How are large retailers responding to growing ESG expectations?

Agnè Baltakienė · 23 Aug 2026

Large retailers are responding to ESG expectations by embedding sustainability into every layer of their business, from supply chain sourcing and store design to public reporting and product materials. The pressure is coming from multiple directions at once: regulators, investors, and consumers are all raising the bar, and brands that treat ESG as a checkbox exercise are falling behind those that treat it as a genuine business strategy. Below, we break down the most important questions retailers are asking right now and what the answers look like in practice.

What specific ESG pressures are retailers facing right now?

Retailers are currently facing ESG pressure from three main sources: regulatory requirements, investor scrutiny, and shifting consumer expectations. In 2026, compliance frameworks such as the EU Corporate Sustainability Reporting Directive (CSRD) are pushing large retailers to disclose detailed environmental and social data. At the same time, institutional investors are using ESG scores to make capital allocation decisions, and shoppers are increasingly choosing brands whose values align with their own.

The regulatory side is probably the most urgent right now. The CSRD requires large EU-based companies and many non-EU companies with significant European operations to report on a wide range of sustainability metrics, including Scope 1, Scope 2, and, in some cases, Scope 3 greenhouse gas emissions. For physical retailers, this means tracking emissions not just from their own operations but potentially from their suppliers and logistics partners too.

Investor pressure adds another layer. ESG ratings from agencies such as EcoVadis, MSCI, and Sustainalytics are increasingly influencing lending terms and equity valuations. Brands with poor ESG performance are finding it harder to access favorable financing. And on the consumer side, research consistently shows that shoppers, particularly younger demographics, factor a brand’s environmental and social record into their purchasing decisions, even if price and convenience still dominate at the point of sale.

How are retailers integrating ESG into their supply chain decisions?

Retailers are integrating ESG into supply chain decisions by applying sustainability criteria to supplier selection, prioritizing nearshoring to reduce transportation emissions, and auditing suppliers against labor rights and environmental standards. This shift moves ESG from a marketing statement into a procurement policy, with real consequences for which suppliers get contracts and which do not.

Nearshoring is one of the most visible trends in retail supply chains right now. Sourcing from regional suppliers rather than distant low-cost manufacturers reduces freight distances and the associated carbon emissions, while also giving retailers tighter control over labor standards and product quality. For European retailers in particular, working with European suppliers means faster turnaround times, easier communication, and less exposure to geopolitical supply disruptions.

Supplier audits are becoming more rigorous too. Retailers are asking suppliers to demonstrate compliance with internationally recognized labor standards, including prohibitions on forced labor, child labor, and discrimination, many of which are aligned with frameworks like the UN Global Compact. Environmental criteria are also part of the conversation, covering everything from a supplier’s energy sources to how they manage air and water quality in their production facilities.

Packaging is another supply chain area where ESG decisions are landing fast. FSC-certified cardboard, reduced plastic use, and recyclable materials are now standard asks from major retail buyers rather than optional extras.

What role does in-store design play in retail ESG strategies?

In-store design plays a growing role in retail ESG strategies because the physical store is one of the most visible expressions of a brand’s values. Retailers are making sustainability-driven decisions about store fixtures, display materials, lighting, and mannequins, choosing products made from recyclable or low-emission materials and designed to last longer rather than be replaced frequently.

Store fit-outs are a significant source of material waste for retailers, and brands are starting to take that seriously. Choosing display solutions made from materials that can be recycled or reused at the end of their life reduces the environmental footprint of store refreshes and seasonal updates. Polystyrene mannequins, for example, are 100% recyclable and can go through multiple recycling cycles, including mechanical recycling, making them a more sustainable choice compared to fiberglass or polyurethane alternatives that are harder to process.

Energy use in stores is also part of the in-store ESG picture. LED lighting, smart energy management systems, and efficient HVAC installations are now standard considerations in new store builds and refits. Some retailers are going further by sourcing electricity for their stores exclusively from renewable energy, which directly reduces Scope 2 emissions.

The materials used in store design also carry reputational weight. Shoppers notice when a brand’s store presentation contradicts its sustainability messaging. A fashion retailer promoting its eco-credentials while fitting out stores with single-use or non-recyclable display materials sends a mixed signal that increasingly discerning consumers pick up on.

How are retailers reporting ESG progress to stakeholders?

Retailers are reporting ESG progress through annual sustainability reports, mandatory regulatory disclosures, and third-party certification schemes. The trend is toward standardized, auditable data rather than narrative-only reporting, with frameworks like GRI, SASB, and the EU’s ESRS providing the structure that investors and regulators expect to see.

Third-party certifications add credibility to self-reported data. Ratings from organizations like EcoVadis give stakeholders an independently verified score that allows meaningful comparison across suppliers and competitors. For retailers, requiring their suppliers to hold recognized certifications is one way to extend ESG accountability through the supply chain without having to audit every partner directly.

Internally, leading retailers are setting binding, time-bound targets rather than open-ended commitments. A target to reduce GHG emissions per unit by a specific percentage by a specific year, with annual tracking against a baseline, is far more credible than a general pledge to become more sustainable. It also creates internal accountability, because the numbers either move in the right direction or they do not.

Stakeholder communication is broadening too. ESG reporting used to be primarily aimed at institutional investors. Now it is also directed at employees, suppliers, customers, and regulators, each of whom has different priorities and needs different information presented in different ways.

Which retail sectors are moving fastest on ESG adoption?

Fashion retail, sports retail, and experience-driven retail sectors are moving fastest on ESG adoption, driven by high consumer visibility, significant environmental footprints, and intense media scrutiny. Fast fashion in particular is under pressure to demonstrate credible progress on materials, waste, and labor standards after years of criticism about its environmental and social impact.

Fashion retailers have some of the most complex supply chains in any consumer sector, which makes ESG integration both more difficult and more important. Brands that have made genuine progress tend to be those that started early, set measurable targets, and made supply chain transparency a non-negotiable part of their procurement process.

Sports and outdoor retailers are another group moving quickly, partly because their customer base is particularly values-driven and partly because the environmental credentials of their products are central to their brand identity. Luxury retail is also accelerating, with heritage brands recognizing that longevity, craftsmanship, and sustainability are naturally aligned messages.

What are the biggest obstacles retailers face when meeting ESG goals?

The biggest obstacles retailers face when meeting ESG goals are supply chain complexity, data availability, cost pressures, and the challenge of balancing short-term commercial targets with long-term sustainability commitments. No single obstacle dominates, and most retailers are dealing with several at the same time.

Supply chain data is a persistent challenge. Retailers often have reasonable visibility into their own direct operations but limited insight into what their suppliers, and their suppliers’ suppliers, are actually doing. Building the systems and relationships needed to gather reliable ESG data across a complex supplier network takes time and investment.

Cost is another real tension. Sustainable materials, certified suppliers, and nearshored production often carry a higher unit cost than the cheapest available alternative. Retailers need to make the business case that the long-term benefits, including brand value, regulatory compliance, and supply chain resilience, outweigh the short-term cost premium. That case is getting easier to make as regulatory penalties and reputational risks increase, but it still requires internal alignment and clear leadership commitment.

Greenwashing risk is also an obstacle in a counterintuitive way. Some retailers are so cautious about being accused of overstating their progress that they under-communicate genuine achievements. Finding the right balance between honest, specific communication and avoiding inflated claims is a real challenge for sustainability and communications teams.

Finally, organizational structure can slow progress. ESG goals that sit with one team but require action from procurement, store design, logistics, and marketing to deliver are difficult to execute without strong cross-functional governance and clear executive sponsorship.

At IDW Display, we have spent years building a production model that helps retailers answer many of these questions practically. From sourcing electricity exclusively from renewable energy and setting binding GHG reduction targets, to holding EcoVadis Silver certification and manufacturing 100% recyclable polystyrene mannequins in our European factory, our sustainability commitments are measurable and independently verified. If you want to understand how our approach works in practice, you can read about our sustainability model. And if you are ready to talk about what that means for your next store project, get in touch with our team.

Frequently Asked Questions

How do we get started with ESG if we're a mid-sized retailer without a dedicated sustainability team?

The most practical starting point is a baseline audit of your own direct operations — energy use, waste output, and key supplier relationships — before trying to tackle the full scope of your value chain. From there, focus on two or three measurable commitments you can actually track and report on, such as switching to LED lighting across stores or requiring FSC-certified packaging from your top-ten suppliers. You don’t need a large team to begin; many retailers start by assigning ESG accountability to an existing operations or procurement lead and building from there. Third-party frameworks like GRI offer free guidance that can structure your approach from day one.

What's the difference between Scope 1, Scope 2, and Scope 3 emissions, and which should retailers prioritize first?

Scope 1 covers emissions from sources your business directly controls, such as fuel burned in company-owned vehicles or on-site generators. Scope 2 covers indirect emissions from purchased energy, most commonly the electricity powering your stores and warehouses. Scope 3 is the broadest category and includes everything upstream and downstream — supplier manufacturing, freight, customer travel to stores, and product end-of-life. Most retailers find it practical to start with Scope 1 and 2 because the data is more accessible and the levers are more directly within their control, such as switching to renewable electricity tariffs. Scope 3 is typically tackled in a second phase once internal systems for data collection and supplier engagement are in place.

How can retailers avoid greenwashing accusations when communicating their ESG progress?

The safest approach is to anchor every public claim to a specific, independently verifiable metric — a percentage reduction against a named baseline year, a named certification held, or a time-bound target with annual progress updates. Avoid vague language like ‘eco-friendly,’ ‘green,’ or ‘sustainable’ without substantiation, as these are the claims most likely to attract regulatory scrutiny, particularly under the EU’s incoming Green Claims Directive. Third-party certifications such as EcoVadis, FSC, or recognized carbon standards add a layer of credibility that self-reported data alone cannot provide. When in doubt, say less and prove more: a single well-evidenced claim is far more valuable than a broad narrative that cannot be audited.

What should retailers look for when evaluating whether a supplier genuinely meets ESG standards?

Look for suppliers that hold recognized third-party certifications rather than relying solely on self-declarations, since certifications require independent verification against defined criteria. Ask specifically about their energy sourcing, waste management practices, labor standards compliance, and whether they set their own measurable ESG targets — suppliers who track their own progress are far more likely to be genuine partners in your sustainability goals. It’s also worth checking whether their certifications are current and whether they can provide audit reports or rating scores, such as an EcoVadis assessment, that allow you to benchmark them against industry peers. A supplier that is transparent about where they still have room to improve is often more credible than one claiming perfection across every metric.

Is nearshoring always the more sustainable option, or are there situations where it doesn't make sense?

Nearshoring reduces transportation-related emissions and typically improves visibility into labor and environmental standards, but it isn’t automatically the right answer in every situation. If a regional supplier uses a significantly more carbon-intensive manufacturing process than a more distant alternative, the emission savings from shorter freight distances can be offset by higher production-stage emissions. The most rigorous approach is to conduct a full lifecycle assessment that compares total emissions across production, transport, and end-of-life for each sourcing option, rather than assuming proximity equals sustainability. That said, for most retailers the combination of reduced logistics emissions, faster lead times, easier auditing, and lower geopolitical risk makes nearshoring a strong default preference where viable alternatives exist.

How do ESG ratings like EcoVadis actually work, and how much weight do investors and buyers really give them?

EcoVadis and similar ratings assess companies across four themes — environment, labor and human rights, ethics, and sustainable procurement — using a combination of supporting documents, public data, and industry benchmarks, resulting in a score that places the company within a percentile ranking for its sector and size. The resulting scorecard is shared with the requesting party, which could be a buyer, investor, or lender, and is increasingly used as a qualification criterion in procurement tenders and supply chain onboarding processes. In practice, institutional investors and large retail buyers are giving these ratings growing weight: some buyers now set minimum EcoVadis scores as a contract requirement, and lenders are beginning to tie financing terms to ESG performance. Achieving a recognized rating is therefore both a credibility signal and, in some markets, a commercial prerequisite.

What common mistakes do retailers make when setting ESG targets, and how can they be avoided?

The most common mistake is setting targets that are aspirational but unmeasurable — pledges to ‘become more sustainable’ or to ‘work toward net zero’ without a defined baseline, timeline, or methodology. A credible target needs a starting point, a specific end goal, a deadline, and a named metric that can be tracked annually. Another frequent error is setting targets in isolation from the teams responsible for delivering them: a procurement team that wasn’t involved in setting a supplier emissions reduction target is unlikely to feel accountable for hitting it. Finally, many retailers underestimate how much data infrastructure is needed to track progress reliably, and end up unable to report against targets they’ve publicly committed to. Building the measurement system before announcing the target — rather than after — avoids a significant amount of downstream credibility risk.