‘1 in 5’ retailers cancel supplier contracts over poor ethical standards

Last year, one in five UK retailers cancelled contracts with suppliers who fell foul of ethical and sustainability standards according to research from Barclays Corporate Banking.

The cumulative value of these contracts was £7.1 billion according to the research, which surveyed more than 300 retail decision makers.

The research found four-in-five - 79 per cent - of retailers think long-term improvement to sustainable and ethical credentials is more important than overcoming short-term supply chain disruption.

The majority of the survey’s respondents - 51 per cent - said sustainability is more important now than it was two years ago and 49 per cent said the same about ethical standards.

On average, the research found retail businesses with more than 10 staff are investing £504,000 per year to improve their own footprints.

The most common reason for cancelling contracts with suppliers was the use of unsustainable materials, which was cited by 39 per cent of respondents.

Unfair working hours were cited as a reason for cancellation by 37 per cent of suppliers, while lack of membership to a trade body that monitors ethical and sustainability standards was cited by 32 per cent.

Barclay’s research cited stats that said that UK retailers invested £179 million last year in joining trade bodies that monitor supplier performance in ethics and sustainability, while 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.

Quality of product and price were shown to be the purchasing factors of most importance to consumers and were cited by 78 per cent and 76 per cent of them, respectively.

Ethical and sustainable credentials were the third most popular consideration, cited by 52 per cent of respondents.

Younger consumers are leading the demand for ethical supply chains according to the research, two thirds of 16-24-year-olds would stop shopping with their favourite retailer due to ethical concerns and 68 per cent of 25 to 34-year-olds would cut ties and shop elsewhere if their favourite retailer was found not to meet sustainability standards.

However, on average, the research found that shoppers will pay 4.55 per cent more for an ethically-sound product and 4.36 per cent more for sustainably sourced goods.

In addition, consumers feel there is room for further improvement according to the research with nearly two thirds - 63 per cent - wanting to see retailers make more ethical and sustainable upgrades in future.

“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.

“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.”

She added: “Retailers must continue to monitor and improve their ethical and sustainability standards if they are to appeal strongly to younger demographics.”

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