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Created: 15.01.2019
Category: Blog posts

Sustainable supply chain management – What must and can retailers do?

Kathrin Ankele and Judith Winterstein

Let’s start with a thought experiment and outline a vision for sustainable food production: what elements would it consist of?

There would certainly be no child labour on cocoa plantations in the Ivory Coast, slavery-like conditions in the tomato or strawberry harvest in southern Europe would be history, the negative effects of mass livestock farming on animals, soil, water and human beings would be overcome, there would be alternatives for using non-renewable, fossil groundwater resources for potato cultivation in Egypt, there would be no more deforestation of rain forests for the cultivation of soya and palm oil and there would be no need for pesticides with their damaging effects on nature and humans. The list could be continued for many other products and regions of origin. However, it should already have become clear what range and complexity of topics and challenges the food industry and consumers are confronted with today, combined with the question: What can I do as an individual consumer or as an individual company?

It should not be neglected that retailers and consumers have already started to change the existing situation. However, so far the efforts have not been sufficient in the sense of a consequent sustainable food production. Despite the intensive interaction between the two groups of actors, this article focuses on retailers.

Pioneers make progress

Since neither organic farming and even less conventional farming provide satisfactory answers to the question “HOW TO DO IT THE RIGHT WAY?“, it is no longer sufficient for companies to apply existing standards. They must also develop their own sustainable supply chain management and, as pioneers, raise the standard for the entire industry. This includes the development of ambitious own standards through to the implementation of pilot projects with ecological and social focal themes tailored to the respective cultivation land/region and the commodity. In a subsequent consolidation step, however, the requirements of retailers should be harmonised again at a higher level in order not to overburden producers with an increasing variety of requirements and audits.

Overcoming traditional procurement and market structures

Sustainability departments and the purchasing departments of retailers are confronted with procurement and market structures that sometimes impede sustainable improvement. These include buying on spot markets or stock exchanges or non-acceptance of a higher purchase price for more sustainable products. Future-oriented purchasing policy recognizes that more and more buyer markets will change into seller markets. Because the resource fertile soil is becoming increasingly scarce and climate change will exacerbate this situation. A close and long-term relationship with suppliers still seems impossible or economically unreasonable in some segments today. However, these relationships are indispensable for the actual improvement of ecological and social conditions, but particularly for securing the retailer’s

Prioritisation is required

Given the multitude of challenges, the first step is to take a strategic look at the product range and create a step-by-step plan. While the „low hanging fruits“ can usually be „harvested“ quickly by sourcing certified raw materials and applying general supplier requirements, the necessary far-reaching measures require considerable commitment. In order to prioritise the implementation steps, an analysis of the specific risks and vulnerabilities makes sense. In this respect, sales and product range relevance on the one hand and the type of ecological and social risks on the other play a central role.

Human and financial resource development

The examples given at the beginning of the vision have shown that the number of issues to be addressed is large. In order to overcome the challenges, the sustainability departments must provide sufficient human and financial resources as well as expertise in new topic areas. If the systematic deployment of a sustainable purchasing strategy cannot be achieved with internal resources alone, retailers should also build networks (taking into account antitrust restrictions) and involve external experts, especially in the pioneering phase mentioned above. These experts can provide important impulses in terms of both content and development of internal competencies. In addition, they can support resource-intensive tasks such as managing pilot projects.

Realigning Communication and Marketing

In addition to implementing technical requirements, retailers must increasingly use communication and marketing as levers of change. At the moment, however, retailers do a balancing act between cheap and sustainable. This is neither beneficial to the credibility of their own commitment, nor does it provide clear incentives and orientation for changing consumer behaviour. However, this is another important component for changing market structures towards sustainability for producers, retailers and consumers.

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