Retailers ditching suppliers due to sustainability fears

One in five UK retailers cancelled contracts last year with suppliers who fell foul of ethical and sustainable standards, research by Barclays has found.

The value of the cancelled contracts was £7.1bn, with unfair working hours, use of unsustainable materials, and a lack of membership to a trade body that monitors ethical and sustainable standards, the most common reasons for cancellation.

The study of more than 300 retail decision makers also found that 51% believe sustainability is more important now than it was two years ago, and 49% say the same about ethical standards.

Additionally, 79% think that a long-term strategy to improve their ethical and sustainable credentials is more important than overcoming short-term supply chain disruption.

“We are seeing a marked acceleration and shift among retailers towards prioritising sustainable and ethical standards in every part of their business operations,” said Karen Johnson, head of retail and wholesale at Barclays Corporate Banking.

“That is now starting to take its toll on retail suppliers with billions of pounds worth of contracts being cancelled every year.”

The importance of monitoring standards throughout the supply chain is reflected in the £179m that retailers invested last year in joining trade bodies that monitor supplier performance in ethics and sustainability.

Over a quarter of retailers signed up to new bodies last year, spending an average of £34,500 each in doing so.

Barclays also carried out a survey among 2,000 members of the public, finding that, on average, shoppers will pay 4.55% more for an ethically-sound product, and 4.36% more for sustainably-sourced goods.

Nearly two-thirds said that they want to see retailers make more ethical and sustainable upgrades in future.

Johnson explained how demand will rise even further as Gen Z enter the workplace and begin to earn their own money, adding: “Retailers must continue to monitor and improve their ethical and sustainability standards if they are to appeal strongly to younger demographics.”