Retailers are introducing greener supply chains, but they are still not thinking innovatively enough. They need to change how they work with suppliers, says Katie Kilgallen

Retailers often boast about how their supply chains are becoming more environmentally friendly and a great deal has been achieved. But it’s largely been a case of going for the easy wins. To achieve the ambitious targets retailers have set themselves, a more pioneering approach will be needed.

As a result, many are moving away from compliance-based supplier relationships and adopting a collaborative approach to tackling green issues. Tesco has been working closely with several suppliers to produce carbon footprint labels on 20 products and is now taking the bold step of looking at its whole supply chain to measure the entire business’s indirect carbon footprint.

Tesco climate change manager Ellen Gladdiers says that the grocer wants to identify carbon hotspots to “see where there is scope to work with suppliers to reduce [the environmental impact].” Suppliers that have worked with Tesco on the carbon-labelling initiative have also made discoveries that have helped their own businesses. Potato supplier Branston, for example, is planning to reduce emissions from waste potatoes and build an anaerobic digestion plant to turn them into energy to power the factory.

Nicky Amos – an independent advisor on CSR and former Body Shop head of corporate responsibility – says a collaborative mentality is being adopted by retailers. “Many retailers are realising that suppliers can be a primary source of innovation and value creation.”

Working in partnership and establishing an open dialogue means retailers can share product-development costs and customer insights and will find it easier to look for more sustainable sourcing. At its UK headquarters in Nottingham, Alliance Boots holds “beacon days”, where it invites between 60 and 100 suppliers to see how they deal with the environmental agenda. CSR director Richard Ellis says the aim is to stimulate ideas. “Nobody has the monopoly; it’s about how can we work together for mutual benefit,” he says.

There is no doubt that collaboration is a great idea in theory, but the scale of supply chains makes it difficult in practice. Engaging with packaging suppliers that are often at least three steps away from the retailer, for instance, is easier said then done. Judith Murphy, senior consultant at business consultancy CSR Network, says retailers are beginning to make demands on producers about packaging, which, in turn are making demands on their suppliers, but the whole industry now needs to unite. “The more long-term approach would be for all parties to come together and agree on a way to incorporate sustainability criteria into the design brief on packaging,” she says.

Murphy advocates setting up roundtables and forums, rather than the present more “reactive” approach where environmental targets are “cascaded down the supply chain when there hasn’t been the infrastructure set up to meet those commitments”.

Ellis adds, however, that retailers should also get ideas from outside the sector, such as mining or energy companies. “It’s good for retailers to sit down together, but what you should do is sit down with a wide range of companies and learn from them,” he says.

Perhaps one of the biggest emerging threats to this new spirit of collaboration is choice editing. Some retailers are going one step beyond product development and refusing to sell products that are entirely unsustainable. For instance, Wyevale and B&Q have decided to stop stocking patio heaters. This could leave suppliers in the lurch, but if they seize the chance to innovate, they may well find themselves ahead of the game and the first to supply the products of tomorrow. As Amos says: “It’s as much for companies to put the challenge out to the supply base and say: ‘Who is willing to come with us?’.”

Laying down the gauntlet can produce quick results. When Wal-Mart decided to back the more environmentally friendly, compact, fluorescent light bulbs instead of traditional incandescent ones, its attitude to suppliers was one of: ‘We’re going here – come with us if you want’. For fear of losing the world’s biggest retailer as a customer, most suppliers rose to the challenge and did just that.

Ellis believes this approach has its merits, if it is done in a supportive manner and “there is a realisation that it’s not always possible”. He adds that if suppliers are committed to changing production processes, retailers should make the commitment to stick with them.

Gladdiers says Tesco is not at the stage where it is “hammering down suppliers on carbon”, but it is challenging them by saying: “‘Come on guys, let’s look for opportunities’.”

Fundamentally, it wants to lead by example. Gladdiers adds: “We’re hoping to inspire our suppliers to look at their supply chains and do the same.”

For real progress to happen, retailers must not only establish strong partnerships with suppliers, they must also be prepared to be innovative and inspirational themselves.