Sustainability in the supply chain

By Sophie Stoneham

07-2020

Sustainability is undeniably a hot topic in the retail and consumer sector, and this is especially pervasive in the supply chain space. It is also a hugely broad term which covers a span of environmental, social and economic issues. Many companies are well attuned to the fact that consumer choice is no longer solely governed by quality and brand reputation, but also by alignment with personal values and responsible practices. The demand for sustainable brands, products and services is ever-growing, with 88% of respondents in a recent US/UK survey stating that they wanted brands to help them become more environmentally friendly and ethical in their daily lives.

There are many promising and imaginative sustainability initiatives in the retail market. For example, Adidas and Allbirds are collaborating to produce a zero-carbon mass-market shoe technical enough to compete at the Olympics, Tesco has pledged to send surplus food to Green Generation for conversion to green energy, Levi’s has commissioned a peer-reviewed sustainability assessment across the life cycle of its jeans and e-commerce platform Zalando has informed its 2,000 fashion brands that they must disclose their supply chain sustainability practices and address any deficiencies, or risk removal from the platform.

However, retailers are also vulnerable to criticism for not clearly defining their sustainably policies and marketing strategies. Added to this challenge is the complex nature of supply chains and the variety of interesting sustainability questions that are raised at each avenue, including carbon emissions, packaging, air pollution, water pollution, loss of biodiversity, waste, human rights, deforestation and energy consumption. In light of this, we discuss below several ways in which some retailers are successfully addressing these questions to help enhance their brand image.

Technologies

The digitisation of supply chains presents an exciting opportunity to simultaneously integrate sustainability practices. For example, digital tools can be used to monitor, analyse and gather data on the sustainability of each element of the supply chain, therefore providing brands with greater transparency. Risk management processes can be automated through technology that automatically screens suppliers based on country of operation, products, audits and pre-existing data. Equally, software can indicate the carbon footprint of suppliers and produce a ‘carbon emissions per pound spent’ figure. At Bird & Bird, we pride ourselves in assisting businesses that are being transformed by the digital world, and we can provide sophisticated and pragmatic advice on technology contracts to assist retailers implement such technologies.

Whilst these technologies can help retailers identify and appoint sustainable suppliers, there are difficulties to overcome; suppliers can be unwilling to provide sustainability information and digital transformation can be expensive. Digitalisation must therefore be a collaborative practice that offers incentive where possible, such as when Walmart launched a program to help its Chinese suppliers make their factories more energy efficient through the use of an online tool (reducing energy consumption of the average supplier to by 10 percent).

Thought Leadership and Education

Brands such as H&M, Nike and Patagonia are market-leaders in sustainable supply chain, and they have the opportunity to apply their capabilities and resources to educate smaller retailers. For example, H&M have provided smaller brands with access to their supply chain in an effort to educate them in sustainability practices in respect of product development, sourcing, production, logistics and more. Over time, it is hoped that such leadership in the textiles industry could encourage sustainable thinking wholesale. This includes education on eco-material production, green transport distribution and green retailing (e.g. issuing vouchers for returning old clothes). This learning mechanism could equally apply across other retail sectors such as food and beverage, beauty and wellness. 

Sustainability Provisions

Sustainability plays a key role in the identity of some brands, and this creates a parallel expectation that supply chain providers should equally commit to the brand’s sustainability policies. For example, sustainability targets can be drafted into distribution agreements which oblige supply chain providers to plant a certain number of trees, reduce their carbon footprint and to limit landfill use. If you require assistance with drafting sustainability policies into your supply chain agreements, we have expertise in drafting such terms and conditions. Similarly, retailers can impose restrictions through their network in respect of using disposal products (cups, napkins, cutlery etc.) and only using products that are recyclable or compostable.

Looking Forward

Unfortunately, market research indicates that COVID-19 has had a negative impact on sustainability initiatives globally. California lifted its ban on plastic bags and a number of coffee chains are serving drinks in disposal cups and temporarily stopping the use of personal cups. This trend is understandable as businesses enter into survival mode during COVID-19, and want to ensure strict healthy and safety measures are implemented to protect employees and customers alike. We have also seen a rise in the use of disposable health products such as gloves, masks and hand sanitiser bottles. However, it is predicted that, similar to what happened with the financial crash, this is only a pause and sustainability regimes in supply chains and other realms will recommence once the market conditions stabilise.

If your business is considering a restructure of its supply chain in light of sustainability practices, or undergoing an audit to assess its sustainability, our International Retail & Consumer Group can provide strategic advice on the product life cycle, from design, manufacturing and distribution to marketing, advertising and promotion.