Efficiency and ethics make recipe for success at Greggs

Bakery chain finance director Richard Hutton explains why it makes good business to pay suppliers within the stated time

PA Wire Greggs
File photo dated 31/07/07 of a Greggs shop as the bakery chain is to slow shop expansion plans and focus on "food on the go" customers under a turnaround to shore up sales after the recent summer heatwave left it nursing a £2 million hit to profits. PRESS ASSOCIATION Photo. Issue date: Tuesday August 6, 2013. See PA story CITY Greggs. Photo credit should read: Tim Ireland/PA Wire newcastle tark pic

With a turnover approaching £800m and 20,000 employees on its books, bakery chain Greggs is one of the North East’s true success stories.

In business, though, size isn’t everything, and with the launch of The Journal’s Pay Fair campaign, the group’s finance director Richard Hutton has spoken of how a responsible and ethical approach to dealing with companies in its supply chain has helped it boost efficiency while projecting the right message to the consumer.

Every year, Greggs spends around £400m with suppliers, including everyone from landlords and utility firms to those providing ingredients.

The company, which employs standard 45-day payment terms, has signed up to the Government’s Prompt Payment Code, and believes it makes good business sense to keep its promises when it comes to paying up in that timeframe.

“If you can provide certainty over when someone will receive payment, it gives them the confidence to build their own businesses,” he said.

“We have a reasonable degree of confidence that we will receive payment from our customers, and, as long as we have that, it gives us the ability to do the same for our suppliers. This creates a much more stable supply chain in which to invest confidently for the future.

“If we start to play games with each other, there’s a ripple effect and it’s very inefficient for business generally.”

Throughout its lifetime, Greggs has formed a number of long-standing relationships with suppliers, among whom the issue of payment terms rarely needs to be discussed, eliminating wasted administrative time.

Efficiency, though, is only part of the equation, with prompt payment forming part of overarching ethos in the company: that an ethical business is a strong business.

Managers, for example, are asked to sign up to a business conduct policy, thereby agreeing to take an ethical approach to those within the firm and indeed in other companies.

Employees are also encouraged to ask themselves whether they feel comfortable in their working environments and to report any matters of concern.

“This is important, because it means if we did get somebody who was a rogue operator putting pressure on colleagues, it give those colleagues permission to say, ‘This isn’t right’,” Mr Hutton said. “That is backed up by our whistle-blowing procedures. There’s an independent line people can call that will put them through to someone on our main board of directors.”

Ethical conduct, he added, was all the more important in consumer-focussed businesses, with customers becoming more and more likely to vote with their feet should they learn about bad practices.

Innovations such as social media also meant word could spread quicker than ever before when companies acted unethically.

At Greggs, though, it isn’t simply a matter of avoiding bad press, but of build stronger communities in the areas it operates.

Through the Greggs Foundation, the group has engaged in a wealth of charitable initiatives, launched Breakfast Clubs with help from partners in almost 300 schools, and worked hard to improve the employment prospects of disadvantaged young people and ex-offenders, for example.

But, while other big businesses might not choose to follow suit of their own accord, Mr Hutton believes the issue of late payments at least is best tackled through a cultural shift than trhough legislative change.

“It would be nice to think that people would see the benefits of treating others with respect and giving suppliers certainty when it comes to payment,” he said. “Going down the legislative route would be a last resort.

“I would hope by publicising the benefits of strengthening relationships with suppliers, businesses would take note.”

Through the Pay Fair campaign, The Journal is calling on regional firms to adopt a fair and ethical approach towards their supply chains while promoting a culture of responsible business.

We are also asking companies of all sizes to join up to the North East Institute of Business Ethics (NIBE) and sign the organisation’s Business Ethics Pledge.

By doing so, businesses agree to join with others to discuss the role and value of business ethics and to work with each other to transform their working environments for the better.

To support the campaign, visit http://www.nibe.org.uk/

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