Building a More Sustainable Retail Supply Chain

From the pandemic forcing businesses and manufacturers to shut down, to natural disasters and dramatic demand fluctuations, the retail industry had, and continues, to face a multitude of operational and economic challenges. Leading retailers are responding by rebooting and focusing on their sustainable supply chain programs to build resilience, and respond to new business conditions. For example, the rapid transition to e-commerce amplifies certain sustainability issues for retailers, like in packaging and fulfillment. Also, the rise of store and “own” brands is a double-edged sword. On one hand, this provides retailers a great way to innovate and capitalize on market demands for sustainable products. On the other hand, it adds higher risk on the retailer for how those products are made with regard to not only safety (higher brand risks as well as increased liability when their brand is on the product) but also sustainability claims. And there is also the consumer experience to consider. More consumers are prioritizing sustainability and they expect to see their values mirrored in their digital and “own” brand experience.

As pressures around sustainability and transparency grow stronger, retailers need a strategic rethink of how they approach, value, build and optimize entire value chains. The key to rethinking and rebuilding a stronger, more resilient retail supply chain is collaboration. “COVID caused a huge increase in visibility and opportunity to look at sustainability,” says Andrew Newnham, Director of Group Procurement at Marks & Spencer. As Newnham suggests, the silver lining in the current landscape is the opportunity for retailers to connect with their suppliers, specifically on their sustainability efforts and goals.

Let’s explore specific areas where communication and working directly with suppliers enables retailers to create a more holistic approach to supply chain sustainability.

Scope 3

Scope 3 emissions account for around 80% of total emissions for manufacturers at consumer-goods organizations. Because of this, retailers need to have transparent conversations with their suppliers about what they are doing to combat climate change and lower Scope 3 emissions. Also, set the expectations for them; tell suppliers what they should be doing and how. The ultimate goal is for top retailers to develop a universal plan with suppliers together to lower Scope 3 emissions.

Reputation

An organization’s sustainability performance is more than just setting goals and fulfilling commitments. It also plays an important role in gaining new customers and retaining existing ones. For example, more consumers are aligning values with shopping habits. In fact, 73% of consumers would change their purchasing and consumption habits to reduce impact on the environment (according to Nielsen). Therefore, retailers should implement proper risk management practices to make sure they are monitoring and fully aware of the actions within the entire supply chain. This also ensures the values and goals of their partners align with their own mission and values.

Retailers with sustainable procurement initiatives underway are already realizing a strong return on their investments. At EcoVadis’ 2021 Sustain conference, Senior Vice President of Global Procurement and Supply Chain at Edgewell Personal Care, Nirav Mehta, told attendees, “the increased level of awareness due to COVID helped drive key projects forward, including a key project with AI in logistics to leverage predictive analytics in our work. It was the ‘perfect time’ to get this initiative up and running.”

It’s promising that we are hearing from retailers who are already reaping the rewards of their sustainable procurement initiatives, but there’s still work to be done. Here’s what retailers who are reassessing or starting their sustainable supply chain programs can learn from those already achieving success.

• Align engagement with mutual (buyer-supplier) value creation. Today, leading programs are using validated sustainability indicators or ratings, delivered digitally. This approach offers the right insights to enable procurement to collaborate, monitor and improve performance, and create value and ROI for all parties. (Read more about all seven ROI levers.)

• Coverage is king! Ensure your supply chain sustainability tools and intelligence are comprehensive, and have adequate depth of criteria, and cover the full industrial breadth (e.g. categories) and geographical range (all countries and language adaptations) of your supply base. Review all five critical factors here.

• Leverage data and benchmarks in stakeholder relations. What you say (or don’t say) about your sustainability efforts matters now more than ever, as this is a major focus for stakeholders and consumers. So, develop a clear plan for benchmark reporting and measuring progress that you can share publicly.

• Seize this moment to engage suppliers. Organizations everywhere have been communicating with and monitoring their suppliers like never before. Take advantage of this given landscape to remind your suppliers how critical and beneficial sustainable practices are for everyone.

No matter where your retail company’s sustainable supply chain journey stands, the case for investing in building resilience and competitiveness has never been stronger, and the tools are available today. All that awaits is you to take action!

Interested in learning how to help your retail organization be more sustainable, engage with suppliers, and expand credible transparency to your supply base? Contact us here.