Welsh businesses terminate contracts with suppliers who fail to meet sustainability standards

One in five retailers (21%) in Wales have canceled contracts with suppliers in the past 12 months who fail to meet strict ethical and sustainable standards, new research reveals.

The report published today by Barclays Business Banking – Reshaping retail: how ethics and sustainability are changing the retail ecosystem – shows that the pandemic and the growing attention to environment, sustainability and governance (ESG) are changing the business priorities. In a study of over 300 retail decision-makers, 51% in Wales say sustainability is more important today than two years ago and 49% say the same about ethical standards.

Additionally, 63% of retailers in Wales believe a long-term strategy to improve their ethical and sustainable credentials is more important than overcoming short-term supply chain disruptions. On average, retail businesses with more than 10 employees invest £504,000 a year to improve their own footprint.

However, the imperative to be more sustainable and ethical is now being felt financially throughout the supply chain. Nationally, the average is six canceled contracts per retailer, with an average value of £306,000 per contract. A total of £7.1bn of contracts have been canceled across the industry in the past 12 months.

The most common reasons for canceling contracts with suppliers were:

  • Use of non-sustainable materials (39%)
  • Unfair working hours (37%)
  • Lack of membership in a trade body that monitors ethical and sustainable standards (32%)

The importance of monitoring standards throughout the supply chain is reflected in the £179 million invested last year by retailers to join trade bodies that monitor suppliers’ ethics performance and durability. More than a quarter (28%) of retailers signed up new bodies last year, spending an average of £34,500 each to do so.

Karen Johnson, Retail and Wholesale Manager, Barclays Business Banking, noted:

“We are seeing a marked acceleration and shift among retailers in Wales towards prioritizing sustainable and ethical standards in every part of their business operations. This is now starting to weigh on retail providers with billions of pounds worth of canceled contracts every year.

“It’s driven by growing consumer demand and will grow even more as Gen Z enters the workplace and starts earning their own money. Retailers must continue to monitor and improve their ethical and sustainability standards if they are to strongly appeal to young people.

Consumer demand for enhanced credentials is highlighted in Barclays’ research with 2,000 members of the public. While product quality (77%) and price (76%) turn out to be the most important purchasing factors for Welsh consumers, ethical and sustainable credentials (57% and 57% respectively) are not far behind.

Young consumers are leading the demand. In fact, two-thirds of 16-24 year olds would stop shopping at their favorite retailer for ethical reasons and 68% of 25-34 year olds would cut ties and shop elsewhere if their favorite retailer turned out not to meet. sustainability standards.

There is, however, an advantage for retailers, in that consumers are willing to pay extra for these higher standards. On average, Welsh shoppers will pay 3.95% more for an ethical product and 3.88% more for sustainably sourced products.

Consumers also believe there is still room for improvement, with 61% wanting to see Welsh retailers make more ethical and sustainable upgrades in the future.

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