Why Sustainable Product Returns Are So Hard to Get Right

Product returns have become one of the most persistent problems in the retail industry.

In 2025, retailers processed an estimated $850 billion in returned goods, and most of those products never made it back to shelves. Even with investments in reverse logistics, the returns outcome hasn’t shifted much.

Returns still add excess costs, present landfill diversion challenges, and increase brand risk when they end up in unauthorized secondary channels. At the same time, expectations are increasing. Landfill diversion mandates are expanding. And a growing number of Extended Producer Responsibility (EPR) laws hold you accountable for what happens after a product leaves your control.

The bar is getting higher, and the results are hard to reach. Most returns systems weren’t designed to handle the range of conditions products come back in, or to make consistent decisions about what happens next. And that limitation shapes the outcome from the start.

Where Visibility and Control Break Down

The challenge with returns doesn’t start when products come back. It starts when they leave sellable inventory.

Up to that point, you have structure. Inventory is tracked, and its movement is visible. Decisions are made within defined systems. But once a product is removed from inventory, that structure falls away. Handling often shifts to the store or site level. Different locations manage returns in different ways, based on available space, staffing, and internal processes.

That shift changes how decisions get made.

When handling is decentralized, there’s no single standard guiding what happens next. Each site makes calls based on its own constraints, which leads to different outcomes for similar returns. Over time, consistency breaks down, and so does control over where products ultimately end up – increasing brand risk.

Returns are already a major retailer focus, with two-thirds planning updates to their returns process in 2026, often aimed at reducing return rates and controlling costs. But even with that level of attention, what happens to the product itself still requires a different approach to how returns are handled today.

Why Returns Are Often the Last Challenge to Solve

That need for a different approach usually becomes clear once you turn your attention to returns. By that point, you’ve already made progress on easier waste streams.

Materials like cardboard and pallets are relatively simple to divert. They’re consistent, easy to separate, and fit cleanly into existing recycling programs. Those gains come early, and they’re measurable.

Returns are different.

They don’t behave like a material stream. They show up as finished products – mixed and not compatible with standard recycling or recovery pathways. That makes them harder to process and integrate into the systems you’ve already built.

This is where many sustainability programs lose momentum.

You’re still generating a significant amount of waste through returns, but the tools that worked for earlier gains don’t apply in the same way. Progress slows because the remaining material requires a different kind of handling.

You can continue to optimize around the edges, but without a way to consistently break down, sort, and divert returned products, the approach you’ve been using can’t extend any further.

How Returns Are Managed Today – and Where the Model Falls Short

To deal with returns at scale, most organizations rely on a combination of approaches that fit within existing operations.

Liquidation is often used to move volume quickly. It helps reduce backlog and recovers some value, especially when speed is a priority. In other cases, returns are routed to bulk landfill disposal. These approaches make it possible to manage high volumes without disrupting store or warehouse operations, but they also introduce tradeoffs.

They solve for immediate needs – clearing space and keeping operations moving – but they reduce control over how products are sold and where they end up, which creates brand exposure. And the underlying challenge of how returns are processed is still there.

Why the Current Model Limits What’s Possible

Returns are handled in environments designed to move product, not to break it down. Stores and distribution centers are built for speed, space efficiency, and throughput. They’re not set up to evaluate each returned item, separate materials, or determine the best path for recovery – and that shapes what happens next.

When returns are processed in those environments, the outcome is largely decided before any sustainability strategy comes into play. Products are grouped, moved, and cleared in ways that align with operational priorities. Once that happens, the opportunity to recover value or divert materials more effectively becomes limited. That’s where progress starts to level off.

You can improve processes, add vendors, or introduce new policies, but those changes are working within the same constraints. As long as returns are handled in environments that aren’t built for sorting, separation, and controlled disposition, the range of possible outcomes stays narrow.

Changing the outcome requires changing where and how that work happens.

What It Takes to Change the Outcome

If the limitation is structural, the solution has to be as well.

Returns need to be handled in an environment that’s designed for what they actually require – evaluation, separation, and controlled routing. That work is difficult to do at the store or site level, but it becomes more practical when it’s centralized and purpose-built.

When returns are aggregated across locations, volume becomes an advantage rather than a constraint. Materials that would be difficult to process at a single site can be transferred to a controlled diversion channel, separated, and then routed to the most appropriate end-of-life path – whether that’s recycling, resale, donation, or another form of recovery.

Control improves as well. Handling decisions are no longer made in isolation at the site level. There’s a consistent approach to how products are processed, where they go, and how verified outcomes are tracked. That makes it easier to protect brand integrity, reduce unintended exposure in secondary markets, and fulfill mandated reporting requirements.

This kind of model doesn’t remove the complexity of returns, but it changes how that complexity is managed. Instead of working around it, the process is built to handle it.

The Next Phase of Returns Management

Product returns aren’t going away, and expectations for how they’re handled will only continue to rise.

If you’ve already made progress on the easier, more straightforward parts of your waste stream, what remains are the areas that don’t fit neatly into existing systems – and returns sit right at the center of that challenge.

The limitations you’re running into aren’t just operational. They come from how returns are structured and where they’re processed. As long as that foundation stays the same, the results won’t change much.

Moving forward doesn’t mean starting over, but it does require a different approach. One that’s built for how returns actually show up – and capable of delivering the kind of consistent, controlled outcomes that current systems struggle to produce.

Learn more about how a different approach to product returns can improve your sustainability outcomes. Talk to our ZeroPoint team.