2021: 21% of retailers cut ties suppliers for ethical or suistainable reasons
Retailers within the UK have terminated contracts worth 8.3 billion euros with suppliers that didn’t meet ethical and sustainable standards in 2021. The demand for ethical and sustainable products from customers has led to a shift in how retailers shape their supply chain.
According to a research conducted by Censuswide among 302 UK-based retailers and 2.002 consumers, two thirds of younger shoppers will abandon their retailer if they don’t show commitment to ethics and sustainability. Businesses have noticed this phenomenon, as 51 percent of decision makers in retail say that sustainability is more important now than 2 years ago. Almost half of them (49 percent) say the same about ethical standards.
21% of retailers terminated contracts
As a result, one in five (21 percent) retailers that were surveyed have stopped buying inventory from suppliers that didn’t meet ethical and sustainable standards. On average, six contracts were terminated per retailer, with a an average value of 364.430 euros per contract. This adds up to a cumulative value of 8.3 billion euros.
Reasons for terminating contracts
A large group of retailers terminated those contracts because of the use of unsustainable materials (39 percent) and unfair working hours (37 percent). A lack of membership to an organization or trade body that monitors ethical and sustainable standards was also often a reason for termination (32 percent).
‘Consumers will pay more for ethically-sound and sustainably-sourced goods.’
Over a quarter of retailers (28 percent) signed up to trade bodies that monitor supplier performance in ethics and sustainability last year. On average, they spent 41.088 euros in doing so. While retailers are spending a lot to make sure they can meet ethical and sustainability standards, research also shows that consumers are willing to pay 4.55 percent more for an ethically-sound product. For sustainably-sourced goods, they will pay 4.36 percent more.
‘Retailers must improve their standards’
“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”, said Karen Johnson, Head of Retail and Wholesale at Barclays Corporate Banking.
‘We are seeing a marked acceleration towards prioritising sustainable and ethical standards.’
“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.”