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UK retailers have cancelled £7.1 billion in contracts across the last 12 months with suppliers that do not meet stringent ethical and sustainable standards, according to research by Barclays Corporate Banking that shows that the pandemic and an increasing focus on environment, sustainability and governance (ESG) are shifting business priorities.
The report, titled ‘Reshaping retail: how ethics and sustainability are changing retail’s ecosystem’, is based on a study of more than 300 retail decision makers. The majority (51 per cent) say sustainability is more important now than it was two years ago and 49 per cent say the same about ethical standards.
Additionally, almost four in five (79 per cent) retailers think that a long-term strategy to improve their ethical and sustainable credentials is more important than overcoming short-term supply chain disruption. On an average, retail businesses with more than 10 staff are investing £504,000 per year to improve their own footprints, Barclays said in a press release.
UK retailers have cancelled £7.1 billion in contracts across the last 12 months with suppliers that don’t meet stringent ethical and sustainable standards, according to research by Barclays Corporate Banking that shows that the pandemic and an increasing focus on environment, sustainability and governance (ESG) are shifting business priorities.
However, the imperative to be more sustainable and ethical is now being felt financially across the supply chain. Over a fifth of retailers (21 per cent) that Barclays surveyed have cut ties with suppliers in the last year because they are not meeting required standards.
Among this group, the average is six contracts cancelled per retailer, with an average value of £306,000 per contract. Cumulatively, £7.1 billion worth of contracts have been cancelled across the industry over the last 12 months.
The most common reasons for cancelling contracts with suppliers were use of unsustainable materials, (39 per cent), unfair working hours (37 per cent) and lack of membership to trade body that monitors ethical and sustainable standards (32 per cent).
The importance of monitoring standards throughout the supply chain is reflected in the £179 million retailers invested last year in joining trade bodies that monitor supplier performance in ethics and sustainability. Over a quarter (28 per cent) of retailers signed up to new bodies last year, spending an average of £34,500 each in doing so.
The consumer demand for improved credentials is highlighted in Barclays’ research among 2,000 members of the public. While quality of product (78 per cent) and price (76 per cent) are shown to be the purchasing factors of most importance to consumers, ethical and sustainable credentials (both 52 per cent) are not far behind.
Younger consumers are leading the demand. In fact, two thirds of 16-24-year-olds would stop shopping with their favourite retailer due to ethical concerns and 68 per cent of 25-34-year-olds would cut ties and shop elsewhere if their favourite retailer was found not to meet sustainability standards.
There is, however, an upside for retailers, in that consumers are prepared to pay a premium for these higher standards. On an average, shoppers will pay 4.55 per cent more for an ethically-sound product and 4.36 per cent more for sustainably-sourced goods.
Consumers do also feel there is room for further improvement with nearly two thirds (63 per cent) wanting to see retailers make more ethical and sustainable upgrades in future.
Fibre2Fashion News Desk (DS)
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