Whether it is healthier alternatives to sugary drinks and meat, clean beauty products and vitamin supplements, or clothing made from recycled materials – consumers are demanding that retail brands produce products that are better for their health and for the planet.
Recognising this growing number of consumers who want to purchase products that have been sourced, manufactured and sold with the least impact to the environment, retail brands are now transforming both their product portfolios and the way they operate.
“The origin of a raw material or ingredient – whether it’s sugar, dairy, cocoa, coffee, fish, cotton or leather – is becoming as critical as the right caloric content, fit and finish when consumers are choosing products,” Shanthi Rajagopalan, senior director of worldwide retail and consumer goods strategy at Microsoft. “This is leading to a growing number of retailers and consumer goods (CGs) companies investing in sustainable farming, forestry, fishing and sourcing to ensure a quality supply of raw materials will be available for years to come.”
To achieve this, retailers and CGs must be able to accurately calculate the environmental impact of every individual process and product across their end-to-end supply chains – from sourcing the raw materials to what happens at the end of the product’s life cycle. And to satisfy consumers who want to make the most sustainable product choices, they must make this data as transparent as possible. However, they find it difficult to gather accurate and reliable data from their suppliers, particularly as they move beyond Tier 2 suppliers. And if they do obtain this data, they struggle to make sense of it.
“Retailers and CGs get sustainability data from multiple sources – including suppliers, facilities, utilities, business units – and it is often manually reported in many different formats, such as spreadsheets, databases and paper,” explains Rajagopalan. “Consequently, while retailers and CGs may have a lot of data, they struggle to gather, normalise and use it effectively to record and report their emissions and other factors. This is compounded by the fact that there are multiple calculation methodologies and standards, which results in what many call ‘reporting season’ – the several months it takes them and an army of temporary workers to gather and submit required reporting.”
Several innovative organisations are using Microsoft’s technology to develop solutions that help retailers and CGs to easily gather and validate data from across their supply chains. For example, Transparency-One uses graph database technology, social network-style supplier collaboration capabilities and other technology to digitise and map entire source-to-store supply chains. Hosted on Microsoft Azure, the solution allows brand owners, retailers, manufacturers and suppliers to access and share detailed real-time information about a product’s composition, raw materials, quality, country of origin, testing and safety, as well as data about the sustainable practices, regulatory compliance and certifications of suppliers and facilities.
To guarantee the security and integrity of the data, Transparency-One stores the supply chain information in Microsoft Azure’s Blockchain Services. This creates a ledger of all transactions between supply chain partners and any modifications to the data are immediately and permanently recorded and stored in the blockchain, making them immutable. This blockchain data can immediately be accessed by designated partners, providing full transparency at each step of the supply chain.
“The Transparency-One network for responsible sourcing connects global supply chain networks to create a healthier, safer, and more sustainable world for consumers,” says Rajagopalan. “It helps manage supply chain and product safety risk, ensure accurate product data, and connect all suppliers.”
Connecting Food has also used Microsoft Azure and digital twins on the blockchain to develop the world’s first ‘Food Confidence’ platform for the agribusiness sector. The solution automatically converts unstructured food data into digital twins, allowing it to be digitised, standardised, analysed, audited, measured and stored to provide end-to-end transparency to stakeholders across the supply chain, including producers, farmers, primary processors, manufacturers, transportation and logistics firms, brands and retailers. Connecting Food has already been implemented by brands such as multinational confectionery, food, beverage and snack food company Mondelēz International, as well as French dairy ingredients producer Ingredia.
“Traceability and transparency are some of the key elements of determining if a product is from sustainable sources, and Connecting Food’s blockchain-based solutions ensure trust in the source data,” says Rajagopalan. “Not only do Connecting Food’s digital transparency solutions create value for agri-food players, but they also restore consumer confidence in food.”
Retailers and CGs are also exploring how they can recycle, reuse, repurpose and resell products at the end of their life cycles. The resale model has been a mainstay for some time in categories like electronics and sporting goods, but it is quickly becoming popular with fashion, accessories, and home furnishings brands too.
“Re-commerce extends the life of a product, thereby reducing its overall carbon footprint and preventing items from stacking up in landfills,” explains Rajagopalan. “Circular fashion considers materials and production thoughtfully, emphasising the value of continuing to use a product right to the end of its life cycle, and then going one step further by repurposing it into something useful.
“To facilitate this, retailers need to trace a product’s full life cycle to validate its authenticity for resale. But challenges with tracing products past the point of purchase and through reverse logistics have long plagued retailers.”
New York City-based tech start-up EON is partnering with brands, retailers and other stakeholders across the fashion industry to overcome this issue by building a Connected Products Economy. Using an internet of things (IoT) platform powered by Azure and Microsoft Cognitive Services, EON generates a digital identity for every garment, which contains information about the raw materials and origins of the product, and more. EON then embeds a QR code, radio-frequency identification or other type of tag into every garment, which can be scanned as the product moves through different stages of its life cycle, creating an accurate data record.
Armed with business intelligence captured in EON’s platform, brands can identify the materials in the product, provide accurate sustainability information to customers, and authenticate the garments for resale or recycling at the end of their life cycles. This could help them introduce new offerings such as clothing rental, resale, reuse or recycling services, or peer-to-peer exchanges and digital wardrobe apps.
“EON assigns every product a cloud-hosted digital identity, turning it into a connected asset that ‘speaks’ to brands, customers and their partners,” says Rajagopalan. “Once an item has a digital footprint, it can be stewarded through a transparent, sustainable and data-driven life cycle – from production through customer use, reuse, resale, next-life and regeneration.”
Implementing solutions to accurately calculate the environmental impact of their products is also empowering retailers and CGs to identify opportunities for reducing water use and the carbon emissions and waste produced in the manufacturing and supply chain processes.
“Many are looking for opportunities to improve the timeliness and granularity of the data they are measuring – whether it’s coming from farms, factories or fleets – to better understand baseline metrics and set corporate, divisional or product line goals that can be continually improved over time,” says Rajagopalan. “IoT sensors and real-time measurement can be the key to meeting these sustainability goals.”
Improving demand forecasting is also an effective way to reduce waste. “If a retailer is able to order or produce the right amount of an item or product, they are less likely to send waste materials and inventory to landfill sites,” says Rajagopalan. “However, it is challenging to accurately predict consumer demand for products at the best of times – and it has become even more difficult with the shocks to loyalty, supply chain constrictions and demand spikes brought on by the pandemic.”
Traditionally, retail employees must manually review food items to visually assess potential spoilage, which is labour intensive, time consuming and unlikely to be consistent or accurate. The retailer would then need to ensure continual diligence in order and inventory management to reduce markdowns and write-downs. Now, several Microsoft partners are applying artificial intelligence (AI) and other technologies to improve both forecasting and markdown optimisation.
“Shelf Engine, for example, uses Microsoft Azure and other technologies to help grocers and suppliers increase profits while reducing food waste by completely automating the ordering process for highly perishable items,” says Rajagopalan. “The solution accurately predicts inventory at a hyperlocal level for each store, reducing food waste.”
Meanwhile, Stratuscent has developed a low-cost, portable ‘electronic nose’ device, which leverages chemical sensing and AI technologies to detect, digitise and catalogue different scents. The device can be used by retailers in the food and beverage industry to assess how fresh products are.
“By detecting certain chemicals released in the air, an eNose can recognise individual items of food and determine freshness by cross-referencing it with Stratuscent’s scent library,” explains Rajagopalan. “The AI platform can digitise and map smells that may go unnoticed by the human nose. This ensures that retailers do not throw away food that is still in good condition.”
In addition, many retail and CG brands are aiming to minimise waste with innovative recyclable and sustainable packaging and shipping materials. “What if containers and dispensers themselves were reusable, and not just easier to recycle or compost?” asks Rajagopalan. “Reusable dispensers could facilitate shipping refills with lower water content or packaging. Or, better still, what if packaging materials could be IoT enabled to help retailers understand consumption patterns and trigger reordering? This would create a win-win situation.”
Rajagopalan shares that, Microsoft is committed to empowering retailers, CGs and other stakeholders to develop more sustainable products and navigate a path towards net zero emissions. In July 2021, it introduced the new Microsoft Cloud for Sustainability to help organisations collect and analyse data and turn the insights they glean into effective actions.
Multinational bakery business Grupo Bimbo, for example, is piloting the solution to achieve its aim of attaining carbon neutrality by 2050. The group, which has more than 200 bakeries across 33 countries and a worldwide distribution network of more than 54,000 routes, is using the cloud to gain greater visibility into its value chain and pinpoint opportunities for decreasing carbon emissions directly emitted by its assets and the production of electricity it consumes. In the future, it will use the cloud to limit emissions occurring across the company’s value chain.
“The Microsoft Cloud for Sustainability will help companies like Grupo Bimbo effectively record, report and reduce their emissions,” says Rajagopalan. “Microsoft recognises that we have a responsibility and opportunity to help those in the retail, CG and other industry sectors to address critical environmental challenges. We’ll continue to share technology and resources developed for our own sustainability goals with our customers to ensure we can all work together to create a better future – for both humans and the planet.”
Partner perspectives
We asked a selection of Microsoft partners how they are using technology to help retailers make the end-to-end product life cycle and shopping journey more sustainable. Below are extracts from their responses, which you can read in full from page 150 of the digital edition of the Spring 2022 issue of Technology Record.
Bede Jordan, chief technology officer and co-founder at Shelf Engine, said: “We use sophisticated demand forecasting and machine learning techniques to determine how much food they should order to ensure shelves are full and waste is minimal.”
Oskar Jakobsson, chief product officer at Ombori Grid, said: “Ombori Grid also has many solutions that can help retailers become more sustainable. For example, we can provide solutions to offer customers size guidance and relevant reviews and recommendations to reduce returns and shipping.”
Marco Vergani, CEO of K3, said: “Our solutions, like K3 Fashion, offer the ability to classify all products according to their materials and certifications. This ensures that our clients have all the necessary information to build sustainable catalogues and be authentic and transparent in their sustainability credentials.”
Margaret Totten, managing director at Akari Solutions, said: “The Akari team has engaged with some of the world’s largest retailers – including Marks & Spencer – to simplify their in-store organisation, sustainability efforts and performance with innovative solutions like our Digital Display application, which allows for vital communication and collaboration between workers.”
Michael Schulte, vice president of product management retail software at Diebold Nixdorf, said: “The sustainable consumer journey starts with the retailer themselves. That’s why we enable our retail customers to evolve their in-store and back-office processes and their future technology deployments in a way that always keeps them on top of all dynamically changing consumer trends and requirements.”
Megan Fritzler, senior channel partner manager at Adyen, said: “Merchants using Microsoft POS and Microsoft Commerce can take advantage of Adyen Giving to maximise and track their charitable donations.”
This article was originally published in the Spring 2022 issue of Technology Record. To get future issues delivered directly to your inbox, sign up for a free subscription.