Scope 3 emissions are widely considered as accounting for more than 70% of organisations’ carbon footprint. So, it comes as…

Scope 3 emissions are widely considered as accounting for more than 70% of organisations’ carbon footprint. So, it comes as no surprise that at the heart of any businesses’ sustainability strategy is a required focus on their operations and supply chain. Choices in sourcing, production and distribution can dramatically impact a businesses’ environmental and carbon footprint.  

The UK Retail industry is no different, growing customer awareness of ESG topics is increasing the focus on transparency and placing increasing pressure on businesses to measure, and be able to meaningfully communicate, the sustainable footprint of their products and services. An ability driven from within a businesses’ supply chain.  

Despite the undeniable need for focus on sustainability, the effectiveness and advancement of many businesses’ sustainability strategies is unclear. In collaboration with the British Retail Consortium, BearingPoint sought to better understand the maturity of the UK Retail Industry. This provides an insight into how advancements can be achieved.  

A structured assessment was conducted with 42 members of the British Retail Consortium across seven different business dimensions. These included Strategy; Supply Chain & Operations; Finance, Regulatory and Risk; Customer and Stakeholder Centricity; Data and Technology and Governance & Organisation. Participants were asked to self-report their maturity level against a 5-point Likert scale.  

Indication of supply chain focus 

Retailers are advancing sustainability efforts within their operations and supply chain. Comparison of the average maturity level for all BRC assessment participants found that operations and supply chain was the highest scoring dimension (a score of 3.37 out of 5). This indicates UK Retailers have started at the source, recognising that a more sustainable supply chain can drive benefits elsewhere. Benefits including regulatory compliance and enhanced consumer loyalty. 

A need for data automation  

To drive sustainable improvements, a comprehensive understanding of the as-is position is required. Accurate and reliable Scope 1,2 and 3 emissions data is thus, a critical enabler. BearingPoint found just under half (47%) of BRC survey participants were able to measure Scope 1, 2 and most Scope 3 emissions. However, retailers had not developed the capability to automate the collection of their sustainability data, with 87% reporting they manually collect data.  

The challenges of measuring Scope 3 emissions should not be downplayed. Data availability and access across the entire value chain is dependent on the willingness and capability of suppliers to share information. Beyond this, differences in measurement methodologies present challenges of comparability and consistency.  

Currently a reliance on industry averages, proxies and other sources address situations where primary data cannot be provided yet. This in turn compounds complexities and issues of data quality.   

To best face these challenges automation is required with investment in a technology platform. Manually gathering Scope 3 emissions data in unfeasible, given how resource-intensive such an exercise would be where retailers typically have hundreds, if not thousands of suppliers.  

As Retailers look to respond to increasing regulatory pressure, no doubt we will see Retailers reviewing their reporting capabilities to ensure compliance. This may in turn, drive investment in this area.  

The power of procurement  

Retailers are heavily reliant on their suppliers, requiring that their sustainability focus and practices are equally developed as their own ambitions.  

Sustainable sourcing standards, considering social, economic and environmental factors as well as price and quality, should be fully incorporated into decision-making processes. Retailers have started to recognise this; almost 74% of respondents reported the presence of sustainability criteria in their sourcing proceses. Yet only 16% could say such criteria had as much weighting as price and quality.  

To advance, equal weighting must be placed on sustainable factors in procurement. Retailers must be confident in ceasing business with those not meeting the criteria, encouraging action throughout their supplier network.  

Improved sustainable transparency in the procurement process delivers knock-on benefits, enhancing retailers’ ability to track and communicate the sustainability of their products and services. An area retailers are struggling with as it was found that 44% did not know what percentage of their revenue was from sustainable products. This makes it harder to communicate comprehensive, and trust-worthy, information to consumers.

It’s all about collaboration  

Opportunities for cost savings, process optimisation and resource efficiency create a strong case for suppler collaboration. In the face of sustainability issues, aligning goals and combining resources can enable a greater impact than can be achieved individually. Retailers should adopt the mentality that ‘We’re not Net Zero until we’re all Net Zero’. They should develop partnerships to share knowledge around aspects such as origin information for raw materials and detailed sourcing information.  

Achieving traceability through supplier collaboration can provide broader business benefits. For example, in the luxury space, traceability from source-to-make can enable product authentication, allowing for greater brand protection. For Retailers operating in the grocery sub-sector, traceability can enhance a ‘farm-to-table’ narrative supporting consumer trust.    

Around half (52%) of participating Retailers indicated they are working with suppliers to develop new or alternative products indicating a willingness to invest in innovation. Retailers should build on the trust developed through such initiatives, considering ways to address Scope 3 data challenges. Currently, just 14% of participants stated they collaborate with their suppliers to collect primary data for Scope 3 emissions calculations.  

Recognising risk and retaining resilience  

Clearly, sustainable sourcing, effective emissions measurement and strong supplier collaboration are key levers to drive sustainability within a businesses’ operations and supply chain. Yet, the reality of operating in the current global environment necessitates above all, a proactive disaster recovery strategy. Without which, retailers risk paralysing delays and shortages.  

It is no secret that as average temperatures rise, global climate hazards such as heatwaves, droughts and floods will grow in frequency and severity. This will only increase the need for supply chain resilience. One only must look at recent Black Swan events, to realise how quickly business operations can be affected. Long-term risk mitigation planning combined with data and intelligence is increasingly important for businesses.

An understanding of risk can be effectively developed through an assessment of ESG trends, including global warming, the rise of artificial intelligence, data privacy, and cybersecurity topics. UK Retailers are yet to uniformly adopt such a strategy. Some 43% had not considered the impact of future ESG macro trends within a 10/20/30 year time horizon. While only 26% had performed a horizon scanning exercise.   

Half of retailers (51%) have recognised sustainability-related risks and have generic mitigation plans however and such risks have not been quantified or assessed in financial terms. An inability to understand the quantitative impact of these risks limits the ability of any business to prioritise actions based on strong evidence.   

Advancing progress  

UK Retailers are on the journey towards establishing more sustainable supply chains. Indications are that it’s currently the business area where the most progress has been made. Four key recommendations can be made which will be crucial in accelerating sustainable maturity. All of which, have inextricable links to a businesses’ supply chain.  

Retailers should accelerate investment in data and technology capabilities. Establishment of a supplier integrated and automated data platform will become the most effective method of closing the measurement and reporting gap for Scope 3 emissions.  

There is a need to recognise the role of employees in driving accountability and transparency. Central to success is a retailer’s ability to cultivate a sustainable culture where individuals throughout the supply chain better understand their role in making sustainable progress. Individuals must feel empowered to lead and deliver sustainable initiatives. They need a clear understanding of how and why such action contributes to the strategic objectives of the business. Supply chain leaders should recognise their role in communicating the strategic priorities to all stakeholders.  

Retailers should incorporate long-term risks and ESG macro trends into strategy. By incorporating long-term risks and ESG macro trends into their sustainability strategy retailers can better build resilience.  

Finally, collaboration amongst all value chain players is required to advance transparency. Supply chains are only as sustainable as their weakest link.  

In the highly complex and interdependent world we live in, an external mindset is critical to advancing sustainable progress. Ultimately this is how UK Retailers can develop greater confidence in their ability to face future supply chain shocks disruptions.  

Read the full issue of SCS here!

Related Stories

We believe in a personal approach

By working closely with our customers at every step of the way we ensure that we capture the dedication, enthusiasm and passion which has driven change within their organisations and inspire others with motivational real-life stories.