We all know it, retail in comparison to other property sectors has a bit of a bad rep when it comes to sustainability. On 31 October, Landsec hosted a fantastic webinar with a panel of representatives from John Lewis Partners, Lush, Hollywood Bowl and All Good Things discussing the realities of what retailers are doing, and the challenges they are facing, in making the sector a greener one. 

In my experience as a solicitor operating in the retail and leisure sector, the infamous green clauses found in leases tend to be more easily agreed in the ‘light touch’ areas and heavily negotiated in others. There are plenty of positive steps being made but, despite published ESG credentials, occupiers remain cautious in signing up to concrete obligations in leases that could expose them to additional costs in the current climate.  The comments from the panel discussion gave a great insight into why this might be. To frame the discussion, Landsec's Jennie Colville drew upon themes from the real estate company's report “The Potential of Sustainable Retail”, which you can access from the link below and which is well worth a read. Here are my key takeaways from the discussion. 
 

Collaboration is key

This will come as no surprise; everyone agrees that more collaboration is needed. Landsec's report covers this in more detail, especially around the need for data sharing, but what was interesting in the panel discussion was a resounding view that whilst talk about collaboration abounds, what is needed is more action. The path to sustainability looks different for different retailers, and so there needs to be a degree of flexibility on this (which is perhaps why our green clauses continue with statements of intent as opposed to fixed requirements). Smaller retailers need initiatives to be kept simple in order to take part.

In a larger centre, the Landlord is the one consistent player and has a key role in helping their retailers collaborate at a centre level. Larger retailers that have given stores a degree of autonomy as to how they invest, both in general sustainability efforts and local community initiatives, have seen great results when collaborating with landlords in their efforts. Interestingly, Landsec reports that the consumer considers localism a key part of sustainable retail - see Landsec's report for more detail on that. 

Clearly these conversations are happening, but need to happen more. But with the Government recently reneging on plans to increase the minimum EPC rating for housing, will they increase before the Government makes it clear they are not going to do the same for commercial properties? 

The cost of sustainable retail is still a challenge

When it comes to choosing location, it was clear from across the panel that footfall and commerciality were key, and for many businesses the models and algorithms determine this for them. However, if the price and location are right then sustainability is important too. That needs to become more important if we are to reach sustainability goals. 

One of my key takeaways from the panel discussion was the repeated point that sustainability is always going to cost more, until the buying power is behind sustainable products. Once that happens, then it will be much easier for businesses to justify any perceived additional cost in choosing a sustainable option as consumer demand for sustainability is a key driver for retailers’ ESG commitments. Perhaps the buying power will shift in time as the (arguably) more climate-conscious younger generations become the key decision makers and breadwinners across society, and have the ability to put their money where their mouths are.

In the meantime, businesses need to start taking responsibility where they can. But where to start? Businesses should be looking at where they have the biggest carbon impact and spend the most money, and look at the opportunities there in order to have the biggest impact. 

Hollywood Bowl’s Mark Johnson talked about their bottom-up approach in terms of making a day-to-day difference. Local teams have waste and recycling targets so that all employees can take ownership in the business’s goal to reduce its impact on the environment. Perhaps small actions like this on the ground will also in time move the buying power.

I repeat, collaboration is key

There are some things that are just outside the control of the retailer. A key challenge for occupiers in terms of energy is the limitations of the UK grid; for some there is simply not enough power in the grid to move completely away from gas for manufacturing processes.  However,  collaborating with landlords on installing sustainable (and reusable) fit outs is within the retailers' control and can make a difference. I have seen great examples of this throughout my work across the retail and leisure industry. Lush’s Ellen Peters talked about the importance of considering embodied carbon in the buildings and materials we already have, especially in listed properties that also hold social value. It may not always be possible, but where it can be, one should work with materials that already exist and, importantly, ensure that those recycled materials remain recyclable in the future as we use them.

Smaller retailers just simply do not have the same amount of expertise and resource to look research sustainable choices, which is where collaboration under common landlord ownership can help. Ellen Peters said that Lush “would rather share knowledge than data” and hopes to be able to do that increasingly in the future. Many major centres have merchants’ associations or forums that can create a place for sharing this knowledge. Hopefully, these avenues will continue to foster conversations across occupiers to create more sustainable retail destinations.

You can find Landsec’s report here: