How sustainability is reshaping the future of the retail industry

Retail sustainability is no longer a future ambition; it is a current operational and strategic priority.

Retailers worldwide are encountering significant challenges, like shifting regulatory frameworks, escalating operational expenses, and higher expectations from consumers, investors, and regulators.

At its core, retail sustainability is about reducing environmental impact while improving efficiency, resilience, and long-term value creation. It needs a shift in how products are designed, how supply chains are managed, and how materials are handled at the end of life.

For retailers, this is not just about compliance. It is about transforming how value is created and retained through the product lifecycle. Research from Deloitte reinforces this, confirming climate change as one of the top 3 issues for consumer-facing brands, highlighting the importance of sustainability in the industry. Those who act early not only reduce risk, they also unlock new efficiencies, improve margins, and build more resilient, future-ready business models.

In this piece, we explore the current landscape of sustainability efforts in the retail industry, the scale of the challenge, and the key trends shaping the future of retail.

Let’s dive in.

What is retail sustainability?

Retail sustainability definition

Retail sustainability refers to the strategies, systems, and operational changes retailers implement to reduce environmental impact while maintaining or improving business performance.

What retail sustainability means in practice

This includes:

• Reducing waste and emissions
• Improving resource efficiency
• Designing products for longevity and reuse
• Increasing supply chain transparency
• Meeting regulatory requirements
• Embedding circular economy principles

Retail sustainability and the circular economy

Retail sustainability is not a standalone initiative. It is a system-wide change that affects every stage of a product journey, from design and sourcing to fulfilment, returns, and end-of-life processing.

It represents a shift away from a traditional linear model of take, make, dispose, towards a circular system, one where products and materials retain value for longer.

Why retail sustainability matters now

Retail sustainability is accelerating due to a combination of structural pressures that are reshaping the industry.

1. Regulation is redefining responsibility

Retailers are no longer just responsible for selling products. They are increasingly accountable for what happens to those products after use.

Policies such as Extended Producer Responsibility, Digital Product Passports, eco-design regulations and waste legislation are fundamentally changing the role of retailers within the value chain.

These policies are shifting responsibility upstream, requiring retailers to manage environmental impact across the full product lifecycle.

At the same time, emissions data highlights the scale of the challenge. Only 2% of retail and wholesale emissions are in direct operations, while 98% are in Scope 3 supply chains (EuroCommerce, 2024).

This reinforces a critical point. Retail sustainability is not just an operational issue; it is a supply chain challenge requiring collaboration across partners, suppliers and logistics networks.

Learn about EPR

Learn about DPPs

Learn about Simpler Recycling

2. Consumers are driving transparency and accountability

Consumer expectations are evolving rapidly. According to research from Deloitte:

• 59% of consumers surveyed are actively trying to reduce waste
• 41% consider environmental impact when purchasing
• And nearly 45% expect sustainable options as standard

At the same time, retail continues to scale. Global retail sales reached $31.3 trillion in 2025, increasing both economic impact and environmental responsibility (Capital One Shopping, 2025).

3. Economic pressures are increasing

Sustainability is no longer just an environmental issue; it is an economic one.

Rising material costs, supply chain disruption and waste inefficiencies are directly impacting margins.

At the same time, the global economy remains highly inefficient. The Circularity Gap Report (2025) shows that the world is only 6.9% circular, meaning over 90% of materials are lost after use.

For retailers, improving resource efficiency is directly linked to cost control and operational performance.

Learn about The Circularity Gap

4. Sustainability fatigue and changing consumer behaviour

While awareness is high, behaviour remains complex.

Consumers continue to prioritise value, convenience and price, particularly during economic uncertainty (McKinsey, 2025).

This creates a key challenge. Sustainability must be embedded in a way that does not increase cost or complexity for the customer.

The scale and reality of retail waste

Retail waste is generated at every stage of the product lifecycle, from production and distribution to consumption and end-of-life.

Across the UK and EU, the scale of waste highlights a system that remains largely linear, and valuable materials are lost rather than retained.

The scale of the problem

• • The UK generates over 190 million tonnes of waste annually (DEFRA, 2024)
  • The EU generates more than 2.2 billion tonnes of waste each year (Eurostat, 2024)
  • Globally, the economy is only 6.9% circular (Circle Economy, 2025)
  • EU municipal waste stands at 513 kg per person (Eurostat, 2024)

While progress is being made, waste volumes remain high.

Packaging: the biggest source and opportunity

Packaging is the largest source of waste in retail, and one of the biggest opportunities for change.

• The EU generates 84.3 million tonnes of packaging waste annually
• Packaging accounts for over 40% of plastic usage in Europe
• Waste volumes have increased by more than 20% in the last decade

(Eurostat, European Commission, EEA, 2024)

Recycling performance remains inconsistent, with some countries reporting rates below 30%.

At the same time, consumer expectations are clear. Sustainable packaging is the top sustainability priority for consumers (Deloitte, 2024).

Packaging, therefore, represents both the biggest challenge and the fastest route to impact.

Textile waste and product lifecycle challenges

The fashion and textiles sector is one of the most resource-intensive areas of retail, with significant environmental impact.

• The UK generates approximately 1.45 million tonnes of textile waste annually, with a large proportion lost to landfill or incineration (WRAP, 2024)
• Less than 1% of textiles are recycled into new textile products globally, representing a significant loss of material value (European Parliament, 2025)
• Across Europe, textile consumption is the fourth highest environmental pressure category, after food, housing and mobility (European Environment Agency, 2024)
• The average EU citizen consumes approximately 19 kg of textiles per year, contributing to growing waste volumes (European Environment Agency, 2024)

These figures highlight a fundamental issue. Retail systems are still designed for throughput rather than value retention.

Food waste in retail

Food waste is one of the most visible and preventable inefficiencies.

• The EU generates 58 million tonnes of food waste annually, with retail contributing ~8% (Eurostat, 2025)
• The hospitality sector produces an estimated 1 million tonnes of food waste per year (Food Hygiene Certificate, 2026)
• Food waste costs the EU over €130 billion per year (European Commission, 2024)

This represents a clear opportunity to improve forecasting, redistribution and supply chain coordination.

The systemic challenges behind retail sustainability

Despite growing awareness, progress remains limited. This is down to retail sustainability not being constrained by a single issue.

A linear operating model

Retail continues to operate within a fast-paced, volume-driven model.

High product turnover and low-cost manufacturing reduce product longevity and increase waste volumes. This creates pressure across the entire system.

Fragmented supply chains

Retail supply chains are complex, global, and often transactional.

This limits:

• Long-term collaboration
• Investment in circular infrastructure
• Data sharing across stakeholders

Learn more about Circular Economy supply chains

Lack of data and visibility

Many retailers lack visibility beyond Tier 1 suppliers.

This creates challenges in:

• Measuring impact
• Tracking materials
• Ensuring compliance
• Making informed decisions

Infrastructure limitations

Circular systems rely on the availability of physical and operational infrastructure across the value chain. This includes:

• Collection systems to capture materials after use
• Sorting facilities to separate materials effectively
• Repair networks to extend product lifecycles
• Recycling infrastructure to recover and reprocess materials

However, this infrastructure remains uneven.

• Over one-third of global waste is not managed sustainably (World Bank, 2024)
• Recycling and sorting capacity remains insufficient in many regions (OECD, 2024)

These infrastructure gaps create a fundamental barrier to circularity. Without the systems in place to collect, process and recover materials at scale, products are far more likely to be lost as waste rather than retained as valuable resources.

Consumer behaviour

As we highlighted, consumer behaviour remains a key barrier.

Low-cost, low-durability products reduce perceived value and discourage reuse, repair, or recycling.

Key sustainability trends shaping retail

Several related trends are shaping the movement toward sustainability in the retail sector.

Circular business models

These models are designed to extend product lifecycles, reduce waste, and unlock new revenue streams.

Environmental and commercial factors drive this shift.

Circular business models can significantly reduce material consumption while creating long-term economic value (Ellen MacArthur Foundation, 2024).

In parallel, McKinsey highlights that resale, repair, and circular services are among the fastest-growing areas in retail, particularly in fashion and consumer goods, as businesses respond to both cost pressures and changing consumer expectations (McKinsey, 2024).

These trends highlight a clear shift. Retail is moving from a volume-based model to one focused on value retention and lifecycle extension.

Product traceability and data

Product traceability is becoming a critical enabler of retail sustainability, driven by both regulation and the need for greater transparency across supply chains.

Digital Product Passports (DPPs), introduced under the Ecodesign for Sustainable Products Regulation (ESPR), are set to transform how product data is captured, shared, and used.

DPPs require retailers and manufacturers to provide structured, product-level data, including:

• Material composition
• Environmental impact
• Repairability
• End-of-life pathways

Learn about DPPs

Sector-specific transformation

Retail sustainability is not evolving uniformly. Different sectors are progressing at different speeds, driven by varying levels of regulatory pressure, waste intensity, and consumer scrutiny.

Fashion

The fashion sector is under significant pressure due to its environmental impact and short product lifecycles. The stats previously mentioned surrounding textile waste reinforce this:

These challenges are driving increased focus on circular models, including resale, repair, and fibre-to-fibre recycling.

Read our circular economy in fashion blog

Understand circular fashion

Grocery

The grocery sector is rapidly evolving as retailers work to reduce waste, optimise packaging, and improve efficiency across high-volume supply chains.

Circular economy principles are central to this shift. The estimates of circular food systems could generate up to $2.7 trillion annually by 2050 (Ellen MacArthur Foundation).

Solutions are scaling. Platforms like Too Good To Go have saved 79 million meals globally, while innovations such as dynamic pricing and Deposit Return Schemes are reducing waste at source.

Together, these trends highlight a clear shift from volume-driven retail to value retention, where reducing waste improves both sustainability and operational performance.

Learn about the circular economy in Grocery

Circular economy and retail transformation

Retail sustainability is fundamentally linked to the circular economy. It is not an adjacent concept; it is the operating model that enables long-term sustainability at scale.

In a circular model, value is retained rather than lost. Products are designed to last longer, materials are recovered and reused, and waste is designed out of the system entirely.

This represents a fundamental shift in how retail creates and captures value.

In a traditional linear model, value is created through volume, products are produced, sold, and ultimately discarded. In a circular model, value is created through lifecycle optimisation, where products, components, and materials are kept in use for as long as possible.

This shift is increasingly critical when viewed through the lens of resource constraints and economic efficiency.

For retailers, this presents both a risk and an opportunity.

A risk, because reliance on virgin materials increases exposure to cost volatility and supply chain disruption

An opportunity, because retaining materials and products unlocks new sources of value

In practice, this transformation is already underway across retail:

• Resale markets are growing rapidly, particularly in fashion, extending product lifecycles and reducing waste
• Refurbishment and repair services are enabling products to re-enter the market rather than being discarded
• Closed-loop systems are emerging, where materials are recovered and reintegrated into production

Ultimately, the circular economy shifts retail from a model based on throughput to one focused on value retention, resilience, and long-term efficiency.

Regulation and the future of retail sustainability

Regulation is accelerating the transition to sustainable retail.

Extended Producer Responsibility (EPR)

Extended Producer Responsibility (EPR) is one of the most significant regulatory shifts impacting retail.

EPR moves the responsibility for waste management upstream, requiring producers and retailers to take financial and operational responsibility for the end-of-life of products and packaging.

This has direct commercial implications.

Under packaging EPR schemes, fees are increasingly linked to product design characteristics such as recyclability and material composition. This creates a clear financial incentive to:

• Reduce unnecessary packaging
• Improve recyclability
• Increase use of recycled materials

According to the European Commission, EPR schemes have already contributed to higher recycling rates across multiple material streams, while also driving eco-design improvements (European Commission, 2025).

For retailers, EPR is not just a compliance requirement; it is a mechanism that links product design decisions directly to cost and environmental impact.

Learn more about Extended Producer Responsibility

Digital Product Passports

Digital Product Passports (DPPs), introduced under the Ecodesign for Sustainable Products Regulation, represent the next phase of regulatory evolution.

DPPs require retailers and manufacturers to create and maintain structured, product-level data that travels with a product throughout its lifecycle.

This includes:

• Material composition
• Environmental impact data
• Repairability and durability metrics
• End-of-life instructions

The European Commission has positioned DPPs as a core enabler of circularity, improving transparency, traceability, and accountability across value chains (European Commission, 2024).

For retailers, this represents a significant operational shift.

Understand Digital Product Passports further

Learn about DPPs impact on EU businesses

Increasing policy complexity

Retailers are now operating within an increasingly complex regulatory landscape.

Alongside EPR and DPPs, businesses must navigate:

• Packaging and waste legislation
• Eco-design requirements
• Carbon reporting frameworks
• Sector-specific regulations, particularly in textiles and electronics

This creates operational complexity, particularly for businesses operating across multiple markets.

However, it also provides clarity on direction.

Retailers that align early will reduce compliance risk and gain a competitive advantage as regulations continue to evolve.

From pilots to scale, why progress is slow

Despite strong intent, many retailers remain at an early stage of sustainability implementation.

A recent Circular Fashion Innovation Network (CFIN) study found that although 81% of surveyed brands now include circularity in their strategy, around 63% of circularity efforts remain stuck at the pilot stage, highlighting a gap between ambition and execution.

This is often described as “pilot paralysis”, where initiatives demonstrate value in isolation but fail to scale across the organisation.

The reasons for this are structural rather than conceptual.

How retailers can operationalise sustainability

Moving from ambition to action requires a structured, system-wide approach.

Retailers need to embed sustainability into core operations rather than treating it as a standalone initiative.

1. Conduct a waste and resource audit

Understanding material flows is the foundation of any sustainability strategy.

This enables businesses to identify:

• Waste hotspots
• Cost inefficiencies
• Opportunities for value recovery

2. Design for circularity

The majority of a product’s environmental impact is determined at the design stage.

Retailers should prioritise:

• Durability and longevity
• Repairability
• Recyclability
• Reduced material complexity

Eco-design is increasingly being driven by regulation, but it also represents a major opportunity to reduce costs and improve product value.

See our circular design insights

Learn about the Circular Economy in architecture 

3. Build data capabilities

Data underpins every aspect of retail sustainability.

Retailers need to invest in systems that enable:

• Product-level tracking
• Lifecycle analysis
• Real-time reporting

This is essential not only for compliance but for informed decision-making and performance optimisation.

4. Invest in infrastructure and partnerships

No single organisation can deliver circularity alone.

Retailers must work with partners across the value chain, including:

• Logistics providers
• Waste management specialists
• Technology providers

Collaboration is essential to scale solutions effectively.

5. Implement take-back and reuse systems

Take-back schemes play a critical role in recovering products and materials.

These systems enable:

• Product reuse and resale
• Material recovery
• Reduced waste volumes

They are increasingly being supported by regulatory frameworks such as EPR.

6. Engage consumers

Consumers are a critical part of the system.

Retailers need to promote sustainable behaviours:

• Easy
• Accessible
• Incentivised

Behavioural insights show that convenience and clarity are key drivers of participation (Behavioural Insights Team, 2024).

7. Align with regulation

Retailers should anticipate regulatory change and align strategies accordingly.

Final summary: Why retail sustainability matters

Retail sustainability is not just about reducing environmental impact. It is about building better, more resilient businesses.

Retailers that act now can:

• Reduce costs
• Improve efficiency
• Strengthen compliance
• Build customer trust
• Unlock new revenue streams

The transition is already underway. The opportunity lies in how quickly businesses move from intention to implementation.