Consumers in the UK are increasingly factoring in the sustainability of products and the retailers that sell them when they make their purchasing decisions. Nearly 90% of consumers in one survey indicated that over the past five years, they had become greener in their purchasing habits, while only 8% stated that it was not a concern. To engage with potential customers effectively, a robust and committed sustainability strategy is vital for retailers.
With the energy crisis impacting particularly harshly on many retailers, further squeezing tight margins and impacting on supply chains, sustainable energy use is far from the only priority that needs to be contended with. Growing concerns that the UK will face gas shortages this winter, ultimately risking blackouts in a worst-case scenario, has also refocused attention on the issue of energy resilience.
These three disparate aspects of energy management make up the Energy Trilemma: the need for energy to be affordable, sustainable, and reliable.
Energy Affordability for Retailers
With the energy crisis in turn driving a cost-of-living crisis that is squeezing household budgets, tackling rising energy costs for retailers is a tricky balancing act. With supply chain costs rising rapidly, many retailers are facing a difficult choice between increasing prices and swallowing cost increases themselves. Smaller retailers are particularly exposed, with the Association of Convenience Stores already warning that thousands of its members face closure. However, even major retail chains are feeling the pressure.
The Energy Bill Relief Scheme has mitigated some of the expected price rises this winter, but retailers still face significantly inflated energy bills. Proactive measures are becoming more and more necessary in terms of mitigating these increases, whether that is through better energy efficiency, procuring energy more intelligently or by looking at on-site generation options that reduce reliance on grid supply.
Energy Resilience within Retail
The UK has seen worryingly low margins between available generation capacity and anticipated demand repeatedly over recent winters, but so far National Grid has managed to keep the grid balanced. Concerns over the UK’s supplies of natural gas, which in turn is responsible for a significant portion of our electricity generation, means that the balance between supply and demand will be more precarious than ever this winter.
Electricity outages often have a more significant impact on retail businesses than those in some other sectors, as they can have a lasting effect on customer perception. Disruption that forces store closures, even if only briefly, can quickly alienate even previously loyal customers.
Energy Sustainability in the Retail Sector
Soaring energy costs has seen many businesses reassess their net zero commitments. A survey by the Confederation of British Industry found that 30% of their members had seen the rise in energy costs negatively impact their current or planned investment in planned net zero measures.
One sector that has bucked the trend most visibly is major grocery retailers. Instead, on a weekly basis one or more of the UK’s largest supermarket chains will announce a new measure to reduce emissions, plastic use, waste or otherwise improve sustainability benchmarks. All of these decisions will be focused on delivering the expectations of customers, and these retailers clearly believe that ongoing, significant investment in improving their sustainability performance and credentials is worthwhile in terms of increased customer engagement and brand perception.
Balancing the Trilemma
The complex nature of the Energy Trilemma, and the growing pressure that retailers are feeling across each aspect of it, makes definitive solutions difficult. Any steps taken to address one area, such as rising energy costs, has to be carefully assessed in terms of how it will affect the other areas. As an extreme example, as wholesale energy prices rise it may be cheaper to run a premises using diesel generators, but such an approach would leave that organisation’s net zero plans, and associated customer perception, in tatters.
One area where you can be confident of ensuring improvements across the trilemma is with better energy efficiency. Simply put, the cheapest and cleanest unit of energy is the one that you don’t use. Energy efficiency measures range from simple steps, such as changing staff behaviour to ensure that equipment is shut off when not in use or heating and cooling systems aren’t working at crossed purposes, through to more significant infrastructure upgrades such as voltage optimisation.
