Market turbulence is hitting the retail industry hard. Faced with significant market disruptions, this would have historically been the juncture when retailers deprioritized their sustainability commitments. Instead, we are seeing something very different.
Sustainability = Business Resilience
Wildfires, supercharged storms and extreme heat are upending conventional retailers’ supply chains, leading to disruptions, delays and the loss of profitability. Climate-caused supply chain disruptions are projected to account for as much as USD $120 billion in losses by 2026.
At the same time, faced with widespread price hikes, today’s consumer is buying less – spending dips that continued even during typical holiday-related spending spikes. Already faced with supply chain turbulence, retailers also are challenged by shifting consumer shopping habits. With tariffs looming – and consumer apparel pricing anticipated to surge by as much as 33% – retailers are bracing for consumer confidence and spending to be further thwarted.
Rather than being a burden, sustainability initiatives are helping insulate retailers through the current volatility – helping them to mitigate supply chain risk, meet growing regulatory requirements, improve efficiencies and reduce and stabilize costs. Data shows that these planet-friendly moves are even bettering customer relations and attracting customers.
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Despite the perception that companies around the world are rolling back their sustainability commitments, a recently published survey found that more 84% of businesses plan to maintain or even accelerate their decarbonization efforts. This undeterred climate commitment is in line with conversations I’ve had with hundreds of brand leaders and supply chain partners; I repeatedly hear that sustainability is core to their business strategies and supply chain resilience.
As retailers work to strike the balance between affordability and environmental impact, their sustainability initiatives are enabling them to deliver on both.
Sustainability Spurs Innovation
Many retailers see an accelerated transition to circular and Next Gen materials as key components of their medium-term and long-term business strategies. These products come from materials that are normally wasted or burned, including agricultural residues like sugarcane bagasse, wheat straw, recycled textiles or cacao shell hulls.
Next Gen packaging, paper and textiles made from agricultural residues and recycled textiles can reduce nearly 563 million tons of greenhouse gas emissions globally by 2030 and eliminate the need to mow down 64 million hectares of protected forest annually for paper packaging and fibers like viscose and rayon. By 2030, Next Gen materials are expected to make up 10% of the total fiber market, with brands like Reformation, H&M, Lush and LVMH already using Next Gen in their clothes.
Strategic retailers recognize Next Gen materials as fundamental to accessing the affordable, quality materials their businesses will rely on five, 10 and 20 years from now. These materials can help retailers to meet the climate, waste, deforestation and circularity regulations blossoming around the globe, reducing both compliance workload and risk.
Investing in Next Gen reduces the growing risks associated with supply chain volatility and regulations in key markets, whilst positioning leading brands and manufacturers to increase market share and future-proof vital supply chains.
Creating New Revenue Streams for Farmers
Demand for paper packaging drives about one tenth of total logging pressure on the world’s forests – a number expected to increase with the continued ecommerce boom. With tens of millions of hectares of forests burning annually, this is a fiber basket that is going up in smoke. Next Gen solutions significantly reduce deforestation and an overreliance on forests for stable supply, while also minimizing pollution and creating new revenue streams that can improve rural livelihoods.
Much of the estimated 140 billion metric tons of agricultural waste produced every year can actually be converted into valuable materials, the basis of many of the goods sold by retailers. In regions where fibrous agricultural industries are abundant – including the U.S., Brazil, and India – establishing Next Gen mills would support massive social and economic transformation for under-resourced and underemployed rural communities, providing farmers with additional income for each ton of straw and residue.
North America Positioned to Lead this Next Chapter
North America, in particular, is primed to be a leader in this new circular manufacturing system. Currently in the U.S., 15.4 million tons of textile waste are produced every year, with a whopping 85% of that waste sent to landfills or incinerators. Recycling just 56% of U.S. textile waste represents a $1.5 billion economic opportunity, thousands of domestic jobs, reduced pollution and low-impact inputs for domestic and global manufacturing.
There are similar gains to be made from embracing circularity for packaging production. North America is one of the world’s biggest users and producers of pulp and paper, as well as a major agricultural region. With strategic investment, by 2028 the region holds the potential to be an early Next Gen low-carbon paper and packaging manufacturing hub that can contribute to nearly 5,000 new jobs, 52 million tons of agricultural waste diverted and 52 million tons of agricultural waste diverted.
We estimate North America can produce 13+ million tons of Next Gen textiles and packaging made from waste inputs like leftover wheat straw, industrial food waste or clothing destined for landfills by 2033. These material alternatives are not subject to geopolitical turbulence and promise to provide retailers with high-quality materials at relative pricing stability – all the more important with today’s turbulent economic climate.
Innovation is core to the Next Gen transition, just as it is for businesses to stay competitive. Investments into circular solutions and Next Gen materials reduce sourcing risk, manage stakeholder expectations and bolster business operations.
Today, investing in sustainability is an action to safeguard retail’s future. By future-proofing supply chains to quell supply and pricing volatility, doubling down on sustainability is the clear path forward.
Nicole Rycroft is the Founder and Executive Director of Canopy, the award-winning environmental not-for-profit that’s shifting global supply chains to keep the world’s forests standing and bring low-carbon, circular alternatives to market at scale. For over two decades, she’s led systems-level change — transforming unsustainable production models, forging unlikely partnerships, and proving that what’s good for the planet can also be good for business. Under Rycroft’s leadership, Canopy has catalyzed the conservation of 39+ million hectares of forest and secured commitments from 1,000+ global companies — with collective revenues exceeding USD $2 trillion — to eliminate Ancient and Endangered Forests from their paper, packaging and fashion supply chains.
