ALMOST one in five Scots retailers are cancelling supplier contracts because of ethical and sustainable standards, new research reveals.
17% of retailers in Scotland have cancelled contracts with suppliers across the last 12 months who don’t meet stringent ethical and sustainable standards, according to a report out today from Barclays Corporate Banking.
The report shows that the pandemic and an increasing focus on Environment, Sustainability and Governance (ESG) are shifting business priorities.
In a study of more than 300 retail decision makers, 51% in Scotland say sustainability is more important now than it was two years ago and 49% say the same about ethical standards.
Additionally, 83% retailers in Scotland think that a long-term strategy to improve their ethical and sustainable credentials is more important than overcoming short-term supply chain disruption.
On average, retail businesses with more than 10 staff are investing £504,000 per year to improve their own footprints.
The drive to be more sustainable and ethical is being felt financially across the supply chain though.
Across the UK, the average is six contracts cancelled per retailer, with an average value of £306,000 per contract.
In total, £7.1bn worth of contracts have been cancelled across the industry over the last year.
The report found that the most common reasons for cancelling contracts with suppliers were:
- Use of unsustainable materials (39%)
- Unfair working hours (37%)
- Lack of membership to trade body that monitors ethical and sustainable standards (32%)
The consumer demand for improved credentials is highlighted in Barclays’ research among 2,000 members of the public.
While quality of product (84%) and price (76%) are shown to be the purchasing factors of most importance to consumers in Scotland, ethical and sustainable credentials (52% and 53% respectively) are not far behind.
Younger consumers are the ones leading the demand.
Two thirds of 16-24-year-olds said they would stop shopping with their favourite retailer due to ethical concerns.
Further to this, 68% of 25-34-year-olds would cut ties and shop elsewhere if their favourite retailer was found not to meet sustainability standards.
An upside for retailers however, is that Scottish shoppers have said they will pay 5% more for an ethically-sound product and the same for sustainably-sourced goods.
Euan Murray, relationship director and retail sector expert at Barclays Corporate Banking, Scotland said: “The impact of COP26 in Glasgow and the need for all businesses to become more sustainable is now starting to hit home amongst retailers.
“We are seeing a marked acceleration and shift among retailers in Scotland 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.
“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.”