Environmental and social responsibility in retail enterprises

Greater transparency by informing the consumer (as per January 2010)

In their function as an interface between manufacturers and consumers, and as employers of more than 2.5 million people, retail enterprises in Germany have a special social responsibility. Hence, they can promote changes – both in their own field and also by setting targets for their suppliers. Supported by the Federal Environment Ministry and the Federal Environment Agency, the VERBRAUCHER INITIATIVE e.V. (a federal association) conducted a survey in early summer 2009 in order to assess the social and environmental activities of companies of the six retail sectors with the highest sales volume in Germany. These sectors are food, beverages and tobacco; textiles and shoes; building and DIY material; information and communication technology; and health and body care. In 2010, the survey will be expanded to the sectors watches and jewellery, stationery, and toys.

First, a feasibility study was prepared with the support of the Öko-Institut e.V. Based on this study, the institute then developed questionnaires for the six retail sectors. The ambitious questionnaires requested the sales activities of the companies at their locations in Germany and comprised the following topics:

  • Business activity (company management, measures taken in the companies and at point of sale as well as transparency)
  • Supply chain (environment and health aspects in procurement, social and socio-political aspects in procurement)
  • Support of sustainable consumption (measures)

The questionnaire posed questions such as "Does your company take measures on the topic of social issues/employees?", "Which standards does your company demand from your suppliers?" and "Which measures does your company put into practice in order to provide a sustainable assortment?". The topic "supply chain" alone pooled around 70 environment and health aspects and some 70 social and socio-political issues. The questions covered the entire value chain from extracting natural resources, to production and transport, to disposal.

Hundreds of companies all over Germany, with a total turnover of more than ten million Euros each, received the questionnaire. This included both shops and mail-order houses. The questionnaire referred to the companies' key ranges, i.e. retailers with several product lines received the respective number of questionnaires. By signing the questionnaires, the participating companies confirmed that the information given was correct at that point in time. Furthermore, the retailers were asked to submit evidence for their answers. The answers were verified as far as possible.

Up to five points per topic were awarded for answering the related questions, depending on the quantity and quality of the responses. As a minimum requirement, at least 20 percent of the questions had to be answered. The award for points was based on an evaluation matrix developed by the Öko-Institut e.V. Five points equal an outstanding performance, which means that the company meets almost all the criteria requested in the questionnaire. At the lower end of the scale one point is awarded for a performance below average. The quality of processes, structures and measures is assessed by internationally acknowledged benchmarks, standards, quality marks and best-practice examples.

Based on the results of the study, the VERBRAUCHER INITIATIVE granted the award "Sustainable Retail Company 2009" in gold, silver and bronze. The award required a thorough and sustainable commitment with respect to all three topic groups (supply chain, business activity, supporting sustainable consumption). In order to receive a bronze award, a company had to achieve at least half the total number of points. Overall, the VERBRAUCHER INITIATIVE granted 30 awards in 2009, including three gold medals, nineteen silver and eight bronze medals.

The gold medal winners show a commitment to sustainability that is far above average. They almost always scored full points in the fields surveyed – from developing a mission to corporate social responsibility and operational environmental management, from social and eco-friendly procurement guidelines to how to address the consumer.

In most industries, the surveyed companies covered large shares of their respective market. Participating companies in the food, beverages and tobacco industry, for example, account for a market share of around 60 percent, while this figure amounted to 40 percent for the textiles and shoe industry, and more than 30 percent for the building and DIY material industry.

Retailers that do not attach any, or very little importance to sustainability for their companies did not participate. Nor did any retailers participate that are only just starting to develop and implement [a] comprehensive sustainability management.

Among other targets, it is the objective of the study to motivate companies to act sustainably. This is particularly true for companies that are still at the beginning of their sustainability drives. This is why the far-reaching questionnaire was at the same time designed as a sustainability checklist. It is designed to help companies to establish and expand sustainable actions.

It is not easy to undertake a thorough and in-depth study of entrepreneurial conduct. This is due to the data situation in many companies and the amount of effort required, but also due to the way company information is dealt with. Here, confidentiality is an indispensable condition for convincing companies to participate in the first place. Therefore non-participants and respondents that did not obtain either an award or an evaluation of the individual aspects are not mentioned.

The retail interface
As the bottleneck between manufacturers and consumers, retailers have a central role. Consumers can only buy what retailers put on their shelves, and manufacturers only produce what retailers are able to sell. By choosing eco-friendly and socially compatible merchandise, the retailer therefore has a considerable influence on enhancing sustainable consumption. This is another reason why taking on social responsibility in retail is so important.

Retailers in particular have increasingly become a focus of public criticism recently, either for spying on employees, misuse of data or precarious labour conditions. This is another reason why companies that orientate their corporate strategy to social needs and environmental challenges are one step ahead of the rest. Sustainable actions induce respect in society, which pays off in several ways: for example, responsible actions enhance their reputation. Customers are increasingly interested not only in products that are made in an eco-friendly and socially compatible way, but also in companies that take on social responsibility, and they honour this commitment by buying products from such companies. Therefore, responsible corporate conduct increases sales, offering retailers competitive advantages (edge on the competition?). Further education for employees, or improving social and health care programmes in addition increases employee commitment. Not least the company saves expenses by implementing climate protection activities, for example through improved energy efficiency.

Corporate Social Responsibility
A credible CSR policy (CSR = Corporate Social Responsibility) includes all departments and positions at a company. It takes into consideration employee interests, environmentally sound operations, environmental protection, humane working conditions all along the supply chain, an integrated product policy, and consumer protection. Reaching beyond their core business, companies may in addition engage in charitable activities or community outreach, or make a contribution to improving general law and order, for example by taking firm action against corruption and bribery.

For effective CSR strategies, it is crucial that the activities are credible. If CSR is to be more than mere lip service and image polishing, ethical, social and ecological value must be compulsory in the company's strategies and objectives. These should be set forth in corporate guidelines or embedded in the existing company mission. Furthermore, companies should communicate their activities and the resulting impact in an adequate and transparent way. As the measures are of voluntary nature, each company establishes its own CSR priorities, which explains why the commitment of individual companies tends to vary widely. This in turn causes difficulties when comparing companies.

The power of the consumer
Every day, consumers with their numerous decisions make a contribution to respect for human rights, careful use of resources and the protection of the climate – or they don't. With their consumption patterns and lifestyles, consumers exert a considerable and lasting influence on the merchandise offered for sale and thus on the market. Examples from the past show how consumers are able to exercise power with their buying decisions. Organic food managed to jump from its niche existence in health food stores to (organic) supermarkets and discounters because of increasing demand.

Sustainable buying means making sure in a responsible way that environmentally sound and socially compatible products end up in the supermarket trolley. And sustainable consumption is fashionable. Organic and fair-trade products can be found on shopping lists with increasing frequency. When it comes to furniture, textiles, electric devices etc. consumers increasingly pay attention to whether products were manufactured eco-friendly and in socially compatible processes and that they are energy-saving in use and can be disposed of in an environmentally and socially sound manner.

When it comes to products, labels such as the Blue Angel, the FairTrade or Bio offer a good orientation. The VERBRAUCHER INITIATIVE offers (provides) information on 400 different labels at www.label-online.de.

But sustainable consumption also means purchasing from retailers that take their responsibility seriously – treating employees well, paying attention to energy efficiency and choosing products that were manufactured eco-friendly and in socially compatible processes. However, what happens behind the scenes at retail outlets remains a closed book for many consumers. Up to now, it has been difficult to understand how products are manufactured in the global supply chain, or how a global company ensures environmental and social standards.

The overview of companies awarded the title "Sustainable Retail Company 2009" on www.nachhaltig-einkaufen.de makes corporate commitment transparent for the consumer and provides customers with a tool for sustainable buying. This in turn supports retailers and gives them incentives in their efforts towards greater sustainability. The companies that have earned medals with actions considered "committed" to "very strongly committed" should serve as an example to others.

Next steps
The survey shows that retailers often perform better than their reputation. It clearly demonstrates that many of them have realized the added value of sustainable conduct for their companies. But much remains to be done. Still left out of the equation are small and medium-sized companies that lack the human and financial resources to prepare a comprehensive collection of data in order to participate in an extensive sustainability survey.

As the feedback and the conversations during and in particular after the 2009 study prove, retailers have a great deal of interest in the topic of environment and social responsibility. It is becoming increasingly important for companies to distinguish themselves and to stand out positively from competitors. Participants and non-participants alike considered the questionnaire a helpful checklist for their internal sustainability management. The publication of the survey's results caused positive feedback from both retailers and the press. Following the survey, a number of retailers asked for advice on ways to improve their commitment to environment and society.

In the next step, in 2010, the three industries jewellery and watches, toys, and stationery will be researched with respect to their commitment to the environment and social responsibility. Furthermore, there are plans to repeat the survey of the six industries with the highest sales volume in 2011 in order to reflect the further development of the companies and to give other retailers the opportunity to present their actions.