Companies with an established commitment to sustainability grew more than 4 per cent globally

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Mumbai, 15 February 2017: KPMG in India and the Retailer’s Association of India (RAI) today launched a report on Green Governance in Retail Supply Chain at the Retail Leadership Summit 2017 held at The Renaissance, Powai, Mumbai. The report gives detailed insights on the importance of establishing a sustainable global supply chain network and how it helps practicing companies.

Citing a survey by the Retail Industry Leaders Association (RILA) for its 2015 Retail Sustainability Management report, it emphasizes that 92 per cent of the respondents believe sustainability to be a source of innovation. While only 25% retailers surveyed see sustainability as a regulatory formality, about 66% say that it presents an opportunity to explore new markets while 63% say that a sustainable business helps to mitigate risks better.

Explaining the report, Rajat Wahi, Partner – Consumer Markets and Agriculture Sector, said “This report, following close on the heels of a pro-consumption budget, identifies the myriad of challenges that Indian companies face to weave in sustainability in their supply chain networks and also recommends action points that can alleviate these stress points as we go ahead. The benefits would not just be reaped by the companies implementing these methods, but also by the society as a whole as a better ecosystem of conducting business would be established.”

Speaking about the relevance of the report, Kumar Rajagopalan, Chief Executive Officer, RAI said, “Sustainability has become one of the prime areas of discussion for businesses and government alike. When adopted by retailers across all channels of supply chain, it is not only beneficial for customers and environment, but also makes good business sense. It is therefore essential for innumerable stakeholders including service providers and consumers to come together and discuss key milestones towards sustainability. This report will serve as an important guide for Indian retailers in their journey towards sustainable retailing.”

The report also says that while developed countries have so far lead in enforcing Voluntary Sustainability Standards (VSS), developing countries including Brazil, Kenya, India and South Africa, have been more active in the development of sustainability standards. While USA leads the list with 85 standards, India has recorded 68 standards close to Brazil and China from the BRICS countries who recorded 78 and 73 respectively.

The report further analyses that over time, the increasing awareness about environmental and social issues has led to a surge in demand for new governance mechanisms in developing countries while the focus on voluntary standards has become more specific to a product/category or operation, like agricultural products, textile-based, organic products, trade practices and supplier relations.

Explaining that with the increasing awareness and concern about the environment, societies are now embracing the concept of becoming eco-friendly in most of the aspects of daily life. Added to that, the increasing consumer demand for implementing environment-friendly practices in the retail industry has spurred the adoption of Sustainable Supply Chain Management (SSCM) practices.

The report cites the survey conducted to show that the companies with an established commitment to sustainability, grew over 4 per cent globally in 2015, as compared to 1% growth registered by those without an established commitment.

Research also found that the SSCM practices bring back long-term advantages by inculcating an ethical code of conduct for a company, regarding human rights, labour, enviornment, corruption, etc., across the retail value chain. This in turn helps to pro-actively manage reputation risks that may arise due to a violation of standards or unethical practices by some suppliers/stakeholders in a supply chain. Sticking to an ethical code of conduct also helps a company to enhance its brand image, thereby making it a preferred choice for customers.

About 92% of the 250 largest consumer companies by revenue as defined by Fortune 500 list report on sustainability, while about 68% of the N100 companies report on the same topic as the need for reporting has gained precedence over the past few years. The N100 list includes 100 globally largest companies by revenue in 45 countries and this shows that many developed countries and major companies are now engaging in reporting their sustainability to promote transparency.

In India, establishing sustainability is being promoted and encouraged by the government. In 2012, the Securities and Exchange Board of India (SEBI) introduced a regulatory mandate to include sustainability report with Business Responsibility Reporting. From 20% of the top 100 companies in the country reporting sustainability, by 2015, the figure increased to 100%. However, the change is still seen as legislative driven, and the companies still need to be more diligent in adopting the international standards, such as GRI frameworks, to improve the quality of reporting.

Supply chains today have evolved to form a worldwide inter-connected, interdependent supply and demand network as methods like frequent outsourcing and off-shoring, extended networks with multiple stakeholders, centralised control and decentralised communication have been implemented for efficient operations. With the impact of sustainable supply chains spilling over to environment, society and economics, companies are increasingly focusing on incorporating sustainability in their day-to-day operations and must incorporate these values in their supply chain networks.