The sustainability issues facing retailers are certainly complex, but the industry is making progress. Katie Kilgallen joins some of the UK’s top CSR chiefs to lay down the blueprint for the future

When leading retail CSR executives came round the table to debate responsible supply chains at the top of the BT tower, the sheer scale and complexity of the issues that the industry faces became apparent quickly. Ethical and environmental credentials have long been seen as a nice-to-have, but they are now a necessity. Retailers now have to aim to make a significant positive impact on issues as fundamental and challenging as climate change and poverty.

The key challenge is the complexity of the issues. Many retailers have grasped the nettle already and momentum is building. And, although all the hard work is ahead, there is much to be positive about, although the pace of progress varies between retailers.

Tesco head of trading ethically Giles Bolton said: “Some people are really starting to pick up speed and are getting a feeling of control over their supply chain, while others are just sensing there is a trend.”

Marks & Spencer environment manager Mike Barry agreed that some companies will flounder if they don’t adopt the right strategy. He said: “In the future, you will no longer be able to cherry pick, to manage one or two issues. [It’s a case of] how you manage all issues across all locations. Wal-Mart and Boots are doing good things, but the ones still concentrating on one or two things are being left behind.”

Kingfisher public affairs manager Caroline McCarthy-Stout also expressed concern that it is the big retailers alone that are making headway. “The thing that gets missed out is small and medium-sized businesses – that’s where it gets difficult,” she said.

Barry divided consumers into three groups: the top 10 per cent who actively purchase green and ethical products, the bottom 25 per cent who are often too poor to buy such products and the remaining 65 per cent, or middle group, who are now starting to ask questions. “The businesses that profit in the future will be the ones that find a way of tapping into that middle group,” said Barry.

Regardless of having the right strategy, the sheer scale of the mountain that retailers have to climb is immense. Barry was quick to point out the enormity of the challenge M&S faces in trying to ensure it has a responsible supply chain. “The first challenge is the sheer scale,” he said. “There are thousands of organisations, thousands of locations and 1.5 million workers in the supply chain – that’s a big operation.”

He added that it is crucial to work with suppliers to help them develop solutions. McCarthy-Stout echoed that. “It’s about working with them, rather than dictating to them,” she said.

Ethical Trade Initiative chairman Alan Roberts believes that balancing ethical concerns with commercial interests is the biggest challenge retailers face in the supply chain. “It can’t be overstated,” he said. “The buyer has the clout and they have to be in sync [with CSR policy].”

Still a way to go

However, Roberts also pointed out that there is a long way to go. At Otto UK, where Roberts is director of sourcing and QA, they have an internal auditing process, but he acknowledges that it is not as credible as it could be. “Who checks the checker?” he asked.

Traceability in the supply chain and being able to demonstrate your efforts were big concerns for everyone at the table. Barry stressed the importance of working with external organisations, including the ETI, Fairtrade Foundation and Soil Association. “You need an external organisation to verify it [for consumers],” he said.

He cited the difficulties of connecting with consumers on these issues and conveying to them the often complex messages. “They’ve heard of fair trade and organic, but there are a lot of other issues that they can’t get their heads around – we have to do it for them,” he said.

Wyevale sustainability director Alan Knight said he was often overwhelmed by how complicated the relationship between different ethical and environmental issues could be. He said: “The biggest challenge we face is the law of unintended consequences.” Knight, who was one of the creators of the Forest Stewardship Council’s (FSC) certification system for sustainable wood, cited its standard as an example. “The FSC is just one issue at one point in the supply chain – that’s why it can work – but it still staggers me how complex it is,” he said.

“The FSC is debating whether we should get involved in labour standards in the supply chain. My view is no, we shouldn’t. Our beauty is that we are about one point in the supply chain – and that just complicates the issue.”

The Soil Association’s organic standard and the Fairtrade Foundation’s Fairtrade label are now widely recognised. The latest push is from the Carbon Trust, which is developing a label that displays the carbon footprint of a product and demonstrates the producer’s commitment to reducing it.

Opinion was split as to whether developing a carbon label is the right way forward. Working in partnership with the Carbon Trust, Tesco has just launched a carbon label pilot scheme on 20 of its products. Bolton said: “It’s complex, but it’s do-able. I think it’s absolutely worth doing.”

Bolton also stressed that it is imperative to work in partnership with suppliers and Roberts believes that suppliers will get on board. “They’re geared up because they have to be,” he said.

Barry highlighted the problem of labelling fresh produce, where a carbon footprint can change throughout the year as supply shifts from country to country. “Every time you shift the carbon footprint, there’s a huge database that needs to change. It’s a logistical nightmare ahead of us,” he said.

Knight was far from convinced that a consumer-facing carbon label is the right way to go. “I’ve always had an intuitively bad feeling about carbon labelling,” he said. “It’s a bit too much information for consumers – you are asking too much from them. Why confuse them when it will make absolutely no difference to your carbon footprint?” However, Barry argued that it highlights to customers that everything both you and they do has an impact. Bolton echoed this and said that, like the plastic bag debate, it is “important symbolically” and is a door to wider issues.

when to use carbon labelling

Knight also questioned whether the calculation process is precise enough to use in labelling. “I haven’t seen a carbon footprint that is accurate. I’m not sure it’s intellectually robust enough,” he said.

However, he agreed that tracking the carbon footprint of a product can be beneficial. He believes retailers should use the data as a tool to “choice edit” for consumers. “It should be used in retailer-buying relations, not in retail-customer relations,” he said.

Barry added that the most useful part of the carbon-labelling process is how it pinpoints the carbon hot spots in a product’s life cycle. Highlighting this to customers can help cut through confusion. M&S has found three hot spots. In clothing, it is customers washing products, rather than manufacturing and the supply chain, that has the biggest impact. In food, the farming and production of meat products are the worst offenders and, in retail operations, leaking fridges are a big concern.

M&S has launched a marketing offensive to educate customers that most clothes can be washed at 30˚c. It is also measuring refrigeration leaks and looking at alternative methods that are less harmful to the environment. However, according to Barry, meat is a topic that customers are not ready for the grocers to tackle just yet. Many argue that the only remedy to meat production damaging the environment is to simply reduce the amount we consume.

Barry said: “The challenge for all of us is: do you march at the same pace or do you keep ahead of consumers? Inherently, as retailers, you are not confident of reducing choice and you can’t do it before your customers are ready.” He cited the example of M&S, which waited until the right moment to switch to only offering fair-trade tea and coffee.

B&Q launched its One Planet Living campaign in association with the World Wildlife Fund in January. At present, consumption levels in the UK are unsustainable – we are living as if we are three planets rather than one. The DIY chain is working to highlight this and supply a range of sustainable solutions for its customers. McCarthy-Stout said we all have a part to play in raising customer awareness of these issues, but she questioned whether retailers should be the “sole educators”.

There was agreement that there is scope for retailers to work with NGOs, not just to gain third-party accreditation for products, but to exchange ideas and facilitate collaboration with other retailers. Roberts said: “The ETI creates a space for retailers to work together and with NGOs. It’s not a competition issue; it’s much more about collaboration. It’s getting better every month. The likes of M&S, Tesco and Asda working together has had an impact.”

Barry said there is a place for competition because it drives innovation. He said a mixed approach – half competition and half co-operation – gets the best results.

All participants agreed that the UK is pioneering in terms of sustainable retailing. Barry said: “We spend a lot of time beating ourselves up and beating each other up, but with UK retail overall, there is still a lot to be proud of if you benchmark us.” Roberts agreed. “The UK is a long way ahead,” he said.

While progress may be encouraging, all participants acknowledged that the most challenging times still lie ahead. Retailers will have to weigh up the virtues of fair trade with the developing world against the environmental impact of increased food miles, and decide how to increase sales while encouraging consumers to reduce overall consumption. They will face tough choices and be challenged to come up with innovative solutions. As Barry concluded: “The low-hanging fruit has gone. The future is about how we manage conflict.”