Report Buyer, the online destination for business intelligence for major industry sectors, has added a new report predicting that the profitability and survival of many retail businesses will depend on their ability to absorb ethical sourcing costs.
"The Future of Ethical Sourcing” finds that nearly half of the retailers surveyed expect ethical sourcing to increase production costs by at least 5%. 14% of retailers believed that costs could be raised by as much as 10%.
With retailers having to deal with skyrocketing rents and fixed costs, authors of the report believe that a key factor in remaining a viable retail business is the ability to withstand the additional costs of ethical sourcing.
Ethical sourcing traditionally focussed on ensuring that labour was not exploited in the supply chain of goods. Over the years, the agenda of ethical sourcing has widened to ensuring that products are obtained in ways that are environmentally friendly as well. Analysts believe that over the next five years, rising environmental concerns will guarantee that they become a key priority on retailers’ corporate social responsibility (CSR) agendas.
Retailers are discovering that products need to comply with more than just high labour standards to justify premium pricing. They are increasingly finding more credibility in higher price bands if their products are sourced by environmentally friendly methods, say the analysts.
However this aspect doesn’t hold true for all consumers. The report says customers who choose value for money products are sensitive even to minute price changes. It forecasts that this band of customers will be less likely to pay more for ethically sourced products putting heavily price driven retailers under pressure to account for increased costs. On the other hand, larger retailers in the sector like Primark and Tesco will be able to leverage economies of scale to secure their hold on the market.
Marks and Spencer was named one of the most innovative retailers in its approach to ethical sourcing by over 90% of respondents in the report. The company has introduced comprehensive policies to improve protection for all of the resources in its supply chain and has arguably the most established CSR programme. Authors believe that the company is reaping the benefits of a proactive and early CSR programme that has, over time, earned them a high degree of customer loyalty.
The report puts in perspective the importance of Corporate Social Responsibility as well as the necessity for ethical sourcing across various retail sectors. It outlines the changing priorities for retailers over the next five years. While on one hand it forecasts potential costs that retailers will incur, it also suggests ways and means of how these costs could be offset.
"The Future of Ethical Sourcing” is available from Report Buyer. For more information, please visit the website.
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