Case study: Supermarkets and Supply Chains

The Corporate Sustainability Reporting Directive (CSRD) marks a significant step in expanding sustainability reporting requirements for businesses across Europe. One area where its impact will be felt particularly strongly is in supermarket supply chains, where transparency, compliance, and sustainability are becoming crucial factors. Although there are no specific case studies currently available for supermarkets, we can extrapolate some important implications based on CSRD requirements and trends in supply chain management.

1. Supply Chain Impact: Increased Transparency

The CSRD puts a strong emphasis on supply chain transparency. Large companies, such as supermarkets, are now required to disclose detailed information about their supply chains, including the environmental and social risks associated with their operations. Supermarkets, with their vast and often global networks of suppliers, must ensure they track and report the sustainability practices of every entity involved.

This will require companies to gather data on everything from carbon emissions to labour practices, putting pressure on suppliers to be more transparent. Non-compliance from suppliers could lead to both financial and reputational risks for the supermarkets involved, as their disclosures will be scrutinised by stakeholders and regulators alike.

2. Supplier Relationships: A Shift Towards Accountability

Under the CSRD, companies are expected to report on their value chains, which will necessitate a deeper engagement with their suppliers. Supermarkets will need to gain more comprehensive information from their suppliers, encouraging better sustainability practices and transparency throughout their global supply chains. This process could be particularly challenging for smaller suppliers, but it also opens opportunities for collaboration.

For supermarkets, this increased engagement can be seen as both a risk and an opportunity. On the one hand, they must ensure their suppliers are compliant, while on the other, they can use this reporting requirement to enhance supply chain resilience and boost brand reputation by demonstrating robust sustainability practices.

3. The Risk for Non-Compliant Suppliers: Losing Contracts

One of the key risks for suppliers under the CSRD is the possibility of losing contracts if they fail to comply with the new sustainability demands. Supermarkets and other large companies face significant risks from non-compliant suppliers, particularly in terms of reputation and legal exposure. As seen in other sectors, greenwashing or failing to meet regulatory standards can lead to financial penalties and a loss of consumer trust.

Supermarkets may have to adopt either a punitive or collaborative approach with non-compliant suppliers. While severing ties with non-compliant suppliers is an option, many companies are now adopting a more collaborative stance, offering support to help these suppliers meet the required standards. This trend towards collaboration not only mitigates risk but also strengthens relationships across the supply chain.

4. Supporting Suppliers for Better Compliance

Supermarkets will likely need to play an active role in supporting their suppliers through this transition. Large companies can offer resources such as:

• Workshops and Training Sessions: Helping suppliers understand what is required under the CSRD and how they can adjust their processes.

• Guidance and Checklists: Providing detailed frameworks or templates that suppliers can use to assess their sustainability practices.

• Mentorship Programmes: Offering one-on-one guidance to suppliers who may struggle with compliance.

• Access to Reporting Tools: Supplying or subsidising tools and platforms that make sustainability reporting easier for smaller suppliers.

By offering these forms of support, supermarkets can maintain their supplier relationships while ensuring their own CSRD compliance.

5. Indirect Impact on SMEs: A Growing Burden

Although small and medium-sized enterprises (SMEs) may not be directly required to comply with the CSRD, they will likely feel indirect pressure from their larger clients—supermarkets included. Supermarkets will need to request sustainability data from these smaller businesses, which could create a resource burden for SMEs. In response, SMEs might need to invest in sustainability reporting, even if they are not directly covered by the CSRD.

This knock-on effect could also encourage SMEs to upgrade their sustainability practices, creating a more sustainable supply chain overall. However, supermarkets must recognise the additional burden this places on smaller suppliers and offer support and resources to ease the transition.

6. Long-term Implications for Supermarket Supply Chains

The CSRD’s focus on transparency and accountability signals a long-term shift in how companies select and manage their suppliers. Sustainability will no longer be a nice-to-have but a key factor in supplier selection and retention. Over time, supermarkets that invest in sustainability reporting will find themselves better prepared for future regulations and better positioned to attract ethical investors and conscious consumers.

In addition, as sustainability becomes central to the supply chain, the demand for sustainability innovation will likely increase. Suppliers who embrace sustainable practices could gain a competitive advantage, potentially securing more contracts and long-term business relationships with supermarkets seeking to comply with the CSRD.

Conclusion: The Need for Collaboration and Support

Although the CSRD presents significant challenges for both supermarkets and their suppliers, the trend towards collaboration rather than punishment offers a promising way forward. By supporting their suppliers in the transition to sustainable practices, supermarkets can ensure compliance while strengthening their supply chains.

For supermarkets, the CSRD is not just about meeting regulatory requirements—it’s an opportunity to build more resilient, transparent, and sustainable supply chains. To navigate this new landscape, supermarkets must engage their suppliers with support, training, and resources to foster long-term sustainability.

Call to Action for Supermarkets

As we approach the CSRD implementation, supermarkets should begin assessing their supply chains and engaging with their suppliers to ensure compliance. By adopting a proactive and supportive approach, they can not only mitigate risks but also capitalise on the opportunities that come with greater supply chain sustainability.

For more detailed insights and guidance on CSRD compliance and its impact on your supply chain, consult the sources below:

Supply Chain Management and CSRD (https://vinciworks.com/blog/supply-chain-management-and-the-corporate-sustainability-reporting-directive-csrd/)

The Global Impact of the CSRD (https://www.novata.com/resources/blog/the-global-impact-of-the-csrd/)

This shift towards greater transparency could be the catalyst for the next generation of sustainable supply chains in the supermarket industry.

The Impact of the CSRD on Supermarket Supply Chains: A New Era of Transparency and Accountability