Retail’s Biggest Emission Hotspots

Introduction

The retail industry significantly contributes to global greenhouse gas emissions, and the pressure to reduce company carbon footprints in consumer-facing sectors is increasing every year.

For retailers, understanding the biggest sources of emissions is critical to keep thriving under this demand. Implementing strategies to reduce hotspot emissions can not only enhance sustainability, but also increase efficiency, cost savings, and improve consumer trust. Retailers proactively addressing these areas position themselves as responsible, forward-thinking brands in an increasingly eco-conscious market. With tightening regulations and global sustainability goals, reducing emissions has become essential not just for environmental responsibility but also for regulatory compliance and long-term business growth.

A key challenge in managing these emissions hotspots is that the majority fall under Scope 3 emissions. These emissions are indirect and often difficult to measure due to the complexity of tracking data across the supply chain. How can retailers identify and reduce these hotspots’ emissions? 

Retail’s expansive carbon footprint is topped by four main hotspots:

• Purchased goods & services
• Use of sold products
• Waste generated
• Scope 1 & Scope 2
  
  

Purchased Goods & Services

Generally, the biggest hotspot in the retail industry is the purchased goods & services sector. According to data from a US-based retail company operating department stores, the emissions from this hotspot reach 70.5%.

This hotspot includes emissions generated from indirect value chain activities, like buying raw materials, finished goods, packaging, or services like transportation, advertising, and others. These supply chain decisions have a direct impact on retailers’ carbon footprint in Scope 3. Every activity, from the raw materials to the manufacturing processes and logistics, contributes to overall emissions.

Some of the biggest drivers contributing to the hotspot’s carbon footprint are manufacturing and production, raw material extraction and processing, and packaging. Each of these drivers, though often indirect, has a significant impact on the size of this hotspot. 

An example of this is agriculture, a significant emission hotspot within many retailers’ climate footprints. Agricultural production requires large amounts of land, water, and other resources. It also results in significant greenhouse gas (GHG) emissions due to deforestation, methane release from livestock, and the extensive use of fertilisers. The environmental impact doesn’t stop at farming, however - processing raw materials into finished products and transporting them also consumes energy, often from non-renewable sources, increasing the carbon footprint. Retailers whose supply chains depend heavily on agriculture must be mindful of their value chain’s environmental footprint and carefully consider more sustainable sourcing.

Use of Sold Products

Another major emissions hotspot in the retail industry is the use of sold products, which is responsible for 12.2% of total retail company emissions.

Once products leave the shelf, their overall carbon footprint continues to grow as they are put to use by customers. Sold products ranging from washing machines and cars to food and clothes consume energy throughout their lifespans, which can lead to substantial greenhouse gas emissions. The emissions generated from this energy use can be significant, especially when products are powered by non-renewable sources. 

Beyond energy consumption, the environmental impact of sold products also includes maintenance, repairs, and eventual disposal, all of which add to their carbon footprint. For example, clothes that require frequent washing and drying or food that demands energy-intensive refrigeration extend the lifecycle emissions of these products, increasing the hotspot’s footprint for retailers. As a result, retailers should take into account the entire lifecycle of the products they sell, not just the emissions associated with their production and distribution.

Waste Generated

The generated product waste is another critical emissions hotspot in the retail industry. The waste produced across various stages of retail operations is 5.1% of a retail company’s total emissions.

Inefficient manufacturing, improper disposal methods, and packaging can result in higher greenhouse gas emissions. Practices like the production of single-use packaging and non-recyclable materials lead to waste, increasing the value chain’s footprint. Products not designed for longevity or recyclability often end up in landfills or incineration plants, where they emit more GHGs during decomposition and waste management. Unsold merchandise that ends up in landfills is another type of waste that contributes to the GHG emissions. This is an incentive to promote retailers’ supply chain efficiency, which can lead to cost reductions and less waste. 

Emissions in this hotspot heavily depend on the recycling and disposal infrastructure of the region. While companies can ensure the product and packaging are minimised, the way products are disposed of is outside of the company’s control, which makes the emissions fall under Scope 3.  

Scope 1 & Scope 2 

The 3 hotspots above are focused on Scope 3 emissions. The next biggest hotspot is the combined emissions of both Scopes 1 and 2, adding up to 8.4% of total company emissions. 

Several main generation sites include offices, manufacturing sites, company-owned transportation, fugitive emissions, and purchased electricity. Unlike Scope 3 emissions, which involve complex supply chain data, Scope 1 and 2 emissions are more straightforward for companies to measure and manage. This is because the data is typically under the company’s direct control and is easier to access.

Reducing Scope 1 and 2 emissions offers a clear pathway for companies to demonstrate immediate progress toward sustainability. For companies committed to meeting global sustainability standards, taking action in these Scopes is a critical and actionable step toward overall emissions reduction.

What can retailers do next?

To reduce the emissions of these hotspots, retailers should focus on a few key areas across their operations. Targeting these high-impact actions will significantly streamline retailers’ decarbonisation journey.

• Engage Suppliers. Suppliers play a crucial role in shaping a company’s Scope 3 emissions, as their practices and products directly impact the retailers’ carbon footprint. Selecting suppliers committed to sustainability, optimising procurement strategies, and prioritising goods with lower carbon footprints can reduce the Scope 3 impact of a retail company’s supply chain. Focusing on this area cuts emissions and aligns the business with consumer demand for greener products, building the company’s green credentials.
• Assess Total Product Lifecycles. To address emissions from the use of sold products, retailers can focus on sourcing and selling products designed to be more energy-efficient, durable, and easier to recycle or refurbish. By promoting such products, retailers can play a crucial role in reducing the carbon footprint associated with the use phase of consumer goods. 
• Minimise Waste. Retailers can mitigate this by reducing packaging materials, opting for biodegradable or recyclable alternatives, and prolonging the products’ lifecycle. By minimising waste generation and improving disposal practices, retailers can demonstrate their commitment to sustainability that resonates with environmentally-conscious consumers.
• Manage Direct Emissions. A way to reduce Scope 1 and 2 emissions could be through implementing energy-saving policies, consuming fewer resources, and using more energy-efficient technology. In company-owned facilities, switching to LED lighting, improving insulation, and optimising heating and cooling systems can significantly lower energy use. Companies could encourage virtual meetings instead of business travel where possible or choose more sustainable travel options, like flying economy class or using public transport within cities, which can further reduce emissions. 
• Leverage Technology. The biggest challenge for retailers is to measure their Scope 3 emissions without any direct supplier data. Generally, it takes weeks to gather and analyse this data, making the process time and resource-intensive. Retailers could leverage decarbonisation software to get accurate hotspot data much faster. Terrascope helps retailers track their emissions even without direct supplier data, helping them rapidly hit their decarbonisation goals. 

Conclusion

In a consumer-facing market, understanding your emissions hotspots is essential to staying competitive and meeting growing sustainability demands. By focusing on the main sources of emissions - such as purchased goods and services, the use of sold products, waste generation, and Scope 1 and 2 emissions - retailers can develop targeted strategies to reduce their carbon footprint. Not only does this help comply with environmental regulations, but it also builds green credentials and ensures long-term growth. 

As consumer preferences continue to shift towards greener products, retailers that prioritise sustainability will be better positioned to thrive in a rapidly evolving market. By focusing on these emission sources, companies can make substantial progress toward their sustainability goals while also cutting costs and improving operational efficiency.

Terrascope is an end-to-end decarbonisation platform, empowering large retail enterprises to embark on meaningful decarbonisation journeys with precision and confidence. Get in touch with our experts to learn more.