Responsible sourcing is on its way to becoming a business requirement that affects all categories
From a new scorecard ranking grocers on their animal welfare policies published by the American Society for the Prevention of Cruelty to Animals, to allegations of underage migrants working in U.S. food-processing plants, the stakes have never been higher for the supermarket industry to source more responsibly.
To be sure, a number of retailers ranging from the largest (think Walmart and Kroger) to the smallest have taken notable steps in recent years to improve their sourcing practices — Kroger even exceeded several of its 2023 sourcing-related sustainability milestones, according to its just released 2023 environmental, social and governance (ESG) report. But there’s still plenty of room for improvement and a range of additional categories to be considered.
Until now, sustainably minded grocers have been mostly paying attention to the conditions around animal products they sell, such as poultry, eggs and beef, as well as fresh produce. This will certainly continue, but expect to see more action in all categories (and ingredients) going forward, thanks to the boom in retailers’ private label programs, increasing consumer interest and regulatory pressure.
Industry watchers tell Progressive Grocer that there’s really no area of the business that won’t be affected. In fact, one expert asserts that the industry is nearing a “tipping point” when the implementation of sustainability protocols such as responsible sourcing will pivot from being “good to have” to being a requirement of doing business in North America and Europe.
“Retailer demand for assurance around social compliance and environmental responsibility has never been higher,” maintains Jorge Ramirez, VP of responsible sourcing strategies at SCS Global Services, a global provider of third-party environmental and sustainability verification, certification, auditing, testing and standards development, based in Emeryville, Calif. “We see acceleration in the adoption of more stringent requirements for upstream grocery suppliers.”
Ramirez explains that the drivers for this shift are multifaceted and reflect both an “increasingly rigorous regulatory and public reporting environment,” as well as a shift in consumer sentiment. “Younger generations in particular are demanding that retailers take responsibility for the impact of products and issues like biodiversity, climate change, and worker protection and empowerment, among a whole host of other issues where costs have historically been externalized,” he points out.
Andy Harig, VP of tax, sustainability and policy development at Arlington, Va.-based FMI — The Food Industry Association, echoes this sentiment, noting that he’s already seen changes in the way retailers and suppliers are conducting business as a result. Whereas sustainability topics used to be more siloed, they are increasingly making it into everyday business conversations, he says. This is a collaborative process that will require a higher level of partnerships among retailers and their suppliers if the industry is to succeed.
A lot of collaborative work is already taking place. For instance, Solon, Ohio-based Efficient Collaborative Retail Marketing (ECRM) and its subsidiary product discovery tool, San Francisco-based RangeMe, have been working with food retailers since 2021 to conduct virtual “Sustainability Summits,” for which they connect larger retailers with suppliers that are focused on responsible sourcing and other sustainable practices. Participating grocery companies have included Amazon, KeHE, Kroger, Meijer, Sprouts and Wakefern.
Advice From the Pros
Perhaps the gold star holder in responsible sourcing is Austin, Texas-based Whole Foods Market, which has long held this as a key pillar of its sustainability strategy, even rolling out its own Sourced for Good program two years ago.
“At Whole Foods, we want customers to feel good about what they’re putting in their baskets, so we prioritize supply chain transparency and responsible sourcing,” says Karen Christensen, SVP of perishables and quality standards. “That includes supporting the rights, well-being and dignity of workers in our supply chain.”
Through the Sourced for Good program, which supports workers, communities and environmental stewardship where products are sourced, Whole Foods collaborates with farms, suppliers and international third-party certifiers, including Fair Trade USA, Rainforest Alliance, Fairtrade America, Fair Food Program, Equitable Food Initiative and Regenerative Organic Certified. The program has raised millions of dollars annually for hundreds of communities across 12 countries, including the United States.
Looking ahead, Christensen says that she expects more retailers to require traceability to a farm or fishery so that they can provide their customers with better transparency.
Another retailer that has prioritized responsible sourcing is rapidly growing German-owned discount chain ALDI, whose U.S. headquarters is in Batavia, Ill. With a strong emphasis on private label (its stores are stocked with more than 90% of its own brands), its work can inspire other grocers to be more discerning in their sourcing. “Because we’re focused on offering a better selection — not a bigger one — we can curate the best products in terms of both quality and sourcing,” explains Joan Kavanaugh, VP of national buying. ALDI also aims to make sustainability “affordable” and “accessible to all” through the lower prices of its own brands, she adds.
Kavanaugh notes that ALDI has led the industry as the second-largest private label purchaser of Fair Trade USA coffee. Meanwhile, the chain sources 100% of its fresh and frozen beef from areas free from deforestation, and uses palm oil that’s certified sustainable by the Roundtable on Sustainable Palm Oil (RSPO).
Its goals moving ahead are just as ambitious: The retailer plans to continue focusing on human rights while increasing its supply chain transparency and promoting socially and environmentally responsible sourcing practices.
Like ALDI, Phoenix-based Sprouts Farmers Market aims to balance sustainable sourcing with competitive pricing. “Being different has always been at the core of who we are at Sprouts,” says Tanya Carlson, division VP of fresh buying. “Our customers care deeply about where the products they are purchasing come from. They also care that what they’re buying is better for their bodies, sustainable for the environment and responsibly sourced.”
Carlson has also found that partnering with the right suppliers is paramount, and that retailers must be committed for the long term.
Setting the Right Strategy
In Harig’s view, grocery companies are increasingly viewing responsible sourcing as a competitive advantage. As proof, he points to FMI’s latest “Speaks” report, which finds that 55% of retailers view sustainable or social/environmental issues as a potential differentiator in a competitive environment.
Harig advises companies to think how their sourcing strategies align with their mission statement, customer base and size. “For instance, if you’re a one-store operator who doesn’t self-distribute but uses a wholesaler, you may not have much of a hook to do a complicated supply chain map, but you can certainly ask for that information,” he notes. “Then it will be different if you source locally.”
Meanwhile, retailers that don’t sell much seafood probably don’t need to consider an elaborate seafood program, but they can still look at other ways to be more sustainable. Also, grocers that serve more budget-conscious shoppers will need to think about what their customers are willing to pay for.