Woolworths sets new green goals

Clothing and food retailer Woolworths has set new public sustainability goals that will increase reliance on renewable energy and improve supply chain processes at a time when SA companies are under pressure to keep prices down in a weak economy.

Clothing and food retailer Woolworths has set new public sustainability goals that, among others, will increase reliance on renewable energy and improve supply chain processes at a time when SA companies are under pressure to keep prices down in a weak economy.

Its new goals, to be reached by 2025, include ensuring a traceable supply chain so that the firm will know every aspect of the origin of its food and clothing raw materials. Other goals include a plan to rely only on renewable energy sources by 2030. The company said it will also ensure that all Woolworths private-label fashion and home products are designed to be reused, repaired, repurposed or recycled.

The goals apply to Woolworths’s David Jones and Country Road businesses in Australia and its SA stores.

The retailer started what it calls its “Good Business Journey” in 2007 and has to date saved R2bn in electricity and water costs and reduced its electricity consumption 175% since 2005.

Through the Better Cotton Initiative, 90% of Woolworths’s cotton is bought from sustainable sources, but it admits in its sustainability report that it needs to work on more responsible sourcing of raw material ingredients such as palm oil, soya beans and leather.

The Better Cotton Initiative works to transform cotton production worldwide by advocating the wellbeing of the people who produce it, and the environment in which it grows.

Woolworths group head of sustainability Feroz Koor told Business Day that ambitious goals will make the company more competitive as consumers are becoming more conscious of the environmental and social effects of the food and clothing they buy.

Koor said: “Consumers are asking: how is it made? What is the impact on the environment? What is the social impact? What’s the human rights impact?”

He said the company intends to publish information on the factories it uses so that consumers can ascertain if those plants source materials responsibly and treat employees properly. “We will need to put that out in public so that people can hold us accountable.”

On its goal to have a fully traceable supply chain, Koor said the idea is to see how many steps back Woolworths can go in the supply chain to understand “exactly where this product comes from”. It wants plans to understand where clothing suppliers and food manufacturers source raw material.

However, the retailer is under pressure to decrease prices due to SA’s weak economic environment and subdued performance in clothing sales for the past few years, which led it to retrench about 65 staff, cut two labels and reduce formal wear from its clothing line earlier in 2021.

In the half-year to December 27, earnings in its fashion, beauty and home division before interest, a measure of operating profit, dropped almost 40% from

R969m to R582m.

CEO Roy Bagattini has previously said that Woolworths’s clothes are expensive and the company is working to offer better value for money to the mid- to upper-end customers.

Asked about the tension that will be created by expecting higher standards from factories and suppliers while needing to cut prices, Koor said the retailer will not drop being responsible or change its values even while needing to make good commercial decisions.

Woolworths head of investor relations Jeanine Womersley said that in the past some fashion and home products had become too expensive. But this was due to having too great an assortment of products to choose from in certain categories, which compromised the company’s economies of scale, she said.

By reducing the variety of stock Woolworths has, it improves economies of scale and, in turn, pricing.

The retailer is looking to improve its “speed to market ”— how quickly it brings fashion from the design stage to the store — to make it more responsive to trends. It will do this by growing its local supply chain and ensuring sustainability credentials are embedded in local operations, Womersley said.

On the likelihood of being able to exclusively use renewable energy by 2030 when currently most of SA’s electricity comes from fossil fuel sources, Koor admitted it “won’t be easy to achieve”.

But, he said, “unless we set these ambitious targets, it’s difficult to get the momentum required to make significant change”.

“We’ll be looking at a mix of own energy supply where feasible, such as solar, and working with third parties such as landlords, and independent power producers to deliver against this goal,” Koor said.