A New Leaf: X5 Group's Evolving Sustainability Vision
Business perspective at Pyaterochka, as articulated by Alina Yuhnevich, is centered around the lens of sustainable development.
A fresh take on X5 Group's journey over the past few years in shaping their sustainability program "Pyaterochka with Care," now a key component of their Environmental, Social, and Governance (ESG) strategy.
Initially, the ESG plan followed a rigid structure, with goals set for three to five years. Recognizing the need for adaptability, X5 Group's trading network now reviews their objectives every six months, taking into account global happenings and the evolving needs of society. Though major vectors for impact remain, the content of their initiatives can be updated based on societal and business demands.
In the past, ESG projects primarily focused on the areas of ecology, social impact, and governance. Now, X5 Group aims for a more holistic approach, ensuring that everything they do in terms of sustainability benefits people in one way or another. They've swapped customer-centricity for human-centricity, making individuals their main focus. By actively communicating with "guests" (their term for customers), they gather insights into what matters most to them and tailor their efforts to meet these needs.
One result of this focused approach is the launch of the "Care Manager" project. Anyone can contribute to X5 Group's ESG strategy by submitting proposals through their website for review. The most impactful ideas will be implemented, fostering a sense of community involvement and ownership. X5 Group has also shifted its focus from aligning with international directives to achieving national goals.
A Peek into the Changing Landscape of Sustainability
To remain relevant in the ever-evolving sustainability arena, projects must adapt to emerging trends. Here are some key developments impacting the ESG landscape:
The Blurred Line between Online and Offline
Digital transformation is blurring the boundaries between online and offline experiences. This includes the development of so-called "phygital" directions, such as scaling community centers into both physical and digital spaces. By providing digital tools in stores where hosting events isn't feasible, they can continue engaging customers and enhancing the shopping experience.
Inclusivity goes digital
Retail stores are adapting to cater to the needs of people with health limitations by integrating inclusive profiles in their mobile apps. They are also working on adapting their entire online environment to be accessible for people of all abilities. X5 Group is collaborating with Russia's largest social network to offer an IT employee course on digital accessibility, empowering them to develop inclusive solutions for customers with various physical, sensory, or cognitive challenges.
Artificial intelligence (AI) also plays a vital role in the sustainability strategy. AI has been integrated into automated grocery ordering systems to reduce waste more effectively than manual methods. The same goes for optimizing delivery routes, which helps reduce exhaust emissions and fuel consumption. "Smart stores" are another hot trend, reducing energy consumption in retail outlets by an average of 5%.
Focus on the local
People have become increasingly local-minded, seeking to influence and change their immediate surroundings. This has sparked a trend in funding projects within walking distance and supporting local initiatives.
Measuring Success
To evaluate the impact of their key ESG projects, X5 Group follows the principle of double materiality, considering both the technical KPIs of a project and its economic efficiency. Their main parameter as a retailer is the Net Promoter Score (NPS), which they measure through customer surveys based on several ESG indicators. Analyses have shown that stores implementing the Community Management System (CMS) have an NPS 0.8% higher, a significant increase in customer loyalty. The CMS also boosts foot traffic by 1.1%, thanks to events held in the stores.
Internal ambassadors within X5 Group, consisting of early adopters and opinion leaders, play a crucial role in promoting ESG principles throughout the company. As the ESG direction has evolved in recent years, it has progressed from an add-on to a necessary function, providing stability to the entire business.
When Decisions Don't Pan Out
As with any venture, there have been experiments that didn't yield the desired results. One instance was the installation of reverse vending machines for recycling plastic bottles, an initiative spearheaded by suppliers. While the idea seemed promising, the high cost, limited types of recyclables, vulnerability to breakdowns, and the introduction of separate waste containers made it an impractical solution. Consequently, only a few reverse vending machines remain in X5 Group's stores today.
Another example is the minimization of waste sent to landfills using biogas installations. These trials didn't prove effective due to the expensive equipment and complications in implementation. Instead, the focus has shifted to maximizing the use of food products to prevent waste.
Integration of Sustainability Across Business Processes
ESG considerations are now an integral part of X5 Group's overall strategy, shaping decisions and processes within various departments. Whether it's optimizing energy consumption through renewable energy sources, streamlining delivery routes, or adapting stores to better serve customers with disabilities, every function within the company plays a role in pursuing sustainability.
This heightened emphasis on ESG principles has transformed them from a peripheral concern to a cornerstone of the business, driving positive change and boosting overall performance.
- X5 Group has expanded the scope of their sustainability initiatives beyond traditional areas like ecology and governance, now focusing on education-and-self-development and sports as well, with a human-centric approach that prioritizes the needs of individuals.
- In line with the evolving landscape of sustainability, X5 Group's projects, such as the "Care Manager" and digital accessibility initiatives, incorporate advanced technologies like artificial intelligence and digital platforms to achieve their goals in education, self-development, sports, and more, while maintaining a commitment to local communities and reducing waste.
