How is the customer perception of value impacting buying, sourcing and ranging decisions for retailers?
Driving sustainable value within the retail sector is an increasingly important issue in today's world. Consumers are becoming more aware of the impact their purchases have on the environment and society and are looking for retailers and consumer brands to be responsible and make a positive impact.
We looked to understand whether retailers and consumer brands organisations are prioritising long-term sustainable value over shorter-term economic objectives by looking at the end-to-end supply chain overlaid with our Prosperity Framework. This helped to determine the ethical, environmental, and economic factors that represent the values and behaviours that enable a business, and the world it impacts, to prosper sustainably.
One way for retailers to demonstrate ethical value is by implementing a robust and measurable responsible sourcing policy, only sourcing products from suppliers who can demonstrate a positive impact on the environment and society, and who operate in a fair and ethical manner. Organisations can prioritize ethical value by maximising transparency throughout their supply chains with a commitment to calling out inappropriate practices and only working with suppliers who uphold the highest ethical standards. Top-performing organisations will be doing this regardless of potential economic costs.
Investment is required in education and learning resources to enable buyers and procurement organisations to determine what makes an ethical supplier and work together as an industry to set universally accepted guidelines to follow (e.g. the ILO indicators). There is too much reliance on suppliers providing self-certified audits and buying departments lack time to conduct any meaningful evaluation of supplier submissions.
Cross-industry and sector learning should also be encouraged: for example, public sector organisations have generally been more proactive in addressing this within their supplier evaluation frameworks.
Opportunity exists for the development of an independently verified supplier database and a gold standard based on industry-standard indicators (e.g. the 11 ILO indicators for Modern Slavery) for fully compliant suppliers, enabling buying organisations to know with greater certainty they are working with ethical suppliers.
Greater collaboration as an industry to share development costs and adopt standard practices would increase transparency and adoption rates.
Many retailers make environmental impact a prominent part of their sustainability agenda. It makes for good headlines and eye-catching statistics, but only a few have invested in developing genuine, measurable baselines from certified sources upon which environmental claims were based. Tracking and analysing end-to-end lifecycle costs is possible but rarely done in a way that is verified independently or substantiated.
Retailers and consumer goods companies have gone to the last degree to make products available to customers wherever and whenever they want them (same-day delivery, marketplaces) reducing the barriers to customer purchase decisions and thus enabling overconsumption vs genuine need – just look at all the unnecessary stuff we acquired online during the pandemic! The knock-on effect of this drives increased stock holding, warehousing & logistics costs, and excess packaging waste – all of which carry their own environmental impact. The emergence and growing success of the second life, preloved sector (e.g. Vinted, Secret Sales, Facebook Marketplace) is a sign of the positive actions organisations can take to reduce landfill and waste through more effective repurposing of markdown stock, returns, seconds and faulty products.
Retailers can make a huge impact here if sustainability is truly embedded in their commercial agenda. The ‘Re-Selfridges’ programme focuses on resale, rental, repair, refill and recycling, and now incorporates a preloved marketplace on its main website. It is messaging like this that will drive consumers to think and behave more sustainably. They have also publicly set themselves a target for 45% of transactions to come through circular products and services by 2030!
Setting stretching targets using quantifiable measures and collaborative working between retailers, brands and manufacturers will increase progress and set benchmarks.
Sustainable and economic values have, in previous research, often found conflict with each other with suggestions that sustainable practices come at a premium. At a recent 4C event, there was an overwhelming view that sustainability does not have to mean a higher price. Being more sustainable in product development can and should mean using the right design principles to minimise waste and utilise the most efficient materials for the job: being efficient was, in effect, being sustainable. Awareness of alternative materials and appropriate investment from retailers to realise these relatively untapped resources can transform cost models and deliver a huge reduction in waste throughout the supply chain.
However, economic value is not the sole responsibility of the retailer to deliver. Consumers ultimately need to act responsibly with their purchasing choices; to facilitate this, retailers, CPGs and government organisations need to provide better education, clearer/standardised labelling and more ‘incentives’. The implementation of carrier bag charges drove a rapid decline in the consumption of bags at limited inconvenience to the consumer because it is generally accepted to be the right thing to do…so why stop there?
PRN and EPR regulations target the retailer/producer with shouldering the costs, but is the reality more that consumers facing a penalty for buying an ‘unsustainable’ product can ultimately make the biggest impact and put pressure on the retailer/producer accordingly? Consumer behaviour following the implementation of the ‘Sugar Tax’ saw a decline of 35% in more expensive sugary drinks as consumers found alternatives1. Similar incentives to the carrier bag scheme will drive better behaviours.
By prioritizing ethical, environmental, and economic values, retailers can create a sustainable business model that is profitable and supports the local community. As consumer awareness of sustainability issues continues to grow, retailers who do not prioritise sustainable value risk losing market share and damaging their brand reputation. Delivering sustainable value is a responsibility shared by all consumers and organisations. Encouraging organisations to pool their resources, collaborate with each other, and invest in achieving wider macro goals will create more significant and long-lasting impacts on the environment and society.
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This article was also published in The Retailer, our quarterly online magazine providing thought-leading insights from BRC experts and Associate Members.