Cost Pressures and Net Zero Challenges: Retail’s Perfect Storm

By Craig Baldwin, Sales Director

The UK retail sector is currently grappling with something of a perfect storm. Economic pressures and sustainability mandates threaten both present stability and future growth.

From the escalating costs introduced by the 2025 Budget to the complex demands of Scope 3 emissions reporting, retailers must now be ready to take on a range of new challenges. Ensuring your company is involved in the right strategic partnerships is as important now as it ever has been, with retail expertise at a premium.

Under (Economic) Pressure 

The 2025 Budget has imposed significant financial burdens on the retail industry. From rises in National Insurance Contributions (NICs) and the National Living Wage (NLW), to a reduction in business rates relief. Because of this, retailers face multiple additional financial strains that must be addressed. With the retail sector being the largest employers of individuals making minimum wage, the cumulative costs are expected to hinder retail investment and even potentially lead to job losses. 

As part of the 2025 Budget, Employer NIC rate has increased from 13.8% to 15%. The earnings threshold has also been lowered from £9,100 to £5,000. This adjustment is expected to add over £2bn to retailers’ annual tax expenses. Add to this business rates relief being reduced from 75% to 40%, and retailers suddenly find themselves scrambling for innovative methods of cutting costs across the board. 

So, what kind of solutions are out there? Where should the retail industry look to make up the difference? And what kind of partnerships will be the most beneficial going forward?  

Rises in National Insurance Contributions are expected to add £2bn to retailers’ annual tax expenses.

To find out more about tackling rising costs, contact Commercial’s team of retail experts today.

Cutting Costs 

Commercial’s retail expertise dates back more than three decades. Our team of specialists possess the necessary skills and knowledge to improve the efficiency of any retailer. Consolidating procurement can yield significant benefits to various areas of your business. Leveraging purchasing power across different categories, such as office supplies, print, IT and facilities management, can lead to hugely impactful cost savings. By consolidating your supplier base, you can vastly improve operational efficiency, streamline your operations and reduce administrative overheads. 

A retail partnership with Commercial also means access to cutting-edge advanced reporting tools. Utilising tools like Power BI can enhance both data visibility and reporting capabilities. Dashboards can be fully customised to your preferences and used to provide up-to-date information on cost metrics. They can also measure procurement activities across the entire breadth of your estate. By integrating your data from various sources, you will be able to undertake a more comprehensive analysis. This will obviously lead to more informed decisions. 

By collaborating with Commercial and your supplier network, you can standardise the way you collect, measure and report data. This will ensure consistency across your supply chain, while also giving you an all-encompassing view of your reporting. Our team of retail specialists can recommend investments in the right technology and training for your business.  

By implementing automated systems, we can streamline your data collection and reporting processes. Providing training for both your team and your suppliers will mean a shared understanding of reporting requirements. It can also ease any previous or particularly tricky sticking points over data methodologies. Our experts can source and implement the right technology upgrades for your organisation’s IT infrastructure. In addition to this, Commercial will support the integration of advanced reporting tools and data management systems for your business. 

The Scope 3 Conundrum  

As if all that effort maximising budgets isn’t enough, in parallel, retailers are also under increasing pressure to meet Net-Zero targets. In recent years, Scope 3 emissions have become a hot topic for all businesses. It is now the responsibility of an organisation to be aware of all indirect emissions within your value chain, including those from suppliers, transportation and product disposal. For retailers, Scope 3 accounts for an average of 91% of total emissions, so reporting and managing these emissions presents a significant challenge. 

If you consolidate your procurement with Commercial, you will gain greater visibility of your Scope 3 emissions. Because the reporting is all done through one source, consistency is ensured as we track emissions and compare them with targets and requirements. Consolidating orders also has a significant impact upon Scope 3. Less vans on the road means less emissions to worry about and Commercial can give you accurate details on the emissions associated with a given product. When we calculate our own Scope 3 emissions, our partners are incorporated into this, leading to shared benefits and ease of communication across the entire network. 

Engaging with your suppliers is crucial for the effective management of Scope 3 emissions. Encouraging them to share their own data will improve the accuracy of your reporting and give you a clearer picture of the emissions you are not directly responsible for. Additionally, partnering with your suppliers on sustainability initiatives can lead to a shared reduction in emissions. 

Selecting the correct training programmes for your team and your suppliers ensures a shared understanding of sustainability goals. Once everyone is aligned and working towards the same targets, emissions will be far easier to identify and reduce using a range of innovative solutions that Commercial’s team of experts can source for you. 

Take The Leap With Commercial 

The UK retail sector is staring down the barrel at significant changes that will have to be made in the coming years. With increasing operational costs and complex sustainability requirements, retailers must adopt innovative strategies like advanced reporting tools, supplier collaboration, investment in technology and consolidation. As retail experts, Commercial are committed to supporting retailers in navigating these challenges effectively and achieving sustainability and financial goals.