One in five UK retailers cancelled contracts last year with suppliers who fell short of ethical and sustainable standards, according to Barclays Corporate Banking.
Research involving more than 300 retail decision-makers, shows that the pandemic and an increasing focus on environment, sustainability and governance (ESG) are shifting business priorities. Suppliers that don’t come up to scratch are paying the price.
Just over half (51%) of those surveyed said sustainability is more important now than it was two years ago. What’s more, 79% felt that a long-term strategy to improve their ethical and sustainable credentials is more important than overcoming short-term supply chain disruption. Last year, retailers spent an average of around 11% of turnover to improve their ‘green’ credentials.
Two thirds of the senior managers surveyed said customer opinion is the most important factor in determining how ethical or sustainable their business is perceived to be. Consumer demand is forcing companies to act, explained Karen Johnson, head of retail and wholesale at Barclays Corporate Banking.
Food businesses came out on top when consumers were asked about the ethical and sustainability credentials of different retailers.
A poll of 2,000 people, conducted for the report, showed ethical and sustainable credentials (52%) were behind only quality of the product (78%) and price (76%) as the most important purchasing factors.
Recyclable packaging, fair wages for staff and fair working hours for employees were the top three concerns among consumers.
They would pay on average 4.55% more for ethical products and 4.36% more for sustainable products. Two thirds of 16-24-year-olds would stop shopping with their favourite retailer due to ethical concerns, while 68% of 25-34-year-olds would cut ties and shop elsewhere if their favourite retailer was not meeting sustainability standards.
This pressure to be ‘greener’ is shaking up supply chains. Barclays estimates that £7.1bn worth of contracts have been cancelled across the industry over the last 12 months, with businesses terminating an average of between five and six supplier contracts.
The most common reasons for dumping suppliers were the use of ‘unsustainable’ materials (39%), unfair working hours (37%) and failure to join a trade body that monitors ethical and sustainable standards (32%).
