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How the New Agreement on Climate Change Will Impact Retail

​The Lead-Up to Paris.  Five hundred investors and 4,431 companies representing $25 trillion, or one third of global assets under management and $38 trillion in annual revenues, or half of global GDP, urged their governments to strike a climate deal in Paris. The U.S., the EU, and China, collectively representing 54% of global greenhouse gas emissions, came into the negotiations in Paris with public national reduction commitments.

Background: The Paris Agreement

In Paris in December 2015, 195 countries reached consensus on a climate deal – the Paris Agreement – during the 21st yearly session of the Conference of the Parties (COP21) to the 1992 United Nations Framework Convention on Climate Change. Negotiations began with strong support from industry, investors, and the world’s largest economies and ended with a global agreement to reduce greenhouse gas emissions (GHG). This will be achieved through nationally determined reduction plans, as well as a pledge to hold “the increase in the global average temperature to well below 2 °C above preindustrial levels” with “efforts to limit the temperature increase to 1.5 °C.” The U.S. has committed to reduce GHG emissions 26-28% by 2025 from 2005 levels. The Paris Agreement will enter into force in 2020, and requires national governments to meet every five years to review reduction plans in light of new climate science.

Businesses representing 50% of global GDP have welcomed the Paris Agreement as a substantive signal to the private sector that national policies to foster low carbon technologies and business models need to grow. The text of the agreement includes elements designed to encourage the private sector – including the retail industry – to lead the transition to a low carbon future. However, some climate scientists criticize the agreement for failing to put a price on carbon, while others express doubt over whether some countries will ratify the agreement when it opens for signatures in 2016.

Considerations for Retailers

While new legislation directly targeted at retail is not anticipated, analysts expect a growing number of incentives for investment in low carbon alternatives and emission reductions – from energy efficiency and green power, to preventing deforestation and food waste. Retailers that are proactive on energy reduction and renewable energy generation will benefit from those incentives through reduced costs and maintenance. Topics relevant to retailers:

Topics relevant for retailRetail initiatives underway
​Retail operations (Stores / Corporate Offices, Warehouses / DCs, Data Centers & ​Applications)
  • Energy efficiency
  • GHG emissions
  • Green buildings
  • Electric Vehicle Charging Stations
  • Food waste
  • Refrigerant emissions

Energy – Retail is among the leading industries transitioning to lower carbon technologies. The U.S. EPA Green Power Partnership recognizes the top 30 retailers for their shift to green power – 23 of the top 30 retailers source wind, solar or both, and 11 have installed onsite generation. The Solar Means Business report ranks organizations in terms of total on-site installed solar capacity; 10 of the top 25 are retailers.

Green buildingTarget's goal is for 75% of its U.S. buildings to reach EPA Energy Star status by the end of 2015, with 58% Energy Star buildings in 2014.

Food waste – Delhaize, Publix, Safeway, Walmart, Wegmans, and Weis are among the retail participants in the Food Waste Reduction Alliance, working to reduce the 40 million tons of food waste sent to landfill in the U.S. each year.

RefrigerantsDelhaize Group's goal is to reduce refrigerant emissions per m2 of sales area 20% by 2020 from 2008 levels. Sobeys Inc., together with members of the Consumer Goods Forum, is committed to begin phasing HFCs out of new refrigeration installations in 2015 and to improving refrigeration efficiency.

Supply chains (Transportation & Logistics)
  • Fuel efficiency
  • Low carbon transport fuels
  • Food waste
Fuel efficiency – Lowe's and The Home Depot received recognition from the U.S. EPA with a SmartWay Excellence Award in 2015 for reducing freight emissions. IKEA is a corporate member of the Global Green Freight Action Plan, which is working alongside countries to reduce GHG and other pollutants from freight by 2025.
Product materials & factory operations (Product & Packaging Design and Development, Owned Manufacturing & Production)
  • Energy efficiency
  • GHG emissions and renewable energy generation
  • Green / energy efficient products (e.g., Energy Star certified)
  • Deforestation (for key commodities such as palm oil)
  • Sustainable / climate-smart agriculture
  • Refrigerant emissions

Transparency – The retail sector, along with many of its product suppliers, continues to gain greater visibility into the GHG emissions, deforestation, and other impacts behind products on the shelves. Unilever & WRI's Global Forest Watch provides maps of certified palm oil concessions.

Green / energy efficient products – Sears, The Home Depot, and Best Buy won awards for increasing their selection of EPA Energy Star certified products and marketing the benefits of those products.

DeforestationCostco expanded its commitment to zero net deforestation in the palm oil supply for its store brand products, targeting 100% certified sources by 2021. In the U.S., Walmart has transitioned 25% of its private brands to certified sustainable palm. ​

The examples above illustrate how retail companies are taking leadership roles. Retailers, individually and in collaboration, have initiatives underway to measure and address GHG emissions from energy consumption, wasted food, deforestation, and refrigerant leaks. These efforts are significant. Retail buildings consume approximately $20 billion in energy in the U.S. alone. Approximately one third of the food produced globally is wasted. As food production accounts for an estimated 15% of global emissions (higher when transportation, processing, and packaging is included), cutting food waste can make a meaningful reduction. Deforestation represents 20% of annual global emissions and clearing forests to grow key commodities, such as palm oil used in prepared foods and personal care products, generates a significant portion of those emissions. Leaking refrigerants containing CFCs or HCFs can account for 25% of the total GHG emissions from retail store networks.

As the focus on GHG emissions reduction increases in the U.S., the retail industry is well positioned to help lead the transition to a low carbon future and stands to gain from ongoing efforts to reduce emissions.

Questions for Retailers

Retailers should begin now to answer critical questions about their GHG emissions:

  • In what ways do the company's operations and supply chains contribute to GHG emissions? What are the largest sources of emissions?
  • How can the company reduce emissions, both from operations and from its full supply chain, while saving costs?
  • How can the company report, either internally or externally (to the CDP, for example), on its GHG emissions and reduction strategies?
Last Update: 8/30/2016 8:35:32 AM