According to a recent report from Barclays Corporate Banking, UK retailers are taking a stronger stance on ethical and sustainable practices and are cancelling contracts with suppliers that do not meet these standards. In 2019, one in five retailers terminated contracts with underperforming suppliers, resulting in a total loss of £7.1 billion in orders. On average, each retailer cancelled six contracts, with a value of £306,000 per contract.
The report identified three main reasons for contract cancellations: the use of unsustainable materials (39%), unfair working hours (37%), and a lack of membership in a trade body that monitors ethical and sustainable standards (32%). These findings highlight the growing importance of ethical and sustainable practices in the retail industry.
In fact, 79% of retailers surveyed stated that long-term improvement in these areas is more important than overcoming short-term supply chain disruptions. Retail businesses with more than 10 staff members are investing an average of £504,000 per year to enhance their ethical and sustainable footprint.
The study, conducted with over 300 retail decision-makers, also revealed that 51% of respondents consider sustainability to be more important now than it was two years ago, with the same percentage stating the same about ethical standards.
Consumer demand for improved ethical and sustainable credentials is also increasing. In a survey of 2,000 members of the public, 52% of respondents ranked ethical and sustainable credentials as important factors in their purchasing decisions, closely following factors like product quality (78%) and price (76%). Younger consumers, in particular, are leading the demand, with two-thirds of 16-24 year-olds stating that they would stop shopping with their favorite retailer due to ethical concerns.
Interestingly, consumers are willing to pay a premium for products that meet higher ethical and sustainable standards. On average, shoppers are willing to pay 4.55% more for ethically-sound products and 4.36% more for sustainably-sourced goods. The report also found that 63% of consumers believe that retailers can make further improvements in ethical and sustainable practices.
To ensure ethical and sustainable practices throughout the supply chain, retailers are investing in joining trade bodies that monitor supplier performance. In 2019, retailers spent a total of £179 million to join these trade bodies. A significant portion (28%) of retailers joined new trade bodies, with an average spending of £34,500 each.
Overall, the report emphasizes the increasing significance of ethical and sustainable practices in the retail industry. Retailers that fail to meet these standards not only risk losing valuable contracts but also consumer trust. However, there is also an opportunity for retailers to set themselves apart and attract consumers by investing in ethical and sustainable practices.
Useful Links:
– Barclays Corporate Banking Report: “Reshaping Retail… how ethics and sustainability are changing retail’s ecosystem”
– Retail Sustainability Manifesto
