LONDON (Reuters) - British retailers have cancelled 7.1 billion pounds ($9.6 billion) in contracts over the last 12 months with suppliers that do not meet their ethical and sustainability standards, according to a report from Barclays Corporate Banking.

The report, published on Thursday, found that the COVID-19 pandemic and an increasing focus on environment, sustainability and governance (ESG) matters are shifting business' priorities.

Alongside climate change, a core focus for most investors, there is growing concern over the corporate world's impact on nature and the treatment of social stakeholders, including workers, across often lengthy supply chains.

Barclays found 21% of the retailers it surveyed cut ties with suppliers in the last year because they were not meeting required standards.

The most common reasons for cancelling contracts with suppliers were the use of unsustainable materials, unfair working hours and lack of membership of a trade body that monitors ethical and sustainability standards.

British retailers are grappling with international supply chain delays that are being compounded by labour shortages in domestic transport and warehousing networks.

However, Barclays also found that almost four in five retailers believe a long-term strategy to improve their ethical and sustainable credentials is more important than overcoming short-term supply chain disruption.

"We are seeing a marked acceleration and shift among retailers towards prioritising sustainable and ethical standards in every part of their business operations," said Karen Johnson, head of retail and wholesale at Barclays Corporate Banking.

"That is now starting to take its toll on retail suppliers with billions of pounds worth of contracts being cancelled every year."

Johnson added that retailers must continue to improve their ethical and sustainability standards if they are to appeal to younger demographics.

($1 = 0.7372 pounds)

(Reporting by James Davey; Editing by Mark Potter)