The global retail market reached nearly $20,331.1 billion in 2020, increasing at a compound annual growth rate (CAGR) of 2.4% since 2015. Experts expect the market to grow at a CAGR of 7.7% from 2020, reaching $29,446.2 billion in 2025. The sheer volume of goods and products manufactured, stored, and distributed across supply chains plays a significant role in global decarbonization. For example, according to the United Nations, retail fashion contributes between 2% and 8% of global emissions.
From 2020 to 2022, the Task Force on Climate-related Financial Disclosures (TCFD) framework gained significant traction in the European consumer goods retail industry. Companies started adopting the framework to understand better and manage climate-related risks and opportunities.
The benefits of implementing the TCFD framework in the retail industry include enhanced transparency, improved risk management, and competitive advantage.
However, challenges persist, such as data availability and quality, resource constraints, and a diverse regulatory environment.
Retail companies face climate-related risks like extreme weather events and challenges transitioning to low-carbon operations. At the same time, they encounter opportunities for sustainable product offerings, energy efficiency improvements, and innovative low-carbon solutions.
The European Green Deal, Non-Financial Reporting Directive (NFRD), and national-level regulations have incentivized the adoption of the TCFD framework. Companies implementing the framework have experienced increased investor interest, leading to better access to capital and improved long-term financial performance. In addition, adopting the TCFD framework has driven better sustainability practices.
Manifest Climate produced a first-of-its-kind analysis of over 3,000 companies’ climate disclosures in 2022. Across all companies, 66% of exposures aligned with at least one TCFD recommendation in 2021. However, among retail companies, the share was only 40%, indicating that the retail sector needs to catch up in public climate reporting.
Specific companies, like H&M and Unilever, have successfully integrated the TCFD recommendations into their corporate strategies.
Large multinational retailers, with their resources, can finance and pilot low-carbon research and other innovations that smaller retailers can widely adopt. A robust decarbonization plan also helps companies manage climate-related risks across their supply chains, benefiting their financial bottom lines.
In conclusion, implementing the TCFD framework in the European consumer goods retail industry has enhanced transparency, improved risk management, and identified climate-related opportunities. Despite challenges and the current lag in public climate reporting, the industry has made significant strides in integrating climate considerations into corporate strategy and financial decision-making. As the sector embraces decarbonization and climate-related disclosures, the TCFD framework will become an increasingly important tool for retail companies to manage risks and opportunities and contribute to global decarbonization efforts.
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