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This project and report were undertaken with the financial assistance of the European Union. The contents of this document are thesole responsibility of Consumers International and can under no circumstances be regarded as reflecting the position of theEuropean Union.

Are European supermarkets living up totheir responsibilities for labour conditions

in the developing world?

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About Consumers International (CI)

Consumers International (CI) is the global federation of consumer organisations, representing over 220groups in 115 countries. Based in London, and with regional offices in Kuala Lumpur and Santiago, CI isthe campaigning global voice for consumers, our mission is to build a powerful international consumermovement to help protect and empower consumers everywhere.

Consumers International is a not-for-profit company limited by guarantee in the UK (company number4337865) and a registered charity (number 1122155).

Checked outAre European supermarkets living up to their responsibilities forlabour conditions in the developing world?

ISBN 978-0-9560297-6-8

Published by Consumers International in March 2010

Consumers International24 Highbury CrescentLondon N5 1RX, UKemail: [email protected] www.consumersinternational.org

Creative Commons Attribution 3.0 Licensehttp://creativecommons.org/licenses/by/3.0

Checked outAre European supermarkets living up to

their responsibilities for labour conditionsin the developing world?

Credits

This report was produced by CI’s London office as part of a project funded by the European Union toraise European consumers’ awareness of the impact that supermarkets supply chain policies can have onpoverty reduction in developing countries.

The report was written by Catherine Nicholson and Justin Macmullan with assistance from MatthewLloyd-Cape. Comments were received from Fiona Gooch, Alessandra Mezzadri (SOAS) and Dr Bill Vorley(IIED).

CI would also like to acknowledge the valuable assistance of Sanne van der Wal (SOMO), Fiona Gooch,Dr Bill Vorley and Dr Sue Hornibrook (University of Kent) in developing the research.

The following CI member organisations conducted the research that formed the basis of this report:

Belgium: Test-Achats (Christian Rousseau, Gilles de Halleux)

Denmark: Forbrugerrådet, the Danish Consumer Council (Maria Hyldahl, Claus Jørgensen)

France: Consommation, Logement et Cadre de Vie (CLCV) (Vita Romano, Marie-France Corre)

Greece: New INKA (Mary Pliatsika, Celia Tsekeri)

Poland: The Association of Polish Consumers (APC) (Tomasz Odziemczyk, Grazyna Rokicka)

Spain: Organización de Consumidores y Usuarios (OCU) (Amaya Apesteguia, David Ortega)

Italy: ALTROCONSUMO (Eliana Guarnoni)

Portugal: DECO PROTESTE (Maria Antonieta Duarte)

This project and report were undertaken with the financial assistance of the European Union. Thecontents of this document are the sole responsibility of Consumers International and can under nocircumstances be regarded as reflecting the position of the European Union.

.

Contents4 Acronyms

5 Executive summary

8 Introduction

10 Chapter 1Background to supermarket supply chains and development

16 Chapter 2Research methodology

18 Chapter 3 Consumer attitudes and awareness

20 Chapter 4 Supermarket commitment to CSR

26 Chapter 5 Ensuring good working conditions throughout thesupply chain

30 Chapter 6Fair trading relationships

37 Chapter 7Support for fairly traded products

42 Chapter 8Overall summary of results by company

45 Conclusions and recommendations

51 Annex ASupermarkets included in the survey

52 Annex BSummary of initiatives relating to corporate socialresponsibility identified in the survey

54 Annex CSummary of labels relating to labour conditions andfair trading identified in the survey

56 Annex DExamples of country specific policies forinternational companies

58 Endnotes

Acronyms

BSCI – Business Social Compliance Initiative

BSCD – Business Council for Sustainable Development

CSR – Corporate Social Responsibility

DIEH – Danish Initiative for Ethical Trade

ETI – Ethical Trading Initiative

FLO – Fairtrade Labelling Organisations International

Global GAP – The Global Partnership for Good Agricultural Practice

ICS – Initiative Clause Sociale

GSCP – Global Social Compliance Programme

ILO – International Labour Organisation

ISO – International Organisation for Standardisation

SA8000 – Social Accountability

This report is part of a project that seeks to informEuropean consumers about the impact of supermarketpolicies on producers and suppliers in developingcountries and engage them in actions to support povertyreduction and development. Leading supermarkets inBelgium, Denmark, France, Greece, Italy, Poland, Portugaland Spain1 were surveyed on their policies relating tolabour conditions and trading relationships in developingcountry supply chains.2

The report focuses on food supply chains as consumers’weekly grocery shop is often their most regular form ofcontact with supermarkets and food is a key productgroup for trade between European supermarkets anddeveloping countries. We have focused particularly onsupermarkets’ private or own brands as it is the areawhere the supermarkets exercise the greatest control.

Food markets are also of particular interest because theyare an area where supermarkets are increasinglydominant players. The top five supermarket chains in sixof the eight countries surveyed control over 50% of themarket and this figure rises if buying groups are takeninto account. This gives the supermarkets immensepower. In theory, this power has the potential to deliverwidespread benefits, however in highly competitivemarkets there is also a risk that supermarkets will abusethat power to pass costs and unacceptable risks on tosuppliers and producers.

The report also includes results from a consumer surveyconducted in Belgium, Denmark, France, Greece, Polandand Spain to assess consumer attitudes and awareness inthis area. The survey revealed widespread supportamongst consumers for supermarkets paying theirsuppliers enough to ensure workers receive a decentwage, even if this led to higher prices for consumers.

This supports other consumer surveys that have shownEuropean consumers are increasingly concerned aboutthe impact that their choices can have on others. These

results point to an upward trend in those willing to makedecisions based on the responsibility of companies3. Thishas led to an increase in sales of fairly traded products4

and to the increasing conversion of conventional brandsto such standards. However, our own survey suggeststhere is still considerable scope in some Europeancountries to increase levels of awareness of the issues andthe availability of these products.

Consumers will understand that many of the issuesconnected with supermarket supply chains will becomplex. However, in such cases they expect thatsupermarkets will put the right policies in place to ensure,at the very least, that basic human rights are notundermined by their procurement practices, that they willindependently verify their actions and then provide clearand accessible information as to what they are doing.

On the basis of the survey the report concludes that mostsupermarkets in the countries surveyed are not meetingthese obligations to consumers. Despite some examplesof good practice, the majority of supermarkets failed todemonstrate that they are taking adequate responsibilityfor labour conditions and fair trading relationships in theirfood supply chains.

What we found:There was evidence of good practice

• Relatively speaking Coop Italia was found to have themost consistently good policies overall, followed byCoop Denmark.

• Auchan and Carrefour, and to a slightly lesser extentMercadona and Colruyt, have some policies across therange of issues covered.

Coop Italia

Coop Italia showed board level commitment to CSRrelating to labour conditions and fair tradingrelationships. They apply the SA8000 standard to their

Executive summary

Executive summary

5

purchasing, engage actively with a range of differentstakeholder groups and they showed exceptionalcooperation with the survey.

Their policy on labour standards is comprehensive,applied throughout the supply chain and independentlyverified. Buyers are trained and suppliers are informedand supported in the implementation of the code.

Company principles require Coop Italia to act withintegrity in their trading relationships especially in relationto developing countries or minor supply chains. This isbacked up by a comprehensive code of conduct andtraining of buyers. All suppliers have written and bindingterms of trade and incentives are linked to coherence andcompliance with these policies. Coop Italia haslongstanding trading relationships with small-scalesuppliers.

Coop Italia stocks and promotes a wide range of fairlytraded products and offers preferential terms to suppliersof such products.

Coop Denmark

Coop Denmark also demonstrated commitment to CSRrelating to labour conditions and fair trading relationshipsthrough their membership of the Danish Initiative forEthical Trade (DIEH) and other initiatives to promotecooperation and good practice. Responsibility for theimplementation of relevant CSR policies is integrated intothe day-to-day management of the company.

The company has a comprehensive policy on labourstandards and a code of conduct relating to supplierrelations which includes clarity on terms of trade andpricing mechanisms, payment on time and according towritten terms of trade and states that suppliers’contributions to promotions should be voluntary.Contracts, including complaint mechanisms and timing ofpayments for example, are negotiated with 100% oftheir suppliers.

Coop Denmark support the inclusion of small-scaleproducers in their supply chains. They also have specifictargets in support of fairly traded products (10 Actionsfor Ethical Trade) which include significantly increasingsales and the range of independently verified fairly tradedproducts stocked, as well as actively promoting theseproducts and the issues behind them at their own cost.

However, generally the picture wasdisappointing

• It is clear that supermarkets’ CSR initiatives do notalways apply to all products and are not always active-ly applied to food supply chains in developing countries.

• There is a pervasive lack of sufficiently detailedinformation available. Information on suppliercompliance and audit reports was either unavailable orat such a general level that it was difficult to establishwhether or not audits had taken place in the relevantsupply chain.

• Supermarket codes of conduct on labourconditions and workers’ rights generally cover ahigh number of the core ILO conventions. However,only 5 out of 16 companies include a commitment to aliving wage and only 3 reported a complaintsmechanism. Relatively few supermarkets coulddemonstrate clear evidence that they trained theirbuyers in the application of their policy or code orconduct, or had a reward structure for the buyerswhich ensured they genuinely acted in a manner toenable its realisation in practice.

• Ensuring fair trading relationships with suppliersrequires practical means to prevent ‘bullying’ tactics,share risks and costs, and encourage stability. Overallsupermarket policies and codes of conduct lackmeasures to ensure that trading relationships are fair.For example, only 6 out of 17 companies report thattheir policies include the provision that contributionsfor promotions should be voluntary. Implementation ofpolicies is also mixed, for example 11 companiesreported the inclusion in policy that payments shouldbe on time and according to terms of trade butcorresponding information on how often this happensin practice was very limited. Ten out of 17supermarkets refer to training their buyers in theirpolicies, but only two refer to incentives toencourage application.

• A survey of European suppliers was conducted togain a supplier’s perspective of trading relationshipswith supermarkets. In some cases supermarket claimswere supported, however there were also examples ofpractices that suppliers felt passed unfair additionalcosts and risks on to them. These examples includedlate payments by supermarkets, changing paymentterms within a contract period and compulsorypromotional costs. Late delivery penalties werereported, sometimes deducted from payments withoutnotice. Suppliers also considered that requirements tomake increasingly frequent deliveries passed increasedcosts and risk on to them.

Unfortunately, despite contacting 200 suppliers indeveloping countries it was not possible to get anyresponses to our requests for information. This is notsurprising given the climate of fear that is reportedamongst suppliers associated with the fear of delisting5

and underlines the difficulty in getting information inthis area and supports the role of an independent bodyto oversee accusations of abuse.

6 Executive summary

• Buying fairly traded products is a practical meansthrough which consumers can support moreresponsible trade. In some of the countries surveyed,notably France, Belgium and Denmark, supermarketsstock a wide range and some take part in awarenessraising activities. However, there are still opportunitiesfor supermarkets to do more in this area particularly inthose countries where awareness is relatively low suchas Spain, Portugal, Poland and Greece.

It is important to note that fairly traded products mustnot be used as a substitute for more systemicimprovements in the procurement of food items fromdeveloping countries.

OverallThere is a need for supermarket initiatives to rapidlyexpand their scope to cover food supply chains indeveloping countries. Policies on labour conditions andtrading relations should be developed and implementedthrough multi-stakeholder processes wherever possibleand processes should be put in place for independentverification.

Supermarkets should publish clear information abouttheir CSR policies and their implementation.Governments should introduce Right to Knowlegislation6, or review existing legislation if it is noteffective, to ensure consumers have access to informationabout the sustainability of products and services.

The EC has recognised the existence of problems in therelations between European suppliers and supermarkets.Research elsewhere has shown that these issues also existbetween European supermarkets and suppliers indeveloping countries7. Therefore, the EC should extendits investigation to cover developing country suppliersand make proposals for remedial action.

Ensuring that human rights are met in their supply chainshould be a non-negotiable commitment that allsupermarkets make. This may have a marginal impact onthe cost that European consumers have to pay butsupermarkets should be prepared to share any additionalcosts. Costs should not be passed down the supply chainto those least able to absorb them.

Executive summary 7

This report is part of an EC funded project that seeks toraise European consumer awareness about the impactthat supermarket supply chain policies can have onproducers and suppliers in developing countries. It looksspecifically at food supply chains, as this is a sector inwhich supermarkets have great influence and theproducts involved provide one of the most regular linksbetween consumers in Europe and producers indeveloping countries.

The report includes results from a survey of supermarketpolicies and a consumer survey. The consumer survey wasconducted in Belgium, Denmark, France, Greece, Polandand Spain. The survey of supermarket policies wasconducted in the above countries with the addition ofItaly and Portugal.

International trade, if combined with the right conditions,has the potential to bring major benefits to people indeveloping countries. Access to new markets can lead tothe creation of new jobs, increased incomes and theadoption of new skills and technologies. Developingcountries make considerably more each year frominternational trade than from overseas aid, though thebenefits are not necessarily evenly shared or targeted atthose most in need.

However, the benefits developing countries can realisefrom international trade are not automatic. Given thevery different circumstances and unequal relations thatcan exist in international trade between companies indeveloped countries and producers and suppliers indeveloping countries it is important that those that havethe greater power take responsibility for promoting and,wherever possible, ensuring fair trading relations andgood working conditions.

This is a concern for consumer organisations for tworeasons. Surveys, such as the one conducted byConsumers International (CI) for this project, show that inmany European countries, consumers are increasingly

concerned about the social impact of their consumptionchoices and want independent information on which tobase their decisions. Secondly, there is growingrecognition of the importance of incorporating issues ofsustainability into all decision-making. This necessitatesthat consumption is not seen simply in terms of price,choice and functionality but also incorporates concernsabout the social and environmental impacts.

While this project looks specifically at food supply chainsin developing countries, the principles are in many casesalso applicable to trade within European countries andacross Europe. Poor working conditions and unfairtrading relations are a concern for many Europeanproducers as well. CI members have conducted surveys ofthese issues in a European context and will continue todo so in the future.

Structure of the reportThis report seeks to inform consumers about differentaspects of Corporate Social Responsibility (CSR) policiesof European supermarket chains relating to workersrights, the conditions in which goods are produced andhow they are traded.

Chapter 1 outlines some of the underlying concerns withsupermarket supply chains in relation to developingcountries and how supermarkets have responded.

Chapter 2 explains the methodology that was followedin conducting the consumer survey and the survey ofsupermarket CSR policies.

Chapter 3 outlines consumer attitudes and awareness inrelation to these issues.

Chapter 4 provides an overview of the overallcommitments of supermarkets to CSR in relation tolabour conditions and trading relationships in these

8 Introduction

Introduction

supply chains. This includes their involvement in industryinitiatives, where responsibility for these aspects of CSR islocated within the business, as well as how transparentthe company is in relation to their social responsibility.

In Chapter 5 we look at any policies that thesupermarkets have to encourage good workingconditions amongst their suppliers. In particular, thecontent of these policies, operational issues, theirapplicability to food supply chains in developing countriesand the existence and effectiveness of any verificationschemes.

Chapter 6 looks at policies relating to the tradingrelations that supermarkets have with their suppliers. Thisis an important issue given the buying power of manysupermarket chains.

Chapter 7 looks at the promotion of certified fairlytraded products by supermarkets, including their stockingof such products and initiatives they have taken to raiseconsumer awareness about the issues behind theseproducts and promote their sale.

Chapter 8 gives an overview of results averaged acrossall areas and highlights examples of good practice.

In each chapter we have sought to highlight areas ofgood practice to demonstrate the feasibility ofsupermarkets improving their policies and encourageothers to take similar steps.

Finally in our conclusions and recommendations weassess the overall situation of the European supermarketsector in relation to suppliers and producers of food indeveloping countries.

Introduction 9

Fairly traded

Consumer facing standards (such as Fairtrade,Rainforest Alliance and Utz Certified forexample) are identifiable to the consumer bythe labels that they carry. The label tells theconsumer that the product has been producedor traded according to set standards.

Although the overall objectives of thesestandards vary, in this report we areconcerned specifically with the aspects thatrelate to the quality of the working conditionsin which relevant goods from developingcountries are produced, and how fairly theyare traded.

Products produced to standards thatincorporate these issues (albeit to differentlevels) are referred to throughout the reportas fairly traded. We have only includedstandards that were found in thesupermarkets surveyed.

Corporate Social Responsibility (CSR)

The ISO 26000 working definition of socialresponsibility8 is as follows:

The responsibility of an organization for theimpacts of its decisions and activities on societyand the environment, through transparent andethical behaviour that

• contributes to sustainable development,including health and the welfare of society;

• is in compliance with applicable law andconsistent with international norms ofbehaviour, and

• is integrated throughout the organization andpractised in its relationships.

In the context of this report however, we onlyconsider aspects of corporate social responsibilityrelating to the labour conditions in which goodsare produced and how they are traded.

Consumer support for responsible tradeEuropean consumers are increasingly concerned aboutthe social impact of their consumption choices. In 2009,CI undertook a consumer survey in six Europeancountries (Belgium, Denmark, France, Greece, Spain andPoland). One of the aims was to assess consumer supportfor supermarkets paying suppliers a fair price.

In all but one of the countries surveyed the majority ofconsumers felt that supermarkets should pay a price thatenabled suppliers to pay their workers a fair wage, evenif it resulted in consumers having to pay more at the till. Itis also interesting to note that the survey was conductedin June that year, at the height of a financial crisis, whenmost European countries were in a recession.

This supports the view that consumers are concernedabout the social impacts of their consumption choices.9

Furthermore, consumers want to use their consumptiondecisions to actively support positive change. TheGlobeScan CSR Monitor suggests high and risingnumbers of consumers believe they can make adifference. When asked whether consumers could makea difference in how responsibly a company behaves,more than two thirds replied positively in Europeancountries such as France and Italy10.

Another indicator of consumer action to supportdevelopment can be found in growing sales figures forfairly traded products. The Fairtrade Foundation forexample reported that in many European countries, salesof products carrying the FAIRTRADE Mark11 grew at a rateof 20% to 75% in 200812 and stated that, “Despite theglobal recession, worldwide sales of Fairtrade productsgrew in 2008 as consumers spent an estimated 2.9 billionEuros on Fairtrade products globally.”13

While there is little doubt that this is a growing trendacross Europe, levels of awareness of the issue are notthe same across all countries. Generally countries withlower national incomes also tend to have lower levels ofawareness, and sales of fairly traded products are alsolower. However, with rising incomes there is good reasonto believe that consumer campaigns will be effective inraising awareness and support.

Consumer organisations are also reflecting growingconcern in this area by helping to provide access to moreinformation about the social impact of their consumptionchoices. Several CI members in Europe now conduct CSRsurveys alongside more traditional functionality tests for anumber of products.

CI members also support the introduction of Right toKnow legislation for public or privately owned entities,imposing a duty to disclose any information which isrelevant to consumers regarding sustainability, and whichrelates to products and production processes throughouttheir supply chain14. CI and its members have also beenactive participants in developing a new internationalstandard (ISO 26000) for a more holistic approach tosocial responsibility.

If consumers are concerned about the impact that theirconsumption choices have on people in developingcountries, their local supermarket is an obvious focus forthat concern.

Arguably supermarkets are the place where Europeanconsumers have their most regular – if indirect – contactwith people in developing countries. Survey resultsproduced by GlobeScan for the years 2005-200915 foundthat food and beverages were the products or services

10 Background to supermarket supply chains and development

Background to supermarketsupply chains and development

Chapter

1

that consumers said they would most like to see becomemore socially and environmentally responsible.

With the advent of refrigerated travel and moderncommunications, European supermarkets are now able tostock hundreds of products that originate in developingcountries. In some cases the products are sourced directlyby the supermarket, but in others a European suppliermay source the product from the developing countryproducer and then sell it on to the Europeansupermarket.

Many of these items are common food items such ascane sugar, tea, coffee or bananas. However,supermarkets are now also stocking more exotic productssuch as mangos or guavas or importing out-of-seasonproducts such as green beans or apples from developingcountries.

Supermarket supply chains andlabour conditions Developing country supply chains are inherently morerisky in terms of working conditions and sociallyresponsible trade because the countries in which theproducts are sourced are less likely to have effectivelegislation and well-resourced systems to ensure basiclabour rights.

In the past this has led to examples of products inEuropean supermarkets being produced by workers wholack basic labour rights as recognised in human rightsinstruments and International Labour Organisations (ILO)standards. For instance, the ILO estimated that therewere 30,000 child workers on banana plantations inEcuador alone16. Amongst other issues workers can alsoreceive low pay, be exposed to dangerous workingconditions or lack job security.

In South Africa, where fruit exports for Europeansupermarkets account for 30% of all agricultural exports,and many areas of Latin America, major studies haveshown how job insecurity of agricultural export workersmakes long-term planning very difficult, and low wagescontribute to the ongoing and sometime increasingpoverty of workers and their families17.

The increasing use of ’informalised‘ and ’feminised‘workforces to keep costs low has further underminedstandards. Women and temporary seasonal workers areless likely to be members of a trade union leading to afall in union activism and collective bargaining. Economicmigration in agricultural work also undermines the abilityof workers to negotiate for better conditions. Migrantsare often undocumented and desperate for work, thisnot only leads to worse labour conditions for these

workers but the existence of an alternative workforcealso undermines the position of local workers. Thedisruption of trade unions and the hiring of informallabourers who cannot unionise are reported in LatinAmerican18 and South African19 food supply chains.

Supermarket supply chains –buyer powerMore recently concerns have also been raised about thegrowing concentration of the supermarket sector inEurope and the power that this gives the ‘big players’ innegotiations with smaller suppliers. There has alwaysbeen an imbalance of power between large Europeancompanies and smaller companies in developingcountries, however, recent consolidation and growthamongst European supermarkets has magnified thiseffect.

In many European countries the largest five supermarketchains now account for more than two thirds of thegrocery market.

The figures above do not take into account the effect ofsmaller retailers grouping together in buying alliancegroups that, from a suppliers’ point of view, caneffectively increase the concentration of the market.

Such consolidation brings opportunities and risks. A largecompany adopting good policies and practices can deliverfar-reaching benefits, but equally the concentration ofpower can lead to abuses.

The UK Competition Commission in 2000 concluded thatsupermarkets ’having at least an 8 per cent share ofgrocery purchases for resale from their stores, havesufficient buyer power [to undertake abusive practiceswhich] when carried out by any of these companies,adversely affect the competitiveness of some of theirsuppliers and distort competition in the supplier market—and in some cases in the retail market—for the supply ofgroceries.’20

Market share of top 5 retailers

Portugal 70%

France 65%

Poland 20%

Denmark 80%

Spain 70%

Belgium 80%

Greece 50%

Italy 40%

Source: Planet Retail, May 2009

Background to supermarket supply chains and development 11

In 2007, a subsequent report by the UK CompetitionCommission stated that 46% of a total of 381submissions from suppliers related to the transfer of risksor unexpected costs to suppliers by supermarkets. Theyalso found that restrictive business practices (listed below)by UK retailers towards their suppliers had increasedsignificantly in the preceding five years.

In 2009, a report by SOMO/Europe Economics definedabusive buyer power in this context as ’when [buyers]squeeze suppliers’ income and margins to such an extentthat suppliers’ have little bargaining power nor means ofdefence or redress. As a result of abusive buying practicessuppliers’ income is unpredictable and they have to bearexcessive risks, meanwhile the supermarkets incomeincreases and their risks are diminished‘.21

The report gives examples of abusive practices identifiedby competition authorities, suppliers and the media in atleast 17 EU member states which reflect those listedabove. Amongst other issues they also discuss the impactof imposing very low prices on suppliers which can resultin producers making very little or no profit, or even losseswhile prices to consumers are much higher.

Following consultation with Member State CompetitionAuthorities, the European Commission reported failingsin the food supply chain in Europe resulting from‘pervasive inequalities in the bargaining power betweencontracting practices [that contribute] towards reducingboth the speed and magnitude of price transmissionalong the chain.’26

These asymmetries in bargaining power can lead to‘larger and more powerful actors [seeking] to imposecontractual arrangements to their advantage, eitherthrough lower prices or through improved terms andconditions.’ The document from the EuropeanCommission only refers to the food supply chain withinEurope, however there is every reason to suppose thatthe conditions found within Europe also exist in supplychains between Europe and developing countries, andare likely to be greater.

While the abuse of buyer power impacts on suppliercompanies in the first instance, lower prices and increasedrisks are inevitably passed on to producers and workerswho receive lower pay or have to work longer hours.

Restrictive practices carried out by

grocery retailers reported to the UK

Competition Commission by suppliers

• Obligatory contributions to the marketingcosts of grocery retailers

• Delays in receiving payments from a groceryretailer substantially beyond the agreed time

• Required to make excessive payments togrocery retailers for customer complaints

• Additional services required in relation topackaging and distribution

• Requested price reductions for products soonbefore or after delivery

• Obligatory payments in return for stocking orlisting products

• Not provided with standard terms of businesswhen requested

Source: UK Competition Commission inquiry into thegroceries market in 2000

Recent examples of increasing

recognition of abuses of supermarket

buyer power in Europe

• In France, the Secretariat of State forCommerce announced in October 2009 thatFrench retailers were being summonedbefore commercial courts for improperpractices with suppliers.22

• At EU level, supplier relations are beingconsidered by the European Economic andSocial Committee, Parliament and theDirectorate Generals responsible forEnterprise, Agriculture, Internal Market andCompetition and Parliament.23

• In January 2010, following threeinvestigations into the food retail sector bythe UK Competition Commission in eightyears, the UK Government accepted therecommendation that a supermarketombudsman be established to protect therights of farmers, producers and consumersagainst abuse by larger supermarket chains.24

• The introduction of a statutory code ofconduct for grocery retailers and supplierswas announced by the Irish Government inJanuary 2010.25


Supporting evidence is available from an impactassessment carried out by the Institute of DevelopmentStudies on behalf of the Ethical Trading Initiative in theUK. Suppliers contacted as part of the assessmentcomplained bitterly about the adverse effects ofsupermarket purchasing practices. They ‘indicated fallingprices and commercial pressures constrained their abilityto improve working conditions. Anecdotal informationsuggested that these pressures are compounding the useof labour contractors as a means of coping with volatileorders. Yet the risks of labour abuse are more likely to befound amongst this group of workers.’27

Market pressures to reduce costs and increase efficiencycan also have perverse effects on efforts to introducestricter standards for sustainability. Raising standards andverifying progress in countries with limited labourlegislation and enforcement is both costly and risky.

If supermarkets are to improve working conditions intheir supply chains and have a positive developmentalimpact then there will be additional costs. Consumershave shown that they are prepared to bear some of thisadditional cost if it results in workers and producersbeing paid a fair wage28. However, this cost should beshared by the supermarkets. Additional costs should notbe passed down the supply chain to those least able toabsorb them.

Challenges for small-scale farmersAs the vast majority of poor people in developingcountries are small-scale farmers a key question is howthe development of supermarket supply chains impact onthis group. The power, demands and sheer scale ofinternational supermarket chains would seem to makeaccess for small-scale producers to these global supplychains an impossible task; however, where this can beachieved under fair trading conditions it could provide animportant opportunity for poverty reduction.

Smallholder farmers face particular challenges inproviding the volumes required, meeting standards andinteracting with supermarkets. They are scattered, lack

business and negotiation skills, and have very limitedaccess to capital and market information. As a result, inthe developing world the majority of direct suppliers tosupermarkets are large exporters.

However, with support and policy measures such ascooperatives, out grower schemes and public-privateinitiatives, access to such markets can be possible andexamples of positive practice and outcomes do exist. Astudy of the impact of supermarket procurement on10,000 farmers in the highlands of Madagascarcontracted to produce vegetables for Europeansupermarkets showed that with assistance andsupervision programmes the results for the communitywere ‘higher overall welfare, greater income stability andshorter lean periods’. Other unforeseen benefits werealso observed, including improved technology adoptionand better resource management30.

The response from supermarketsSince the 1970s supermarkets have sought to respond toconsumer concerns by stocking fairly traded products andthe development of CSR policies.

Fairly traded productsThere are a number of different standards that areidentifiable through ‘consumer facing’ labels. Thesestandards include, to varying degrees, the workingconditions in which goods are produced and the way inwhich they are traded in their criteria.

These standards reflect their different objectives, originsand governance and offer consumers different levels ofassurance both in terms of the different aspects ofproduction and trade that they cover and howachievement of the standard is verified.

For example, Rainforest Alliance grew out ofenvironmental activism and retains an environmentalfocus. Utz Certified was set up by the Dutch AholdCoffee Company and gives a high priority to traceabilityand promoting agricultural best practices. The FairtradeLabelling Organisation (FLO) which owns the FAIRTRADEMark was established by development NGOs and is theonly standard to guarantee suppliers a minimum price forproducts.

Although the overall objectives of these standards vary, inthis report we are concerned specifically with the aspectsthat relate to the fairness of the working conditions inwhich relevant goods from developing countries areproduced, and how fairly they are traded. Productsproduced to standards that incorporate these issues,albeit to different levels, are referred to throughout thereport as fairly traded.

‘Supermarkets have often used the moneyfrom customers to invest with profit

(eg, in interest from the bank) beforepaying the supplier. Late payments in

France are a continuing practice that in thepast have provided more income to super-

markets than the profit margins fromselling products’29


Fairly traded products are increasingly available insupermarkets. The conversion of some supermarket ownbrands/private brands, as well as the conversion of otherbrands has had a big impact, and sales of these productshave increased dramatically in some European countriesin recent years. As this has been from a relatively lowbase however, their total share of relevant markets is stillsmall and sales of fairly traded products remain a nichemarket in all but a small number of products.

As well as stocking fairly traded products, somesupermarkets now promote their sale by supportingawareness events such as ‘Fair Trade Fortnight’ and otherinitiatives.

While the increased availability of fairly traded productsset the scene for the rapid increases in sales that havebeen achieved in subsequent years, the stocking of fairlytraded products alone tells consumers nothing about thepolicies of the supermarket itself, beyond the fact it wasprepared to give consumers a socially responsible choicein relation to a small number of products (and a verysmall proportion of the products from developingcountries that supermarkets purchase and sell).

Further details of the labels identified in this research canbe found in Annex C.

Growth in Corporate Social Responsibility

(CSR) policiesAnother indication of supermarket responses toconsumer concern about their social impact can be foundin their development of CSR policies.

At best CSR policies can be genuine cross-organisationalcommitments that ensure a company’s policies andpractices seek to maximise benefits from their operations.At worst CSR policies can be a public relations exercisethat seeks to deflect criticism and whitewash unethicalpractices. If not genuine, CSR stimulates dishonestywithin supply chains putting suppliers in a no-winsituation, as well as confusing developing countryworkers, and undermining their rights.

Key concerns for this report include the applicability ofsupermarket CSR policies (relating to labour conditionsand trading practices) to specific supply chains. Inparticular whether policies are applied:

• to food products from developing countries

• beyond the group of suppliers that the supermarket isin direct contact with to include suppliers andproducers in developing countries.

It is also important that all policies have effective meansof verification. Criteria for assessing verification includethe direct involvement of a third party or preferably amulti-stakeholder group and that the results of auditsand visits are publicly available.

CSR initiatives initially existed at a company level but arenow increasingly developed at an industry level and insome cases with the involvement of other stakeholderssuch as unions, consumer groups and other non-governmental organisations.

Finally it should be noted that there is a growingmovement amongst many European NGOs that believesCSR initiatives have failed to achieve their stated aimsand that a more regulatory approach is needed. Thisargument stresses the voluntary nature of CSR initiatives,the lack of effective verification and the lack of a systemof effective sanction and compliance.

As evidence, NGOs point to continued abuses bycompanies that have had CSR policies for several years.At another level they highlight the structural difficulties ofasking a company to implement policies that could besaid to run counter to their short-term objectives as profitmaximising private entities that are operating in a highlycompetitive market.

As described above, the pressure by supermarkets forlower prices and the passing of costs and risks down thesupply chain can in itself limit the ability of suppliers and


Examples of supermarkets convertingown brand ranges to fairly traded –

in this case Fairtrade

Coop Switzerland was the first supermarket toconvert all its own brand bananas to Fairtradein 2004. With other Swiss supermarkets makingsimilar commitments Fairtrade bananas nowaccount for more than 50% of the Swiss market.The UK has followed a similar path withcommitments from Sainsbury’s, Waitrose andthe Co-op. Over a quarter of all bananas sold inthe UK are now Fairtrade; the highest marketshare for any EU country.

The Co-operative food group in the UK hasconverted a number of its own brand ranges toFairtrade. In 2002 they converted all their ownbrand chocolate to Fairtrade, in 2003 theyconverted all their own-brand coffee and in2008 they converted their entire own-brand hotbeverage range to Fairtrade. Partly as a resultof the conversion of own brands, theCo-operative’s Fairtrade sales increased 33.6%in 2008–2009.

producers to maintain and genuinely improve workingconditions. The additional costs of stricter standards forsustainability can further undermine their ability to makethe fundamental changes needed. Coherence betweenthe trading practices of supermarkets and their CSRpolicies is essential if improvements are to be achieved.

Policies and practicesThis report focuses on supermarkets’ policies in the beliefthat this is the first step towards a supermarket adoptingpractices that will have a positive impact on people indeveloping countries. However, we recognise that policiesalone are not sufficient.

An assessment of supermarkets’ verification processesand transparency was included in an effort to gaugewhether supermarkets are putting these policies intopractice.

A survey was undertaken of suppliers and visits to storesto assess their staff’s knowledge of the issues and theavailability and promotion of fairly traded products.

However, CI recognises the limitations of a survey withthis level of focus on policy and welcomes onsiteinvestigations that seek to ensure company policies arebeing put into action.


This report is the result of a consumer survey and a surveyof supermarket CSR policies conducted during 2009. Inorder to verify some of the information in the CSR surveywe also undertook a short survey of supermarketsuppliers and a mystery shopping exercise.

Consumer surveyThe telephone survey was conducted by GlobeScan onbehalf of CI.

Questions were asked relating to consumer expectationsof the prices that supermarkets pay their suppliers, theirawareness of fairly traded products and the visibility offairly traded products, as well as who they trusted to givethem reliable information on how fairly supermarketstreat their suppliers.

The sample size in each country was 1,000 or moremembers of the general public, with quotas set bygender, age and region reflecting national distributions asdefined by census data. The survey was conducted inBelgium, Denmark, France, Greece, Poland and Spain inJune 2009.

CSR surveyThe CSR survey looked at the supermarkets’ currentpolicies relating to the conditions in which goods areproduced and traded in the context of supply chains ofsupermarket ‘private/no brand’ food products originatingin developing countries. For example, fresh tropical fruit,or commodities produced in developing countries such ascane sugar, rice, coffee, tea, or cocoa.

Research criteria took account of policies in the followingareas:

• Indications of corporate commitment to CSR andtransparency.

• The labour conditions in supermarket supply chains andhow they are verified.

• How supermarkets communicate with and contractsuppliers.

• The stocking and promotion of independently verifiedfairly traded products.

Supermarkets of regional significance were selectedbased on market share and representation across theparticipating countries. Additional supermarkets wereidentified by each participating organisation bringing thetotal number of companies surveyed over 8 countries to35 (this figure does not include separate nationalapproaches to the 9 international companies surveyedwhich were combined for analysis). Please see Annex Afor a list of supermarkets included in the survey.

Survey of supermarket policiesThe survey was conducted by consumer organisations ineight European countries (Belgium, Denmark, France,Greece, Italy, Poland, Portugal and Spain) and included areview of information on supermarket policies in thepublic domain and a questionnaire sent to the nationalheadquarters of each supermarket.

Each project partner was responsible for identifyingrelevant contacts at the supermarket headquarters of thecompanies to be included in their survey. Questionnaireswere sent by the middle of July 2009. Significant delayswere experienced due to key contacts being on annualleave during the summer months. Results were receivedin early to mid-October 2009. Each company was offeredthe opportunity to review the information that had beencompiled and international supermarkets were offeredthe opportunity to coordinate their responses31.

16 Research methodology

Research methodology

Chapter

2

Survey of suppliersProject partners also contacted a number of Europeanbased suppliers of the supermarkets involved in thesurvey. A brief and confidential telephone interview/survey was conducted covering their contractual/non-contractual agreements, communication withsupermarkets and the supermarkets’ promotion of theirproducts. Responses were received from 13 suppliers, allof whom supply more than one supermarket, whichprovided useful anecdotal information.

Using the information collected by partners on thecountry of origin of products found in relevantsupermarkets, CI contacted over 200 suppliers of freshproduce to European retailers in developing countries inorder to gather information on their knowledge andexperience of the relevant supermarkets’ CSR policies inrelation to working conditions in the supply chain andtrading relationships with their suppliers.

Despite translation, clear explanation of the purpose ofthe survey, assurances of confidentiality and follow upphone calls, none were willing to take part in the survey.

Mystery shopping and anonymousenquiries Mystery shopping research and anonymous enquirieswere conducted by national consumer organisationscovering the following areas:

• The quality and availability of consumer information onethical trading practices in supermarkets stores andthrough customer help lines.

• The availability, placement and promotion of fairlytraded products.

Assessing supermarket policiesSupermarket policies were assessed on the informationavailable and against criteria in each of following fourareas: commitment to CSR, good working conditions, fairtrading relations, stocking and promotion of fairly tradedproducts.

Based on the assessments the supermarkets polices aregrouped as follows:

• Best Available Policies

• Good Policies

• Some Policies

• Limited/No Policies

The categories ‘Best Available Policies’ and ‘GoodPolicies’ highlight the more progressive or comprehensivepolicies found in the survey. This does not mean thatthere is not still room for development and improvementin both categories.

The category ‘Some Policies’ covers a wide range,including for example companies, which deserveacknowledgement for steps towards Good Policies orwhere there is insufficient information to justify a betterassessment.

The category ‘Limited/No Policies’ may include companiesthat have relevant policies but in the case of this surveywe were not given sufficient information about them toplace them in a different category.

International companies have been compared at anational level. These results have been averaged forinternational companies, however, where a full responsewas only received from one country this is indicated.Country specific policies that are better than theinternational average are summarised in Annex D.

It should be noted that these assessments are relative andbased on comparisons with the other supermarketsinvolved in the survey; they are not absolute judgements.The assessments only relate to the policies of thesupermarkets.

Access to supporting information provided by thesupermarkets surveyed was a key consideration. As themystery shopping and the survey of supermarketsuppliers did not provide comparable information on allthe supermarket chains these results were not included inthe assessment of the supermarket policies. However,reference is made to the findings in the analysis of theresults.

Overall assessmentIn the overall assessment of the supermarket policies,greater weight was given to the sections that focused ongood working conditions and fair trading relationships.The intention was to give credit for policies that, in theopinion of the project partners, would have the greatestimpact in terms of development and poverty reduction.

In the overall comparison, the final category, Limited/NoPolicies, is split into Limited Policies and No Policies.

All sections of the report refer to food supply chains indeveloping countries private/own brand, except Section D,which refers to all brands.

Research methodology 17

In June 2009, CI undertook a survey in six Europeancountries to assess consumer attitudes and awareness inrelation to supermarkets and responsible tradingpractices. Questions included the prices thatsupermarkets should pay their suppliers, consumerawareness of fairly traded products and the visibility ofthose products, and finally, who they trusted to givethem reliable information about a supermarket policieson responsible trading.

Supermarket relations with suppliersThe results demonstrate widespread consumer supportfor responsible trade. Despite the survey being conductedat the height of public concern over the financial crisisconsumers in all but one of the six surveyed countries feltthat supermarkets should pay suppliers enough to ensuredecent wages for their employees, even if this meanshigher prices for customers.

Q1 How supermarkets should treat suppliers

Awareness and visibility of fairly tradedproducts The survey also asked consumers about their awarenessof fairly traded products and their visibility in stores.Again there were strong results in many of the countriessurveyed. Awareness is fairly high in France andDenmark, though somewhat lower in Spain and Belgium.Consumers in Greece and Poland are the least aware ofall the countries surveyed.

Most respondents in the countries surveyed have only‘occasionally’ noticed fairly traded products to beavailable in shops, although a large proportion didindicate that they have noticed them ‘often.’ At oppositeends of the spectrum, only small proportions ofconsumers have noticed these products either very oftenor never.

Overall, the level of visibility of fairly traded products inindividual countries tended to mirror levels of consumerawareness. However, there are still significant gapssuggesting that supermarkets can do more to make theseproducts available to consumers. As visibility is also ameans to increase consumer awareness, supermarketscould also do more to promote awareness by stockingand promoting such products. Spain and Belgiumdemonstrate good potential to increase awareness, asonly a small percentage of respondents know nothingabout fairly traded products. GlobeScan note in particularthat ‘more than three quarters of Belgians – higher thanin any other country – would prefer to see higher pricesin stores than have supply chain workers denied a livingwage. Awareness of fairly traded products is lower whencompared with France and Denmark however, as isvisibility of such products in stores.

18 Consumer attitudes and awareness

Consumer attitudes andawareness

Chapter

Belgium

France

Denmark

Poland

Spain

Greece

78

70

70

65

59

21 70

19

21

24

17

18

Pay enough toensure good wages

Ensure lowest prices bypaying minimum to suppliers

3

The results did reveal a disparity within different parts ofEurope, with lower levels of support for fair tradingrelationships, as well as lower levels of awareness of fairlytraded products and lower visibility of these products insome countries. This may be explained by lower incomelevels in some parts of the population, the minimumwage in Greece is half that in France and Belgium forexample and the disparity is even greater in the case ofPoland. The relative absence of awareness raising

campaigns in Greece and Poland may also be animportant factor. With levels of income rising in mostcountries and growing experience in how to conducteffective awareness raising campaigns it is reasonable toexpect that consumer campaigns will be effective atraising awareness and support for more responsibletrading practices.

Consumer attitudes and awareness 19

Denmark

France

Spain

Belgium

Greece

Poland

A great deal A fair amount A little Nothing at all

77

65

16

36

8

18

1

2

8

9

11

20

9

4

26

23

36

34

11

15

49

30

44

28 France

Denmark

Greece

Spain

Belgium

Poland

Very often Often Occasionally Never

8433513

16432812

2053179

1862145

1054274

3143181

Trust in information sourcesOut of five sources of information on how fairly supermarkets treat their suppliers (see chart 1), respondents from allcountries put the most trust in consumer organisations, followed by independent verification and labellingorganisations. Supermarkets were the least trusted information source in all countries except Greece. These resultsreflect other surveys that have shown low and declining levels of public trust in corporations and governments.32 Theresults of this survey show that consumers are sceptical about the information they receive from supermarketsconcerning their relationships with suppliers.

Belgium Denmark France Greece Poland Spain

Top trusted Consumer Consumer Consumer Consumer Consumer Consumer organisations organisations organisations organisations organisations organisations

2nd trusted Third party Third party Third party Third party Third party Third party verifiers verifiers** verifiers verifiers verifiers verifiers

3rd trusted Suppliers Government** Suppliers Suppliers Suppliers Suppliers

4th trusted Government Suppliers Government Supermarkets Government Government

5th trusted Supermarkets Supermarkets Supermarkets Government Supermarkets Supermarkets

‘Third party-verifiers’ was worded as ‘Independent verification and labelling organisations’Rated 7–10 on a scale of 1 to 10, where 1 is ‘Not trust at all’ and 10 is ‘A great deal of trust’

**Tie

Q3 Visibility of fairly traded product

(how often noticed in shops)Q2 Consumer awareness of fairly traded products

Q4 Who consumers trust for reliable information on supermarket treatment of suppliers

CSR Guidelines and Initiatives In order to assess supermarkets’ overall commitment tofairer working conditions and trading practices, theirstated support for international declarations, such as theUniversal Declaration of Human Rights and the ILODeclaration on Fundamental Principles and Rights atWork, and their membership or application of differentinitiatives in this area were assessed, including:

• Guidelines for good practice published by multilateralinstitutions such as the Tripartite Declaration ofPrinciples Concerning Multinational Enterprises, theOECD Guidelines for Multinational Enterprises and theUN Global Compact.

• Co-operative/information sharing initiatives to promotegood practice such as Ethical Trading Initiatives,Business Social Compliance Initiative (BSCI), GlobalSocial Compliance Programme (GSCP), Initiative ClauseSociale (ICS) and business to business initiatives such asCoopernic.

• Facility/site certification systems: (SA8000, Global GAP).

A comparison of these guidelines, initiatives and systemswas made on the basis of their content, operationalissues, enforcement systems and their relevance to thefood supply chain in developing countries to help clarifythe significance of supermarkets’ commitment to them inthe context of this survey.

ContentKey issues in the assessment of the initiatives includedreference to the eight core ILO conventions that are deriv-ed from the internationally recognised four labour rights.

Initiatives were also given credit if they referred to a livingwage as this is a recognised human right33. Additionally,we looked for references to hours of work, disciplinary

practices, employment relationships and health andsafety at work.

Operational issuesThis considered the effectiveness of the initiatives’processes for achieving the stated aim. Significant weightwas given to the quality of assurance used by theinitiative with third party verification given a highweighting. Initiatives that committed to auditing allsuppliers were also rated highly.

Multi-stakeholder involvement in the decision-making,the setting of the code and the operation of the systemwas also seen as leading to better standards ofverification and better transparency and accountability forthe initiative as a whole.

Some initiatives also gave support to social projects.Whilst this is to be welcomed it was considered lessimportant than the systematic application of goodconditions throughout the supply chain.

Enforcement For initiatives to be effective in achieving their stated aimsthere has to be an enforcement mechanism to ensurecompliance, therefore initiatives where the base code isenforced through audits as a requirement for certificationwere rated highly. Equally initiatives that requiredprogress towards a base code to be demonstrated forcontinued membership were considered to be preferableto those that did not have such as system.

RelevanceAs the focus of this survey was food supply chains indeveloping countries it was important to ensure that theinitiative was relevant to this sector.

20 Supermarket commitment to CSR

Supermarket commitmentto CSR

Chapter

4

Supermarket commitment to CSR 21

Each initiative (broadly grouped below) is compared on content, operational issues and enforcement: Content of Code Operational Indicators Enforcement Focus

Guidelines for good practice OECD Guidelines for

SOME NO D — — — — — — — Multinational EnterprisesUN Global Compact FULL YES B — — — — — — — Tripartite Declaration of Principles Concerning — — — — — — — — — —Multinational Enterprises

Cooperative/information sharing initiatives to promote good practice Business Council for

— — — — — — — — — —Sustainable DevelopmentBusiness Social Compliance

FULL YES B SOME — • D PROGRESS B LIIMITEDInitiative (BSCI)Coopernic — — — — — — — — — — Ethical Trade Initiative (ETI) FULL YES* A FULL YES • A* PROGRESS B YESDanish Intitiative for

FULL YES* A FULL YES — A PROGRESS B YESEthical Trade (DIEH)Initiative Clause Sociale (ICS) FULL YES B SOME — — D PROGRESS B LIIMITEDGlobal Social Compliance

FULL YES B SOME — — D — — —Programme (GSCP)

Facility/site certification systems SA8000 FULL YES B FULL YES — A FULL A YESGlobal Gap

— YES E FULL — •Global

B* FULL A YES GRASP

ILO

Cor

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Cove

red

Add

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anda

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Ratin

g

Man

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anda

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erifi

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g

Third

Par

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d

Mul

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vern

ance

of

syste

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de se

tting

Socia

l Pro

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s

Ratin

g

Evidence of system applied to food supply chains in developing countries

RATING: Content of Code ILO Core Conventions Additional StandardsA FULL coverage YES* (additional standards include: price paid should be greater than costs/living wage) B FULL coverage YESC FULL coverage SOMED SOME coverage —E — (NO coverage) YES

RATING: Operational Indicators Third Party Auditing Multi-stakeholder involvement in Social Projects governance of system and code settingA* FULL: Audits of all suppliers YES • (some involvement)A FULL: Audits of all suppliers YES B* FULL: Audits of all suppliers — • (some involvement)B FULL: Audits of all suppliers —C* Audits of SOME suppliers YES • (some involvement) C Audits of SOME suppliers YES D* Audits of SOME suppliers — • (some involvement) D Audits of SOME suppliers —

RATING: Enforcement Mandatory fulfilment of standards verified through third party audits:A FULL (standards in code must be met prior to certification) B PROGRESS (progress towards achieving code standards required)

See Annex B for further information and references on initiatives relating to social responsibility identified during the survey.

Comparison of initiatives relating to social responsibility identified during the surveyThe initiatives below are all concerned with working conditions in which products from developing countries areproduced and how they are traded.

Results

• Best available practice in this area wasconsidered to be systematic procurement throughSA8000 or membership of multi-stakeholderinitiatives that require full audits and evidence ofprogress for all suppliers such as ETI/DIEH. Twocompanies (Coop Italia and Eroski, Spain) meet thesecriteria through the SA8000 certification of theirpurchase centres, and Coop Denmark through theirmembership of DIEH.

• A number of companies combined a partialcommitment to SA8000 or ETI with membershipof industry initiatives to cooperate, shareinformation on, and verify good practice inlabour standards such as BSCI and ICS specificallyin relation to relevant supply chains. Thesecompanies included Auchan, Carrefour, Colruyt andSpar in Belgium. Auchan, Portugal’s purchase centre isSA8000 certified but this only covers two relevantsuppliers – as the majority of their procurement fromdeveloping countries is carried out centrally by AuchanImport/Export which is not certified.

• Some companies reported membership ofbusiness initiatives that require some audits andimprovements in labour standards in food supplychains in developing countries (such as BSCI) ordemonstrated practical progress towards SA8000certification. While membership of business initiativesby companies such as Lidl, Makro and Delhaize shouldbe acknowledged, a key issue is the very limitedinformation on the implementation of these initiativesand the fact that it is not always clear to what extent acompany’s involvement in such initiatives is relevant tofood supply chains in developing countries.Mercadona, Spain is not involved in any relevantbusiness initiatives, but their commitment andpractical progress towards SA8000 certification isacknowledged here.

• Finally some companies gave no indication ofinvolvement in initiatives that result in activeimplementation of standards in food supplychains. For example Dia has not fully adoptedCarrefour Group policies and the involvement of Aldiand El Corte Inglés in BSCI relates to non-foodproducts only.

Results

• The highest level specified for CSR responsibilitywas the President/Vice President of Coop Italia.This company also has named board members at eachlevel and describes systematic dialogue with differentstakeholder groups.

• In some cases, different company structures made itdifficult to identify whether responsibility for CSR islocated at board level or not; nor was it possible toestablish from the information received, how wellresponsibility for CSR is integrated into the dailymanagement of the company.

• For example, in the case of Coop Denmarkresponsibility is technically not located at board level,but there is a named director with links to the board.This director has direct, ongoing responsibility for CSRand labour standards internally, as well as withsuppliers. Additionally, Coop Denmark reports thatresponsibility for CSR is embedded into theirmanagement on a daily basis, which they consider tobe a stronger structure.

• In some companies, responsibility for labourstandards in the supply chain is shared between


In order to assess the extent to which supermarkets haveintegrated CSR through their organisation, informationwas also sought about where responsibility for CSR waslocated within the company.

Locating responsibility at board level and in a relevantoperational area such as sourcing was considered to bean indication of a company seeking to integrate CSRinto their practices. Departments such as public relationswere not considered to be appropriate locations forCSR responsibility.

Specific (named) board level responsibility was alsoconsidered to demonstrate corporate commitment to:

• labour standards (and specifically labour standards inthe supply chain)

• the integrity of trading relationships.

Companies’ involvement in stakeholder dialogue wasalso considered here.

Board level responsibility for different aspects of CSR

different departments, in some cases includingdepartments responsible for procurement. Auchanfor example, has a steering group that brings togetherthe purchasing director from Auchan Import Export,with directors responsible for sustainability and(clothes) quality. Colruyt, Intermarché, Belgium andCarrefour Group also stated that purchasing orcommercial departments share some responsibility forlabour standards in the supply chain. Only Delhaizenamed the individual in charge of procurement asresponsible for labour standards in the supply chain.

• Only Dia and Mercadona reported thatresponsibility for CSR was located in externalrelations.

Stakeholder dialogue was also included here tohighlight the commitment and willingness ofcompanies to engage organisationally with different stakeholder groups and to identify good policies in this

area. It is interesting to note that some companiesreported on purely philanthropic activities as examplesof stakeholder dialogue, but others described a moresystematic approach:

• Carrefour is involved in stakeholder dialogue atdifferent levels. They call an annual meeting ofstakeholders, ie rating agencies, environmental andsocial NGOs, consumer organisations, trade unions,national and international bodies and sustainabledevelopment think-tanks. Internationally, they haveworked in collaboration with FIDH on the developmentof their Social Charter, signed an agreement with UNIon human rights in the workplace and they participatein Social Accountability International as a member oftheir advisory board.

• El Corte Inglés describes a working groupincluding consumer associations, unions andNGO's to discuss CSR in the company.

Results

• Overall public reporting on progress towards CSRtargets by companies lacks detail. Information onsupplier compliance and audit reports was at such ageneral level it was often difficult to establish whetheror not audits have taken place in relevant food supplychains.

• CSR or sustainability reports are the mostcommon form of public reporting. Auchan forexample sets out commitments and describes overall

progress made on an annual basis; Carrefour, Delhaize,Colruyt, Makro, El Corte Inglés, Feira Nova, PingoDoce, Coop Italia, Coop Denmark, Casino also publiclyreport on CSR in some way.

• Public reporting on compliance of suppliers isonly available at an aggregated level (throughBSCI or ICS for example) if at all. Public access to socialaudits is only provided by Coop Italia who do so onrequest as a legal requirement.34


Transparency was considered to be fundamental to aneffective CSR policy. Without transparency it is impossiblefor external stakeholders to understand the policy or itsimpact. Transparency therefore enables accountability, aswell as facilitating learning between corporations andorganisations. From a consumer perspective transparencyalso relates closely to consumer rights to informationabout products and services and can be an importantelement in developing trust.

We therefore looked for the highest levels oftransparency in the reporting of CSR targets, suppliercompliance and public access to audit results.

As an example of a supermarket’s transparency we alsotook into account their cooperation with this survey,including their response to the questionnaire and theextent to which they made external and internaldocumentation available.

Public reporting on CSR targets, supplier compliance and transparency in relationto audit results

Results

• Overall a total of 17 out of 3535 companiesresponded to the questionnaire. Some companiesalso provided additional information and a distinctionwas made between those who provided access topotentially more sensitive documents such as internalor commercial policies and contracts. Credit was alsogiven to companies who supported their responseswith external or public documents. Others notablyEroski, Spain and Esselunga, Italy, provided somecompany information but did not complete thequestionnaire.

• Despite repeated attempts to elicit a response,very little information from supermarkets inPoland and Greece was received. The response ratein Denmark and France was also disappointing.Participation varied across international companiesthough in some cases (eg, Carrefour, Lidl) there was tosome extent a coordinated response through the datachecking process.

• Willingness to share commercial informationvaried, with encouraging openness from some

companies. Internal or commercial documents weresupplied by:

– Auchan (France: Code d'ethique commerciale EURAUCHAN; Portugal: Ethical code for suppliers, Internal Code of conduct; Auchan Spain ’Código de ética comercial’)

–Cora (Ethical charter and supplier agreements)

– Coop Denmark (Code of Conduct)

– Delhaize (Code of Conduct)

– Ethical code for employees (Coop Italia)

– Code of Conduct for suppliers (Feira Nova and Pingo Doce, Portugal).

• Although the information is not publiclyavailable, Mercadona (Spain) and Coop Italia alsoinvited contacts to come to their offices to viewtheir commercial contracts.

• Eroski, Spain sent some information and explainedtheir refusal to take part in the survey as they were inthe process of reviewing management systems for alltheir suppliers.

Level of participation in surveyParticipation in the survey was undoubtedly affected bythe fact that companies were asked to complete thequestionnaire during the summer months. The length

and complexity of the questionnaire also had an impact.Please see Annex A for a list of all companies included inthe survey and their responses.


Overall summary of results by company on commitment to CSR

• Coop Italia shows the greatest level of corporate commitment, accountability and transparency according tothese criteria, closely followed by Coop Denmark.

• Carrefour demonstrated commitment to CSR in terms of its location in the company, specified board levelresponsibility at each level and involvement in wide ranging stakeholder dialogue. Colruyt, and Auchan(especially Spain and Portugal) also showed commitment to CSR as did Eroski despite the very limited informationdue to their current policy review.

• Mercadona showed particular transparency in their cooperation with this survey.


Please note that the comparison is relative and based on information available during this survey only.International companies in countries in italics did not respond so are not included. **Did not respond to questionnaire.

Involvement in Board level Public reporting Cooperation with CSR initiatives responsibility on CSR and this survey & stakeholder dialogue Transparency

AUCHAN Spain, Italy, Good Policies Some Policies Some Policies Some CooperationPortugal, France

(Poland)

LIDL Belgium, Spain, Some Policies Good Policies Some Policies Some CooperationItaly, Portugal, Denmark,

Greece (Poland)

CARREFOUR Spain, Good Policies Good Policies Good Policies Some CooperationItaly, France (Belgium,

Greece, Poland)

INTERMARCHÉ Belgium Limited / No Policies Limited / No Policies Limited / No Policies Some Cooperation (France, Portugal

(Belgium only) (Belgium only) (Belgium only) (Belgium only)and Poland)

DIA Spain, Limited / No Policies Limited / No Policies Limited / No Policies Some CooperationPortugal (Greece)

CORA Belgium Limited / No Policies Some Policies Limited / No Policies Some Cooperation(France) (Belgium only) (Belgium only) (Belgium only) (Belgium only)

DELHAIZE Belgium Some Policies Good Policies Some Policies Some Cooperation(Greece) (Belgium only) (Belgium only) (Belgium only) (Belgium only)

COLRUYT Belgium Good Policies Good Policies Some Policies Good Cooperation

SPAR Belgium Good Policies Good Policies Limited / No Policies Some Cooperation

MAKRO Belgium Some Policies Good Policies Some Policies Good Cooperation

EL CORTE INGLÉS Limited / No Policies Good Policies Some Policies Some CooperationSpain

MERCADONA Spain Some Policies Some Policies Limited / No Policies Best Cooperation

FEIRA NOVA & Limited / No Policies Good Policies Some Policies Good CooperationPINGO DOCE

(Jerónimo Martins Group) Portugal

COOP Italy Best Available Policies Best Available Policies Best Available Policies Best Cooperation

COOP Denmark Best Available Policies Good Policies Some Policies Best Cooperation

CASINO France Some Policies Limited / No Policies Some Policies Some Cooperation

VEROPOULOS Limited / No Policies Limited / No Policies Limited / No Policies Some CooperationGreece

EROSKI Spain** Best Available Policies Limited / No Policies Some Policies Some Cooperation

ESSELUNGA Italy** Limited / No Policies Limited / No Policies Limited / No Policies Some Cooperation

• ‘Best Available Policies’ and ‘Good Policies’ highlight the more progressive or comprehensive policies found in thesurvey. This does not mean that there is not still room for development and improvement in both categories.

• ‘Some Polices’ covers a wide range, including for example companies, which deserve acknowledgement for stepstowards good policies or where there is insufficient information to justify a better assessment.

• ‘Limited/No Policies’ may include companies that have relevant policies but in the case of this survey we were notgiven sufficient information about them to place them in a different category.

Corporate Commitment to CSR

ResultsAlthough a significant number of companies whoparticipated in the survey reported the existence of acode of conduct on labour standards covering a range ofelements, less than half the respondents include acommitment to a living wage and only three include acomplaints mechanism.

• Sixteen companies reported an existing policy orcode of conduct on labour standards, 14 of whichcovered all the elements relating to the core ILOconventions.

• Coop Italia’s policy covers all elements specified.Five other companies (Auchan, Lidl, Makro, CoopDenmark and Mercadona) reported that their policies include over ten or more of the specified elementsincluding the minimum wage. These companies alsostate that their policies apply to all products groups(and therefore theoretically to food products fromdeveloping countries).

• Only six reported the inclusion of a commitmentto a living wage in their policies (Lidl, Cora(Belgium), Coop Italia, Mercadona, Intermarché(Belgium) and Casino), the latter two provided nosupporting information.

• Colruyt, Coop Italia and Coop Denmark include acomplaints mechanism in their policies.

• Substantiating information was provided by Auchan(Spain, Portugal and France); Lidl (Belgium, Spain,Portugal, Denmark and Greece); Cora (Belgium);Delhaize (Belgium) for coffee, and Coop Denmark. Theoffer to validate information was taken up for CoopItalia and Mercadona, Spain.

• Credit was not given to companies whose policies arestill under development (eg, Delhaize).

This section looks specifically at the policies that super-markets have in place to promote good workingconditions throughout food supply chains in developingcountries.

The content of supermarket policiesEach supermarket was asked to provide informationabout its policy or code of conduct. This was assessedaccording to the core ILO labour conventions, as well asother standards drawn from examples of internationalbest practice.

Given the focus of this study the relevance of the code tothe food supply chain in developing countries was alsoconsidered. Supporting evidence, such as a copy of thecode of conduct was requested.

The specific elements that were included in theassessment of the supermarket codes included:

• Freedom of association and the right to collectivebargaining*

• Forced or bonded labour*

• Child labour*

• Non-discrimination*

• A living wage

• Healthy and safe working conditions

• Maximum hours of work

• Disciplinary practices

• Security of employment (right to clear and writtenterms of employment)

(*ILO core labour conventions)

26 Ensuring good working conditions throughout the supply chain

Ensuring good working conditionsthroughout the supply chain

Chapter

5

Results

• The application of codes of conduct on labourstandards within food supply chains in developingcountries is difficult to establish except wherecertification is available. Some companies such as ElCorte Inglés state specifically that policies only apply tothe first tier and they purchase very few products fromoutside the EC.

• Only two companies state specifically that theircode of conduct on labour standards appliesbeyond the first tier of the supply chain,compliance is monitored and independently verifiedand that this takes place specifically within relevantfood supply chains in developing countries. Coop Italiaalso gives detailed information on the systematicapplication of its policy through SA8000 and permitsaccess to audit results on application. Colruyt statesthat ‘all active non-European food suppliers have been(independently) audited at least once since 2002’.

• Even where companies are members of specificindustry initiatives, it is difficult to establishwhether or not compliance with policies ismonitored or independently verified in relevantsupply chains or not. Where there have been fewaudits, there is no information on the proportion ofaudits in relevant supply chains; or where policies andsystems apply only to specific schemes or suppliers,companies have been assessed as demonstrating‘Some Policies’.

• Auchan, Carrefour, Lidl and Cora (Belgium) forexample report that their code of conduct onlabour standards applies throughout their supplychain and that compliance is monitored andindependently verified but very little information

is available on the extent to which compliance withpolicies is verified in relevant supply chains in practice.Although Carrefour also state that they givepreference to SA8000 certified products, for which noadditional verification is required, Carrefour andAuchan refer to ICS, and others to BSCI in relation tosupply chains in developing countries for which veryfew audits have been carried out in food supply chainsin developing countries.

• El Corte Inglés (who apply their policy only to the firsttier of the supply chain) state specifically thatalthough they have undertaken over 100 BSCI audits,none have yet been done in food supply chains.‘According BSCI practices, social audits should starton suppliers that have the greatest weight in thepurchases of the company, food is not a priority’.

• Nine out of 17 companies reported the use of acorrective action plan agreed with suppliers priorto termination of contracts as a system to remedynon-compliance. Seven companies did not explaintheir current policy and only Cora stated simply that inthe event of non-compliance their contract with thesupplier would cease with no mention of the chancefor remedial action.

• A degree of over claim is likely in terms ofabsolute certainty of application of codes ofconduct throughout the supply chain. CoopDenmark is clear on their doubts over this: ‘Inprinciple, Coop’s responsibility concerns the entiresupply chain, but they are only able to control the 1sttier supplier’. Coop claims that this is in accordancewith the guidelines adopted by DIEH the DanishInitiative for Ethical Trade (DIEH).

The first obligation of any international company is toobey the labour laws in the countries in which it isoperating. However, given the fact that some countrieshave limited labour laws and/or the enforcement of theirlabour laws is lax, company codes have an important rolein ensuring, as a minimum, that labour conditions meetILO standards and that those standards are enforced. Acode of practice should go beyond the law and wherethere is no relevant law, the code has additional meaning.A code can also be useful where a supply chain applies tomany different countries.

Modern supermarket supply chains are complex and caninclude a number of suppliers between the supermarketand the producer. In order for a code of conduct to havean impact on producers it is therefore necessary for the

supermarket to commit to working with its suppliers toensure that the standards in their code apply throughouttheir supply chain

For the code to be meaningful there must also be asystem of monitoring and independent verification toensure the code is being implemented. And in the eventof non-compliance with the code, procedures have to bein place to ensure conditions are improved.

Again the relevance of companies’ commitments to thefood supply chain in developing countries was taken intoconsideration and supporting documentation was soughtto verify companies’ claims.

Ensuring good working conditions throughout the supply chain 27

Application of labour standards/codes of conduct through the supply chain

An indication of the likely effectiveness of a code ofconduct in influencing practice down the supply chain isthe extent to which the supermarkets’ own buyers andcontracted buyers are trained to understand the contentof the code and how this might impact on a supplier.

At the next level the supermarket can provide trainingand other practical activities to support suppliers inunderstanding and implementing the code. There should

also be a requirement that the suppliers inform theirworkers of the content of the code.

Due to the possible variation in the quality ofcommitments and programmes in this area we asked fordescriptive supporting information, for instance statingthe number of training sessions held and the particularactions taken.

28 Ensuring good working conditions throughout the supply chain

ResultsNone of the companies surveyed demonstratedcomprehensive coverage of all the indicators.

• Few companies showed overall good levels ofcommitment to training and support for theapplication of the code of conduct on labourstandards. COOP Italia described the mostcomprehensive support with systematic training in theSA8000 system.

• Carrefour36 Spain describes their training for allnew buyers in business ethics, audit managementsystems for quality and sustainable development,and the use of their Social Charter in purchasing.Makro Belgium offers BSCI supplier awareness trainingand their buyers are trained in the application of thepolicy. All three companies offered some kind ofsupport to suppliers (eg, technical support, training)

and require suppliers to inform their workers abouttheir policies.

• Only Lidl states that they offer training to buyersof contracted companies in the application oftheir policies/codes of conduct. Coop Denmark alsooffers training to buyers of their contracted suppliers,but states that this does not apply to food products.

• Some companies (such as Auchan) havesystematic training for buyers who source directlyor, as in the case of Carrefour, are developingsystematic training in this area.

• El Corte Inglés, Feira Nova and Pingo Doce indicatethat they carry out some training of their buyers butthis is not in conjunction with any other activities andvery little information is given.

Overall summary of results by company for ensuring goodworking conditions in the supply chain

• Coop Italia were considered to have the ‘Best Available Policies’ relating to labour standards in the supply chain,their implementation and support to suppliers in this area.

• No companies were assessed as having ‘Good Policies’ overall in this area, but Auchan, Lidl, Makro, Mercadona andCoop Denmark were all considered to have comprehensive policies on labour standards in the supply chain andColruyt in the application of those policies. In addition, Makro gave examples of support to suppliers inimplementing their policies.

Training and support for the application of labour standards throughout thesupply chain

Support for good working conditions

Ensuring good working conditions throughout the supply chain 29





Policies to promote good Application of policy Application of policy on working conditions on labour standards: labour standards:

Verification and compliance Training and support

AUCHAN Spain, Italy, Portugal, Good Policies Some Policies Some PoliciesFrance (Poland)

LIDL Belgium, Spain, Italy, (Poland) Good Policies Some Policies Some PoliciesPortugal, Denmark, Greece

CARREFOUR Spain, Italy, France Some Policies Some Policies Some Policies(Belgium, Greece, Poland)

INTERMARCHÉ Belgium Some Policies Limited/No Policies Some Policies(France, Portugal and Poland) (Belgium only) (Belgium only) (Belgium only)

DIA Spain, Portugal (Greece) Limited/No Policies Limited/No Policies Limited/No Policies

CORA Belgium (France) Some Policies Some Policies Limited/No Policies (Belgium only) (Belgium only) (Belgium only)

DELHAIZE Belgium (Greece) Limited/No Policies Some Policies Limited/No Policies(Belgium only) (Belgium only) (Belgium only)

COLRUYT Belgium Some Policies Good Policies Some Policies

SPAR Belgium Some Policies Some Policies Limited/No Policies

MAKRO Belgium Good Policies Some Policies Good Policies

EL CORTE INGLÉS Spain Some Policies Limited/No Policies Some Policies

MERCADONA Spain Good Policies Some Policies Some Policies

FEIRA NOVA & PINGO DOCE Some Policies Limited/No Policies Some Policies(Jerónimo Martins Group) Portugal

COOP Italy Best Available Policies Best Available Policies Best Available Policies

COOP Denmark Good Policies Some Policies Limited/No Policies

CASINO France Some Policies Limited/No Policies Limited/No Policies

VEROPOULOS Greece Limited/No Policies Limited/No Policies Limited/No Policies

EROSKI Spain** Some Policies Some Policies Limited/No Policies

ESSELUNGA Italy** Limited/No Policies Limited/No Policies Limited/No Policies

ResultsIn this section it is possible to cross-reference some ofthe company statements with anecdotal informationfrom suppliers. However, as this information is notcomprehensive it has only been referred to in theanalysis of results and not the assessment of allcompanies.

• Not all companies have formal policies onsupplier relationships, but some referred tocontracts; others to purchase agreements andgeneral policies that they considered representedpolicy on these issues. Supporting information wastaken into account and although some companies (eg,Delhaize, Colruyt, and Spar in Belgium) describedpolicies currently in development, assessments weremade on the basis of existing policies only.

• Coop Italia have the most comprehensive policycovering 16 of the specified elements (such asclarity on terms of trade, complaints mechanismsfor example). Carrefour, Spain report coverage of 15

elements but there is no documentation to supportthis. Coop Denmark, Auchan, Carrefour and El CorteInglés all report policies with wide coverage ofspecified elements from our criteria and also providedinformation to support this.

• Lidl and Makro gave very little information aboutformal policies or contracts setting outpurchasing/ supplier relationships across relevantproduct groups. This is in contrast to theircomprehensive policies on labour standards.

• Elements most commonly covered by company policiesincluded:

– clarity on terms of trade (13 out of 17 companies)

– quality and quantity required (13 out of 17 companies)

– delivery schedule (11 out of 17 companies)

With the growth of supermarket size and power there isincreasing concern about the ability of supermarketchains to exert undue influence on their suppliers asdescribed in Chapter 1. This issue has been raised inrelation to suppliers within Europe, but given the disparityin size and power between some European supermarketchains and many suppliers of developing countryproducts the concerns may be even more pronounced.

In particular there are concerns that supermarkets areable to exert their power in order to reduce the pricespaid to suppliers and pass on unacceptable levels of risk.Demands for greater flexibility, faster turnaround timesand lower costs are likely to impact on the pay, jobsecurity and conditions of workers and producers.

Trading integrity with supply chain policiesThe nature of trading relations between supermarketsand their suppliers is a relatively new area of concern incomparison to concerns about labour conditions in thesupply chain.

We therefore sought information about any codes ofconduct or polices that the supermarkets may haveconcerning their relations with suppliers. The content ofthese policies was assessed according to a set of 18criteria developed with the cooperation of non-governmental organisations working on this issue.37

Supporting documentation was requested includingevidence of the relevance of the policy to food supplychains in developing countries.

30 Fair trading relationships

Fair trading relationships

Chapter

6

Results There is very little information available to support theapplication of policies in this area due to commercialsensitivities. To try to counter this, weight is given toindicators of quite advanced practice such as incentivesfor coherence between policy and practice. It should benoted however, that this assessment is made on thebasis of practice reported by supermarkets.

• Only three companies (Lidl, Makro and CoopItalia) report that their policy or contracts on thisissue apply beyond the first tier of the supplychain. Only Coop Italia and Casino reportindependent verification of this policy and for thelatter there is no supporting information.

• Training of buyers (buying directly) in the policyis widespread (reported by 10/17 supermarkets),

As with the supermarket codes of conduct relating tolabour conditions, it was important to assess theapplication of the supermarket policies on fair tradingrelations throughout the supply chain.

This included commitments from the supermarket toapply the policy to all relevant suppliers and sub-contracted suppliers, as well as systems to monitor andverify the application of the policy.

Information was also sought on the number of suppliersthat had been informed and were aware of the code of

practice and the proportion of buyers that had receivedtraining in the code.

Additionally, given that the application of the policy couldbe said to undermine the achievement of short termgoals that may have been set in terms of reducing pricesand improving delivery times, a question was also askedabout the incentives that the board, managers andbuyers had for complying with the policy on fair tradingrelations.

Fair trading relationships 31

– payment on time and according to terms of trade (11 out of 17 companies)

– clarity on pricing mechanisms (11 out of 17 companies).

However, inclusion in policy does not tell us whether the‘clear terms of trade’ or payment terms for example arefair or happen in practice. The elements that could besaid to indicate a more proactive approach to ensuringfair relationships occurred much less frequently and evenin these cases there was little or no supportinginformation:

• Four out of 17 companies report that they forbidthe use of delisting38 tactics as a means of gettingbetter terms of trade in existing policy. (CoopItalia, Mercadona, Intermarché and Carrefour in Spainonly. However, no information is available on how thisis enforced)

• Six out of 17 companies state in existing policythat supplier contributions for promotions andlaunches are voluntary. (Auchan, Carrefour,Intermarché (Belgium), El Corte Inglés, Feira Nova andPingo Doce (Jerónimo Martins Group) and Coop Italia)

• Four out of 17 companies report the inclusion ofrisk assessments of adverse social impacts downthe supply chain. (Mercadona, Intermarché (Belgium)and Auchan and Carrefour in Spain only)

More companies claim to have complaintmechanisms in their policies on tradingrelationships than in their policies on labourstandards. In total 11 out of 17 companies referred tocomplaint mechanisms in relation to tradingrelationships, but Auchan only in Portugal and Carrefouronly in Spain.

No information is available on how companies ensurethat complaints received are investigated and dealt withfairly39, but the existence of complaint mechanisms incontracts with suppliers is endorsed by suppliers inSpain, Italy, Belgium and Denmark, but refuted in France(one supplier stated although a complaints mechanismwas included in their contract they were not on equalterms with Auchan, the supermarket concerned).

Although some supporting information was providedand Coop Italia and Mercadona offered contacts theopportunity to view commercial documents at theiroffices, there is commercial sensitivity about suchdocuments and very limited supporting information isavailable.

Delhaize (Belgium), Colruyt and Spar (Belgium) reportthey are in the process of developing a policy. Delhaizeand Colruyt/Spar claim their policies will cover 17 and 10out of 17 elements specified respectively.

Application of policy through the supply chain

Communication and terms of tradewith suppliersIn order to ensure the application of fair trading policiesboth supermarket staff and suppliers must be aware ofthe relevant policies. Therefore, a number of questionswere asked in relation to the availability of written andbinding terms of trade explaining the buyers’ policy onordering, quality and complaints. The terms of tradeshould also give clear and consistent payment terms andan order timetable with specifications and delivery times.

Finally, it is important that suppliers have an effectivecomplaints mechanism that gives them some form ofredress in the case of any failure on the part of thesupermarket to abide by the policy or contract.

Pricing issuesA key concern in relation to fair trading relations is theprice that the supermarket agrees with the supplier andwhether this price enables the producer to cover the costof production and pay a living wage. Payments belowcost should be forbidden in supermarket policies onpurchasing and supplier relationships and there should bespecific measures to ensure that the price paid exceedsthe cost of production.

As cash flow is also an important issue for most companies,an associated issue is whether the supermarket has aneffective policy on paying suppliers on time and accordingto agreed written terms of trade. Requiring a supplier todeliver to a strict timetable but paying late passes all therisk onto the supplier.

Companies should be able to report a high proportion ofpayments that are made on time according to the contract.

Stability of relationships with suppliersTo enable security for suppliers, supermarkets should havea policy commitment to developing long-term stablerelationships that enable suppliers to plan, and invest ininnovation and develop their businesses. The key is forsuppliers to be able to trust trading agreements given byretailers and know that if they cease to trade with theretailer there will be notice and clarity on what basis so thatsuppliers can aim to improve and stay in the supply chain.

Supporting policies and information that describe themeasures taken were requested to verify thesupermarkets’ claims.

Support for small-scale suppliers andproducers Supermarkets that have a genuine commitment tosustainability should support small-scale farmers in theirsupply chains as it is one of the most effective ways toreduce poverty, as well as delivering other environmentaland community benefits. However, the nature ofsupermarket supply chains that require large quantitiesand the ability to absorb risks often mitigate against theinvolvement of small-scale producers41.

To support the involvement of small-scale producers,supermarkets should review their own practices to ensurethat they support, enable and facilitate good livelihoodoptions for smallholders.


Coop Italia describes the most systematic application of policy on procurement/supplier

relations. Their policy and SA8000 principles are applied in ‘every country and every

supply chain’. As a cooperative company, they state that the integrity of trading

relationships is central to their values and mission – ‘especially when referred to

developing countries or minor supply chains’40.

but no companies report offering training tocontracted companies. Coop Denmark offerstraining on this issue but only in relation to non-foodproducts.

• Only two companies reported incentives relatingto the application of policy in this area at board,management and buyer level (Auchan Spain andCoop Italia).

A number of companies had incentives specifically forcoherence including Coop Italia (all levels); AuchanPortugal; Carrefour Spain (board level); Carrefour

Spain (management and buyer level).

Delhaize, Belgium has incentives at management levelfor coherence but as their policy is still in developmentis not clear if this is current or planned practice.

Incentives for levels of compliance achieved werereported by Auchan Spain (management level) andCoop Italia (board and management level).

Incentives for stability of relationships with supplierswere reported only by Auchan Spain and Coop Italia.


ResultsThe results from these areas are considered togetherbelow but are dealt with separately in the table in ordernot to lose the detail of different supermarkets’approaches.

The indicators in this section are used to assess as far aspossible how policy statements on supplier relationshipstranslate into practice. There is very little supportinginformation (beyond the policy documents themselves).

Some information from suppliers is available to supportor refute some of the statements made by supermarketsin this section, but as explained above this is anecdotalonly and has not been used in the assessment, but addedhere for information.

• Eleven of the 17 companies that respondedreported that over 75% of their suppliers havebinding terms of trade. Only one company (Casino)reported that only 0-25% of suppliers have bindingterms of trade.

• Coop Italia states that 100% of suppliers havewritten/binding terms of trade, including thetiming of payments and a complaints mechanism.They state a commitment to a minimum periodbetween the latest change in requirements and deliverydate. Coop Denmark also has these conditions with theexception of a policy on minimum time betweenchanges and delivery, which they say, varies with theproduct in question.

• Suppliers reported that the very frequent deliveriesrequired by supermarkets trying to maximise efficiencyin their turnover of stock means that the existence of apolicy on minimum time between changes and deliverywas not considered relevant by many (nationally based)suppliers surveyed. It is possible that the impact ofchanges at short notice is likely to be of more relevanceto suppliers of fresh produce or labour intensiveproducts located in developing countries.

• Changes to systems impact on suppliers. Newsystems requiring more frequent delivery such as thoseused by Auchan, Spain (Alcampo) are more efficient forthe supermarket but were considered to increase therisk to this Spanish supplier who now has to delivertwice a week: ‘This system has a negative impact onthe small suppliers, because it increases the transportcosts, increases the work for the suppliers to preparethe orders, and increases the risk of rupture of stocks atthe sales point.’

• The timing of payments is frequently reported asbeing included in binding terms of trade with 12of the 17 companies that responded reportingthat 75-100% of payments are made on time and

according to terms of trade. Suppliers confirmedinformation provided by some supermarkets (CoopDenmark and Carrefour Spain and Italy) and providedpositive information on the practices of others(Esselunga and all Danish supermarkets). In the case ofAuchan Spain, which reported only 25% of paymentsmade on time and according to terms of trade, asupplier reported better than average payment terms of30 days.

• However, anecdotal information from supplierswas mixed regarding payments on time. Somesuppliers claimed that they didn’t receive payments ontime from Carrefour France. Carrefour France claim75% of payments made on time and according toterms of trade. Suppliers also state that althoughpayments are often made according to terms, termscan be unfavourable to suppliers or they can be late –especially in France (Leclerc, Cora and Systeme U). Inthe case of Casino, a supplier reported having to buy a"shortening of payment time", ie the right to be paidwithin 60 instead of 90 days and state that: ‘Each year,the supplier must dedicate 0.20% of its turnover to buythis "shortening of payment time".

• Only 5 of the 17 companies that responded(Auchan in Portugal only) report the inclusion of acomplaints mechanism. Although feedback fromsuppliers indicates that these mechanisms may be moreprevalent than is indicated. The exception to this is inFrance where suppliers reported no complaintsmechanism in agreements with Auchan, Carrefour,Leclerc and Intermarché42. There is no information onhow complaints are investigated and resolved.

• The majority of companies refer only to fairlytraded products in relation to any specificactivities or policies to ensure that prices do notfall below costs. However, beyond a specific policy tostock large numbers of products, this cannot really beseen as a proactive effort on their part. Somecompanies quote specific activities: Feira Nova andPingo Doce (Jerónimo Martins Group) for example,state that they base negotiations with suppliers on allaspects of the cost structure to prevent prices fallingbelow the cost to the supplier. El Corte Inglés analysecosts and prices and comparative studies; Coop Italiarefer to the use of their complaints mechanism andMercadona to provisions in their ‘lifetime contracts’(see next page).

• Overall there were few examples of practicalactivities to promote stability in relationships withsuppliers. Some companies refer to companyprinciples based on trust and backed up byorganisational policy (Coop Italia) and contracts (Coop


Partnerships to support small farmers in Kenya

Coop Denmark work together with FDB (The Danish Consumers Co-operative Society) in a projectconcerning fresh products from Kenya. FDB supports a wholesale company, and consumers can grantmicro-loans to the farmers. The farmers then supply the wholesale company who sell their products toCoop Denmark. This project is a part of Coop’s 10 actions in the area of Ethical Trade, in this case toidentify specific goods which make it possible to implement development projects. These projects aim toimprove the conditions for the farmers and producers in Africa43.

Supporting stability

Mercadona’s agreements with medium and long term suppliers of fruits and vegetables ensurethat suppliers will recover the cost of production of their crops and make a profit. The companyalso agrees to pay a stable price for each kilo of fruit and vegetables to help protect suppliers fromthe possible impact of a general price decrease or a bad harvest.

Overall summary of results by company for ensuring fairtrading relationships with suppliers

Coop Italia showed the ‘Best Available Policies’ towards relationships with suppliers.

No companies were assessed as having ‘Good Policies’ overall, but Coop Denmark showed ‘Good Policies’ forsupplier relations, communications and terms of trade and support from small-scale producers. Auchan reportedstronger policies in Spain and Portugal than in other countries of operation included in the survey.

Denmark). Mercadona refers to the "lifetimecontracts" agreed with suppliers through the “Marcode buenas prácticas Comerciales” (FrameworkConvention for Better Business). These contracts aremedium to long term and include provisions on priceand stability.

• Only Coop Italia and Auchan (Spain only) reportthat incentives for buyers are linked to thestability of relationships with suppliers.

• Several different initiatives were described assupport for small-scale suppliers. Coop Denmarkand Coop Italia referred to both long-term relationshipswith suppliers and specific initiatives to include smallsuppliers in the supply chain.

• Several other supermarkets give examples ofactivities to support small-scale producers.Carrefour refers to its policy of procuring certified fairlytraded products, but also gave the example of thedevelopment of a direct relationship with a quinoasupplier. Makro refer to a small farm projectundertaken with GTZ, and Colruyt refer to co-financingof initiatives with government and universities – citingthe example of sustainable shrimp farming in Vietnam.Although these might be a step towards includingsmall-scale suppliers in their supply chains, they are notsignificant in terms of policy or practice and so havebeen categorised as ‘Some Policies’.






Policies Implementation, Communication Price and Stability of Support for compliance, and terms payment relationships small-scale

training & issues with suppliers producers incentives

AUCHAN Spain, Italy, Good Policies Some Policies Some Policies Limited/No Policies Limited/No Policies Limited/No policiesPortugal, France (Poland)

LIDL Belgium, Spain, Italy, Limited/No Policies Limited/No Policies Some Policies Limited/No Policies Limited/No Policies Limited/No policiesPortugal, Denmark,

Greece (Poland)

CARREFOUR Spain Italy, Some Policies Some Policies Limited/No Policies Some Policies Limited/No Policies Some PoliciesFrance (Belgium,

Greece, Poland)

INTERMARCHÉ Belgium Some Policies Some Policies Limited/No Policies Limited/No Policies Some Policies Limited/No Policies(France, Portugal and Poland) (Belgium only) (Belgium only) (Belgium only) (Belgium only) (Belgium only) (Belgium only)

DIA Spain, Portugal Limited/No Policies Limited/No Policies Limited/No Policies Limited/No Policies Limited/No Policies Limited/No policies(Greece)

CORA Belgium (France) Limited/No Policies Limited/No Policies Some Policies Limited No Policies Limited/No Policies Limited/No policies(Belgium only) (Belgium only) (Belgium only) (Belgium only) (Belgium only) (Belgium only)

DELHAIZE Belgium Limited/No Policies Limited/No Policies Limited/No Policies Limited/No Policies Limited/No Policies Limited/No policies(Greece) (Belgium only) (Belgium only) (Belgium only) (Belgium only) (Belgium only) (Belgium only)

COLRUYT Belgium Limited/No Policies Limited/No Policies Some Policies Limited/No Policies Limited/No Policies Some Policies

SPAR Belgium Limited/No Policies Limited/No Policies Some Policies Limited/No Policies Limited/No Policies Limited/No policies

MAKRO Belgium Limited/No Policies Limited/No Policies Some Policies Limited/No Policies Limited/No Policies Some Policies

EL CORTE INGLÉS Spain Good Policies Some Policies Some Policies Some Policies Some Policies Limited/No policies

MERCADONA Spain Good Policies Some Policies Some Policies Good Policies Good Policies Limited/No policies

FEIRA NOVA & Some Policies Limited/No Policies Some Policies Some Policies Limited / No Policies Limited/No policiesPINGO DOCE (Jerónimo

Martins Group) Portugal

COOP Italy Best Available Best Available Best Available Best Available Best Available Best Available Policies Policies Policies Policies Policies Policies

COOP Denmark Good Policies Some Policies Good Policies Some Policies Some Policies Good Policies

CASINO France Limited/No Policies Some Policies Limited/No Policies Limited/No Policies Limited / No Policies Limited/No policies

VEROPOULOS Greece Limited/No Policies Limited/No Policies Limited/No Policies Limited/No Policies Limited / No Policies Limited/No policies

EROSKI Spain** Limited/No Policies Limited/No Policies Limited/No Policies Limited/No Policies Limited/No Policies Limited/No Policies

ESSELUNGA Italy** Limited/No Policies Limited/No Policies Limited/No Policies Limited/No Policies Limited/No Policies Limited/No Policies

Fair trading relationships


What suppliers sayDespite attempts to gather a wider perspective from suppliers in Europe and developing countries,responses were only received from 13 suppliers (all of which sell to more than one retailer) based in 6European countries.

• National variation within companies was illustrated in relation to Carrefour and Auchan, wherethere appeared to be better relations with suppliers in Spain than in France where suppliers reportedpressure to reduce prices, late payments and delivery penalties.

• In Denmark, some pressure to reduce prices was reported in relation to all national supermarkets,even when this represented a breach of contract. Overall however, this was considered rare and inrelation to products which are not selling well.

• Late payments by supermarkets were most commonly reported by suppliers in France. Carrefour,Leclerc, Syteme U and Cora were mentioned in France and Intermarché in both France and Belgium.

Additional charges

• The most commonly reported additional charges were delivery penalties, which in France canreach up to 10-15% of the value of non-delivered products even though the loss to the supermarketis lower. Such penalties are frequently included in terms of trade. This was quoted as more of anissue in relation to delivery to warehouses than to stores. Although these were reported in the caseof Auchan and Carrefour it should also be noted that with these supermarkets suppliers reportedthat the penalty could sometimes be negotiated. Leclerc has different central purchasing agencies indifferent regions of France, each with its own practice regarding delivery penalties and with some ofthem no negotiation over the amount is possible. Delivery systems often place all the risk on thesupplier – to hold the stock - deliver in full – at the agreed time slot – or face a penalty.

• Some suppliers reported that penalties were sometimes deducted without warning or trying to find asolution – ‘Supermarkets present [the supplier] with a fait accompli and it is not always possible for[the supplier] to get the amount back, even if the deduction was not justified or excessive’.

• It was also reported that Leclerc (France) require suppliers to take part in supplier exhibitions at theirown expense under the threat of delisting.

• In Denmark there is some degree of compulsory purchase of advertising (eg, in flyers) reported byDanish suppliers.

The stocking of fairly traded products does not in itselfdemonstrate a supermarket’s social responsibility. It does,however, give their customers the opportunity to supportfairer trade.

Additionally a supermarket can help to raise awareness ofthe products and increase sales through their promotionand specific support for the suppliers of these products.

Schemes to market fairly traded products vary in thesocial commitments that they make. In this survey we did

not distinguish between them except to require that theyincluded certification standards that included reference tolabour standards and mandatory third party verification.All brands, including ‘private/own’ brands that met thesecriteria were included.

The following comparison was made using similar criteriato those used for the summary of initiatives relating tosocial responsibility identified during the survey (seeChapter 4).

Support for fairly traded products

Support for fairly tradedproducts

Chapter

37

7

The initiatives below are all concerned with working conditions in which products from developing countriesare produced and how they are traded.

Content of Code Operational Indicators

Labels

Cafemundi — — — — — • *

Colibri — — — SOME — • E

Ethical Tea Partnership FULL YES B SOME — • D*

FLO/ Fairtrade FULL YES* A FULL YES • A*

Rainforest Alliance SOME YES D FULL — — B

Utz Certified FULL YES B FULL — — B

WFTO (Altromercato /CTM) FULL YES* A SOME YES — C

ILO

Cor

eCo

nven

tions

Cove

red

Add

ition

alSt

anda

rds

Ratin

g

Third

Par

tyAu

ditin

gRe

quire

d

Mul

ti-sta

keho

lder

invo

lvem

ent i

ngo

vern

ance

of

syste

m a

nd co

dese

tting

Socia

l Pro

ject

s

Ratin

g

Comparison of labels identified during the survey

Stocking of fairly traded products Supermarkets can increase the availability of fairly tradedproducts by increasing the number of product lineswhere fairly traded options are available, as well asincreasing the number of stores stocking fairly tradedproducts.

To avoid favouring very large stores, stocking of fairlytraded products was assessed primarily on how many ofa specified range44 of products were available in differentstores rather than the total numbers of products, forinstance whether or not tea was stocked was considered,rather than how many different lines of tea.

38 Support for fairly traded products

RATING: Content of Code ILO Core Conventions Additional StandardsA FULL coverage YES* (additional standards include: price paid should be greater than costs/living wage) B FULL coverage YESC FULL coverage SOMED SOME coverage —E — (NO coverage) YES

RATING: Operational Indicators Third Party Auditing Multi-stakeholder involvement in Social Projects governance of system and code settingA* FULL: Audits of all suppliers YES • (some involvement)A FULL: Audits of all suppliers YES B* FULL: Audits of all suppliers — • (some involvement)B FULL: Audits of all suppliers —C* Audits of SOME suppliers YES • (some involvement) or self certification after initial audit C Audits of SOME suppliers YES or self certification after initial auditD* Audits of SOME suppliers — • (some involvement) or self certification after initial audit D Audits of SOME suppliers — or self certification after initial audit* No information on audits — • (some involvement)

See Annex C for further information on the different labels identified in the survey.

Results

• Auchan (France and Italy), Carrefour (France),Delhaize (Belgium) and Coop Italia had the mostcomprehensive range. They stocked all ten (andpossibly more) of the specified products with allproducts carrying a label that achieves the specifiedstandard and 100% of their stores stocked at leastone product. All these companies (Auchan andCarrefour in France only) actually stock a substantiallywider range than that specified.

• Auchan (Spain) stocked fairly traded options in six tonine of the specified product lines as did Lidl in thecountries stocking their Fairglobe45 range: (Denmark,Belgium and Italy), and Carrefour (Poland, Italy).

• Carrefour stocked the most fairly tradedproducts across its countries of operation. Thisincludes Poland where overall availability is limited.

• Products carrying the FAIRTRADE Mark were the mostwidely represented of the different labels found in allcountries except Greece.

• The only significant range of products carrying a labelthat did not meet the criteria was the Colruyt ownbrand ‘Colibri’ as it is a mechanism for supportingsocial projects and has no reference to labourstandards. This did not in any case affect thecategorisation of Colruyt who stock a wide range ofproducts carrying labels that meet the specifiedstandard.

Stocking varies within the same company across the countries in which it operates, reflecting local awareness anddemand. Affordability may also be an issue as such products are often more expensive than other products. (InPoland responses to store enquiries raised the issue of quality and price and reflected a perception that fairly tradedproducts were more expensive). Delhaize for example stocks a wide range of products in Belgium and only twoproducts (both tea) in Greece. Carrefour’s stocking policy also varies by country, they report that overall they marketand promote 621 products in the countries surveyed but in Greece only one product was recorded. Stockingbetween stores in the same country also varies widely.

Key to table on page 37:

Promotion of fairly traded products In countries where awareness of fairly traded productsand the issues behind them is quite high, the stocking offairly traded products can be seen in a purely commercialcontext as a way to encourage sales. Therefore for thepurposes of this survey a more interesting aspect was tolook at the extent to which supermarkets promote fairlytraded products and who pays for these promotions.Another factor taken into account was the knowledge ofstaff – key to any proactive in-store promotion.

The shelf space devoted to fairly traded products and theheight at which they are displayed is one aspect of

promotion. However, some supermarkets also run otherpromotions, either linked to national Fair Trade Weeks orheld separately. As the usual practice is for suppliers topay for in-store promotions, it is also relevant to ask whopays for these promotions with the assumption that asupermarket paying for the promotion indicates somecommitment to promoting fairly traded products and theissues behind them.

Finally, we also conducted a number of anonymousenquiries to assess staff knowledge and awareness offairly traded products and the benefits to producers.

Support for fairly traded products 39

Results

Several supermarkets took part in initiatives toproactively promote fairly traded products.

• Auchan (in Spain, France and Italy); Carrefour (Franceand Italy), Delhaize (Belgium) and Eroski, Spain wereall involved in a wide range of promotional activities.

• Auchan Spain (Alcampo) has also collaborated withIntermon Oxfam on the Fifteen Days of Fair Trade forfive years and Auchan France promote Fair TradeFortnight, as well as a week of international solidarityand a week of sustainable development.

• Eroski, Spain carry out and pay for awarenesscampaigns. This includes events such as the annualFifteen Days of Fair Trade in collaboration withIntermon Oxfam; consumer training on responsibleconsumption (including information on fairly tradedproducts) and articles in its magazine, Consumer.

• Carrefour described promotional events in Italy andFrance. Carrefour France described a wide range ofactivities including staff and public awareness,participation in Fair Trade Week and information intheir newsletter and website on organisations such asMax Havelaar France46 and Carrefour policy.

• Coop Denmark promotes fairly traded products attheir own expense with campaigns during the yearsuch as the Fair Trade Coffee Break.

• In general staff knowledge about fairly tradedproducts was very low.

• Staff knowledge of the standards behind theselabels was highest in Denmark. In response togeneral queries about relevant products, staff atCoop Denmark, Spar, Superbest and DanskSupermarked showed the greatest awareness andreferred to fair and guaranteed prices and support forsocial projects. Staff at BOMI stores in Poland showedsome awareness of different aspects and although toa lesser extent so did staff at Auchan in Spain andPortugal, Carrefour in Belgium, Leclerc in Poland andin Eroski, Spain.

• Fairly traded products were placed in a range oflocations in the store, including special shelves ordisplays in some cases (although sometimesdisplayed, and confused with organic/bio products).But it is difficult to draw overall conclusions acrosscountries surveyed as what is ideal in terms of asupplier also varies with the context. For example in amarket where awareness is low, a special displaymight raise awareness of such products, however in amore established market some suppliers prefer theirproducts to be placed alongside other ‘regular’products where regular customers might expect tofind them.

Another aspect of a supermarket’s policies in this areacan be seen in the extent to which supermarkets claim totreat suppliers of fairly traded products preferentially inrecognition of the values behind these initiatives or asregular suppliers.

Therefore we asked supermarkets if they had a specificpolicy relating to contracts with suppliers of fairly traded

products and in particular whether:

• they have a specific policy on the margin that can becharged for fairly traded products

• they permit pressure to be put on suppliers to reducecosts for large quantities

• other preferential trade terms for suppliers of fairlytraded products were available.

40 Support for fairly traded products

Trading relationships with suppliers of fairly traded products

Results

• Coop Italia reported that their policy or positionstatement on fairly traded products covers: terms oftrade with suppliers; promotion, price margins andany labelled ‘private/no brand’ products. Their policyalso includes preferential terms for suppliers and doesnot permit pressure to reduce prices.

• Coop Denmark state that promoting fairly tradedproducts and offering preferential terms (coveringterms of trade, promotion and own labels) to suppliers

of these products are a part of Coop’s strategy in thearea of Ethical Trade.

• Colruyt also has a formal policy position stating thecompany’s support for such initiatives. Othercompanies Carrefour, Auchan (in Spain and Portugal),Delhaize47 and Intermarché (Belgium only) and Casinomake only general references in sustainability policy orcontracts with relevant suppliers for example.

Overall summary of results by company for supportingfairly traded products

• Four companies, Coop Italia, Coop Denmark, Auchan (France only) and Delhaize (Belgium only) were assessed asshowing a ‘Good Policies’ overall in support of fairly traded products.

• Coop Italia and Coop Denmark show committed support of fairly traded products over and above stocking awide range with ‘Best Available Policies’ for relations with suppliers (Coop Italia); for promotion (Coop Denmark).

• Carrefour stock a wide range of fairly traded products throughout the countries surveyed (including non-respondents), including some in Poland and Greece where availability of such products is very low, howeverCarrefour has limited policies in support of suppliers of fairly traded products.

Support for fairly traded products 41


Stocking of fairly Promotion of Relations with traded products fairly traded suppliers of products fairly traded products

AUCHAN Spain, Italy, Portugal, Good Policies Some Policies Some PoliciesFrance (Poland)

LIDL Belgium, Spain, Italy, Portugal, Some Policies Limited/No Policies Limited/No PoliciesDenmark, Greece (Poland)

CARREFOUR Spain, Italy, France Good Policies Some Policies Limited/No Policies(Belgium, Greece, Poland)

INTERMARCHÉ Belgium Some Policies Some Policies Some Policies (France, Portugal and Poland) (Belgium only) (Belgium only) (Belgium only)

DIA Spain, Portugal (Greece) Limited/No Policies Limited/No Policies Limited/No Policies

CORA Belgium (France) Good Policies Some Policies Limited/No Policies (Belgium only) (Belgium only) (Belgium only)

DELHAIZE Belgium (Greece) Best Available Policies Good Policies Some Policies (Belgium only) (Belgium only) (Belgium only)

COLRUYT Belgium Good Policies Some Policies Some Policies

SPAR Belgium Some Policies Limited/No Policies Limited/No Policies

MAKRO Belgium Some Policies Some Policies Limited/No Policies

EL CORTE INGLÉS Spain Some Policies Limited/No Policies Limited/No Policies

MERCADONA Spain Limited/No Policies Limited/No Policies Limited/No Policies

FEIRA NOVA & PINGO DOCE Limited/No Policies Limited/No Policies Limited/No Policies(Jerónimo Martins Group) Portugal

COOP Italy Best Available Policies Good Policies Best Available Policies

COOP Denmark Good Policies Best Available Policies Good Policies

CASINO France Some Policies Limited/No Policies Limited/No Policies

VEROPOULOS Greece Some Policies Limited/No Policies Limited/No Policies

EROSKI Spain** Some Policies Good Policies Limited/No Policies

ESSELUNGA Italy** Some Policies Limited/No Policies Some Policies




Support for fairly traded products

Relatively speaking and from the information availableCoop Italia was assessed as having the most consistently‘Good Policies’ by a significant margin, followed by CoopDenmark.

Auchan and Carrefour were the next best of thecompanies researched, with policies in Spain above thecompany average for both companies. The variation in

practice, for example between Spain and Italy (goodpractice endorsed by suppliers) and France (some pressureto reduce prices and additional charges reported bysuppliers) in the cases of both Auchan and Carrefoursuggest the importance of national influences as well ascompany policy on the treatment of suppliers. Mercadonaand Colruyt also show some polices over all areas.

42

Overall summary of resultsby company

Chapter

Coop Italia

Coop Italia showed board level commitment to CSRrelating to labour conditions and fair tradingrelationships. They apply the SA8000 standard to theirpurchasing and have broad stakeholder involvement intheir activities, including representation by ANCC(Associazione Nazionale delle Cooperative diConsumatori) on the board of Fairtrade Italia. Theycooperated fully with the survey, including a visit toheadquarters by a researcher to view audit results andcommercial documents that are not publicly available.

The company has the most comprehensive policy on labourstandards of all companies surveyed and covered a livingwage and complaints mechanism. The policy is appliedthroughout the supply chain and independently verified.Buyers are trained according to the SA8000 standard andperiodically updated, suppliers are informed about the codeand support is offered in the implementation of the codeand where necessary with a remedial action plan.

Coop Italia states that their principles as a cooperativecompany require them to act with integrity in theirtrading relationships especially in relation to developingcountries or minor supply chains. Their code of conduct[La Carta dei Valori: Bari:1997] is comprehensive and

includes amongst other issues: a complaints mechanism,payment on time and according to written terms oftrade, clarity over pricing mechanisms and supplierscontributions for promotions are voluntary. The codeforbids the use of delisting tactics to get better terms oftrade and below cost selling, and 100% of suppliers havewritten and binding terms of trade.

Coop Italia train their buyers in the use of the code ofconduct, all suppliers have written and binding terms oftrade and incentives are used at board and managementlevel for the level of compliance and coherence betweenpolicy and practice, and also at buyer level for the level ofcompliance and the stability of relationships. Coop Italiahas longstanding trading relationships with small-scalesuppliers and has met the cost of specific activities tosupport small-scale producers, including projects relatingto social rights in agriculture in 2005 and 2009.

A wide range of independently verified fairly tradedproducts are stocked by Coop Italia and all stores stocksome products. Coop Italia actively promotes theseproducts, and its policy covers preferential terms tosuppliers of such products and does not allow pressure toreduce prices for large quantities.

Overall summary of results by company

8

Overall summary of results by company 43

Coop Denmark

Coop Denmark also demonstrated commitment to CSRrelating to labour conditions and fair tradingrelationships through their membership of the DanishInitiative for Ethical Trade (DIEH) and other initiatives topromote cooperation and good practice. Responsibilityfor implementing CSR policies is integrated into the day-to-day management of the company and they have acomprehensive policy on labour standards includingcomplaints mechanism.

Coop Denmark’s Code of Conduct relating to supplierrelations includes clarity on terms of trade and pricingmechanisms, payment on time and according towritten terms of trade, a complaints mechanism andstates that supplier contributions to promotions shouldbe voluntary.

100% of Coop Denmark’s suppliers have writtencontracts, which include for example, the timing ofpayments and a complaints mechanism. Coop state thatto ensure coherence between their Code of Conduct onlabour standards and purchasing practices, theynegotiate contracts with their suppliers before signing.

Coop Denmark gave examples of specific activities tosupport the inclusion of small-scale producers in theirsupply chains. They also have specific targets for theirsupport of fairly traded products (10 Actions for EthicalTrade48) which includes doubling sales of independentlyverified fairly traded products in three years, increasingthe number of products available and actively promotingthese products and the issues behind them at theirown cost.

44 Overall summary of results by company

Key



• ‘Limited’ companies have limited policies, their policies in each area are not comprehensive or there was very littleinformation available for the survey.

• 'No Policies' there is no indication/information on any policies in this area.


Corporate Support for good Fair trading Support for Overall assessment Commitment to working conditions relationships fairly traded CSR products

AUCHAN Spain, Italy, Some Policies Some Policies Some Policies Some Policies Some PoliciesPortugal,France (Poland)

LIDL Belgium, Spain, Some Policies Some Policies Limited Policies Limited Policies Limited PoliciesItaly, Portugal, Denmark,

Greece (Poland)

CARREFOUR Spain, Some Policies Some Policies Limited Policies Some Policies Some PoliciesItaly, France (Belgium,

Greece, Poland)

INTERMARCHÉ Belgium (Belgium - Limited Polices Limited Policies Some Policies Limited Policies(France, Portugal Cooperation only) (Belgium only) (Belgium only) (Belgium only)and Poland)

DIA Spain, Portugal Cooperation only No Policies No Policies No Policies No Policies(Greece)

CORA Belgium Limited Policies Limited Policies Limited Policies Some Policies Limited Policies(France) (Belgium only) (Belgium only) (Belgium only) (Belgium only) (Belgium only)

DELHAIZE Belgium Some Policies Limited Polices No Policies Good Policies Limited Policies (Greece) (Belgium only) (Belgium only) (Belgium only) (Belgium only) (Belgium only)

COLRUYT Belgium Some Policies Some Policies Limited Policies Some Policies Some Policies

SPAR Belgium Some Policies Limited Policies Limited Policies Limited Policies Limited Policies

MAKRO Belgium Some Policies Some Policies Limited Policies Limited Policies Limited Policies

EL CORTE INGLÉS Spain Limited Policies Limited Policies Some Policies Limited Policies Limited Policies

MERCADONA Spain Some Policies Some Policies Some Policies No Policies Some Policies

FEIRA NOVA & Limited Policies Limited Policies Limited Policies No Policies Limited PoliciesPINGO DOCE (Jerónimo

Martins Group) Portugal

COOP Italy Best Available Best Available Best Available Good Policies Good Policies Policies Policies Policies

COOP Denmark Good Policies Some Policies Some Policies Good Policies Some Policies

CASINO France Limited Policies Limited Policies Limited Policies Limited Policies Limited Policies

VEROPOULOS Greece Cooperation only No Policies No Policies Limited Policies Limited Policies

EROSKI Spain** Some Policies Limited Policies Limited/No Policies Limited Policies Limited Policies

ESSELUNGA Italy** Cooperation only Limited/No Policies Limited/No Policies Limited Policies Limited Policies

Overall summary

How supermarkets choose to wield their considerablepower has a significant impact on the lives of thosethroughout their supply chains. In addition to thefundamental importance of ensuring that theirprocurement supports rather than underminesimprovements in human rights and working conditionsfor those that produce and supply the goods they sell,supermarkets have much to gain in trust and goodwillfrom consumers, staff and suppliers by making theirprocurement more socially responsible. Good practicesand a longer-term approach can help supermarkets toattract and retain the best suppliers and staff, and lead tocost savings and innovation.

This survey examined supermarket policies on workingconditions and fair trading relations with food producersand suppliers in developing countries. The reportexamines the extent to which they seek to ensure thattheir procurement does not undermine basic humanrights and, where possible, support development and thereduction of poverty.

Additionally we undertook a survey of consumerattitudes and awareness in relation to responsible tradeand a survey of suppliers to assess their experiences ofworking with supermarkets.

Consumer perspectives Most European consumers are concerned with the socialimpact of their consumer choices. The CI surveyconducted in 2009 supported results from European andinternational surveys that suggest consumer support forresponsible trade is widespread and growing.

However, country specific dynamics are important. The CIsurvey demonstrated that consumer attitudes do varyacross different countries with our survey suggestinglower levels in Greece and Poland.

Different economic contexts (for instance a lowernational minimum wage) may explain resistance to moreresponsible trade, as this is often associated with higherprices. However, there have also been fewer awarenesscampaigns in relation to these issues and this may also bean important contributing factor.

Given that emerging/developing economies arebecoming increasingly important markets forsupermarkets; consumer organisations, NGOs and groupspromoting and marketing fairly traded products shouldwork together to raise awareness of responsible tradeamongst consumers and companies in those countries.

Supermarkets also have their part to play in raisingawareness by publishing information relating to theiractivities in this area and responding to surveys such asthe one conducted by CI.

In many European countries, fairly traded products havebeen an important vehicle for raising issues of responsibletrade with consumers and are a potential area for NGOsto work with supermarkets.

Where national organisations promoting fairly tradedproducts have low capacity there should be opportunitiesto twin with established organisations in order to developthe availability of products.

Consumers’ right to informationMost consumers will appreciate that the issues connectedwith supply chains in developing countries will in somecases be complex. In these cases there is an expectationthat the supermarket will have the right policies in place,provide independent verification that the policies arebeing put into practice and communicate thisinformation to consumers in a clear and accessible form.Unfortunately in this case, many supermarkets appear tobe failing consumers on all counts.

Conclusions and recommendations

Conclusions and recommendations

45

Cooperation with the survey varied and this limited ourability to give comprehensive results. However, severalsupermarkets responded to the questionnaire and despitecommercial sensitivities, some companies were willing toprovide internal documents and two invited contacts toview documents they were not willing to disclose publicly.

However, several supermarkets fail to make informationabout their policies publicly available. Some supermarketswere more transparent in their home countries whilstneglecting to make information available in the othermarkets in which they operate. International chains thatfail to give this information in one country whilst makingthe information available in another country are guilty ofa double standard that undermines consumers’ right toinformation about the products and services they arepurchasing. They can also be said to be underminingefforts in those countries to increase consumer awarenessabout these issues.

Supermarket policiesThis survey looked primarily at supermarket policies andtherefore there are limits to what we can infer about theimpact that these supermarkets are having ‘on-the-ground’ in developing countries.

Despite this, the results give consumers an indication asto how different supermarkets are seeking to improve theworking conditions of food producers in developingcountries and their trading relationships with foodsuppliers from developing countries. Unfortunately, theyalso highlight significant areas of concern.

Initiatives relating to social responsibilityidentified during the surveyDespite involvement in a variety of CSR initiatives, overallcompanies are not taking full responsibility for ensuringthat basic labour standards are met in food supply chainsin developing countries.

Compared with the other industry initiatives described inthe report, SA8000 gives the best available level ofassurance that policies on labour standards are beingcomplied with. However, as an audit based scheme,SA8000 is more easily applied to large companies andfactories and also does not lend itself to the resolution ofsensitive (and often invisible) issues such asdiscrimination. SA8000 also does not provide anyassurance on the fairness of trading relationships.

Although they do not provide the assurance of acertification scheme (such as SA8000), schemes such asETI, DIEH provide the best available indication of multi-stakeholder involvement key to developing effective

policies and solutions. They can also support members tomake improvements in specific areas of operation. ETI forexample has produced guidelines to help retailers,suppliers, trade unions and NGOs to improve the workingconditions of smallholders and their workers49.

The involvement of different stakeholders, particularlythose with locally based expertise about workers’ rights,audits and the analysis of compliance should giveconsumers some assurance that supermarkets are gettingcorrect information about where improvements need tobe made. However, unfortunately it is not possible forconsumers to identify which supermarkets that aremembers of these initiatives implement all therecommendations and which are dragging their heels.

This report treats industry initiatives on CSR (such asSA8000 and ETI) and independent socially responsiblelabelling schemes separately. Although some of thelabelling schemes also cover labour conditions. Fairtradeis the only one that also offers producers a guaranteedprice, which means that it goes beyond any of theindustry CSR initiatives in terms of supporting fairertrading relationships between producers and retailers.The structure and systems behind fairly traded productscan also build the power of producers and workers sothat they can negotiate with retailers on an on-goingbasis to get better terms.

As such it is clear that European supermarkets can stilllearn from the models and practices developed by someof the independent socially responsible labelling schemesin applying fairness to all their supply chains.

Clarity and transparency of super-market policies and responsesA constant challenge in conducting the survey was thelack of transparency in many industry and companyinitiatives. Information was often limited andaggregated information made it impossible tounderstand which supply chains had been audited andwhether these suppliers or producers were indeveloping countries or in Europe.

As a result it was often difficult to understand exactlywhat commitment a supermarket had made in relation toparticular supply chains. This was true of supermarkets’involvement in CSR initiatives such as BSCI and ICS dueto the very limited and aggregated information available.

The fact that only aggregated statistics are publiclyavailable also meant that there was a lack of transparencyover specific CSR targets and progress towards them.With the exception of Coop Italia, there is also nodisaggregated information available on compliance ofsuppliers or audits.


Although in some cases, information is provided on thetotal number of audits carried out in developing countries(or high risk countries) there is very little informationavailable on the extent to which compliance is verifiedamongst suppliers in relevant supply chains.

Whilst audits are important as a means of verifyingclaims and learning from experience they should notbecome a distraction from the implementation ofcorrective actions and working with suppliers tomotivate and enable improvements.

Content of policies on labour conditionsIn a context where basic labour rights are not legallyenforced, company codes have an important role inensuring as a minimum that labour conditions meet ILOstandards and that those standards are enforced.

Although nearly all companies reported a policy onlabour standards, these do not all cover basic ILOconventions and key elements such as a living wage andthe availability of a complaints mechanism, only occur ina very small number of cases.

Relevance of policies to food supplychains and developing countriesThe relevance of supermarket policies to food producersand suppliers in developing countries was not clearlyestablished.

It appears that there is very limited application of industryinitiatives to food supply chains in developing countriesand these supply chains are not considered a highpriority, despite many of these countries presenting ahigher level of risk because of frequent lack of enforcedlegislation relating to labour standards. This can partly beexplained, though not excused, by the fact that theorigins of several of these initiatives, such as SA8000,BSCI and ICS lie in the textiles/soft goods sector.

In contrast schemes such as Fairtrade and RainforestAlliance have their origins in agriculture and are thereforehighly relevant. Again this underlines the point above thatsupermarkets can learn from the models and practicesdeveloped by these schemes that were developed tobenefit the weakest in agricultural supply chains.

It was often unclear as to whether supermarkets’commitments covered their whole supply chain. Despitethe fact that all supermarkets stock some products thatoriginate in developing countries, only seven companiesapply their policy beyond the first tier of the supply chain.Other supermarkets failed to take responsibility beyond

their first tier suppliers, which in many cases wereEuropean. El Corte Inglés stated that ‘purchases of foodare performed mostly in Spain and EU. Imports from thirdcountries are very low and generally not relevant.’

Whilst the use of indirect suppliers complicates thesupply chain, if the supermarket does not apply theircode beyond their first tier suppliers then they are notable to give the consumer any information as to theconditions in which the products they have bought arebeing produced.

Relatively few supermarkets claimed to have a complaintsmechanism for labour abuses and although severalcompanies reported third party verification, the lack ofsupporting documentation for developing country foodsupply chains made this hard to substantiate. Withoutindependent third party verification it is impossible to saywith certainty the extent to which policies areimplemented and what impact policies have ‘on theground’.

Support to suppliers in implementing labour policies isvery limited. Eleven companies say they train their ownbuyers in their labour policies, but only one company(Lidl) claims to train buyers who work for contractedcompanies. This is a further indication of the failure ofcompanies to take practical steps to ensure their policiesare applied consistently and effectively further down thesupply chain.

Relationships with suppliersOnly five companies report the existence of a specificpolicy on supplier relations, although others refer tosystematic use of contracts but overall, commitment inpolicy to ensuring trading relationships are fair is very low.

Although complaint mechanisms are reported morefrequently than in relation to policies on labourstandards, companies refer most frequently to logisticalissues and least frequently to the practical provisions thatcould potentially help to make sure trading relationshipsare fair and to prevent abuses of buyer power, such asclear and fair terms of trade with effective complaintmechanisms, or ensuring that supplier contributions forpromotion are voluntary.

The application of these policies beyond the first tier ofthe supply chain is even lower than for policies on labourstandards. No companies reported training of buyers ofsubcontracted companies. The use of incentives relatingto policy implementation and coherence between policyand practice were only reported by three companies:Coop Italia, Auchan (Spain and Portugal only) andCarrefour (Spain only).

Conclusions and recommendations 47

Anecdotal information from suppliers illustrates thecomplexity of this area. Only two companies (Coop Italiaand Coop Denmark) state that 100% of suppliers havewritten/binding terms of trade, including timing ofpayments and complaint mechanisms. Over half thecompanies that responded reported that 75-100% oftheir suppliers had binding terms of trade, but we do notknow how long these contracts last or if these terms oftrade are fair. Only five companies report the inclusion ofa complaints mechanism, and although information fromsuppliers suggests that they occur more frequently inpractice, the discrepancy suggests that the practice is notyet systematised in supermarkets’ policies.

Suppliers did not consider a minimum time periodbetween changes in requirements and delivery wererelevant, but this does not mean this is not an issue forsuppliers outside Europe. Supermarkets are constantlydeveloping their procurement systems to maximiseefficiency and profitability and examples such asincreased frequency of deliveries reported in Spainillustrate the impact of such changes on the suppliers – inthis case, higher costs.

More companies reported the inclusion of ‘payment ontime and according to written terms of trade’ thanprovided information on the percentage of suppliersactually paid on time. This may be understandable giventhe wide range and detail of information requested, butunfortunate considering the information from supplierson late payments.

Very few examples were given of activities to ensure thatthe price paid exceeds the cost of production. Again thisis worrying given that ‘price’ is central to the relationshipbetween the supermarket and the supplier.

The information from suppliers was anecdotal, notcomprehensive and in general very few inconsistencieswere found between information on what is covered byterms of trade provided by supermarkets and fromsuppliers except concerning additional charges andpressure to reduce prices. In some cases however, thisreflects the fact that supermarkets did not all respondfully to the questionnaire, and so there was noinformation to contradict.

There is most evidence of unfair treatment of suppliers inFrance, to a lesser extent in Belgium and some inDenmark.

The unwillingness of suppliers to talk openly about theirtrading relationships with supermarkets reflects theunequal relationship they have and makes it very difficultto establish a clear picture of how supermarkets reportedprinciples and policies translate into practice. Thesuppliers that responded verified the claims made by

some supermarkets but also gave examples of abuses ofpower.

Coop Italia and Coop Denmark are the only companieswith examples of proactive policy commitments topromote stability and the inclusion of small-scalesuppliers. Mercadona’s ‘lifelong’ contracts are practicalexamples of an initiative to support stability in supplierrelations. Carrefour, Colruyt and Makro provide examplesof support for the participation of small-scale producersin supply chains in developing countries but mostexamples given relate to the stocking of certified fairlytraded products

Overall, this reflects the emphasis placed by supermarketson the need for guaranteed volumes and consistentsources of supply, but there are still practical measuresthat they can take to make sure their systems includerather than exclude small-scale producers and benefitsfor retailers in terms of a sustainable supply base.

Again the evidence gathered in this survey suggests thatsupermarkets are only just beginning to address theseconcerns in their supply chains and have yet to developthe necessary incentives and verification systems toensure that their trading relationships do not underminethe stated objectives of their CSR policies.

This suggests that the role of purchasing teams inshaping, as well as implementing more responsiblesourcing is yet to be fully recognised, as is theirresponsibility to enable and encourage goodperformance by suppliers. The use of performance andreward structures can significantly influence behaviourand practical tools such as the complementary buyer andsupplier scorecards developed by the ResponsiblePurchasing Initiative50 can be used to developperformance indicators relating to responsible sourcing.

The structure of the food supply chain between Europeand developing countries, and the lack of practicalinitiatives from supermarkets, suggests that the ECshould extend its investigation of failings in the foodsupply chain in Europe to include food supply chainsbetween Europe and developing countries and ifnecessary suggest remedial actions.

Fairly traded productsAs mentioned above, the stocking of fairly tradedproducts is one way in which supermarkets can supportgood labour conditions, fairer trading relations, and theinclusion of small-scale producers. However, thesebenefits are only realised by the producers and suppliersof the labelled products and do not represent a company-wide commitment to producers and suppliers of food


products from developing countries. Therefore, stockingand promoting fairly traded products should not beconsidered as an alternative to a more systematicapproach to improving working conditions and tradingrelations for producers and suppliers of all food productsfrom developing countries.

Many supermarkets were found to stock fairly tradedproducts and there were a number of good examples ofsupermarkets promoting these products, sometimes attheir own expense. However, knowledge of issues behindfairly trade products was low to non-existent in manycountries.

In some countries it was also noted that there weresignificant trends towards increased third partyverification for private and own brands. The implicationsof the trend towards private/own brands carrying fairlytraded labels need to be explored further.

Coop Italia and Coop Denmark have the mostcomprehensive policy regarding preferential treatment ofsuppliers of fairly traded products.

The stocking and promotion of fairly traded products is tobe welcomed and it provides consumers with a verypractical means by which they can support moreresponsible trading. However, in all supermarkets, theseproducts make up a very small percentage of theproducts that originate in developing countries andtherefore supermarkets should not use them to illustratehow socially responsible their procurement is.

The lack of action and information provided bysupermarkets in relation to producers and suppliers offood products from developing countries that do notcarry a fairly traded label must raise questions about theircommitment to mainstreaming responsible trade.

Conclusions and recommendations 49

Recommendations to improve CSR in food supply chains involvingdeveloping countries

Accountability and transparency

• Companies should be fully accountable for their CSR toboard level and ensure that social responsibility isintegrated into their management, accountability andperformance reward structures. Individual managers,buyers and suppliers should be bonused for responsiblepurchasing.

• Wherever possible, CSR activities should be developedand implemented through multi-stakeholder processesthat recognise the skills and expertise of differentgroups and involve them at a governance level.

• Companies should report more systematically on theirCSR objectives and progress towards them in all thecountries in which they operate. This should includenon-aggregated information about the results of auditsincluding information about the product group and thecountry of origin. Information about compliance andcorrective action should also be made available.

• Governments should introduce Right to Knowlegislation or review existing legislation if it is noteffective in ensuring companies are making informationabout the sustainability of their products available forpublic scrutiny.

Good working conditions

• All supermarkets should have comprehensive policieson labour standards through the supply chain. Policiesshould include core ILO conventions, a living wage,health and safety, disciplinary practices, security of

employment and gender/family friendly policies.Policies should include risk assessments, fair complaintmechanisms and provisions to ensure coherencebetween policy and practice.

• Companies should take responsibility for labourstandards in supply chains of food from developingcountries beyond European based suppliers. Thecompanies own buyers and those of contractedsupplier companies should be trained in the applicationof the policy on labour standards, and how commercialterms need to be adapted to enable the realisation oflabour rights and independent means should be usedto verify compliance.

• Where possible policies should be developed as part ofindustry or business initiatives to ensure coherence andreduce duplication for suppliers. Existing initiatives suchas GSCP, BSCI and ICS should broaden their relevanceand prioritise developing effective policies in relation tothe food supply chain more rapidly.

• The application of all policies should be independentlyverified.

Trading relations with suppliers

• All companies should formalise company principles andvalues into an explicit policy on supplier relationships.This should include practical provisions to guard againstunfair trading practices such as the use of (or the threatof) de-listing to obtain better terms of trade,retrospective discounts, compulsory additional chargesand a transparent complaints mechanism.

• In addition to policy commitments, supermarketsshould take practical steps to make sure their tradingrelationships are fair and do not undermine the abilityof other actors to implement good labour standardsfurther down the supply chain. This is particularlyimportant in supply chains where the imbalance ofpower is greatest and where production is labourintensive and the products are perishable.

• Companies should develop fair and transparent rulesfor communication, terms of trade, pricing andpayment issues, including practical initiatives to ensurethat prices do not fall below the cost of production.Consideration should be given to the impact thatchanges in systems may have on suppliers.

• Companies should recognise the need for stability toenable producers to improve working conditions whereneeded, as well as to plan and innovate.

• In order to be socially responsible, systems for theprocurement of food products from developingcountries must also accommodate appropriate andsustainable models of production that in many casesincludes the inclusion of small-scale producers in thesupply chain. This can be achieved through making along-term commitment to purchase products fromthese suppliers and working with organisations that areable to build up the organisational capacity of small-scale producer groups so that they are able to deliverproduce to an international standard, as well ascommunicate and negotiate with the supermarkets.

• Companies should report on schemes that enable small-scale producers to benefit from international trade.

• The EC should extend its investigation into failings inthe food supply chain to include the impact on foodsuppliers from developing countries and consider theestablishment of an independent body to oversee

accusations of abuse. This independent dedicatedbody would build up expertise into the dynamics ofsupermarket – supplier relationships, and monitor anagreed code of practice. The body should be able toreceive anonymous complaints from suppliers andorganisations with knowledge about relevant supplychains.

• Supermarkets that talk fairness and justice in tradingshould support the adoption of progressive publiclegislation that will create a level playing field for allrelevant operators.

Fairly traded products

• Fairly traded products are a proven method forincreasing awareness of the links between trade andpoverty amongst consumers, and for ensuring thatthose farmers and workers who contributed to makingthe fairly traded product, are not exploited and alsoexperience some community benefit. Supermarkets,non-governmental organisations and consumer groupsshould therefore work together to promote suchproducts amongst consumers to raise awareness of theissues, increase the variety of products available andboost sales.

• Supermarkets should not put a higher margin on fairlytraded products, which results in reduced sales of thoseproducts compared to what they would otherwiseexperience.

• The stocking of fairly traded products should not bepresented as an alternative to implementing moreeffective policy and practice to ensure good workingconditions and fair trading relationships for allproducers and suppliers involved in food supply chainsin developing countries.


Supermarkets included in the survey

Supermarkets included in the survey

Annex A

51

Companies Responded No ResponseAuchan Spain, Italy, Portugal, France PolandLidl Belgium, Spain, Italy, Portugal, Poland

Denmark, GreeceCarrefour Spain, Italy, France Belgium, Greece, PolandIntermarché Belgium France, Portugal, PolandDia Spain, Portugal GreeceCora Belgium FranceDelhaize Belgium GreeceColruyt BelgiumSpar Belgium Spar Denmark Makro BelgiumEl Corte Inglés SpainMercadona SpainFeira Nova & Pingo Doce Portugal(Jerónimo Martins Group)51

Coop Italia ItalyCoop Denmark DenmarkCasino France Veropoulous GreeceLeclerc Poland, FranceAldi Nord Belgium, DenmarkEroski Spain (partial, no questionnaire)Modelo and Continente (Sonae Group) PortugalEsselunga Italy (partial, no questionnaire) Italy Conad ItalyDansk Supermarked DenmarkSuperbest DenmarkSysteme U FranceVeropoulos GreeceAtlantic S/market SA GreeceGalaxias GreeceSkavenitis GreeceMakro Cash and Carry Hellas (Metro Group) GreeceBiedronka (Jerónimo Martins Group) PolandBOMI PolandREAL (Metro Group) PolandTESCO Poland

Business Social Compliance Initiative (BSCI)www.bsci-eu.org

The BSCI is an industry initiative founded in 2002 by theForeign Trade Association (Brussels) aimed at establishing’a common platform for the various European companies’Codes of Conducts and monitoring systems and to laythe groundwork for a common European monitoringsystem for social compliance‘. BSCI members committhemselves to incorporate at least two thirds of theirsuppliers into the BSCI system within three and a halfyears of joining the initiative. There is very little evidenceof audits taking place within food supply chains indeveloping countries.

The Initiative Clause Sociale (ICS)www.ics-asso.org

The ICS was established by three French retailers in 1998and by 2006 had 12 members, including several majorFrench supermarkets. Their baseline code is based on theUniversal Declaration of Human Rights, specific locallabour laws and some ILO core conventions, andimplementation is verified by third party audits. In the ICSsystem, member companies share information on auditresults and solutions to supply chain problems with theaim of moving toward higher labour standards.52 There isvery little evidence of audits taking place within foodsupply chains in developing countries.

Global Social Compliance Programme (GSCP)www.gscpnet.com

GSCP is a business-driven programme for companies whowant to harmonise their auditing systems to reduceduplication. The GSCP also concentrates on sharinginformation between companies on supply chainproblems and also on auditing results to preventunnecessary repetitions of audits of the same supplier.

CoopernicEuropean Alliance of Independent Trading Companies

In February 2006, Colruyt, CONAD, COOP, E. Leclerc andREWE Group announced the creation of COOPERNIC,which functions as a buying cooperative53. Theorganisation was established in order to minimise supplychain costs and does not have any ethical standards forsupply chain activity.

Business Council for Sustainable Development(BSCD)/ World Business Council for SustainableDevelopment (WBCSD) )(www.bcsd-uk.co.uk)

The BCSD/WBCSD is a CEO-led, global association ofsome 200 companies dealing exclusively with businessand sustainable development. The association promotesthe role of business in policy development withgovernments, NGOs and intergovernmental organisationsin the areas of energy and climate, development, the roleof business, ecosystems54. The organisation does notprovide auditing or supply chain management systems.

Ethical Trade Initiative (ETI)www.ethicaltrade.org

The ETI is a learning, not an endorsement initiative. Itsgovernance system provides equal footing for thecorporate, NGO and trade union members. Thesemembers include large supermarket chains, NGOs andtrade unions representing over 160 million workersworldwide. All member corporations audit the suppliersthat they have chosen to include in the initiative. A panelof NGOs, similar corporations and trade unionrepresentatives then discuss the annual reports in orderto identify priority areas where ETI needs to undertake‘learning’ activities/projects/programmes to identify bestpractice in improving particular aspects of raising labourstandards. The ETI also carries out research projects into

52 Summary of initiatives relating to social responsibility identified during the survey

Summary of initiatives relating to corporate social responsibility identifiedduring the survey

The initiatives below are all concerned with working conditions in which products from developingcountries are produced and how they are traded.

Annex B

issues such as living wages, and offers training on ethicaltrade issues to corporate and third sector organisations55.

Danish Ethical Trade Initiative (DIEH)www.dieh.dk

Following the model of the ETI, the DIEH (founded inFebruary 2008) is a multi-stakeholder initiative that bringstogether trade unions, business associations, non-governmental organisations (NGOs) and companies topromote ethical trade and responsible supply chainmanagement among Danish companies56. However, thescope and size of the organisation is smaller and has lessinternational representation in the membership list,especially amongst trade unions57.

SA8000www.sa-intl.org

The SA8000 system requires that suppliers achieve aminimum labour standard prior to certification and theestablishment of a management system that creates anongoing worker – management dialogue which shouldideally provide a mechanism to discuss workplace issues.SA8000 certified suppliers are regularly third partyaudited against a base code covering the ILO core rights.In order to ensure certification standards, non-compliancecan lead to suppliers losing their SA8000 status.

While this system does provide a high level of assuranceto retailers, and potentially consumers, it is based on anaccounting audit model which may not deal adequatelywith sensitive issues such as sexual harassment or genderdiscrimination. It is also expensive to implement, whichcan exclude small-scale producers in developingcountries, favouring large firms instead.

As with other auditing systems SA8000 does not considerthe root causes of labour abuses includingretailer/supplier relationships (and in some casespurchasing practices which prevent suppliers being ableto live up to the standards)58.

However, the SA8000 system, while by no means perfect,seems to be the clearest and most reliable labourstandard initiative currently used in supermarket foodsupply chains.

Global GAP (formerly Eurep GAP)www.globalgap.org

Originally launched in 1997, Global GAP is primarilydesigned to maintain consumer confidence in foodquality and safety. Labour standards are not a centralfeature for example basic living conditions and sanitationis classed as a ‘minor must’. Consequently ‘standards canonly be seen as first steps regarding corporate socialresponsibility of grocery retailers59’.

GRASP Projecthttp://www.globalgap.org/cms/front_content.php?idart=812)

The Global G.R.A.S.P module of GlobalGAP auditingsystem was a two-year public/private pilot scheme runestablished by GTZ, Swiss Coop and GlobalGAP from2005 to 2007. The aim of the project was to establish asocial auditing system in line with the established qualitycontrol auditing systems in place. Four pilot regions wereestablished in Brazil, Vietnam, Kenya and Spain/Morocco.Due to the high cost of social audits, a great deal ofreliance was placed on documentary evidence that meansthat the approach developed ’cannot be compared tothat of full social audits’60.

GRASP Audit process: The GRASP Assessments are notcomplete social audits with in-depth investigations, butfocus on documentary review of an implemented socialmanagement system.

ISO26000www.iso.org/iso/socialresponsibility.pdf

The ISO 26000 (due to be finally negotiated in May 2010)aims to bring all the different elements of socialresponsibility under one standard including:organisational governance, human rights, labourpractices, environment, fair operating practices,consumer issues, and contribution to the community andsociety.

An early working group resolution stated that ‘there is aneed for a guidance document [on CSR] and not for aspecification document intended for conformityassessment‘, and that ISO 26000 is ’not intended forcertification purpose, or regulatory or contractual use‘61.

This voluntary system of implementation, usingstakeholders to verify compliance rather than auditors,would have the advantage of overcoming the high costbarrier that some certification schemes place on suppliersfrom developing countries‘.

Summary of initiatives relating to social responsibility identified during the survey 53

Fair Labelling Organisations International(FLO)/Fairtrade

FLO is made up of 19 ’Labelling Initiatives‘, three’Producer Networks‘, and two ’Associate Members‘, whowork toward creating fairer trading conditions foragricultural producers in developing countries. Anyproduct bearing the FAIRTRADE Mark has been certifiedthrough the FLO-CERT auditing system which has highstandards for labour rights, a guaranteed minimum pricefor producers, and support for small-scale producerorganisations, including social premiums and theopportunity for pre-financing where needed. Theproducer networks represent producers on the board62.

The World Fair Trade Organisation (WFTO)

Formerly the International Fair Trade Organisation, theWFTO is a worldwide certification body. WFTO has astrong code of conduct on labour rights and workingconditions, and a democratic governance structure withboard members being elected by the membership. Inorder to gain the seal, a business must implement theSustainable Fair Trade Management System (SFTMS).Because the organisation rather than the product gainscertification, produce can be sold anywhere in the worldwhereas FLO certified products can only be sold incountries with a Fairtrade body. However, verification thatstandards are being met is made through a self-certification system rather than third party audits.

Rainforest Alliance

The Rainforest Alliance (RA) is primarily an environmentallabel with some social/labour conditions in their basecode63. However, freedom of association and collectivebargaining are not included64. Auditing and recordkeeping are given a high priority but there is no minimumguaranteed price and pre- financing is not available. TheRainforest Alliance seal can be used on productscontaining only 30% certified content65.

UTZ CERTIFIED

The system is established on a market principle: UTZcertification provides buyers with highly traceable coffeebeans which can be guaranteed to have been grownunder specific labour/environmental conditions. UTZ alsoprovides information to growers about agricultural bestpractices and market information. This in theory meansthat UTZ CERTIFIED beans should fetch a higher price dueto their quality and the social and environmentalstandards of their production66. Producers should be ableto better understand the market and make informeddecisions about the current value of their product.However, no minimum price or premium is guaranteed toproducers.

Ethical Tea Partnership www.ethicalteapartnership.org

The Ethical Tea Partnership (ETP) ’is an alliance of teapackers who are working together to improve thesustainability of the tea sector‘. These packers supply 50companies selling tea in over 100 countries. This industry-based initiative is aimed at wholesale change of the teasector rather than to create competition between brandson ethical grounds as other “ethical labels” do67. TheirCode of Conduct stipulates high labour standards formembers to implement on their plantations. However,third party audits are not used, rather an internal systemof progressive improvements is established throughdialogue between the ETP, tea estates and producers68.

Bioequitable

This label combines standards on organic production andsocially responsible procurement and certifies small andmedium-sized businesses. However, from the informationavailable it is unclear how strong their base-code is or tohow it is monitored and verified69.

54 Summary of labels identified in the survey

Summary of labels identified in the survey

The labels below are all concerned with working conditions and trade in which products fromdeveloping countries are produced and how they are traded.

Annex C

eatm

ore

chip

s

Café Mundi

Café Mundi was established by several coffee companiesto improve the living conditions of workers on coffeeplantations. A proportion of the price paid for CaféMundi coffee goes towards eight micro-projects (health,education etc) on plantations to in South America, Africaand Asia. As such, this label describes itself as an ’aidprogramme‘ to fight poverty70, rather than a differentway of trading. Improving labour standards onplantations is not part of this programme.

Colibri

This scheme is run by Colruyt in Belgium. Sales of Colibriproducts raise funds for social projects but no furtherinformation is available.

Summary of labels identified in the survey 55

Internationalcompanies andcountries surveyed

AUCHAN: Spain, Italy,Portugal, France, Poland

LIDL: Belgium, Spain,Italy, Portugal, Denmark,Greece, Poland

CARREFOUR: Spain,Belgium, Italy, France,Greece, Poland

56 Company specific policies for international companies

Company specific policies of international companies

Annex D

Country Specific PoliciesThe assessment of each international company was averaged across its countries ofoperation to give a picture of the companies policies overall. Examples of ‘above average’policies are highlighted here.

Spain: Good Policies for corporate commitment (board level and stakeholder dialogue)Good Cooperation with surveyBest Available Policy on implementation of policy on supplier relationsGood Policies on stability of relationships with suppliersGood Policies on promotion of fairly traded products

Italy: Best Available Policies on stocking of fairly traded productsFrance: Best Available Policies on stocking fairly traded products

Good Policies on promotion of fairly traded productsPortugal: Good Policies for corporate commitment (board level and stakeholder dialogue)

Good Policies on public reportingGood Cooperation with surveyGood Policies on implementation of policy on supplier relationsGood Policies on communication and terms of trade

Belgium: Good Cooperation with surveyGood Policies on stocking fairly traded products and some policies on promotingfairly traded products

Spain: Good Cooperation with surveyPortugal: Good Cooperation with surveyDenmark: Good Cooperation with survey

Good Policies on stocking fairly traded products and some policies on promotingfairly traded products.

Greece: Good Cooperation with surveyItaly: Good Policies on stocking fairly traded products and some policies on promoting

fairly traded products

Spain: Good Policies in training in application of policy on labour standardsGood Policies on implementation of policy on supplier relations

France: Good Cooperation with surveyBest Available Policies on stocking fairly traded products

Continued on next page

Company specific policies for international companies 57

Belgium: Some Cooperation with surveySome Policies on labour conditions and training and support in implementingthese policiesSome Policies on fair trading relationships and their implementationSome Policies on stability of relationships with suppliers

Spain and Good Cooperation with surveyPortugal:Greece: Some Policies in stocking fairly traded products

Belgium: Good Cooperation with surveySome Policies on labour conditions and application of labour policySome Policies on communication and terms of tradeGood Policies on stocking fairly traded products

Belgium: Good Cooperation with surveySome Policies: Application of labour policyBest Available Policies on stocking fairly traded products

INTERMARCHÉ: France,Belgium, Portugal andPoland

DIA: Spain, Greece

CORA: Belgium & France

DELHAIZE: Belgium,Greece

Endnotes

1 Please see Annex A for a list of the supermarkets surveyed.

2 The results are based on the surveyed supermarkets’ responses to our questionnaire and information that is publicly available. SeeChapter two for more information on the methodology used.

3 CSR Monitor has ’documented significant shifts in consumer attitudes and behaviours in response to corporate responsibilityaround the world. The latest wave of research supports the notion that active, ethical consumption is increasingly prevalent intoday’s developed markets‘. In GlobeScan CSR Monitor, 2008.

4 Labels such as Fairtrade, Rainforest Alliance and Utz Certified represent different standards. These standards vary significantly butin this report we are concerned with the aspects that relate to the working conditions in which relevant goods from developingcountries are produced and how fairly they are traded. For this reason these products will be referred to as fairly traded.

5 Delisting in the context of abuse of supermarket buyer power has been defined as follows: ‘When suppliers refuse to reduce pricesor make other payments or concessions supermarkets have been threatening (and actually carrying out the threat) not to dealwith them anymore’. Myriam Vander Stichele, SOMO & Bob Young, The Abuse of Supermarket Buyer Power in the EU Food RetailSector: Preliminary Survey of Evidence, Europe Economics (2009), p16.

6 `Right to know’ legislation for public or privately owned entities, imposes a duty on publicly and privately owned entities todisclose any information which is relevant to consumers regarding sustainability, and which relates to products and productionprocesses throughout their supply chain.

7 For example, Oli Brown with Christina Sander, Supermarket Buying Power: Global Supply Chains and Smallholder Farmers (2007)

8 The ISO standard will be applicable to all types of organisation and therefore uses the term social responsibility rather thancorporate social responsibility.

9 Consumers across all markets express strong intention to purchase from responsible companies (GlobeScan CSR Monitor, 2009).

10 Consumers can make a difference in how responsibly a company behaves (GlobeScan CSR Monitor, 2007).

11 In some European countries the equivalent of the FAIRTRADE Mark is MAX HAVELAAR.

12 Fairtrade flows against economic tide, Fairtrade Labelling Organisations International (FLO) 17 April 2009.

13 http://www.fairtrade.org.uk/press_office/press_releases_and_statements/jun_2009/global_fairtrade_sales_increase_by_22.aspx

14 Statement from Consumers International’s 17th World Congress: The Future of Consumer Protection, Lisbon, 2003

15 Demand remains strongest for social and environmental food/beverage product offerings (GlobeScan CSR Monitor, 2009)

16 Oxfam Last Stop – Supermarket: The Scoop on Tropical Fruit: Retailers’ Buying Power: The conditions under which pineapples andbananas sold in Germany are produced, (2008).

17 Barrientos, S and S Smith Mainstreaming Fair Trade in Global Value Chains: Own Brand Sourcing of Fruit and Cocoa in UKSupermarkets in “Fair Trade: the challenges of transforming globalization, Routledge, London, (2007)

18 Human Rights Watch, Tainted Harvest: Child Labor and Obstacles to Organizing on Ecuador’s Banana Plantations, (2005).Available at http://www.hrw.org/en/reports/2002/04/25/tainted-harvest.

19 Barrientos, S et al, Global production and flexible employment in South African horticulture: experience of contract workers infruit exports, Sociologia Ruralis, Vol 43 No.4 October, (2003). Also, the Sour Grapes by War on Want, available athttp://www.waronwant.org/campaigns/supermarkets/wine-industry/inform/16458-sour-grapes

20 Source: UK Competition Commission inquiry into the groceries market in 2000

21 Myriam Vander Stichele, SOMO and Bob Young, Europe Economics, The Abuse of Supermarket Buyer Power in the EU Food RetailSector: Preliminary Survey of Evidence, p16, (2009)

58 Endnotes

22 http://actualite.aol.fr/letat-assigne-9-distributeurs-pour-pratiques/article/20091028100430174494804


24 http://www.guardian.co.uk/business/2010/jan/13/consumer-affairs-supermarket-ombudsman

25 http://www.irishtimes.com/newspaper/ireland/2010/0114/1224262292095.html

26 A better functioning food supply chain in Europe. Communication from the commission to the European Parliament, the Council,the European Economic and Social Committee and the Committee of the Regions. Provisional version. 28.10.2009

27 Stephanie Barrientos, Are supermarket codes benefiting workers?. Food Ethics Council. Vol 2 Issue 1. Spring 2007

28 See Chapter 3 in this report.


30 Minten, B,Randrianarison, L. and Swinnen, J.F.M (2005) Supermarkets, International Trade and Farmers in Developing Countries;Evidence from Madagascar. Strategies and Analysis for Grown and Access (SAGA), Cornell and Clark Atlanta universities, incooperation with USAID, September 2005 – quoted in Oli Brown with Christina Sander Supermarket Buying Power: Global SupplyChains and Smallholder Farmers March 2007, IISD

31 Metro Group was the exception to this as in one country they were added to the original list of companies to be surveyed.

32 What Assures Consumers in an Economic Downturn? Reviewing the agenda in the global economic crisis, The Co-operative,Accountability. April 2009

33 Article 23, paragraph 3 of the Universal Declaration of Human Rights

34 According to Coop Italia, the contents of social audit reports are covered by the Italian Privacy laws and regulations. Anystakeholder is allowed to access on demand in [Coop Italia] offices.

35 These figures combine national responses from international supermarkets and combined responses from Modelo and Continente(Sonae Group) and Feira Nova and Pingo Doce (Jerónimo Martins Group) in Portugal.

36 In addition to support in the application of policies and the requirement to inform workers to Carrefour Group described its formaltraining programme which is not yet operational, due to be implemented in late 2009.

37 Traidcraft and the publications of the Responsible Purchasing Initiative www.responsible-purchasing.org. International Institute forEnvironment and Development (IIED) in relation to the ‘Race to the Top’ Project 2002-2004 www.racetothetop.org

38 Delisting in the context of abuse of supermarket buyer power has been defined as follows: ‘When suppliers refuse to reduce pricesor make other payments or concessions supermarkets have been threatening (and actually carrying out the threat) not to deal withthem anymore’. Myriam Vander Stichele,SOMO and Bob Young, Europe Economics, The Abuse of Supermarket Buyer Power in theEU Food Retail Sector: Preliminary Survey of Evidence, p16, (2009)

39 Supermarkets were not asked to provide this information.

40 Coop Italia's code for employees was sent with their questionnaire, collective contracts were viewed at company HQ and trainingmaterial is available to view on request.

41 The Agrifood Standards Programme (IIED, NRI and Dfid UK) explored opportunities for more favourable outcomes for smallproducers in developing countries to participate in international horticultural supply chains. www.agrifoodstandards.net

42 Please note that as no French supermarkets responded to this question in France, this does not contradict their response.

43 http://www.fdb.dk/fdb/maerkesager/etiskhandel/mikrolaan/baggrund/Sider/KyomeFreshogCoop.aspx

44 The specified range included some of the most commonly stocked products, including tea, instant and ground coffee, chocolatebeverages and confectionary, honey, rice, sugar and bananas.

45 Lidl’s Fairglobe range carries the FAIRTRADE Mark.

Endnotes 59

46 Max Havelaar is an independent labelling organisation and part of FLO.

47 Delhaize also reported this as a part of a general policy that is still under development.

48 http://www.coop.dk/ansvarlighed/etisk+handel/10+handlinger.aspx

49 http://www.ethicaltrade.org/resources/key-eti-resources/eti-smallholder-guidelines-eng

50 Chartered Institute of Purchasing and Supply (CIPS) and Traidcraft as part of the Responsible Purchasing Initiative: Win/Win:Achieving Sustainable Procurement with the Developing World, (2010) www.responsible-purchasing.org/reports

51 As one combined response was received from Jerónimo Martins Group regarding these two companies, they are referred totogether.

52 http://www.ics-asso.org/doc4/page2_eng.htm

53 Press release, 16 February 2006, available at www.euronext.com/fic/000/003/632/36328.pdf

54 See the “About us” section of the website for more details:http://www.wbcsd.org/templates/TemplateWBCSD5/layout.asp?type=p&MenuId=NjA&doOpen=1&ClickMenu=LeftMenu

55 http://www.ethicaltrade.org/about-eti

56 http://www.dieh.dk/in_english/who_we_are

57 http://www.dieh.dk/in_english/members

58 Reviewing Santa’s Workshop Swedwatch, 2009 http://www.sverigeskonsumenter.se/fileserver/091202.Rapport.Stor.Etik.pdf

59 CSR Report: Retailers and Discounters. International technical report based on IMUG report, 2006

60 P5, GRASP Project Report, 2007, available at www.globalgap.org/cms/upload/Resources/.../GRASP-Report-Part-I.pdf

61 Han-Kyun Rho, Understanding the Nature of ISO 26000: A Coming International Standard on Social Responsibility, p8, (2007)

62 http://www.fairtrade.net

63 http://www.rainforest-alliance.org

64 See ’Sustainable Agricultural Standard‘, available at http://www.rainforest-alliance.org/agriculture.cfm?id=standards_farms

65 See this article for more details: http://www.guardian.co.uk/lifeandstyle/2004/nov/24/foodanddrink.shopping1

66 http://www.utzcertified.org/index.php?pageID=162

67 http://www.ethicalteapartnership.org/pages.asp?page_id=18&parent_id=18

68 http://www.ethicalteapartnership.org/pages.asp?page_id=86&parent_id=20

69 http://www.bioequitable.com/en

70 http://www.cafemundi.org/index.php?id=7&L=2

60 Endnotes

Consumers International

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London N5 1RX, UK

email: [email protected]

www.consumersinternational.org

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