Supply chains and sustainability: retail

As nations emerge cautiously from coronavirus-driven hibernation, what will be the impact on supply network sustainability?

Consider the humble toilet roll. In the early weeks of spring – as coronavirus swept from Asia to Europe, North America and beyond – 200 sheets of two-ply tissue coiled tightly around a cardboard tube signified one of the biggest, non-health impacts of the pandemic. Dull but essential, in high demand but low supply, the toilet roll morphed into a proxy for supply chain constraints; constraints caused by restriction of movement over long distances (closed borders and grounded freight) and short (stay-at-home orders and social distancing rules). The result? Empty shelves, hoarding and even the occasional supermarket fight. 

That was then, this is now. As nations emerge cautiously from lockdown, or make preparations to do so, what about the state of the retail supply chain? Is it fit for purpose? And will commitments to build in sustainability, in all its forms, be put on hold as retailers, brands, and suppliers are simply grateful that they can get goods from A to B, via C and D?

The return of net zero

In some respects, the crisis has demonstrated the resilience of supply chains already. After a hiatus, supplies are approaching normal, albeit with reduced variation in stock-keeping units (SKUs). The toilet roll aisle is restocked and retailers of non-essential items will hope to demonstrate seamless delivery as their outlets reopen.

Lisa Hooker, leader of industry for consumer markets at PwC, argues that recent disruption may provide an opportunity to embed sustainability now. “Sustainability is not going to go away. The net-zero carbon emissions target, for example, will come back with a vengeance once we’re through this crisis,” she says. “If you are looking to adapt or pivot your supply chain, while you do that you might as well have a sustainability lens as part of the investment you are making.”

The need to build greater resilience into supply is evident, with the benefits of nearshoring proving increasingly attractive. “If you have more nearshoring, you can make more regular drops to introduce newness into your stores or online,” says Hooker. This not only encourages more return visits, it “also enables you to go back to the old idea of ‘test and repeat’. If you try something and it doesn’t work, you can speed up the response.”

All things being equal, a localised supply chain reduces carbon footprint. And this matters. After all, supply chains account for more than 80% of a company’s greenhouse gas emissions and more than 90% of the impact on air, land, water, biodiversity and geological resources, according to figures from McKinsey.

Responsibility in the round

Sustainability is more than climate change mitigation, however. As enshrined in the UN’s Sustainability Development Goals, western retailers and brands have an obligation to support responsible production patterns, sustainable communities, gender equality, and decent work and economic growth.

When manufacturing and production is brought back nearshore, developing markets are likely to suffer. Consider, for example, that there are over four million workers in Bangladesh’s garment industry. Not only is the country wrestling with its own coronavirus health emergency, it is contending with cancelled orders, reduced workloads and terminated contracts. 

In reality, the shortening of any supply chain is likely to be tempered by the need to source raw materials from the country of origin. In these circumstances, retailers and brands can help local producers in a number of ways, says Dr Mouhamad Shaker Ali Agha, director of International Programmes at the Department of Management Science, University of Strathclyde. They can, for example, adopt standards set out by the Ethical Trading Initiative, an alliance of companies, trade unions and NGOs that promotes respect for workers’ rights around the globe.

Sustainability is not going to go away. The net-zero carbon emissions target, for example, will come back with a vengeance once we’re through this crisis

Lisa Hooker
Consumer markets leader, PwC

Practical help includes giving smaller suppliers time to address non-compliance with new regulations, providing training free of charge and committing to a fair wage. In the context of coronavirus, it might also include helping suppliers create socially distanced working environments.

“The current crisis shows the importance of building global partnerships with other members in the supply chains,” he adds. Ali Agha advocates the adoption of “supply networks mapping” in order to get a full understanding of what is going on end to end. “There should be a proper analysis of the big data generated from the supply chain.”

Except in retail, measuring sustainability impacts can often prove illusive, says Hooker: “You make a change over here and it creates a problem over there. Big fast-moving consumer goods (FMCG) companies have got the ability to work this out for themselves. But the average retailer in the UK is mid-market and they just don’t have the expertise to look across their whole supply chain and work out how to make it more sustainable.”

Purchasing with purpose

Coronavirus is not the only factor at play; older drivers remain. These include Brexit, preparation for which may have made UK companies more aware of the flaws in their supply networks; and trade and diplomatic tensions with China, which are likely to prompt supply chain diversification that could, in turn, benefit the Indian subcontinent.

A sustainable supply chain is not simply an act of altruism. Business benefits include protection against reputational damage, greater resilience and an opportunity to win more business.

Ultimately, retailers know that sustainability will be propelled by consumer sentiment. “Customers have never been prepared to pay for sustainability, but they are prepared to punish those who don’t act in a sustainable, ethical way,” says Hooker.

It’s just possible that coronavirus might convince them to pay for it, too. During lockdown there were signs that customers were looking for brands with purpose. One survey of 3,000 consumers across 15 countries found that almost half were making more sustainable choices when shopping. Not only that, they said they were likely to continue doing so post-crisis. Supply chain at the ready.

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