A growing number of retailers are alert to the value of marketing the origin of goods to customers. They understand that while provenance can affect prices, it can also boost profits – and that procurement can help
Not so long ago most people bought their food and fashion with little thought for where it came from or how it was produced. Now, for many consumers, there’s been a massive shift towards more conscious, ethical purchasing decisions. Anti-slavery legislation, disasters like the Rana Plaza factory collapse in Bangladesh that killed more than 1,100 people five years ago and the European horsemeat burger scandal of 2013 have increased focus and awareness on the treatment and condition of workers and the desire to know what we’re eating, wearing and buying. Where’s it from, what is its carbon footprint, who made it and are they paid properly?
Companies have become more concerned with monitoring their supply chains to prevent risk and protect against reputational damage but they are also increasingly recognising it as an opportunity to generate revenue.
This is particularly true of retailers. Catalogues for a growing number of brands – big and small – are landing on the doormat featuring the faces of those who make, pick, produce, sew or craft the items within. Among them: Asquith clothing, homewares company Nkuku, Eat Natural cereal bars and Kadai fire bowls.
Powerhouse brands like Adidas, ASOS, Primark and Marks & Spencer now publish supplier maps so customers can see where their workers are. There’s a commercial imperative to disclose information that was previously regarded as commercially sensitive.
Football fans, for example, can see in which factories the Adidas clothes, balls, bags, footwear and accessories for this year’s World Cup are made. ASOS has published a 30-page list of the hundreds of factories it uses with a world map that details the number of employees and the male/female split of staff at each site. Primark’s supplier map, which became available from February this year, shows more than 1,000 supplier factories in 30-plus countries and also divulges the number and gender of workers.
Making the business case for transparency, workers’ rights campaign group the Ethical Trading Initiative (ETI) says it helps to protect corporate reputation and builds brand image and trust with consumers, investors and suppliers, which can lead to more efficient sourcing relationships.
A 2016 study by Transparency International found evidence to support the case for public reporting as a means of increasing corporate competitiveness. Of the 28 Indian and European multinational companies reviewed, the majority maintained or improved their revenue performance during the assessment period.
Rachel Wilshaw, ethical trade manager at Oxfam, welcomes the trend to provide consumers with more information, but warns there’s often a lot to unpack from the claims that are made.
The Fashion Transparency Index 2018, published by Fashion Revolution in April, tries to do some of this unpacking. Since the Rana Plaza disaster, it has campaigned to raise awareness and bring about change. It now reviews and ranks 150 global brands and retailers on their social and environmental practices and impact.
Adidas and Reebok were the top two performers in this year’s study, each scoring 58%. They were followed by Puma and H&M, which received 56% and 55% respectively. All retailers in the 51-60% range publish detailed supplier lists, including
manufacturers and processing facilities, and issue the vast majority of information on their policies, procedures and future goals. No company has yet achieved a score above 60%. To do so, they would have to go further by detailing raw material suppliers, mapping social and environmental impacts, publishing information on any gender pay gap and disclosing the number of workers covered by collective bargaining agreements or who are part of democratically-elected trade unions.
ETI executive director Peter McAllister said it shows that, while greater transparency is fast becoming the ‘new normal’, there is still a way to go. “Unfortunately, many businesses are yet to even start their journey. We hope the report will be a much-needed wake-up call. They can and must do better.”
Food supply chains
While circumspect about specific claims, Wilshaw believes the fashion industry is generally ahead of the foodservice sector when it comes to transparency. “Quite a few companies now have supplier maps for garments but not many do that for food,” she says, “I’d like to see more doing so.”
She believes that Marks & Spencer is ahead of the curve in this respect and unusual in the UK in that it publishes a map for clothing, homewares and food products. It has also invested in marketing these messages to customers. Its recent advertising campaign – featuring juicy steaks and loaded burger buns, with the words: ‘We trace it, so you can trust it’, together with the slogan ‘spend it well’ – aims to reassure consumers it can track all its beef back to the animal it came from, and claims to be the only national retailer that is able to say that. The company is using DNA sampling from every animal from every farm that supplies M&S and its suppliers, and running regular tests to check that M&S standards are being followed.
Foodbuy managing director Oliver Cock says he’s seen demand for identifying provenance grow and become increasingly specific. “It’s not just identifying produce as British, but narrowing it down to specific geographic areas such as Scottish beef, Welsh lamb, Cornish milk and so on.” Foodbuy, a £1bn food procurement business, which was created by catering giant Compass Group in 2015, provides this information by capturing data from its suppliers to identify provenance. It then works with two organisations to ensure it can accurately track these throughout the supply chain: technology firm Authenticate helps map its supply chain, check standards and accurately trace key products through the supply chain; while forensic traceability firm Oritain uses a product’s naturally occurring environment to develop a geo-chemical fingerprint of origin. This information is used to promote seasonal British produce, highlight new SME or family-run suppliers and innovative products coming from the geographic areas where its clients are based.
Cock adds that consumers are also increasingly interested not just in where their food comes from but in the conditions in which it was farmed or made.
Shaun Allen, CEO of Prestige Purchasing, which provides procurement services to a range of foodservice sector businesses, from blue chips to owner-managed restaurants, says his business has also seen a rising interest in provenance. “Some businesses are finding it quite tough and some are differentiating themselves around provenance. Consumers are more conscious about their food and what they’re eating. They’re making more choices around ethical standards and source of origin and the businesses attuned to that are the sort that are seeing good sales growth.”
While the business-to-consumer market is “all over this issue,” some business-to-business companies are working on it too, says Shaun McCarthy, director of Action Sustainability. “In the construction sector I would pick out Marshalls as a great example. Their ethical sourcing programme in India goes back many years, driving towards greater transparency and long-term relationships with their suppliers in the developing world.” And they use their website to market this approach to customers, he adds.
Sonya Bhonsle, head of supply chain at the Carbon Disclosure Project (CDP), points out that more businesses are now aware of the risks and opportunities in their supply chains, and are therefore more interested in the provenance of the goods exchanged within them. “They’re also more interested in the provenance of goods because their investors are asking them about it,” she adds. “We work with more than 650 investors globally, who want to know how companies are managing the risks within their supply chains.”
Bhonsle says the transition to a low-carbon economy can generate considerable cost savings for both purchasing organisations and their suppliers. CDP’s supply chain programme works with more than 100 purchasing organisations and more than 3,000 suppliers to identify and manage climate change, deforestation and water-related risks.
Marketing the geographic provenance of a product can also reap dividends. Global report Brand Britain found international consumers were prepared to pay up to 22% more for British goods, particularly cars, alcohol and food, because they perceive them to be superior. The study, published earlier this year by Barclays Corporate Banking, found demand for products made in the UK has risen by a third (36%) in the past five years, opening up an estimated £3.45bn for British exports.
The Union Jack has the biggest pull with younger people – nearly half (47%) of 18-34-year-olds quizzed said a British flag on a product would encourage them to buy it.
Procurement professionals may not be marketers but they often hold the key to information on supply chain standards that could create competitive advantage.
Tina Fegent, a supply chain professional who has long been interested in combining the logic of procurement with the magic of marketing, says this is an area where the profession could contribute more. “Transparency and the provenance of the supply chain is increasingly important for consumers. Issues like plastic, straws and coffee cups show that, but there continues to be a disconnect between sales/marketing and procurement teams. Everyone is so busy that they don’t join up the dots. We could add value and work more closely with sales teams to understand requirements and criteria and then use that to market goods. Retail-focused buyers are helping but they are in the minority.”
Fegent believes the profession can help specifically by ensuring transparency and audit controls are in place, working with suppliers that are interested in this area and keeping up to date with relevant supply chain legislation.
Cock agrees procurement has a part to play. “It is a key part of the overall value procurement can offer. Understanding the relationship between what a consumer values and how that relates to cost is a crucial dynamic in purchasing.”
For example, he says, restricting sourcing to a specific geography often has an impact on cost because it curbs competition and can mean larger, more efficient suppliers are excluded. But where the consumer is prepared to pay more, it’s a great strategy to engage them and drive sales. Without the consumer value, however, that approach will drive costs up and profits down.
McCarthy sums it up thus: “Procurement is pivotal to this agenda. The profession is uniquely placed to facilitate greater transparency and ethical standards down the supply chain or of course to block them.”
Provenance and transparency are not only areas of risk to be considered by procurement professionals seeking to protect their businesses from potential damage; they are increasingly a potential source of competitive advantage – and another means of it making its mark.
Transparency will be a fundamental requirement for success in the future
Social enterprise Giki (which stands for ‘get informed, know your impact’), launched a free app in May to pull together information on 250,000 beauty, food and cleaning supermarket products. Launched from their kitchen table, Jo and James Hand wanted to help consumers better understand the products they buy and make decisions based on what’s most important to them.
The technology pulls together existing information that may not be on the labels and tells customers scanning a product if it has credentials in these areas, such as palm oil being responsibly sourced.
Tech start-up Provenance envisages every product will have a digital history in the future, and buyers will be able to verify origins. It is part of a blockchain pilot featured in SM last month, tracking transactions between suppliers in real time to ensure products are sourced through an authorised chain of custody. It then helps businesses share the background of their product at point of sale.
Founder Jessi Baker tells SM transparency will be a fundamental requirement for success in the future. “Brands and global businesses will likely fail if their customers cannot access product information. They will need to verify the claims they make and show they operate in sustainable ways. Even now, challenger brands are encroaching on the market share of the bigger players by competing on authenticity, openness and demonstrating positive social or environmental impact.
“Consumers are ready for this shift and already voting with their wallets. There are real commercial benefits including charging a premium, defending brand reputation and mitigating risk.”
The £4million difference for proving provenance
Provenance has long been an essential consideration in the world of art and antiques, where the stronger the proof, the greater an item’s value. Antiques and Auction News illustrates this
with a piece about two recent auctions of similar dresses. In one, a 1950s-era gown sold for $1, while elsewhere another buyer paid $4,810,000 for a different, but not dissimilar-looking frock.
The difference? Marilyn Monroe wore the second when she sang “Happy Birthday, Mr President” to JFK in 1962 and there were documents to prove it.
The art world uses chains of title or ownership, certificates of authenticity, photos, letters, newspaper articles and more to help establish proof, value and validity of items, and it is the responsibility of the buyer to examine provenance prior to purchasing. Failure to carry out proper checks has previously led to multi-million dollar purchasing mistakes for fakes, followed by costly litigation to try to claw it back.