Sustainability and the retail sector


The World Summit on Sustainable Development was held between 24th August and 4th September 2002 in Johannesburg. The main outputs of the event were the plan of implementation, signed by the negotiators of 191 countries, and over 300 partnerships forged between governments, business and NGOs.

The plan recommended action on, or made a commitment to many issues that will affect business, but the retail sector will be most affected by:
1. Promotion of consumer information tools to encourage sustainable consumption and production
2. A commitment to phase out of chemicals with a detrimental health impact by 2020.

Does sustainable development have anything to do with those in the retail sector? Isn’t it all about child labour and so a concern for producers, not the retailer?

Or is that the full picture? Sustainable development represents uncertainty – a key business area that needs to be addressed by retailers. If we turned the question around and asked you if you were uncertain about resources, water, packaging and transport, would the answer be yes? Well sustainable development deals with all these issues and then some.

The key is to consider which areas of uncertainty are relevant to your business, to your suppliers’ business, and likewise with their suppliers. One way to do this is to put a supplier relationship management system in place. Leading companies have found that this delivers competitive advantage; it is perhaps something to talk to your board about.

Supply chain management
The supply chain encompasses every effort involved in producing and delivering a final product or service, from the supplier’s supplier to the customer’s customer. There’s no denying it’s a difficult area to get a handle on but if we take a look at the risks and opportunities that are hidden in the chain, it soon becomes apparent that ‘business as usual’ is not a sound strategy.

We recommend looking at the supply chain as a source of value. Tell your Financial Director it’s a bit like the quality revolution, when retailers moved away from paring costs to the bone and realised that spending money on quality delivered competitive edge.

So where do these hidden costs lie? Poor supply chain management can very easily result in heavy fines if your suppliers do meet local or national regulations (on child labour, health and safety conditions in factories and pollution). Your share price may also suffer when campaigners catch wind of this and start knocking at your door – we are all familiar with the Nike/Gap sweatshop ‘scandal’.

And the problems don’t stop there – companies with a bad reputation have trouble attracting, motivating and retaining staff. Even without high profile risks, valuable employee time will be wasted solving consumer queries when you do not have a good ‘handle’ on your suppliers.

. . . and value
Good supply chain management means your employees will be focused on ‘seamless’ service standards, leading to higher quality standards. You can support your staff, and so help them to do their job productively, by giving them clear guidelines to work with. Collaborative development of these guidelines will also identify opportunities for flexibility and innovation. And finally, a formal supplier relationship management system will build value and robustness in your corporate reputation, or ‘the way we do business'.

How do I create value in my supply chain?
It is often advisable to bring in outside help when developing a supplier relationship management system, however here’s our brief guide on how to start out:

  • Get to know your supply chain
  • Build a map of your supply chain and supporting supply chains
  • Identify the specific areas of high risk to your own supply chain
  • Identify influencers, opinions and perceptions of your supply chain
  • Identify areas of risk and value
  • Develop programme to minimise risk, and so build value
There are established ‘standards’ you can sign up to, such as the Ethical Trading Initiative (members include J Sainsbury and The Body Shop International), or you may wish to create your own as Marks and Spencer have done with their Global Sourcing Principles.

In conclusion
The conclusions reached at the World Summit only served to underline the importance of transparency and accountability in your supply chain to allow you to identify areas of uncertainty. To safeguard your corporate and brand reputation if nothing else, you need to be aware of what’s going on in the chain.

Visionary companies find supply chain management to be a great source of value, developing deeper supplier relationships that deliver innovation and competitive edge.