Failure to act on ESG scuppers £7bn in retail contracts

Pressure to act ethically and sustainably is having a sizeable commercial impact on the retail industry’s supply chain, according to new figures, with more than £7.1bn of supplier contracts cancelled in the past year alone as retailers seek to improve their credentials.

The research, conducted by Barclays Corporate, highlights the example of home furnishings retailer Dunelm, a retailer with a far-reaching policy that regularly audits tier 1 suppliers via an independent agency, moving to its tier 2 this year.

Where social and ethical performance shortfalls are spotted, suppliers are given action plans with tight deadlines to rectify heir operations, or risk being dropped from the supply chain. In addition, the company has linked management incentive plans to the purchase of responsibly sourced cotton.

Barclays’ research confirms that Dunelm’s policies and practices are far from unique and are becoming widespread among UK retailers.

Pricing decisions may also have a part to play in the drive by retailers to enhance ethical and sustainable credentials, and the research demonstrates a noticeable willingness among some consumers to pay more for products and services that meet their expectations, with retailers showing a level of confidence that they can leverage price to reflect higher standards.

However, Barclays notes that a trend towards a sustainable or ethical premium may not become apparent until the spending power of Generation Z (the generation that is the most enthusiastic about it), becomes a more significant part of the customer base.

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