Over three-quarters of the total
environmental impact from products on retail shelves occurs deep in the supply
chain, including greenhouse gas emissions from agriculture, manufacturing,
transport, and refrigeration; the destruction of forests to grow crops and raise
animals for food, apparel, and personal care products; chemical exposures and
discharges from agricultural practices and the manufacture and dying of
textiles; biodiversity losses from removing forests and large-scale
agriculture; and human rights issues and labor practices.
Retail merchandising departments play a critical role for the company, determining the products to sell while reducing costs and minimizing supply chain risks. Sustainability represents a lever for merchandising to reduce risks and costs by increasing visibility and efficiencies along supply chains.
Addressing sustainability issues in the supply chain, such as the use of restricted chemicals or palm oil from tropical forests, requires retailers to know much more about their products and suppliers. For merchandising, this increased transparency can offer predictability and visibility into cost components. It can also help minimize or avoid the costs of supply chain disruptions. Market capitalization can decrease more than ten percent from poor supplier practices, including costs of supply chain disruptions from noncompliance with environmental regulations.
For example, electronics manufacturer Seagate works with suppliers on Full Material Disclosure for all of its products, and cites two key benefits:
Figure 1 Key priorities for merchandising are among the motivations for retailers to engage product suppliers on sustainability. Source: RILA’s 2015 retailer benchmarking
sustainability commitments often begins with mapping supply chains, followed by
direct engagement with key suppliers to request information, and providing
training on specific company requirements or collaborating with suppliers on
solutions. This increased engagement provides a number of benefits for
merchandising. It reduces supplier risks by establishing platforms for
information exchange and longer-term relationships. It also offers
opportunities to renegotiate supplier
and terms, position key suppliers as more of a partner, and share cost savings
from joint improvements. Marks & Spencer goes so far as to connect its direct
suppliers of palm oil with the refiners and processors that meet its
Merchandising can benefit most by focusing first on one topic or product category before applying the acquired knowledge across other topics or product categories. For retail, priorities may include a high volume supplier or widely used commodity, such as palm oil, beef, or cotton. Setting an ambitious and time bound target—for example, one hundred percent sustainable sourcing or zero discharge—is an effective way to bring suppliers to the table, foster meaningful collaboration, and provide transferrable knowledge.
Merchandising professionals can tap into existing forums where retailers and suppliers are collaborating to improve the performance of supply chains and redefine purchasing terms. For example, retailers, buyers, and producers—representing between ten and twenty five percent of the global production of soy, cotton, sugarcane, salmon, shrimp, and other commodities—participate in
roundtables convened by WWF. This type of retailer collaboration provides clear signals to suppliers and creates incentives for supplier action.
How Does Sustainability Enhance Merchandising?
In retail, merchants often begin with questionnaires to engage with their suppliers. A product category survey, created by Walmart and many of its largest suppliers, aims to identify the critical improvement points for dozens of categories of products. Incorporated into Walmart's
Sustainability Index, the survey has been deployed to several thousand suppliers. "Our
merchants are the key point of leverage in working with suppliers to communicate our priorities and to push for improvements. When buyers discuss Index scores and strategies for improvements with their suppliers, it communicates our priorities and allows us to engage entire product categories," explains Zach Freeze with Walmart's General Merchandise and Softlines group. Rob Walton adds that the Index "is really giving buyers information to help inform decisions and compare products."
Figure 2: Retail product supply chain relationships are more transparent and collaborative. Source: RILA Supplier Engagement Report
Retail initiatives that focus on priority topics for the industry, and closely align with merchandising's business goals, include:
Chemicals. Retailers and brands have committed to
zero discharge of hazardous chemicals from supply chains and products by 2020. Asking suppliers to disclose chemical ingredients triggers a wave of requests upstream, and the resulting transparency leads to retailers' increased vulnerability. Helping to build high performance in key supply chains can generate cost savings, and reduce the likelihood of noncompliance or interruptions to supply.
Leadership Steps for Merchandising and Sustainability. RILA and the CRC's Retail Sustainability Management Leadership Model includes a dimension on supplier engagement to enable retailers to benchmark their activities:
relevant resources, case studies, and collaborative opportunities are listed
Retailer deployment examples
Collaborative opportunities & other resources
www.rila.org/sustainability for more tools and