Supplier treatment: why Tesco and other supermarkets need to integrate business and ethics

The actions that large companies take to source their products have direct implications for workers in their supply chains. In the wake of a critical report about Tesco’s treatment of its suppliers, guest blogger Rachel Wilshaw, Oxfam’s Ethical Trade Manager and ETI board member reflects on why more needs to be done to protect suppliers and the rights of their workers. 

This blog post first appeared on the Oxfam Policy and Practice blog on 03.02.2016

Twelve years ago I was at a Brussels corporate responsibility conference presenting the findings of a new  report, Trading away our Rights, conducted by Oxfam partners in 12 countries as part of its Make Trade Fair campaign. Its headline finding was that retailers needed to ‘address the impacts of their own sourcing and purchasing practices on the way that producers hire and treat their workers.’ The report included case studies relating to a range of supermarkets, including Tesco.

Yet 12 years on, the first investigation by the Grocery Code Adjudicator has found that Tesco, a longstanding member of the Ethical Trading Initiative (ETI) has ‘seriously breached a legally binding code to protect groceries suppliers’ and prioritised its own finances over the fair treatment of its suppliers, described by the Business Minister as a ‘scandalous situation’.

The issue of purchasing practices impacting on workers’ rights is well known to members of the ETI, which has put out a blog on the adjudicator’s findings. ETI’s sourcing principles state that ‘the company ensures that the terms of agreements with its suppliers such as prices, lead times and quantities are consistent with the ability of the supplier to observe the provisions of the Base Code’. Yet in a study by ETI Norway, Suppliers Speak Up (available in hard copy only) more than half the 1,000 suppliers surveyed reported that they have sometimes accepted prices below the cost of production and 6% had done so ‘many times’.

Charities such as Traidcraft have campaigned for more than a decade for the role of an adjudicator to be established, against opposition from businesses who argued voluntary regulation was sufficient. Its Supermarkets Campaign highlights the impact of abusive purchasing practices: temporary contracts, evading benefits, paying wages below the cost of living and corner cutting that puts workers’ safety and health at risk.

The same issues are evidenced in Oxfam’s study on in-work poverty. We have heard anecdotal evidence of unfair practices ourselves. One supplier confided to us about a shipment of fresh fruit rejected on spurious quality grounds, coinciding with an over-supply in the market, which cost the small company tens of thousands of pounds. And another small company told us it was de-listed by a different supermarket after making a complaint to the Grocery Code Adjudicator. When a company with Tesco’s market power treats suppliers badly it makes it harder for others to treat suppliers well.

How can a supplier provide long-term contracts to workers when they don’t have a contract with the buyer and aren’t sure when payments they are owed will come in? The pity is, that to the best of my knowledge, Tesco’s ethical trade team has recently done more than their mainstream peers in recognising the systemic nature of labour issues and starting to tackle them. They have spoken out about slavery, advocated for a negotiated minimum wage in Myanmar, and made a rare commitment to pay a living wage to banana workers. But as in other multinational companies, the corporate social responsibility team lacks the power of those controlling sourcing decisions.

The adjudicator’s findings point to the need for all supermarkets to integrate business and ethical trade goals into a company-wide sustainability plan in order to give coherent signals to their suppliers about their commercial and ethical requirements, and to report outcomes publicly, so stakeholders can track their performance, rather than having to wait for an ombudsman to expose them. ETI can help with this, but there must be a genuine commitment from the top.

There is an acute need for action by government too, particularly at a European level, to stop Unfair Trading Practices across the European Union. Oxfam fully supports such campaigns, as well as working with companies to tackle conditions facing workers in the Malawi tea sector, Moroccan strawberry sector, food and beverage sector  and as an active member of ETI.