with 22 areas of activity, 43 indicators and 112 sub-indicators. The data used for the evaluation was taken in part from publicly available sources. In-house information was obtained through a questionnaire. The present study marks the starting point of food retail monitoring which is to be continued in the coming years. It is intended to show trends and developments and to illustrate the extent to which the transformation of the food system in the food retail sector can be recorded so that new political incentives can be generated if necessary.

Sustainability at the supermarket: retailers not tapping their full potential | Umweltbundesamt