Influence of ESG on supplier selection and contracting practices in the South African formal retail industry

Abstract

With growing global concern for sustainability, businesses are increasingly integrating environmental, social, and governance (ESG) practices into their operations. However, limited research has explored how these practices influence supplier selection and contracting processes within the South African retail sector. This study investigates how ESG criteria are embedded in the supplier selection and contracting processes between retailers and their suppliers. It is grounded in stakeholder theory, which emphasises value creation for all stakeholders, a principle that supports the effective integration of ESG factors into business practices. A qualitative exploratory research design was adopted because the study sought to gain an in-depth understanding of this underexplored topic. Twelve semi-structured interviews were conducted with procurement and sustainability professionals from leading South African retail organisations. Data were analysed inductively using a narrative inquiry approach, allowing for a rich interpretation of the drivers shaping ESG-related decision-making in supplier engagement. Findings indicate that ESG integration is an ongoing and complex process that extends beyond compliance. Management and decision-makers play a critical role in driving ESG adoption to achieve long-term value and resilience within retail supply chains. Several drivers and barriers to ESG integration were identified. These findings have practical implications for managers, suppliers, and policymakers. Academically, the study contributes to the literature by demonstrating that ESG integration is not solely a policy mandate but a context-driven process influenced by leadership, operational conditions, and external pressures. A limitation of the study is that legal teams involved in drafting supplier contracts were not interviewed; however, participants demonstrated sufficient knowledge of contractual content to inform the research findings.