A new report published by Barclays Corporate Banking and covering the year January 2021 – January 2022, revealed that British retailers have collectively cancelled £7.1billion contracts with suppliers in that time period, because of concerns over ethical matters and the environment.
21 per cent of the largest British retailers cancelled contracts with suppliers which failed to meet their ESG (environmental, social and governance) standards. The most widely cited reason for the cancellation was suppliers’ failure to use materials which met sustainability criteria, together with a failure to provide good working conditions and appropriate pay for staff.
Retailers are also starting to demand that their suppliers achieve particular sustainability certification or otherwise provide evidence that certain standards are being met, with membership of Trade Associations also helping to build confidence in the supply chain.
This is a loud and clear message from the retail industry – which is listening to the equally loud clarion call from consumers – which many suppliers have been failing to hear. 51 per cent of the 300 retail decision makers surveyed said sustainability is increasingly important to them, compared with two years ago, whilst 79% believe the best way to make long-term sustainable and ethical improvements is via an improved supply chain.
Retail businesses with more than 10 staff are investing an average of £504,000 per year to improve their carbon footprints. Of the fifth which cut supplier contracts over their failure to meet the same standards, an average of six contracts with an average value of £306,000 per contract were cancelled.
The head of retail and wholesale at Barclays Corporate Banking, Karen Johnson, said: “We are seeing a marked acceleration and shift among retailers towards prioritising sustainable and ethical standards in every part of their business operations. That is now starting to take its toll on retail suppliers with billions of pounds worth of contracts being cancelled every year.
“It’s being driven by increasing consumer demand and will rise even further as Gen Z enter the workplace and begin to earn their own money. Retailers must continue to monitor and improve their ethical and sustainability standards if they are to appeal strongly to younger demographics.”
Barclays’ research among 2,000 members of the public confirmed the sustainable shift in consumer mindset. Whilst product quality (78 per cent) and price (76 per cent) are the purchasing factors of most importance, ethical and sustainable credentials are not far behind (both 52 per cent). Two thirds of 16 to 24 year olds claimed that ethical concerns would prevent them shopping with their favourite retailer, whilst 68 per cent of 25 to 34 year olds would similarly cut ties.
Consumers also indicated that they are prepared to pay a premium for higher standards, with shoppers willing to pay an average of 4.55 per cent more for an ethically-sound product and 4.36 per cent more for sustainably sourced articles. Nearly two thirds of consumers are keen for retailers make more ethical and sustainable business choices in future.
