Nordic retail sector's climate transition: Challenges and opportunities

The Nordic retail and wholesale trade sector shows resilience and growth, even in the face of global turbulence and uncertainty. From local grocery stores to global e-commerce giants, the sector is far-reaching and plays a vital role in the economy, connecting producers and consumers while also driving innovation in the marketplace. As environmental, social and governance (ESG) factors gain prominence, Nordic retailers face mounting pressure to adapt. They must now balance traditional business objectives with new imperatives: minimising waste, ensuring ethical sourcing and promoting fair labour practices. At the same time, they are striving for efficient supply chains and transparent operations amid intensifying regulatory scrutiny and increased disclosure obligations.

Waste production remains one of the most pressing challenges for the sector. Yet in the Nordic countries, per capita waste levels have remained stable over the past decade, which is a good sign. There is still much to improve, and the slight decrease in 2022 could have been caused by soaring inflation and a resulting temporary fall in consumption. But the stable levels could also signal that waste legislation, recycling and circularity have had a controlling effect. 

Municipal waste generated (kg per capita)

The increasing parcel shipment counts from e-commerce giants like Temu, Shein, and Amazon also highlight a pressing need to address the global retail sector’s growing contribution to waste generation. For example, Finnish customs reported that in 2024, approximately 28.2 million imports valued under €150 entered Finland, out of which 97.7% were from China. The figure for raw imported goods from China rose by 823%, a fourfold rise in total value of imports compared to the previous year. In response to this trend, the EU is driving to remove the custom duties exemption that currently applies to the category of low-value imports under €150.

Rising regulatory pressures

As for many sectors, heightened regulatory scrutiny is a central theme for the retail sector. Out of the entire global emissions pool, retail accounts for approximately 25%, highlighting the sector’s significance. However, a large portion of these emissions falls under scope 3—originating from activities beyond retailers’ direct control—making them challenging to address. The European Union has adopted regulations to catalyse progress on these challenges.

The Corporate Sustainability Reporting Directive (CSRD), rolling out in phases from 2024, will require retailers to disclose a broader range of ESG metrics, including carbon emissions and labour practices, increasing overall transparency. Building on this, the Corporate Sustainability Due Diligence Directive (CSDDD) will enforce accountability across the value chain, requiring companies to assess and address environmental and human rights risks. However, the EU is currently working on a so-called “omnibus package,” which will most likely simplify and reduce reporting duties for companies, especially for small- and medium-sized companies.

Meanwhile, regulations such as the EU Taxonomy for Sustainable Activities, Extended Producer Responsibility (EPR) laws and the Packaging and Packaging Waste Regulation (PPWR) push retailers to reduce waste in their supply-chains, adopt circular economy principles and meet stricter sustainability thresholds. In addition, the Ecodesign for Sustainable Products Regulation (ESPR) and the EU Plastics Strategy drive resource efficiency and curb single-use plastics through better product design and materials innovation.

Complementing these EU-wide measures, Nordic countries have implemented their own national regulations, often surpassing basic EU standards. These country-specific measures enforce ambitious carbon reduction targets, demand ethical supply chain management and raise corporate transparency requirements. These regulatory pressures are a key driver of ESG efforts in the sector, spurring more responsible sourcing, reduced carbon footprints and stronger accountability across the value chain.

Towards digital platform services and supply chain traceability

The retail sector is undergoing a digital transformation to enhance operations and meet growing sustainability demands. Technological advancements are reshaping the industry landscape:

• Smart inventory management: In-store sensors, data analytics and AI-driven insights allow businesses to optimise their inventory levels, reducing overstocking and waste. 
   
• Enhanced customer engagement: Data-driven insights and automation enable personalised experiences, improving customer satisfaction. 
   
• Automation: Robotics and automation, particularly in warehouses, streamline logistics, allowing staff to focus on high-value areas such as customer interaction and innovation.
   
• Resource optimisation: Digital tools not only increase efficiency but also contribute to resource-conscious use of materials and energy across the value chain. 

Another major area of transformation involves supply-chain decarbonisation, electrification and renewable energy integration.

• Decarbonisation: By pushing suppliers to switch to electric fleets and incorporate biofuels, the sector can cut a major portion of its emissions – its scope 3 emissions – and enhance local air quality.
   
• Sustainable materials: There’s a growing shift towards using renewable, recyclable and biodegradable material in products and packaging. This reduces reliance on virgin plastics, reduces overall environmental footprints and aligns with circular economy practices. 
   
• Enhanced traceability: Internet-of-Things (IoT)-powered solutions, often driven by regulatory pressures, are bolstering transparency, allowing consumers and stakeholders to track a product’s lifecycle from cradle to grave. 

Collectively, these shifts help reduce waste, mitigate climate impact and bolster a company’s reputation as a responsible industry leader.

With these technological advancements and perseverance, the Nordic retail sector has made significant progress towards meeting its goals. However, this transformation will require continued significant investment and focus globally to align with a 1.5°C pathway. At Nordea, we have a general 2030 target of reducing carbon emissions across our lending and investment portfolios by 40-50%.

Ever-changing consumer sentiment

Retail companies, especially those in the Nordics, face increasing expectations from regulators and consumers alike. Sustainability considerations are increasingly integrated into demand patterns and purchasing decisions. As a result, retail companies need to address not only their direct emissions but also the indirect emissions from their wider supply chain (scope 3 emissions). Supply chain traceability and transparency are likely to face increasing scrutiny.

For both regulators and consumers, regulatory compliance and good practices are important. Shifting to sustainable options early can yield multiple benefits for retail companies, including:

• Enhanced brand value
   
• Access to subsidies
   
• Improved operational efficiency
   
• Increased supply chain resilience
   
• Reduced carbon footprint

Failing to adapt carries significant risks, including stranded assets, reputational harm and reduced competitiveness, in a market where sustainability is becoming a license to operate.

Nordea supports the climate transition of the retail and wholesale sector by offering a range of solutions and products to our large as well as small- and medium-sized corporate customers.