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Stakeholder accountability in the UK supermarket sector

Final report of the ‘Race to the Top’ project

Tom Fox and Bill Vorley

November 2004

tracking supermarket

progress towards a fairer and

greener food system

Preface and acknowledgements _________________________________________________________________________iii

Foreword ____________________________________________________________________________________________________iv

Summary _____________________________________________________________________________________________________v

1 What Race to the Top set out to achieve ________________________________________1

2 The UK supermarket sector ____________________________________________________________3

3 Supermarkets and sustainable development: the critique _____________6

3.1 Examining the critique: buyer power and self-regulation________________________6

3.2 Beyond the critique: transparency and accountability __________________________9

4 The Race to the Top methodology _________________________________________________10

4.1 Project governance and institutional arrangements ___________________________10

4.2 Thematic modules________________________________________________________10

4.3 Project coordination and groups ___________________________________________13

4.4 Data collection and benchmarking _________________________________________15

4.5 Scoring and publication of results __________________________________________17

4.6 Retailer participation and ‘critical mass’_____________________________________18

5 Results ____________________________________________________________________________________________21

5.1 2002 pilot year___________________________________________________________21

5.2 2003 public year _________________________________________________________22

5.3 Results of the external data collection ______________________________________22

6 Assessing RTTT against the project objectives ____________________________26

7 Examining what went wrong __________________________________________________________27

7.1 Regulation and self-regulation _____________________________________________27

7.2 Compromise and leverage ________________________________________________27

7.3 Over-reliance on industry data _____________________________________________28

7.4 The lack of company resources ____________________________________________28

7.5 The diversity of the sector_________________________________________________28

7.6 Industry upheaval ________________________________________________________28

7.7 Wal-Mart has changed the rules ___________________________________________28

8 Lessons and conclusions _______________________________________________________________30

8.1 The conflation of customers and citizens____________________________________30

8.2 The buck stops … where?________________________________________________ 30

8.3 Governance gaps in an environment of self-regulation ________________________31

Bibliography ______________________________________________________________________33

RACE TO THE TOP: Stakeholder accountability in the UK supermarket sector i

Contentspage

RACE TO THE TOP: Stakeholder accountability in the UK supermarket sector iii

Preface and acknowledgements

This document records the experiences of a projectentitled Race to the Top: tracking supermarket progresstowards a fairer and greener food system. The projectwas coordinated by the International Institute for Environ-ment and Development (IIED), an independent, non-profit policy research institute, but involved (to varyingdegrees) the top ten UK supermarket companies (bymarket share); twenty-four other civil society organisa-tions, and many other individuals and organisations.This report is written by IIED, and seeks to record andreflect on the lessons learned from the project’s three-year life in relation to the process itself, the method-ologies that were applied, and the content of the indi-cators that were developed. It also draws on feedbackfrom project stakeholders submitted in response to ashort survey circulated in early 2004, and various con-versations and correspondence throughout the life ofthe project. However, the views expressed in this reportare those of the authors alone.

The project (at least in its current model) ended pre-maturely following a confidential ‘pilot’ year (2002) inwhich six supermarkets took part and one ‘public’ year(2003), in which only three supermarkets participated.Whether it survives in a less ambitious form, for exampleas a forum for dialogue, research and informationsharing on supermarkets and sustainability, remains tobe seen. The materials, methodologies and researchdeveloped throughout the course of the project willremain at www.racetothetop.org and we encourageother initiatives to make use of them.

On behalf of the project partners, IIED is grateful to the main funders of the project, the Esmée FairbairnFoundation and the UK Department for Environment,Food and Rural Affairs (Defra), as well as other organisa-tions that provided financial support at the initial stagesof the project, including the Countryside Agency, EnglishNature, RSPB and WWF-UK. Thanks also to the UKFood Group for support with disseminating the report.

The Race to the Top project was a strongly collaborativeinitiative, which relied on the advice, support and inputsof many individuals, companies and organisations.Much of this support was in-kind. IIED is therefore alsograteful to the following companies, organisations andindividuals, for without their enthusiasm and commit-ment to achieving positive change, this project wouldnot have been possible:

Coralie Abbott; Chloe Alexander and Rupert Howes,Forum for the Future; Alison Austin and Leigh AnnTomkins, J Sainsbury plc; Richard Baines, Royal Agri-

cultural College; Barb Baker; Mike Barry, Sarah Healyand Rowland Hill, Marks and Spencer plc; HannahBartram and Phil Rothwell, RSPB; Sandra Bell, Friendsof the Earth; Frans Berkout, University of Sussex; MickBlowfield; Ian Bowles; Chris Blundell; John Breach,British Independent Fruit Growers Association; IanBretman, Fairtrade Foundation; Chris Brody; KerryBurgess and Gary Reese, Compassion in WorldFarming; Martin Caraher, Tim Lang and Lindy Sharpe,City University; Ray Chambers and Neil Wrigley,University of Southampton; Anne-Claire Chambron andHetty Selwyn, Farmers’ Link; Man-Kwun Chan;Bernadette Clarke, Marine Conservation Society; LindsayCoombs, Jim Howell, Callton Young and Simon Cox,Defra; Martin Cottingham, Soil Association; Gill Cowburn,University of Oxford; David Croft, Cooperative Group;Nigel Cross; Alexia Cummins, Marine StewardshipCouncil; Chris Dee, Booths Supermarkets Ltd; DeborahDoane, Andrew Simms, Alex MacGillivray, Molly Conisbeeand Justin Sacks, New Economics Foundation; ClareDruce, Farm Animal Welfare Network; Chizom Ekehand Georgia Glick, National Consumer Council; NicolaEllen and Gavin Bailey, Safeway Stores Ltd.; AndrewFearne, Imperial College; John Foley; Tara Garnett,Transport2000; Fiona Gooch and Geoffrey Bockett,Traidcraft; Tony Gould, Peter Allenson, Barry Leathwoodand Don Pollard, T&GWU; Anne Gray; Julia Hailes;John Hannett, USDAW; Jayn Harding; Michael Hart,Small and Family Farms Alliance; Louise Heaps, ChrisHowe and Richard Perkins, WWF-UK; Vicki Hird andMerav Shub, Sustain: the alliance for better food andfarming; Siaron Hooper and James Trueman, EnglishNature; David Hughes; Mike Ironside, Keele University;Tim Keenan, Esmée Fairbairn Foundation; Rob Lakeand Nick Robins, Henderson Global Investors; JohnLampitt, Farmers’ World Network; Peter Lee and SuzanneRavenscroft, Iceland Group plc; Philip Lymbery, HelenBall and Leah Garcés, World Society for the Protectionof Animals (WSPA); James Markwick, David Parker,James Petts and Peter Simpson, Countryside Agency;Kevin Morgan, Cardiff University; James Northen andRichard Hutchins, IGD; Ruth Potts and Ben Savill,National Federation of Women’s Institutes; Charlie Pye-Smith; Hugh Raven; Stephen Ridge and MichaellaHenderson, Somerfield Stores Ltd.; Julie Shrimpton;Alistair Smith, Bananalink; Julie Smith; Leonie Smith;Sophie Spencer, Council for the Protection of RuralEngland; Anne Tallontire and Valerie Nelson, NRI; JohnThompson, IIED; John Webster, University of Bristol;Phil Wells; Stephanie Williamson, PAN-UK.

Tom Fox and Bill Vorley, IIEDNovember 2004

iv RACE TO THE TOP: Stakeholder accountability in the UK supermarket sector

Foreword

This is an important report at a significant moment inthe corporate responsibility agenda. These pages chartthe course of the Race to the Top project, an innovativecollaboration to track supermarket progress towardssustainability by developing a set of benchmarks. Theinsights within the report need to be digested by anyonewith an interest in the corporate responsibility agenda.

When Race to the Top was established in 2000, theidea that sectoral business benchmarks might be de-veloped by non-governmental organisations (NGOs)with the collaboration of companies was new. “Collab-oration not confrontation” was a fresh and appealingidea to a number of NGOs (though it was far from new).The project’s title itself played on a fashionable theory– that high environmental or social standards could bethe basis of a ‘Race to the Top’ among competingcompanies, instead of issues to be traded off in thedrive to become leaner, meaner, and more appealing toshareholders.

The report makes for sobering reading four years on.The project coordinators, Tom Fox and Bill Vorley, out-line the features of the UK supermarket sector thatmade the project so exciting – and so challenging.Market concentration at every level of the supply chain;the supremacy of shareholder value delivered throughcustomer satisfaction; the pace of business strategyoutstripping the capacity or will of public policy makersto play catch-up. When the supermarkets that weremost loved by the Square Mile dropped out of the Race tothe Top, the market drivers for engagement shattered.

Today, within and beyond the supermarket sector, amood of deep scepticism prevails among many NGOs

who have engaged with the corporate responsibilityagenda over the past five or six years. Corporateaccountability through law, not market-based corporateresponsibility, is the theme of the moment. The story ofRace to the Top demonstrates the attraction of the theme.But it does not in any way downplay the importance ofcommitted staff within businesses working hard tointernalise those environmental and social marketdrivers that do exist. And it points to tougher civilsociety tactics towards the sector as a whole in themonths to come.

Yes, there are lessons in this project for the effective-ness of a market-based corporate responsibility agenda.But Race to the Top must not be considered a failureby anyone. Alliances and friendships have been formedand insights gained that will undoubtedly find areflection in the next wave of efforts to transform theUK supermarket sector. There are insights for coalition-building; for collaboration between businesses andNGOs; and for the future of non-interventionist sectoralregulation.

The conclusion of Race to the Top does not pass thebaton to a Race to the Bottom. This report is a primerfor the strategic and tactical choices that will now needto be made. Efforts to strengthen the contribution ofsupermarkets to sustainable development will continue.And the people behind those efforts will inevitably findways to overcome the barriers that we now know somuch more about.

Halina WardDirector, Corporate Responsibility for Environment

and Development, IIED

RACE TO THE TOP: Stakeholder accountability in the UK supermarket sector v

Summary

Civil society organisations have been deeply critical ofthe perceived dominance of supermarkets over thefood system. Supermarkets are accused of driving a‘race to the bottom’ by procuring food ‘grown anywhere,anyhow’ without regard for standards of labour, theconservation of wildlife and landscapes, the livelihoods(or even survival) of family farms, the congestion ofroads, the demise of vibrant high streets, the manage-ment of waste, the welfare of farm animals, or thehealth and food security of low income communities.As rapid consolidation within the UK supermarketsector continues – three-quarters of the country’s super-market food shopping is now done in just four firms –the critique gets increasingly vociferous.

Each of these issues is hotly contested. Many of theUK supermarkets are considered to be among theleaders of the corporate social responsibility (CSR)movement, and they point to numerous examples ofgood practice. What often gets overlooked in the warof words between supermarkets and their detractors isthe lack of comparable and credible benchmarks formeasuring progress towards greater sustainabilityacross the sector.

The objective of the Race to the Top (RTTT) project wasto develop those benchmarks in partnership with abroad coalition of civil society organisations, and towork with leading supermarkets to apply them. Theoverall aim was to promote accountability and trans-parency within the UK supermarket sector, in doing sobuilding incentives for the major UK supermarketcompanies to improve and communicate their social,environmental and ethical policies and performanceover a five-year period. The methodology centred on aprocess of engagement between supermarkets andcivil society organisations with interests in a variety ofsocial, environmental and ethical issues. The mainactivity was a collaborative benchmarking process, sup-plemented by additional research, good practice casestudies and ongoing dialogue. This was all carried outwithin a structure that combined centralised projectmanagement and brokering, devolved responsibility forinput into the benchmarking development processthrough seven thematic groups, and strategic guidanceby an independent advisory group.

The project demonstrated that it is possible to developmethodologies that allow the benchmarking of super-markets across a range of sustainability issues. Althoughsome issues remain contested, the project facilitatedlearning among participating supermarkets and civilsociety partners, both in terms of greater under-

standing of others’ positions and constraints, and of benchmarking methodologies. Data collection for thebenchmarking process included a questionnaire tosupermarkets; a supplier survey; a Fairtrade survey;and a local foods store survey. Although there weredifficult discussions among the partners andparticipating companies on how the results should bepublished, the scoring methodology demonstratedparticipating companies’ interest in comparing theirperformance with that of their competitors.

From the start, it was clear that the project’s successwould depend on the participation of a critical mass ofretailers, both in terms of market share and number ofparticipants. During the summer of 2003, a few monthsbefore the first public release of results was due, theproject partners were optimistically looking forward tobroad industry participation. But by the deadline fordata submissions, only three supermarkets were onboard – the Co-operative Group, Safeway and Somer-field. These companies are to be commended for theirhard work in collecting data and for demonstrating awillingness to open themselves up to scrutiny. Butwithout the market leaders, a sectoral benchmarkinginitiative is relatively meaningless.

What made a large proportion of the UK supermarketsector eventually turn its back on this constructive andmoderate approach to stakeholder accountability by civilsociety organisations, once it got close to presentinginformation in the public domain? Inevitably there isdisagreement on what went wrong; some civil societypartners said the approach of the project was tooconciliatory, whereas some retail partners thought therewas not enough consensus building. Each of the non-participating retailers had their own reasons for not takingpart. Certainly, a number of interrelated factors togethercreated a problematic environment for the project.

First, given government moves to develop key per-formance indicators on sustainability for the foodsector, some companies seemed to fear that govern-ment might pick up a successful RTTT and use it as thebasis for a new regulatory framework.

Second, civil society partners felt that the projectlacked leverage with the companies, particularly givenan over-reliance on company-provided data. Attemptswere made to complement the data from supermarketsthemselves with data from external surveys. The lattercan be powerful measures of supermarket performance,especially where they demonstrate observable changerather than aspiration or company policy. However,

external surveys, such as store surveys for local food,or surveys of suppliers, are expensive, highly labourintensive, and methodologically problematic. Whenevera negotiated solution was needed to keep the projecton track, the supermarkets’ ultimate sanction ofwithholding data weighed heavily.

Third, committing to a process such as RTTT requiresstaff time and technical resources. It is ironic that theincreasing pressure on supermarket companies toimprove the quality and transparency of data that theyrelease on environmental and social impacts comes at atime when companies have a declining ability to collectthat information, due to cost squeezes resulting from thedrive to stay competitive against the market leaders.But there is a risk of overstating the resource issue. Theproblem is not necessarily one of resources per se, butof priority setting under conditions of resource scarcity.

Fourth, the UK supermarket sector is heterogeneous interms of scale, ownership and customer base. All of thesefactors affect the ability of companies to be successful incertain aspects of ‘sustainable’ business, such as themarketing of organic or high animal-welfare produce.Businesses are understandably wary of initiatives that runthe risk of measuring customers rather than companies.

Fifth, the project took place at a time of upheaval withinthe market, which put unprecedented pressure onmany of the main players. This pressure is likely tocontinue – the entry of Wal-Mart into the UK was aturning point in the way the domestic food retail marketoperates. Price-based competition now dominates themajority of the sector, and the market is currentlyrewarding those companies that do this best. There isa real danger that comprehensive action on social andenvironmental issues will become increasingly asso-ciated with failing companies, reinforcing this trend.

As a case study, RTTT provides insights into:

> the modalities of civil society-led sectoralbenchmarking;

> the challenges of managing a multi-stakeholderengagement process involving large, high-profilecompanies and NGOs, particularly given alegacy of mistrust between some of them;

> research methodologies that attempt to measureand compare the social, environmental and ethicalpolicies and performance of companies; and

> mechanisms for creating incentives forcompanies to improve their social andenvironmental performance.

But the initiative also highlights a number of fundamentalissues that have deep implications for future sustainabilitybenchmarking initiatives and for policy makers, as follows.

The supermarket sector prides itself on being consumer-oriented in the extreme. But this has reached a point at

which it is in danger of crowding out the interests of someother stakeholder groups. RTTT explored whethersufficient incentives could be established, by creating aframework for greater accountability and transparency, toencourage supermarkets to tackle a range of social andenvironmental issues, not only those that are perceivedto add to consumer value. But some supermarketsappear unable or unwilling to engage with this broadernotion of stakeholder accountability, and are attempt-ing to change the parameters of debates about what itmeans to be a responsible retailer, by conflating thenotions of ‘customer’ and ‘citizen’. Influencing changeon those issues that are not automatically in line withsupermarkets’ perceptions of consumer desires thusbecomes increasingly challenging.

RTTT explored what it is reasonable to expect of super-market companies not only as actors in their own right,but also as gatekeepers of the entire food system. Thehypothesis was that influencing supermarkets would inturn influence the actions of many other actors. Manyof the RTTT indicators measured what retailers wereasking or demanding of others, e.g. their suppliers,rather than what they were doing themselves. However,the RTTT experience shows this gatekeeper role to bea double-edged sword. Not only does it offer potentialshortcuts and access to positive change, it creates amechanism for companies to pass responsibility on toother, often less powerful, actors. The allocation of re-sponsibility between retailers, suppliers and consumersis inherently problematic, but this must not be used asan excuse for inaction. The key challenge is to ensurethat the gatekeeper role that supermarkets play withinthe food system is used to drive positive change, ratherthan to pass the buck.

Ultimately, RTTT was about governance of the foodsystem. Given the lack of commitment of the largestsupermarkets, attitudes among some of the civil societypartners have now hardened. They have seen the demiseof RTTT as a signal that only command-and-controlregulation can tame the supermarket sector, markingan end to a period of openness to work through volun-tary, collaborative initiatives. But the drive to a morecompetitive regulatory environment in the UK, as inmany other countries, has handed regulatory respon-sibility for important areas of the food system tosupermarkets themselves. Having supermarkets in thedriving seat can only be successful for those areas thatcreate consumer value – and even then, only in certainsegments of the market. Those aspects of sustain-ability that do not resonate with most consumers fallinto a governance gap that is simply not addressed bythe current mode of self-regulation. The conclusion isclear: in such a relentlessly consumer-oriented industry,self-regulation and voluntary initiatives are only likely tobe appropriate for issues that are in line with the con-sumer interest. Creating incentives for supermarkets todrive positive change on other aspects of sustainabilityimplies a more robust role for the state.

Summary

vi RACE TO THE TOP: Stakeholder accountability in the UK supermarket sector

What Race to the Topset out to achieve1

1 This campaign eventually led to the establishment of the Ethical Trading Initiative (ETI).2 Considered by some participating companies as one of the most useful elements of the project, the RTTT case studies were

prepared by two journalists as pointers to good retailer practice within the thematic areas of Race to the Top. They remain availableat www.racetothetop.org/case/.

3 As envisaged in October 2002.

on an annual basis, thereby showing each company’sperformance and progress over time. The intention wasto publish annual results for the top ten UK multipleretailers over at least five years. The anticipated out-comes for supermarkets, civil society partners andgovernment respectively were as listed in Box 1.

BOX 1: Anticipated Project Benefits3

Benefits for supermarket companies

> Gives public recognition of good practice oncorporate social and environmentalresponsibility, informing the investmentcommunity, government, consumers and otherkey stakeholders;

> Provides guidance on which key social,environmental and ethical issues companiesmight be expected to address from theperspectives of a cross-section of civil societyorganisations;

> Gives insights into how these issues can beaddressed;

> Allows companies to demonstrate a willingnessto engage with civil society stakeholders;

> Creates space for constructive dialogue andmutual learning on contentious issues;

> Gives opportunities to inform and shape datacollection methodologies such as self-assessment questionnaires;

> Provides a mechanism for highlighting theboundaries of corporate social responsibility,and supportive actions required of other actorsincluding government and civil societyorganisations; and

> Has the potential to reduce the transactioncosts of engaging with a range of civil societyorganisations.

(continued)

Race to the Top (RTTT) was established in 2000 by analliance of non-governmental organisations (NGOs),who first met in July to discuss prospects for a projectthat would publicly compare the social and environ-mental performance of UK multiple retailers (super-markets). The aim was to build on the earlier ChristianAid supermarket campaign, which started in 1996, andused league tables of leading supermarkets’ policies todrive home its call on companies to adopt ethicalcodes of conduct in relation to labour standards withintheir supply chains.1 The intention of RTTT was to expandthe scope of civil society scrutiny of supermarketsbeyond labour standards to an integrated set ofsupermarkets’ social and environmental impacts. At anearly stage, the alliance members decided to inviteretailers to participate in the process, and the tenlargest supermarket companies (by market share) wereformally approached in November 2000.

The overall aim of the project was to promote account-ability and transparency within the UK supermarketsector, in doing so building incentives for the major UKsupermarket companies to improve and communicatetheir social, environmental and ethical policies andperformance over a five-year period. Of course, RTTTwas not the only mechanism that supermarkets coulduse to disclose their social and environmental policiesand impacts – some of the participating companiespublished their own CSR or sustainability reports, andtook part in other benchmarking processes. RTTTsought to fill the gaps that these other disclosuremechanisms left, and deal with the issues in an inte-grated way. The methodology centred on a process ofengagement between supermarkets and civil societyorganisations with interests in a variety of social,environmental and ethical issues. The centrepiece ofthe project was a collaborative benchmarking process,supplemented by additional research, good practicecase studies2 and ongoing dialogue.

The benchmarking process involved defining keysocial, environmental and ethical issues for supermarketaction; developing a framework of representative indi-cators that measured each company’s policies andperformance on these issues; collecting data fromeach company and from other sources in relation tothese indicators; and scoring and publishing the results

RACE TO THE TOP: Stakeholder accountability in the UK supermarket sector 1

(continued)

Benefits for civil society project partners

> Provides a mechanism for informingsupermarket companies about key issues;

> Enables learning about business models andpractical solutions, and the constraints facedby companies in relation to these issues;

> Provides credible data on corporateperformance which can inform strategicorganisational priorities;

> Reduces the transaction costs of engagingwith a number of companies; and

> Frames single issues within a broaderframework of ‘supermarkets andsustainability’.

Benefits for government

> Provides a mechanism for implementingstrategic objectives, including conservation ofnatural resources, inclusive rural development,achieving public health goals, and ensuring theintegrity and ethical standard of the foodsupply, at home and abroad;

> Provides a means to support policyinstruments such as the Department of Health‘Five-a-day’ fruit and vegetables consumptioncampaign;

> Tracks the implementation of policies such asthe DTI Code of Practice on relationshipsbetween supermarkets and suppliers throughindependent data collection; and

> Helps government to understand and definethe role of policy in supporting supermarketbest practices, particularly in the context of the UK Strategy for Sustainable Food and Farming.

1 ▲ What Race to the Top set out to achieve

2 RACE TO THE TOP: Stakeholder accountability in the UK supermarket sector


The UK supermarket sector2In order to understand the relationship betweensupermarkets and sustainable development it isimportant to first summarise the corporate strategiesand business environment of the major players. Overthe course of the 20th century, market dominance byfood distributors and wholesalers gave way todominance by manufacturers. This was in turnsucceeded by the rise of the integrated distributor-retailers – the supermarkets. In the UK, supermarketshave captured at least three-quarters of the bread,milk, fruit and meat markets. The food service sector,especially fast food, is also gaining in importance, andis expected to grow from its current share of 30% ofconsumer spending on food to 50% by 2020.

At its simplest, the supermarket model is characterisedby self-service shopping with separate departments forproduce, meat, bread and other grocery items underone roof, discount pricing, large-volume procurementand a centralised distribution system. But the sector isheterogeneous. Different supermarket companies inthe UK have targeted specific market segments andconcentrated on a preferred format, from the con-venience and ‘top-up’ segments dominated by small tomedium size stores such as Somerfield and the Co-ops, the ‘deep discounters’ such as Lidl and Aldi witha limited range of own-brand produce aimed atconsumers in the C2DE social classes, the full rangeone-stop formats of Sainsbury’s, Asda, Tesco andMorrisons often with large, edge of town stores, andthe up-market retailers such as Waitrose and Booths.

Some of these distinctions are eroding, as companiestrack the trend to convenience or pull out of saturatedor heavily regulated areas, such as Tesco’s 2002 pur-chase of T&S Stores bringing the company well withinreach of its target of 1,000 convenience stores. Someretailers are also broadening their demographic base,such as Tesco’s success in appealing to both ‘down-graders’ and ‘up-graders’. Furthermore, the distinctionsbetween grocery, other retailing and food service aregetting less marked as the large supermarkets moveaggressively into non-food sales such as electronicitems and clothing, and into home meal replacementsand so-called ‘meals on the go’. These trends, knownas ‘channel blurring’, have mixed implications for accessto food, for the survival of independent retailing, and forthe structure of the typical high street. Non-food highstreet retailers such as Boots and the Kingfisher groupare struggling against the rapid move by Tesco andAsda into core areas such as pharmacy, opticians,clothing, and financial services. This growth of non-food is redefining the word ‘supermarket’, and is the

other side of the same coin as Wal-Mart’s expansionfrom non-food into groceries.

Ownership is diverse, from publicly traded limitedcompanies (Tesco, Sainsbury’s, Morrisons, Wal-Mart,Somerfield, Marks and Spencer) to private family-ownedcompanies (e.g. Booths), consumer co-operatives (e.g.Co-operative Group) and employee-owned groups(e.g. John Lewis Partnership, owner of Waitrose). Thisdetermines the degree of leverage available to theinvestment community over retailer strategy, andarguably, the degree of freedom of retailers to promotesustainability even where this acts against short-termfinancial interests.

Geographic concentration is also uneven, with Waitroseand Sainsbury’s having a strong presence in the southof England, for example, and Asda and Morrisons (pre-Safeway merger) having strongholds in the north. Theexistence of national retail chains is a relatively newphenomenon. Tesco is the only real international player,with 20% of its turnover from overseas.

Market share is the traditional measure of success inthe marketplace. Larger market share allows economiesof scale. Savings are achieved by extracting morefavourable terms from suppliers, either through demand-ing lower merchandise prices, or demanding greaterprovision of services such as special packaging orthird-party food safety certification, or demanding pay-ment of fees. Another measure of success is salesintensity per square metre. Economies of scale andhigher sales density deliver lower unit costs and highernet margins potentially leading to a ‘spiral of super-market growth’ (Figure 1; Burt and Sparks, 2003).Features of this spiral are (a) that absolute costs andbarriers to entry for competitors are raised, and (b)growth becomes dominated by 1–2 organisations. TheUK market is indeed showing signs of a developingduopoly – Tesco and Asda-WalMart now have acombined market share of over 44% and healthygrowth rates. The success of Asda-WalMart’s EveryDay Low Pricing model shows that investing therevenues of the ‘growth spiral’ in lower consumerprices has been a successful strategy.

Savings are also achieved through attention to shelfmanagement and evaluation, and to distributionlogistics. Distribution is perceived to be as important asretailing in driving costs out of the system, firstly byeliminating the role of the traditional wholesaler throughdirect supply from primary producers and manufacturersto regional distribution centres, and then to super-stores, and latterly taking over parts of the upstream

distribution network from suppliers where savings areperceived. This is described in some quarters as acreeping monopoly of food supply logistics by super-markets.

As food retailing has very high labour costs relative toprofits, retailers have paid much attention to managinglabour costs and increasing labour productivity – this isseen to be key to Wal-Mart’s cost advantage in the US.Corporate overheads are also closely watched; Tescoand Morrisons seem to take particular pride in their no-frills and leanly staffed headquarters.

Another feature of the modern supermarket model isvertical coordination of agrifood chains, with asso-ciative rather than arms-length supply relationships.This means that supermarkets are actively seeking toreduce the number of suppliers from whom theysource, in part to achieve their quality assurance andtraceability objectives, and this constriction in thesupply base is expected to continue. Supermarket gover-nance is changing the nature of the large-scale end ofcommercial farming, from a group that has supportedand benefited from state protection and/or subsidy ofagriculture to more free market-oriented agribusinesseswith high levels of collaboration with downstreamprocessors and retailers. Supply Chain Management(i.e. achieving the right mix of products for maximumprofit and minimum wastage) is being outsourced toproduce suppliers. While the retailer typically sets the‘rules of the game’ for participating in the chains, a keysupplier may take responsibility for developing aproduct category's profile to give maximum returns,such as by devising new packaging strategies, ortaking more responsibility for unsold produce. Withinthis concentrated chain structure, in which most powerand leverage resides at the retail end of supply chains,benefits are passed to customers and shareholders.‘Insiders’ in these chains may be able to prosper

through investing in relationship marketing, productquality, and brand reputation. But in many cases thereis declining overall residual value to be shared betweensupermarkets and upstream actors in the chain.

The phenomenon of own-label branding has been “oneof the competitive forces which shifted strongly infavour of retailers during Britain’s ‘retail revolution’ inthe 1980s” (Wrigley and Lowe, 2002). Own brandsreturn the highest contribution to margin or gross profit.The market share of own-brand in the UK, at around40%, is the highest in Europe. Retailers' brands nowcompete head on with manufacturers' brands throughshelf placement and packaging. Own label is not only ahuge revenue generator, but also key in enhancingcorporate image and customer loyalty.

Lastly, retailers are closer to end consumers and manyhave developed sophisticated information systemswhich can facilitate supply chain management. Infor-mation on consumers from point-of-sale scanners(EPOS data) is a source of competitive advantage toretailers and the chain ‘insiders’ – the categorymanagers – with whom it is shared.

Supermarkets benefit from a high level of publicacceptance in comparison with most public insti-tutions, for the very reason that supermarkets are suchcustomer-driven institutions. By global or even Euro-pean standards, UK consumers have been particularlywilling players in the relocation of retail from high streetspecialist shops such as bakers, butchers andgreengrocers or doorstep deliveries, to one-stopshopping in supermarkets, especially since the ‘retailrevolution’ of the 1980s.4 The same trend, at evengreater speed, is noticeable in Central and EasternEurope and China, where the massive changes in thestructure and governance of the food system whichsupermarkets have ushered in are compared extremely

2 ▲ The UK supermarket sector


4 For more in-depth analysis, readers are referred to Wrigley and Lowe (2002), and Burt and Sparks (2003).

Increased sales

Increased sales

density

Lower unit costs

Higher net margins

Increased investment in (1) facilities

or (2) price reductions

Increased sales and relative scale

Increased sales density relative to

competition

(Relatively) lower unit costs

Figure 1: The Spiral of supermarket growth(Adapted from Burt and Sparks, 2003.)

favourably with the quality and choice associated withearlier regimes. Broad public acceptance is part of theexplanation why political scrutiny of the sector isrelatively light. Another explanation is that super-markets deliver on the economic ambitions of govern-ments – low inflation and high employment – givingthem significant political clout. The one place wheregovernment scrutiny has been intense has been incompetition policy; the recent buy-out of Safewayprompted a tough Competition Commission inquiry hoton the heels of another Commission investigation intothe sector in 2000. As a result of the Safeway inquiry,Asda was prohibited from bidding for Safeway in orderto protect market competitiveness.

The process of consolidation in retail is well advanced.The loss of Safeway from the UK retail scenery hasincreased the 4-firm concentration ratio (CR4) toaround 75%; in other words, three-quarters of the

country’s supermarket food shopping is done in justfour firms – Tesco, Asda, Sainsbury’s and Morrisons(Table 1). A strong oligopsony (i.e. a market dominatedby a few buyers) is considered to occur when the CR4rises above 50%.

Wal-Mart (the owner of Asda) has grown to become notonly the world’s biggest retailer, but also the biggestgrocer, with US grocery sales estimated at $57 billion.Carrefour, Ahold, Wal-Mart and Tesco have becometruly global in their reach. In 2003, these four com-panies alone had sales (food and non-food) of $520billion, and employed 2.5 million people. It is predictedthat there will be only 10 major global food retailers by2010. A similar trend of concentration is taking place in food processing and distribution, matching the scaleof downstream players in order to exert countervailingpower and prevent their profits slipping down the food chain.

2 ▲ The UK supermarket sector


Table 1: Market shares of UK supermarkets

VALUE MARKET SHARE

Retailer 4 wks ending July 2003 4 wks ending July 2004 Implied value growth, YOY

Tesco 26.8% 28.1% + 9.7%

Asda 16.8% 16.7% + 4.4%

Sainsbury's 16.0% 15.3% + 0.5%

Morrisons / Safeway 14.4% 13.8% + 0.5%

• Morrisons 5.6% 6.3% + 17.5%

• Safeway 8.8% 7.5% – 10.3%

Somerfield Group 6.2% 5.7% – 3.0%

• Somerfield 3.6% 3.5% + 3.1%

• Kwik Save 2.6% 2.2% – 11.3%

Co-ops 5.1% 5.2% + 5.5%

Iceland 2.2% 2.0% – 5.6%

Waitrose 3.1% 3.3% + 9.8%

Discounters 4.5% 4.9% n/a

Others 4.9% 5.0% n/a

Total market 100.0% 100.0% + 4.9%

Total market exc Tesco 73.2% 71.9% + 3.2%

Source: TNS Superpanel, July 2004

5 See also the New Economics Foundation’s Ghost Town Britain report (2003).6 Joanna Blythman. Shopped: The Shocking Power of British Supermarkets. Fourth Estate.

William Young. Sold Out: The True Cost of Supermarket Shopping. Vision Paperbacks.Felicity Lawrence. Not on the Label: What Really Goes into the Food on Your Plate. Penguin.

7 See FoE Real Food Campaign at www.foe.co.uk/campaigns/real_food/resource/retailers.html8 A similar remark has been made by WWF-US in dealing with commodity markets.9 ‘We’re being fleeced’. The Grocer, 25 January 2003. 10 ‘Farmers target supermarkets’. The Guardian 22 November 2002.11 ‘Spanish farmers and food producers outraged over huge retail mark up disparity as fruits and vegetables average 227% while meat

products average 154%.’ Food Production Daily.12 ‘Milch nicht als Ramschware verschleudern: Bauern demonstrieren vor Tengelmann-Zentrale („Plus“) für faire Preise.’ Rheinischer

Landwirtschafts-Verband E.V.


Supermarkets & sustainabledevelopment: the critique3

In comparison with consumers, civil society organi-sations have been deeply critical of the perceivedhegemony of supermarkets over the agricultural andfood system. Supermarkets are accused of driving a‘race to the bottom’ by procuring food ‘grown any-where, anyhow’ without care for standards of labour,the conservation of wildlife and landscapes, the liveli-hoods (or even survival) of family farms, the congestionof roads, the demise of the high street,5 the manage-ment of waste, the welfare of farm animals, or the healthand food security of neighbourhoods. They are accusedof running huge, centralised distribution systems alongextractive ‘food-in, profits-out’ lines. Critical concern ismounting. One month alone (May 2004) saw the publi-cation in the UK of three books critical of supermarketsand the associated politics of food.6

With sales of the world’s largest retailer and largestgrocer – Wal-Mart – of over US$ 280 billion, 43% ofwhich is food, and the UK grocery market heading intomonopsony territory, it is clear that supermarkets aredrawing increasingly intense attention and concernfrom a wide range of civil society interests about theirgrowing dominance of the food system. Friends of theEarth and some farming groups have been particularlycritical of supermarkets’ commitment to fair tradingand UK produce.7

Most of these groups associated with farming, publichealth, animal welfare, conservation, and labour rights,have little interest in (or regard for) the industry bench-marks to which some of the supermarkets subjectthemselves, such as FTSE4Good or Business in theCommunity’s Corporate Responsibility Index. Someapproach supermarkets as myriad special interests,each with a questionnaire in hand, hoping to driveimprovements in how supermarkets address their areaof interest, often either through promoting ‘bestpractice’ or through ‘naming and shaming’. Some ofthese groups clearly see supermarket market power as

an advantage for achieving their goals of improvingsocial and environmental conditions – such as wildlife-friendly farming techniques – because they only haveto deal with a very limited number of ‘gatekeepers’ tothe agrifood system with capacity to dictate conditionsof market entry.8 Some supermarkets have generallycomplied with the self-reporting demands of eachgroup, although there is a growing number of complaintsof ‘questionnaire fatigue’ in an era of cost-cutting andbusiness re-focusing. NGOs have also complainedabout being ‘stakeholdered’ by supermarkets to thepoint of ‘stakeholder fatigue’ and have complained thatthese are mainly consultation exercises and sometimestokenistic, rather than genuine partnerships.

3.1 Examining the critique: buyer power and self-regulation

To understand the contradictions between supermarketaccountability to stakeholders and accountability toconsumers, we now focus briefly on the critique ofsupermarkets’ relationships with agricultural producersand rural economies, the subject of one of the sevenRTTT ‘modules’. This issue offers a particularly per-tinent example of what happens when the ‘consumerinterest’ broadly defined (and hence supermarketstrategy) is not in line with the interests of another setof stakeholders. A similar examination of the civil societycritique has been developed for each of the sevenissues covered by RTTT – from impacts on publichealth to the welfare of farm animals – and readers arereferred to briefing papers at www.racetothetop.org fora more complete account in these other areas.

In the late 1990s, the finger of blame for the crisis in UKfarming partly shifted from government to the bigsupermarkets. Similar trends have been noticeable inIreland,9 France,10 Spain11 and Germany.12 Although asubset of farming is profiting from trading preferences

13 A discount based on the amount ordered or on the time it takes to sell an amount of product.14 Where the supplier gives back a percentage of sales if a certain annual level of business is achieved.15 Lord Haskins writing in The Grocer, 12 October 2002.16 “Working Together – Code of Best Practice” presented to Nick Brown on 28 July 2000. IGD Press Release.17 Supermarkets: A report on the supply of groceries from multiple stores in the UK. Available at www.competition-commission.org.uk/

reports/446super.htm. See Chapter 11 and Appendix 11.3.18 In 1999 the NFU strongly criticised Safeway for ‘requesting’ £20,000 donations per product line towards in-store promotion, in order

to guarantee the availability of key products – NFU press release 17 November 1999.

within dedicated supermarket supply chains, manyfarmers – especially mid-sized family units – feel mar-ginalised by the collapse in the wholesale market, alack of alternative markets, the sale of goods below thecost of production, and a perceived disconnectionbetween farmgate prices and retail prices. There is asuspicion that supermarkets are earning too much oftheir money on the buy, not the sell, that is fromcharging suppliers (through 'listing fees' i.e. chargingfor shelf space for new products, for 'supplier rebates'13,for 'overriders'14, or even unilateral deductions frommoney due or ad hoc demands for cash payments)rather than from consumers. It seems to be well knownthat Safeway's reliance on rebates was about threetimes the industry average, a level seen as unsustainable.

This came to a head in the UK in 1998 when a slump infinished lamb prices at livestock markets was not trans-lated into supermarket prices, and again in 2001 with aslump in milk prices. The cost structures of these chains– especially the need for processors to cover their fixedcosts (which have increased due to health and safetyregulations) – have a considerable bearing on farm-retailspread. But the perception remains that supermarketsenjoy a gatekeeper role, which has been variously des-cribed as a ‘stranglehold’ (New Scientist, 19 Dec 99),an ‘armlock’ (Prime Minister Blair, 30 April 2001), and a‘whip hand’ (Dobson, 2002). Farmers say that they areleft with ‘take it or leave it’ deals with a few integrators.Associative relationships involving a high level ofcollaboration between retailers and their supply chains,whether food manufacturers or fresh produce suppliers(Wrigley and Lowe, 2002), are the reality of the post-BSE era, in which dedicated supply chains allow trace-ability to ensure safety, quality, brand differentiation,risk management, and demonstration of ‘due diligence’.

But the closed contract production systems preferredby supermarkets and their first tier suppliers for sourcingown-label produce are now such a large part of thelivestock and produce industries that there is no com-petitive market (e.g. live auctions) where real marketprices can be ‘discovered.’ The wholesale market nowrepresents the price of residual production (and lowerquality production) surplus to supermarket requirements.Farmers who supply wholesale markets, especially inremote or economically marginal areas, are the mosteconomically endangered sector of UK agriculture. Thesystematic coordination of the supply chain using directcontracting, rather than competitive pricing structures,and the use of (or threat to use) imports, allows retailersto regularise (cap) farmgate prices against their precisetargets of gross margins.

Farmers point out that supermarkets have been quickto react to technologies that alienate consumers (suchas genetic modification), but not to marketing practicesthat alienate suppliers. The supermarkets argue thatexcept for some very short supply chains such aspoultry, farmers are often two to four steps away fromthe supermarket shelves. They also point to high levelsof concentration among packer-integrators and pro-cessors, and state that retailers have little control overthe trading relationship between farmers and the chainintermediaries. Unscrupulous behaviour by supermarketbuyers arises because they can exploit offers fromcompeting suppliers.15

A round of inquiries into supermarkets by the UKCompetition Commission was initiated by the Office ofFair Trading (OFT) in July 1998. The Director General ofFair Trading referred the investigation to the Com-petition Commission in April 1999, primarily from a con-sumerist approach, on complaints that profits and foodprices were unreasonably high in the UK (‘rip-off Britain’)compared to continental Europe and the US. But theinvestigation included the relationship between super-market operators and suppliers following the initialinvestigations by the OFT which heard complaints fromfarmers and growers that they were being threatenedby excessive or unreasonable demands of supermarketcontracts. The big six chains developed their own codeof conduct to pre-empt the findings of the Report.16

The Commission’s report17, published in October 2000,dismissed claims of overcharging customers and makingexcessive profits, and concluded that the industry isbroadly competitive. But as a ‘secondary concern’ theCommission unearthed 52 ways in which supermarketsare said to have misused market power. This included‘requests’ for ‘over-riders’ and retrospective discounts,‘requests’ for promotion expenses,18 making changesto contractual arrangements without adequate notice,and unreasonably transferring risks from the main partyto the supplier. They also found a “climate of appre-hension” among many suppliers in their relationshipwith the main supermarkets. “In a competitive environ-ment,” said the report, “we would expect most or all ofthe impact of various shocks to the farming industry tohave fallen mainly on farmers rather than on retailers;but the existence of buyer power among some of themain parties has meant that the burden of cost in-creases in the supply chain has fallen disproportion-ately heavily on small suppliers such as farmers.” Theannexes of the report showed a remarkable correlation

3 ▲ Supermarkets and sustainable development: the critique


between retailer market share and their ability to extractbetter terms from their main suppliers (Figure 2).

The Commission did not impose any sanctions, butrecommended that supermarkets be made to abide bya legally binding Code of Practice on their dealings withsuppliers. A draft code was proposed in the Commissionreport, which was welcomed by many farm groups.Details of the Code were then negotiated between themajor supermarkets and the OFT, in order to find some-thing workable given the diversity of the sector. Thefinal Code19 from the Department of Trade and Industry,which came into effect in March 2002, and which is (onthe insistence of the Commission) applicable only tothe top four supermarkets,20 was roundly criticised forthe inclusion of ‘weasel words’ that allow wide interpre-tation by retailers. By late 2002 it had become clear toall parties that the Code as it stood was fatally flawed.In February 2003, the OFT launched a review of thecode – the report of that review was published in February2004, and “found a widespread belief among suppliersthat the Code is not working effectively” with the vastmajority of respondents claiming that “the Code hasfailed to bring about any change in the supermarkets’behaviour”. The saga now continues, with the OFT in-tending to “obtain information from the supermarketsby conducting a focused compliance audit of each ofthe four supermarkets’ dealings with suppliers”.

The main lesson of this experience is the failure of anattempt at self-regulation in the UK food retail sector, inresponse to concerns by a subset of farming supportedby recommendations from a government authority. The

industry ensured that even the most measured andreasonable request for third party regulation – a Codeof Practice on dealings with suppliers – was diluted tothe point of ineffectiveness. This experience is veryimportant in analysing what happens when supermarketsrespond to the challenge of stakeholder accountabilityand corporate social responsibility (CSR).

There is certainly evidence that when supermarkets doadopt instruments of self-regulation and CSR, such ascodes of conduct on labour standards or environmentalissues, the associated costs and risks can be passedup the chain as an ‘unfunded mandate’, resulting in adisproportional allocation of costs and benefits be-tween standards ‘makers’ and standards ‘takers’. Thechairman of Homegrown Kenya Ltd., which exportshigh value horticulture products to European super-markets, was recently quoted as saying:

Each of the markets to which Kenyanproduce is shipped sends both commercialand technical representatives to observe andaudit what we do here. Some of them makeat least three visits in a year. In addition wehave the British Retail Consortium thatchecks our pack stations to ensure that theymeet European standards. There is also theEthical Trading Initiative that looks into theissue of the awareness of horticulturefarmers of the social impact of their activities.I would say that Homegrown spends aboutKsh2–3 million [EUR 20–30,000] per month [to meet these market standards].21



95

96

97

98

99

100

101

102

103

104

105

106

0 5 10 15 20 25 30

Retailer market share (%)

Price paid to

suppliers

relative to

average (%)

Figure 2: Ability of large supermarkets to extract better terms from their suppliers(From data in UK Competition Commission 2000 Appendix 7.2. Applies to suppliers’ top 5 lines. Thanks to Michael Hutchings.)

19 Available www.dti.gov.uk/cp/pdfs/codeofpractice.pdf including supermarket undertakings.20 The Competition Commission’s findings and recommendations relate to those supermarkets with ‘buyer power’, which they defined

as 8% or more of the groceries market. Only Asda, Morrisons, Sainsbury and Tesco now fall into this category.21 Horticulture Faces Serious Threats. Interview with Rod Evans, the Chairman of Kenya Flower Council, and the Chairman of

Homegrown Kenya Limited by Market Intelligence journal.

An interesting example of the interplay between ethicaltrade and retailer power over suppliers occurred recently(May 2003), when in a letter to The Grocer, Tesco wasanonymously accused of demanding a payment of£278 per year per site from all primary suppliers tocover the costs of its compliance with the EthicalTrading Initiative code. The letter said that supplierswould be wary of approaching the Office of Fair Tradingwith complaints because of the risk to their business.

3.2 Beyond the critique: Transparency and Accountability

The issue of abuse of market power and its impacts onproducers and labour in supply chains, as well as theother issues listed in the supermarket critique, is con-tested. For every horror story there is a case study ofhow supermarkets have applied ethical and en-vironmental considerations to their operations; forinstance, in driving the use of ‘greener’ farming systemsby their producer suppliers. Also, the boundaries ofcorporate responsibility in the supermarket sector(Figure 3) are contested. Not all problems of unsustain-ability in the food system can be attributed to super-markets. For example, supermarkets can only go so farin pushing their customers towards healthy or ‘ethical’foods, and away from unhealthy or ‘unethical’ options.

Stereotypes of mainstream supermarkets as “normal-ised, concentrated and conventional“ are somewhatoutdated, in terms of how much supermarkets havelearned from and incorporated features of the‘alternative’ sectors, as demonstrated by large marketshares of organic, fairtrade and regional foods. In fact,there are examples of quite tough competition betweensupermarkets for the moral high ground; such a ‘raceto the top’ has been a feature of the Swiss market,where the Co-op and Migros have a virtual duopoly buthave both sought to convert whole parts of theirproduct range – such as bananas – to ethically sourcedmaterial.

What often gets overlooked in the war of words betweensupermarkets and their detractors is the lack of com-parable and credible benchmarks for measuringprogress towards greater sustainability across thesector. The objective of the ‘Race to the Top’ projectwas to develop those benchmarks in partnership witha broad coalition of civil society organisations, and towork with leading supermarkets to apply them, therebymeeting many of the civil society organisations’ ex-pectations for greater transparency and accountability.In the next section, we describe how the project partnerssought to achieve this objective, and discuss some ofthe methodological challenges they faced.



Management, Board

CustomersAccess

Supermarket

Health, nutrition

BuyersWages,

conditions

Suppliers

Biodiversity, landscapes

Transport

Energy

Waste

Staff

Communities, Regions

Climate

Primary producers Farm labour

Exploring the boundaries of corporate responsibility

Figure 3: Exploring the boundaries of corporate responsibility

The RTTT experience highlights a number of method-ological challenges for projects that attempt to do oneor more of the following:

> Manage a multi-stakeholder engagementprocess, involving large, high-profile companiesand non-governmental organisations (NGOs),particularly given a legacy of mistrust betweensome of them;

> Develop research methodologies that attempt tomeasure and compare the social, environmentaland ethical policies and performance ofcompanies; and

> Create incentives for companies to improve theirsocial and environmental performance.

This section explores these challenges, and describeshow the RTTT model sought to overcome them.

4.1 Project governance and institutional arrangements

Although the project was instigated by NGOs, one ofthe earliest decisions was that it should be based onthe principle of constructive engagement and dialoguebetween supermarket companies and civil societyorganisations. The process remained civil society-led,in that the key issues to be included in the bench-marking framework were suggested by the civil societypartners, before possible indicators and measurementmethods were discussed with retailers and refined inan iterative process. However, the project dynamic waspredominantly one of negotiation and mutual learning.

The bulk of the project’s funding was provided by acharitable foundation (the Esmée Fairbairn Foundation)and the UK Department for Environment, Food andRural Affairs (Defra). These two funders played a rolebeyond financial support – Tim Keenan of the EsméeFairbairn Foundation took part in some projectworkshops, and Defra provided a representative for theAdvisory Group (see below). Defra is the governmentbody in charge of both sustainable development issuesand relations with the food industry. Defra’s initialfinancial support came through the Environment,Business and Consumer Division, following a recom-mendation from the multi-stakeholder Advisory Com-mittee on Consumer Products and the Environment.But for the bulk of the project, Defra’s engagement washandled from within the Food and Drink IndustryDivision and was inevitably affected by that Division’srelationships with supermarkets. From the perspective

of some of the project partners, Defra was not able toplay as full a role as had been hoped in terms ofsecuring the involvement of retailers.

At no point were the supermarkets themselves ap-proached for funding, both in order to avoid any possibleconflicts of interest, and in recognition of the significantin-kind contributions that each of the participatingsupermarkets would make in terms of data collectionand participation in the process.

From the start, it was clear that a project that wouldpotentially involve ten major national companies andover twenty civil society organisations, and seek toaddress numerous thematic issues across the sus-tainable development spectrum, would need a cleargovernance and management structure, if it was to beefficient, legitimate and credible. The model developedwas a combination of centralised project managementand brokering, devolved responsibility for input into thebenchmarking development process, and strategicguidance by an independent advisory group (Figure 4).The institutional arrangements were divided along boththematic and functional lines, as follows.

4.2 Thematic modules

The thematic areas emerged from an alliance-widediscussion before the retailers were approached. It wasagreed that retailers would only be approached once afirst draft of key issues, indicators and measurementmethods had been developed. This decision was takenfor two inter-related reasons – firstly, to allow a con-crete, constructive dialogue around the draft indicatorframework rather than starting with a blank sheet ofpaper; and secondly, to give a clear message that thetopics to be covered by the benchmarking process werethose considered a priority to the civil society alliancepartners, rather than those with which the retailers wouldbe most comfortable.

One organisation or individual was identified to lead oneach of the seven themes (or modules) that emerged.Obvious institutional gaps (e.g. animal welfare organis-ations) were filled subsequently, after discussions withlikely additional partners. The modules thus covered abroad swathe of the social and environmental issuesrelated to UK food retail (Table 2).

Initial funding from the Countryside Agency allowed theproject partners to hold a series of thematic workshops,for which the partners split into module working groupsaccording to their interest and expertise. The NewEconomics Foundation advised each of the module


The Race to the TopMethodology4

Table 2: Evolution of module themes

November 2000 April 2002 November 2003

Environmental Management & Reporting Environment Environment

Terms of Trade with Primary Producers Producers Producers

Labour Standards Workers Workers

Regional Sourcing and Rural Regeneration Communities Local Economies

Biodiversity and Landscapes Nature Nature

Animal Welfare Animals Animals

Environmental and Public Health Health Health

working groups on theoretical and practical approachesto developing indicators. A short list of up to five issueswas developed for each thematic module, with initialsuggestions for indicators and measurement methodsfor each issue. The prioritisation process was challeng-ing, particularly given the tendency for campaigninggroups to focus solely on their single issue, and theresulting shortlist was inevitably an incomplete com-promise rather than a full wish-list. But partners recog-nised the need to keep the list of indicators, and hencethe data collection burden, as streamlined as possible.The main themes and subthemes that had beendefined by 2003 are listed in Table 3; an explanation ofwhy these themes were deemed significant and thebackground to each issue can be found in each of themodule briefing papers at www.racetothetop.org/issues/.

The selection of topics raises two important method-ological and philosophical issues. Firstly, by seeking tobe wide-ranging yet manageable, the alliance chose

not to include some apparently obvious topics – e.g.GMOs, an issue which was not included because itwas felt that it was already being tackled by super-markets, as well as covered by other NGO initiatives(particularly Friends of the Earth’s Real Food cam-paign). At the same time, some observers argued thatrelatively inconsequential topics (at least in terms ofretailer action, if not also sustainability impacts) wereincluded. To some extent this reflected an attempt toraise the profile of some issues that had not previouslybeen prominent among debates on supermarkets’ethical policies. But some observers continue to arguethat to be credible, a broad-based project such as RTTTneeds to cover all high profile issues, whether or notthey are already being tackled with some effort, even ifthis simply provides ‘easy wins’ for all retailers.

Secondly, the selection of themes was clearly depen-dent on which organisations had already been broughtinto the discussions at the time the modules were formed.

4 ▲ The Race to the Top Methodology


Coordination Group

Advisory Group

Project

Coordinator

Health Animals Nature Local

Economies Workers Producers Environment

UK R E T A I L E R S

Scientific Review Panel

A L L I A C N E P A R T N E R S

Module Coordinator

Module Coordinator

Module Coordinator

Module Coordinator

Module Coordinator

Module Coordinator

Module Coordinator

Figure 4: Project Institutional Structure



Table 3: Consolidated list of indicators, 2003

Module Issue Indicator(s)

Environment Corporate commitment to environmental Board-level responsibility, training andresponsibility & performance reporting for environmental issues.

Climate change Energy use and emissions of CO2

Waste Waste management and minimisation

Producers Corporate commitment to trading integrity Board-level responsibility for trading integrity

Trading integrity with the supply chain Standards and codes of practice– policies

Fair trading relationships Integrity of the trading relationship with UKfarmers and suppliers

Support for smallholder producers Availability of and promotion of Fairtradein developing countries Marked products

Workers Corporate commitment to labour Board-level responsibilitystandards within the company and in the supply chain

Labour standards within the company Remuneration of supermarket employees and conditions of employment

Core labour rights and employee UK company employee representationrepresentation

Labour standards in the supply chain Existence and application of labour standards code of conduct

Local Economies Support for the local economy – policy Company policy on sourcing food ‘locally’ and ‘locality’ foods, and on promotion

Support for the local economy – practice Extent of local and regional sourcing and promotion

Nature Environmental issues within the Corporate commitment to addressing naturesupply chain conservation issues within the supply chain

Environmental issues within the food chain Producer suppliers with retailer-supported farm environment audits and/or plans

Sustainable fisheries Wild and farmed fish from sustainable sources

Animals Corporate commitment to farm animal Board-level responsibility for and policy on welfare standards farm animal welfare standards, and promotion

The welfare of breeding pigs – Sales of pigmeat from progeny of breeding pregnant sows sows kept in stall or tether systems

The welfare of laying hens Sales of shell eggs by production system

The welfare of broiler (meat) chickens Sales of fresh and frozen chicken by production system

Transport of farm animals Policy on transport of farm animals

Health Corporate commitment to public health Responsibility for and action on food and public health

Action on food poverty and health Store location and pricing policyinequalities

Access to and within stores Commitment to widening access

Nutrition and healthy eating Extent to which sales support dietary guidelines

The alliance was built essentially through personal con-tacts at first, and grew somewhat ‘organically’ as exist-ing partners suggested other potential members. Thisnot only implies that such an alliance cannot claim tobe comprehensive, but also raises questions about thelegitimacy of civil society organisations to definesocietal priorities, particularly where these organisationsare not themselves ‘democratic’ or membership-based.In an era in which civil society organisations are in-creasingly expected to represent the interests ofstakeholders – of corporations or of other entities – thischallenge is far from uncommon.

The modular thematic structure had benefits anddrawbacks. It gave a focus to the otherwise unwieldyarray of issues, and enabled project coordination throughthe module coordinators. By scoring and reporting oneach module separately, companies could be givencredit for their efforts and progress in what they (andarguably, their customers) deemed priority areas,without these efforts being hidden by a lower averagescore across all modules. But it militated against anexploration of the links and trade-offs between differentissues – for example, by introducing higher environ-mental standards with the supply chain, producers mayincur increased costs and obligations withoutcompensatory higher returns, thus reducing producerwelfare. The modular structure also had implicationsfor the eventual scoring and benchmarking systems – itwas convenient to give equal weight to each module,which implied that each module was of equal signifi-cance in terms of sustainability impacts, a problematicassumption that some participants understandablychallenged. Furthermore, establishing the modulesreduced future flexibility to introduce other emergingissues. Although the titles and emphasis of somemodules changed during the life of the project (seeTable 2), their overall focus remained relatively stable.

4.3 Project Coordination and Groups

As noted above, the number of actors and complexityof the issues meant that the project required a cleargovernance and management structure if it was to beefficient, legitimate and credible. The project was co-ordinated by IIED, an independent research institute.This role included general project management taskssuch as coordination of research and benchmarking,compilation of the retailer questionnaire, fundraising,financial management and reporting to funders, web-site development and maintenance, documentationand information sharing, etc. In addition, the roleincluded a strong convening, facilitating and brokeringelement, which included developing and maintainingrelationships with supermarket companies and with thealliance’s civil society partner organisations, managingthe process of ongoing dialogue, and seeking nego-tiated solutions where necessary. When the project wasestablished, IIED had worked on sustainable businessinitiatives in other sectors, but was seen as a relative

newcomer to the UK supermarket scene. IIED’s per-ceived impartiality and capacity for rigorous researchwere seen as advantages in performing these conveningand brokering functions.

IIED worked closely with the seven module coordinatorsin what was termed the Coordination Group (Table 4),an executive body which met approximately everythree months. Each of the module coordinators wasformally tasked with leading all matters related to theirrespective modules, including liaising with other alliancemember organisations with an interest in the moduleand convening meetings with alliance partners, retailersand other experts as necessary; developing all datacollection tools including the respective section of theretailer questionnaire and other survey tools; scoringthe results; and writing a module briefing paper, whichdescribed the rationale, issues, indicators and method-ologies for the module.

Other alliance partner organisations were not generallyinvolved in the day-to-day running of the project,although inevitably some were more active than others.They were able to provide input into the developmentof the benchmarking framework and the data collectiontools for those modules in which they had an interest.Some organisations were involved in more than onemodule working group. Once the benchmarking method-ologies were relatively well established, the role of mostof the other alliance partner organisations was re-stricted to information sharing and occasional alliance-wide meetings, called by IIED whenever importantdecisions needed to be made or explained. Seven suchalliance-wide meetings were held in total between July2000 and December 2003. In many cases these weresupplemented by direct contact at regular intervalsthrough the respective module coordinators.

The Advisory Group was established in 2001 to seek toensure the highest quality, balance and integrity of theproject’s work. It acted as an invaluable sounding boardand provided strategic and technical advice to IIED andthe rest of the Coordination Group. It met quarterly for3-hour meetings. There were eleven members of theGroup in all (Table 4). Although all members of theGroup acted in their personal capacity, they wereselected on the basis of their expertise and back-ground. The regular meetings of the Advisory Groupwere an invaluable source of advice and encourage-ment to the Coordination Group, and were where manyof the most interesting discussions about the challenges,dilemmas and trade-offs inherent to the project tookplace. The broad range of members helped to ensurethat the project remained balanced and realistic overall,and added a level of integrity that otherwise wouldhave been difficult to achieve.

Other than through direct engagement with the bench-marking process as individual companies, the AdvisoryGroup was the only formally recognised point of contactor influence that any representative of a supermarket





Table 4: Members of the RTTT Groups

Coordination Group

Chloe Alexander and Rupert Howes, Coordinators, Environment moduleForum for the Future

Bill Vorley, IIED Joint Project Coordinator and Coordinator, Producers module

Julie Smith22 Coordinator, Workers module

Vicki Hird and Merav Shub, Coordinators, Local Economies moduleSustain: the alliance for better food and farming

Hannah Bartram, Coordinator, Nature moduleRoyal Society for the Protection of Birds (RSPB)

Philip Lymbery, Coordinator, Animals moduleWorld Society for the Protection of Animals (WSPA)

Tim Lang and Lindy Sharpe, Department of Health Coordinators, Health moduleManagement and Food Policy, City University

Tom Fox, IIED Joint Project Coordinator

Other Civil Society Partner Organisations

British Independent Fruit Growers’ Association National Federation of Women’s InstitutesCompassion in World Farming New Economics FoundationCouncil for the Protection of Rural England Small and Family Farms AllianceCountryside Agency Soil AssociationEnglish Nature Traidcraft ExchangeFairtrade Foundation Transport2000Farm Animal Welfare Network Transport and General Workers’ Farmers’ Link (Rural, Agricultural and Allied Workers) UnionMarine Conservation Society USDAW (Shop, Distributive and Allied Workers) UnionMarine Stewardship Council WWF-UK

Advisory Group23

Richard Baines Royal Agricultural CollegeChizom Ekeh National Consumer CouncilNicola Ellen Strategy Manager – CSR, Safeway Stores Ltd.Tony Gould T&GWU Food and Agriculture SectorJim Howell 24 Defra Food and Drink Industry DivisionDavid Hughes Imperial CollegeRob Lake Henderson Global InvestorsJohn Lampitt Farmers' World NetworkJames Northen25 IGDAndrew Simms New Economics FoundationAnne Tallontire/Valerie Nelson Natural Resources & Ethical Trade Programme, NRI

Scientific Review Panel

Environment Frans Berkhout, University of SussexProducers Andrew Fearne, Imperial CollegeWorkers Mike Ironside, Keele UniversityLocal Economies Kevin Morgan, Cardiff UniversityNature Richard Baines, Royal Agricultural CollegeAnimals John Webster, University of BristolHealth Gill Cowburn, University of Oxford Institute of Health SciencesRetail strategy Neil Wrigley, University of SouthamptonMethodology Ray Chambers, University of Southampton

22 Succeeded Anne Gray.23 Members acted in their personal capacity and did not necessarily represent the organisations with which they were affiliated.24 Succeeded Lindsay Coombs.25 Succeeded Richard Hutchins.

26 These included Compassion in World Farming’s Compassionate Supermarket of the Year; the Soil Association’s OrganicSupermarket of the Year; and the Business in the Environment (BiE) index.

company had with the project. Nicola Ellen was pro-posed as a potential member of the Advisory Group byother retailers, because as well as being Safeway’sEnvironmental Manager (and subsequently CSRStrategy Manager), she also served as Chair of theBritish Retail Consortium’s Environment PolicyAdvisory Group, which was a key forum among theretailers in relation to many of the issues that Race tothe Top covered. Nicola Ellen’s link with the BRC wasindicated on the Race to the Top website. Officially, themembers of the Advisory Group generally acted in apersonal capacity and did not necessarily represent theorganisations with which they are affiliated. Thisdistinction was made because the British RetailConsortium wished to distance itself from the project.In practice, some members explicitly said that they didrepresent their organisations.

The Scientific Review Panel was added to the projectgovernance structure at the end of 2002 in response tofunders’ wishes to ensure that the outputs and method-ologies were given due scientific scrutiny. It consisted ofleading academics, with one expert nominally assignedto each of the seven modules, plus two additionalexperts to advise more broadly on retail strategy andmethodology respectively (Table 4). The aim was toprovide peer review and technical advice in relation tothe quality and rigour of specific project outputs suchas the briefing papers and data collection instruments.Panellists provided advice on these issues to theadvisory group, through the project coordinators atIIED or through direct contact with the relevant modulecoordinator. As the project only ran for one year afterthe Panel was formed, it is not possible to assess theefficacy of this arrangement.

The other key institutional forum was a series of ad hocmeetings with all participating retailers, organised asnecessary to discuss project content, implementationand strategy. Five such meetings were held throughoutthe project’s life. Additional meetings were held toexplore some key contested issues within particularmodules. In order to keep the number of participantsmanageable, these meetings were generally not opento the whole project alliance, and only involved the Co-ordination Group. As the project methodology becamemore established, these meetings were held less often.However, it was the intention that once the first year’sresults had been published and the annual bench-marking process had become established, workshopswould be organised to allow space to explore keybarriers to social and environmental improvements byretailers. In addition to the collective meetings with allparticipating retailers, numerous meetings were heldbetween IIED and individual retailers to providefeedback on the annual results.

Although this structure of groups created an efficientand manageable project, and provided a focus in termsof content, it had its disadvantages. The main draw-back was a loss of sense of ownership of the project bysome alliance partners, particularly those that were notinvolved in the Coordination Group. It created a relatively‘safe’ environment for discussions between supermarketsand the module coordinators, one step removed fromthe often more critical forum of the wider alliance,which helped to keep the process moving, but tookaway some of the ‘edge’ and impetus for action thatdirect interaction might have created. Finally, the needto keep the whole process moving at the same paceacross all seven modules meant that progress on issuesand methodologies on which there was consensus wasslowed due to lack of consensus elsewhere.

4.4 Data collection and benchmarking

Data collection methodologies for the benchmarkingprocess included a questionnaire to supermarkets; asupplier survey; a Fairtrade survey; and a local foodsstore survey. From the outset, it was appreciated that itwould be very important for RTTT to supplement datacollected from supermarkets with externally deriveddata – partly to cross-reference, and partly to get todata areas that questionnaires cannot reach. Forexample, if the subject is commitment to local food,then store shelves could be surveyed for evidence oflocal and ‘locality’ (i.e. regionally identified) produce.And if the subject is trading relations with suppliers,then suppliers (and hopefully also primary producers)can be surveyed for their views on which retailerconducts trading with fairness and justice. If the sub-ject is labour standards, then the Trades Unions can beapproached to see if their information on wages, staffrepresentation, staff turnover etc. tallies with the datathat supermarkets themselves submit. Much effort wastherefore expended in the development of the suppliersurvey, Fairtrade survey and local foods store survey.

● Supermarket Questionnaire

The supermarket questionnaire provided the majorityof the data used in the benchmarking process. It wasdeveloped in discussion with participating retailers inworkshops and through correspondence, and wentthrough a number of drafts and revisions before andfollowing the 2002 pilot year. Where possible, questionswere aligned with other data collection initiatives26, tominimise cases of similar data being requested indifferent formats. The 2003 questionnaire was sent toall ten major UK retailers. Feedback from 2002 highlightedthe need for a long response window, particularly asdata was collected during the summer period when key members of staff would be unavailable at times.



27 See http://www.fairtrade.org.uk/get_involved_fairtrade_towns.htm.

The final 2003 questionnaire was therefore distributedto retailers on 17 June, with a deadline for responses of10 September.

The questionnaire consisted of seven sections, eachrelating to one module. Guidance notes and a state-ment explaining the rationale were provided for eachmodule and indicator where appropriate. In addition,the questionnaire included general guidance notes forrespondents and a section asking for general data onsupermarket operations. The latter were requested forthe purposes of normalising data in the responses tocertain questions in the seven modules, and to provideinformation to allow the presentation of results to takeaccount of the particular business context of eachcompany.

● Supplier Survey

The supplier survey was devised and implemented bythe Centre for Food Chain Research at Imperial College,Wye, under the leadership of Dr Andrew Fearne. Theoriginal objective was to develop a survey instrumentfor the analysis of UK supermarkets’ terms of tradewith primary producers. But as very few primary pro-ducers have commercial relationships directly withretailers, it was agreed that the research focus shouldshift from primary producers to the suppliers of pro-cessed products – fruit and vegetable packers, meatprocessors and dairy companies, who provide the linkbetween farmers and retailers. The conceptual frame-work was Kumar’s (1996) theory of justice in buyer-supplier relationships, covering distributive justice (e.g.price received, payment terms, distribution of costs,imposed charges); and procedural justice (e.g. bilateralcommunication). The methodology also incorporatedthose findings of the UK Competition Commission’s2000 report on UK supermarkets which pertained tosupplier relationships.

Qualitative research was conducted to identify keyissues from suppliers’ perspectives, test the conceptualframework, and design the survey (questionnaire andsampling). This involved 22 interviews with processors,growers and intermediaries (top fruit, potatoes, beef,lamb, pork & bacon, milk and cheese). During the 2002pilot year, the prototype survey instrument was thentested quantitatively, firstly as part of the OrganicSupermarket of the Year award (in conjunction with theSoil Association) and then via a further six mailings to300 fresh produce suppliers, 60 dairy companies, and19 fresh meat processors using databases at or pro-vided to Imperial College.

In 2003, the questionnaire was slightly simplified, andcomprised 37 questions, of which 36 were statementscovering the different aspects of distributive justice,procedural justice and conflict resolution in the trading

relationship between supermarkets and their suppliersin the fresh meat, dairy and fresh produce sectors. Inorder to get a larger proportion of supermarkets’ supplybase sampled (and thereby avoid small sample sizesfor the smaller retailers) it was decided that for the 2003survey, participating supermarkets should distributecopies of the questionnaire and reply paid envelopes totheir entire supply base. This was done in July 2003.The covering letter emphasised the fact that allresponses would be received in confidence and thatthe results would only be analysed in aggregate, acrossall three sectors, to avoid any possibility of reprisalsagainst suppliers reporting negative aspects of theirtrading relationships with supermarkets.

● Fairtrade Survey

Commitment to Fairtrade labelled goods was a keycomponent of the Producers module. Within the RTTTquestionnaire, retailers were asked about the breadthand depth of support for Fairtrade products – from thenumber of products to the use of displays and eventsduring the annual ‘Fairtrade Fortnight’ (FTF). This wasanother area where it was thought that external datacollection could both ‘ground-truth’ and supplementsupermarkets’ self-reporting. In association with eachFTF, the Fairtrade Foundation proposes a series ofactions with their partner ‘Fairtrade towns’, currentlynumbering 57 cities, towns, villages, zones and islands,27

through an action pack. In 2003, a short survey form formeasuring supermarkets’ support for Fairtrade wasincluded in the pack.

● Local Foods Store Survey

Another area where retailer self-reporting could besupplemented with independent data is in the area ofcommitment to local and regional food. The major part-ners in this survey were the National Federation ofWomen’s Institutes, and Andrew Fearne of ImperialCollege at Wye. A pilot exercise was conducted inassociation with the Huntingdon and PeterboroughFederation of the WI in February/March 2003, whichallowed the survey tool to be improved based onproblems with the original form such as a difficulty indistinguishing between local and locality products. Thiscombined ‘Mystery Shopper’ surveys and a shelf sur-vey. The 103 actual store surveys were conducted inCardiff, Newcastle, Bristol, Carlisle, Coventry, Peter-borough, Huntingdon, Leeds and a number of othertowns, between July and September 2003.

The benchmarking process – particularly defining whatinfluence retailers have on each issue, what should bemeasured, and how – gave a focus to the engagementprocess and the thematic discussions, and helped to



28 In this case, some companies even attracted media attention due to being placed near the bottom of the list, despite each quintilebeing ordered in alphabetical order rather than by score.

29 In subsequent years, it was envisaged that the most improved retailer in each module would also be identified.

highlight where there was consensus and where issuesremained unresolved or contested. But it highlightedsome key methodological challenges, as follows.

Firstly, although the benefit of focusing on a singlesector (multiple food retailers) was that the projectcould go deeper than cross-sectoral benchmarkinginitiatives such as Business in the Environment’s Indexor FTSE4Good, thus identifying themes and measuresthat are specific to the sector, there remains significantdiversity between the ten target companies. Thesedifferences relate to size; market share; typical storelocation, format and size; buying power; target market;product offer (e.g. proportion of non-food and of own-brand products); corporate culture; and ownershipstructure (e.g. PLC versus private company versus co-operative). Finding meaningful indicators of performanceacross such a diverse sector remained a challenge, andresulted in the application of indicators and method-ologies that some participants saw as inappropriate atbest and naïve at worst.

“Working with both leaders and laggards atthe same time is difficult. Leaders are oftenasked to give more than they get out of aninitiative” (Rob Lake, Advisory Group member)

A second, related question was whether the bench-marking should recognise existing achievement or in-cremental change. For example, companies that hadalready developed sophisticated environmental manage-ment and reporting systems expected to be recognisedas leaders, yet the greatest impact in environmentalterms could arguably be achieved by the ‘laggards’taking some first steps. The project hoped to balancethe two aspects by highlighting the ‘most improved’ aswell as the highest performers, but this would onlyhave commenced in the second year, once a first base-line year had been established, and this was not a com-plete answer. And this itself caused a further problem –measuring change would have required a static set ofindicators and methodologies, which militated againstthe evolution of the framework as new issues came tothe fore or better methodologies were developed.

Thirdly, some of the distinguishing characteristics listedabove could arguably affect the opportunities for anyone company to act on any particular sustainabilityissue. This relates particularly to store size and typicalcustomer profile, especially where performance isjudged by sales of ‘ethical’ products. For example, if acompany’s commitment to supporting livelihoods ofsmall producers in developing countries is measuredby the sales and number of Fairtrade-labelled productlines, those companies with large stores (and hencescope for stocking Fairtrade products without removing

other key profitable product lines) and an affluent, edu-cated and socially conscious consumer base will scorehighly. If the indicator is sensitive to this and attemptsto measure effort (e.g. proportion of stores with pro-motional displays during Fairtrade Fortnight) the prob-lem is reduced but not eliminated. Thus the achieve-ment versus progress picture becomes even moreblurred by the different levels of effort necessary toachieve either.

4.5 Scoring and publication of results

When NGOs first discussed the project in 2000, theintention was to publish annual ‘league tables’, rankingthe performance of all ten major UK multiple retailers ineach of the seven module areas. As dialogue with theretailers continued through 2001, it became clear thatthe idea of a league table was a key barrier to someretailers’ participation (and hence access to their data).Some retailers remained keen, pointing to the positiveimpact that other externally driven league tables hadachieved in driving and rewarding change. But com-panies were extremely sensitive to the risks of such apublication format, primarily because this meant thatthey might be ranked in bottom place, thus attractingadverse media attention. There is some truth in theobservation that the media is far more interested inwho has come last rather than who has come top.

Other publication models were proposed, including thepublication of only the top five companies in eachmodule, and a graded ‘star-rating’ system that avoideda ranking of exact scores and distinguished betweenhigh and low scores, irrespective of the rank. Yet someretailers rejected all of these alternative models. By2003, when plans for the publication of the first ‘live’results were under way, retailers were even more con-cerned to avoid any possibility of RTTT results beingused to compile league tables of any description. Therelease of Business in the Community’s first CorporateResponsibility Index was cited as a primary example ofhow the media tends to focus on companies that donot score highly.28 Again, the sanction of non-partici-pation meant that participating companies had a strongnegotiating position, but eventually a tough compro-mise was agreed. This meant that the 2003 resultswere to be published in ‘company profile’ format, withtext describing how each company performed on eachindicator, but no reference to actual scores or allo-cation of grades/stars. In addition, the highest scoringretailer in each of the seven modules would be iden-tified.29 This was a long way from the original intentionof a league table, but civil society partners generallyaccepted that the compromise was necessary to keepretailers on board.



Again, the modular scoring approach and identificationof the best performer in each module had its benefitsand its drawbacks. It allowed companies to be givencredit for their efforts in the modules that they deemedpriority areas, without these efforts being hidden by alower average score across all modules. But it didobscure uneven performance within each module. Forexample, in the pilot year, one company scored highlyon most of the indicators within the Producers module,but because of a policy decision not to stock Fairtradeproducts, its module score was relatively low. Thecompany profiles included space for companies toexplain such policy decisions or make other commentson their performance, but the reader would notnecessarily take this into account.

Away from the difficult debates on how the resultsshould be published, the scoring methodology used inthe 2002 pilot year demonstrated participating com-panies’ interest in comparing their performance withthat of their competitors. Each retailer was provided witha detailed breakdown of their scores across each of themodules. This included a comparison of the scoreawarded for the sub-elements of each indicator againstthe average of all participating retailers, and against thehighest score awarded among all participants (seeexcerpts from a company feedback document repro-duced in Figure 5 and Table 5). It also included noteson scope for improvement. Participating retailers stressedthat this feedback and confidential benchmarkingrepresented one of the most useful elements of theRTTT project. Had all ten retailers taken part, clearlythis would have been even more valuable.

4.6 Retailer Participation and ‘Critical Mass’

From the start, it was clear that the project’s successwould depend on the participation of a ‘critical mass’of retailers, both in terms of market share and numberof participants. All ten major UK retailers were ap-proached in 2000 and individual meetings were heldwith each of them to introduce the project during 2001.Workshops involving all participating retailers com-menced from 2002, involving all but Waitrose andMorrisons. At the request of retailers, a Memorandumof Understanding was developed in early 2002, whichset out the terms of engagement for all participatingcompanies and organisations. This proved a double-edged sword – it confirmed the commitment of the sixcompanies and 24 civil society partners that hadsigned it by April 2002 to the process of data collectionand constructive dialogue (Table 6), but it may haveacted as a barrier to the continued participation ofsome of the others, by creating a formal ‘signing-up’process that required a high-level go-ahead. Once theMoU was in place, those companies that had notsigned it were not permitted access to workshops andmeetings. At that point, only Waitrose had formallydeclined to participate – though discussions continuedwith the project coordinators on an individual basis,even into 2003.

All six participating retailers provided a full set of datain the 2002 pilot phase, and received detailed analysisof their scores relative to the industry best and industryaverage. This important phase of the project repre-sented an acknowledgement by civil society partnersthat they did not necessarily have all the answers, andthat RTTT could comprise a form of joint learning. Inthe light of experience from the pilot year, most surveymethods were modified for 2003.

During the summer of 2003, a few months before thefirst public release of results was due, the projectpartners were optimistically looking forward to broadindustry participation. A letter was received from thechief executive of Tesco on 2nd June 2003, stating thatthe company “would like to participate on a yearlybasis providing our concerns are addressed”. This wasfollowed by a constructive meeting at Tesco head-quarters. There were signs of interest from Waitrose,and it looked likely that the six pilot year supermarketswould remain engaged. Only Asda and Morrisonsshowed no interest in taking part. But by the deadlinefor data submissions in 2003, only 3 supermarketswere on board – the Co-operative Group, Safeway andSomerfield. These companies are to be commendedfor their hard work in collecting data and for demon-strating a willingness to open themselves up to scrutiny.But without the market leaders, a sectoral benchmark-ing initiative cannot have real impact.

The role of the market leaders in making or breaking asectoral initiative must not be underestimated. Tesco,



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Figure 5: How results were presented to retailers:Scores of one supermarket within the ‘workers’ modulein comparison to five other participating retailers



Table 5: How results were presented to retailers: Scores of one supermarket within the ‘workers’ module incomparison to five other participating retailersModule: Workers

Module Workers

Points Average Highest Retailer Y +/– +/–Indicator Question Theme available Score Score Score average best

3.1 Board member 10 10 10 10 0 0

3.1.1 Board member 10 10 10 10 0 0

3.2 Labour Standards within the Company 30 19 24 24.25 6 0

3.2.1 Length employment 6 3 6 6 3 0

3.2.2 Contracted hours 6 4 6 3 – 1 – 3

3.2.3 Pay rates 6 4 6 6 2 0

3.2.4 Staff turnover 6 3 4 4 1 0

3.2.5 Staff benefits 6 5 6 5.25 1 – 1

3.3 Employee representation 30 13 25 6.75 – 6 – 18

3.3.1 Independent TUs 3.75 1 2 0 – 1 – 2

3.3.1 Staff forums 3.75 2 4 3.75 2 0

3.3.1 TU recognition 7.5 4 8 0 – 4 – 8

3.3.2 pay negotiation 15 7 15 3 – 4 – 12

3.4 Labour standards in the supply chain 30 21 28 26.875 6 – 1

3.4.1 labour code 3.75 3 4 3.75 1 0

3.4.2 code coverage 3.75 3 4 3.75 1 0

3.4.3 code training 3.75 3 4 3.75 1 0

3.4.4 code support 3.75 3 4 1.875 – 1 – 2

3.4.5 code monitoring 3.75 3 4 3.75 1 0

3.4.6 code implementation: first tier suppliers 1.25 1 1 0.625 – 0 – 1

code implementation: entire chain 1.25 1 1 0.625 0 – 1

code implementation: own brand or more 1.25 1 1 1.25 1 0

3.4.7 social report verification 3.75 2 4 3.75 2 0

3.4.8 procedures non-compliance 3.75 3 4 3.75 1 0

gangmasters 0 0 0 0 0 0

Total Module 3 100 63 83 67.875 5 – 15

and to a lesser degree Asda, act not only as leaders inmarket share terms, but also in political and insti-tutional terms. The other retailers cannot afford to beoutside certain initiatives once Tesco and/or Asdacommit to taking part – and the opposite is also true.As soon as it was clear that Tesco would not be sub-mitting data to the project in 2003, the attractiveness ofparticipation for other supermarkets clearly declined,even to the extent that at least one company that hadgone to the effort of collecting the data eventuallydecided not to submit it.



Table 6: Participation of UK top 10 retailers, 2000–2003

2000 approach 2001+ workshops 2002 MoU, pilot data collection 2003 roll-out

Asda Asda

Co-op Co-op Co-op Co-op

Iceland Iceland Iceland

M&S M&S M&S

Morrisons

Safeway Safeway Safeway Safeway

Sainsbury Sainsbury Sainsbury

Somerfield Somerfield Somerfield Somerfield

Tesco Tesco

Waitrose

55% of market < 20% of market

The overall results of both the 2002 pilot and 2003public processes are briefly presented here, as far asconfidentiality allows.

5.1 2002 Pilot Year

The spread of pilot year scores across the supermarkets(with non-participants scoring zero) are presented inFigure 6. Scores are not attributed to each super-market for reasons of confidentiality. Most modulesallowed a clear differentiation between best and worstperformers. The pilot year results also highlighted the

need for in-depth discussion regarding the appropriate-ness of the data set to the real issues under investi-ation. For instance, the ‘local sourcing’ module wasvery contested, and a workshop was therefore held inApril 2003 to discuss this in some detail, to identifyrevisions for the 2003 questionnaire.

These data can also be presented in overview format(Figure 7) – here the average and best scores from thesix participating supermarkets are presented. For suchpresentations, the individual scores are translated intoa grading system with the highest scores awarded 5


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Figure 6: Spread of retailer scores in each module, 2002 Pilot Year

points. Each of the participating companies was pre-sented with these charts as well as a complete break-down of their own scores against the average and bestscores on each element of each indicator.

5.2 2003 Public Year

Because only three supermarkets (Co-operative Group,Safeway and Somerfield) provided data sets in 2003,the spread of scores cannot be presented here withouteffectively breaching the agreement on confidentiality.As noted above, it was agreed that the project wouldidentify the ‘best in class’ company in each module(Table 7). On the basis of the data submitted to theproject – and it should be recognised that some partici-pating retailers felt unable to provide complete datasets for confidentiality reasons, which inevitably affectedtheir scores – the Co-op was far and away the leadingcompany in Race to the Top 2003. The Group achieved‘Best in Category’ in six of the seven modules. Theseoutstanding results show what can be achieved whena company puts its whole operation behind the idea ofresponsible retailing, despite a challenging position inthe food retail market.

It would have been very interesting to compare the Co-op’s results with those companies with high-endcustomer bases – especially Waitrose and Marks andSpencer – to see just how far the Group has come, andhow the assumed ethical leaders now have to watchout for the Co-op moving the goalposts of responsibleretailing. There are many lessons from the Co-op’s per-formance, which has accompanied its re-invigoration inthe fortunes of co-operative retailing, for those com-panies, which say that ethics are a luxury they cannotafford.

Table 7: ‘Best in class’ in each module, 2003

Module Best in class

Environment Safeway

Producers Co-op

Workers Co-op

Local sourcing Co-op

Nature Co-op

Animals Co-op

Health Co-op

5.3 Results of the external datacollection

Although the majority of the data collected came fromthe supermarket questionnaire, the project placed con-siderable emphasis on developing workable methodsfor external data collection. Although these sufferedfrom various methodological problems, particularly smallsample sizes, the results are nonetheless revealing.They show that putting policy into action is not alwayssmooth – the supplier survey, for example, indicatedthat the Co-op has work to do in terms of supplierrelationships. And the store survey associated with the‘Local Economies’ module showed that local sourcingof food is weak across the sector.

5 ▲ Results


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● Supplier Survey

The results of the 2002 pilot are presented in Figure 8and Table 8. The results indicate strong validation ofthe survey instrument – there was a wide level of supportfor the items being measured, and the scoring systemgenerated adequate variation to capture the relativeperformance of each supermarket. The single biggestproblem was the sampling method – few retailers wereadequately represented in the sample.

In 2003, only two supermarkets participated in thesupplier survey, from whose supply base a total of 28completed questionnaires were returned (Table 9).

This poor response highlights the problems of relyingon supermarkets for access to suppliers, giving theindustry the same power of veto as for the main RTTTquestionnaire.

5 ▲ Results


Figure 8: Results of supplier survey, Pilot Year

Table 8: Survey of supermarket terms of trade with suppliers – Pilot Year

Supermarket Sample Mean Score* Rank Weighted mean score** Rank Mean Size (unweighted) (weighted by significance progress

to the business) since 2002***

A 12 28.0 2 70.6 2 1.22

B 4 17.7 4 45.2 5 1.09

C 1 15.0 5 35.0 6 1.84

D 8 14.5 6 35.9 4 1.11

E 9 19.9 3 45.7 3 1.18

F 17 –14.0 10 – 36.5 10 1.08

G 37 – 5.1 9 – 16.0 8 1.14

H 4 – 4.7 8 – 27.5 9 1.14

I 31 12.6 7 31.1 7 1.18

J 17 28.1 1 70.8 1 1.17

Total 140 8.1 – 18.6 – 1.16

* Maximum/Minimum = 86/–86 ** Maximum/Minimum = 258/-258 *** 2 = yes, 1 = no

● Fairtrade Survey

This survey did not benefit from testing in the 2002 pilotyear, and the data gathered around Fairtrade Fortnightin February 2003 were not used in the 2003 bench-marking, because national coverage was very uneven.But the exercise showed that by working with motivatedvolunteers, high quality survey data can be obtained onthis issue. The most comprehensive response wasfrom the group in Leeds, who conducted a total of 90surveys (Table 10).

● Local Foods Store Survey

The survey indicated a generally low rate of local andlocality food sourcing by the major retailers (Table 11).

Across the product lines surveyed (apples, potatoes,milk, lamb, beef and cheese) very few instances of‘local’ products were identified. There was more evi-dence of ‘locality’ products, for example many storesaround the country stocking several labelled localitypotato varieties, a few locality meat cuts, and severallocality cheeses. There was also very little evidence of‘promotion’ in the form of point of sale advertising,sampling stands, leaflets etc. Most retailers have notyet ensured that their customer service staff are briefedon the issue of local sourcing. When ‘mystery shoppers’asked customer service staff for information aboutlocal foods available in their stores, the overwhelmingresponse was that no information was available, orcustomer services simply ‘didn’t know’.

5 ▲ Results


Table 10: Survey of supermarkets in Leeds, February 2003

Supermarket No. of Store Size No. of Fairtrade No. of Fairtrade Promotional Support forsurveys lines per store lines (largest effort* Fairtrade**

(average) numbers)

G 6 Large 25.0 29 High good

A 4 Large 7.6 11 Low poor

E 18 Medium – Large 7.6 13 Low poor

I 6 Small – large 11.5 24 Low fair

F 13 Medium 11.7 21 Low fair

H 2 Medium 2.0 2 Low poor

B 26 Small-medium 13.3 40 High excellent

* Special displays, advertising at checkouts, stands etc.**Based on the average and maximum number of Fairtrade lines and promotional effort relative to store size.

Table 9: Survey of supermarket terms of trade with suppliers, 2003

Supermarket Sample Mean Aggregate Standard Mean progress StandardSize Score* Deviation since 2002** Deviation

1 5 17.2 12.3 6.6 8.6

2 23 7.6 10.6 6.2 6.0

Total 28 9.3 11.3 6.3 6.4

*Maximum/Minimum = 60/–60 ** Maximum/Minimum = 30/0

5 ▲ Results


Table 11: Survey of supermarket commitment to local foods, 2003

Supermarket No. of stores Total no. of surveys Points %surveyed conducted

A 8 10 14.04 47

B 4 5 3.52 12

C 6 9 6.05 20

D 10 15 8.1 27

E 6 7 8.79 29

F 7 10 9.83 33

G 7 9 10.97 37

H 6 11 9.64 32

I 12 18 10.37 35

J 4 7 12.84 43

The project objectives can be broken down into keyelements as follows. The extent to which each has beenmet, despite the premature end of the project, is discussedbriefly here. We draw on comments made by projectpartners, submitted to a project review in early 2004.

● To benchmark and track the social,environmental and ethical performanceof UK supermarkets over five years

The project failed to track performance over five years,completing only one pilot year and one ‘public’ year ofdata collection. But the project developed and testedvarious methodologies and benchmarks that could beapplied elsewhere in the future, and collected a base-line of data from some retailers. One project partnercommented that the project achieved the “clarificationand delineation of valid criteria as a basis for bench-marking supermarket performance and progress.”

● To engage stakeholders in the process of research

The model developed by the project encouraged directparticipation of key stakeholders in the research pro-cess, and an iterative process of constructive dialoguebetween supermarket companies and many of theircivil society stakeholders. This had significant benefits.One partner commented, “I think NGOs associatedwith RTTT learnt a lot about the reality of the super-market business.” One supermarket noted that theproject brought various benefits including “buildingrelationships with civil society groups [and] improvedunderstanding of issues.”

● To apply scientific scrutiny to the most contested issues

Where independent research was commissioned, e.g.in relation to supplier welfare, this helped to moveforward contested debates. Additional research wasplanned in subsequent years on other contestedissues, notably the Health and Local Economiesmodules. Because the project ended prematurely, theopportunity to apply such scrutiny to these areas hasnot been taken.

● To catalyse change towards a greenerand fairer food system

The project drew attention to many sustainability issues,both within and outside supermarket companies. Onesupermarket commented that the project influencedthe company’s own corporate social responsibilityreporting and many other benchmarking initiatives. In aletter to the project from Marks and Spencer in Sep-tember 2003, Rowland Hill stated:

A huge amount of understanding andknowledge has been developed within theRace to the Top project and much of this isnow finding its way into other benchmarkingschemes e.g. Compassionate Supermarket of the Year, Organic Supermarket of the Year, etc. As such, the project has generatedrelationships and knowledge which are no longer confined [to] Race to the Top. It could be said that as with ‘reporting’,RTTT’s very success has weakened its own reason for being.

Race to the Top has influenced individual retailers, aswitnessed by the Co-op’s recently launched ResponsibleRetailing Initiative. The project’s legacy can be seen inthe subject areas and choice of advisors to the Co-opInitiative, four of whom were directly involved in RTTT.The project also influenced wider policy debates onresponsible business, through presentations to insti-tutional investors and others, press releases andarticles in accessible policy-oriented journals.


Assessing RTTT againstthe project objectives6

What made a large proportion of the UK supermarketsector eventually turn its back on this constructive andmoderate approach to stakeholder accountability bycivil society organizations, once it got close to present-ing information in the public domain? Inevitably there isdisagreement on what went wrong (Box 2); some civilsociety partners said the approach of the project wastoo conciliatory, whereas some retail partners thoughtthere was not enough consensus building. Each of the non-participating retailers had their own reasons for not taking part. Certainly, a number of interrelatedfactors together created a problematic environment forthe project.

7.1 Regulation and self-regulation

Supermarkets have advocated voluntary self-regulation rather than mandatory and enforceable rulesto improve their social and environmental performance.Transparency is a key pillar of self-regulation, but even the basic idea of Key Performance Indicators onsustainability for food retail – as proposed in Defra’sFood Industry Sustainability Strategy (FISS), in which‘challenging key performance indicators’ are supposedto be developed for food manufacturers, wholesalers,retailers and caterers – have been strongly resisted byparts of the industry. There was no government drive topush supermarkets into engagement with the project,but some companies still seemed to fear that govern-ment might pick up a successful RTTT and turn it intoa form of third-party regulation.

7.2 Compromise and leverage

In seeking to find compromises along the way, RTTTlost some leverage with the corporate sector. Thecommitments of civil society partners to respect con-structive engagement and confidentiality diluted theirability to challenge the businesses, and almost certainlyundermined the aim of partnerships with RTTT, whichwas to develop increased transparency in the super-market sector as a lever for change. When the projecthit rough water around concerns over publication ofdata, one of the retailers proposed instead that theproject restructure to become an ETI-type ‘safe place’in which to discuss issues away from the glare ofpublicity. While such a structure may have had someadvantages outside the restrictive set of measure-ments, it would also have taken the heat out of theproject by attracting the ‘usual suspects’ and lettingthe laggards off the hook. There certainly remains aneed for spaces that allow constructive engagement


Examining what went wrong7BOX 2: Comments from partners on what went wrong

“RTTT was effectively an NGO project‘offered’ to companies – there may evenhave been a sense that it was beingimposed – rather than a genuinely sharedundertaking from the very outset.”

“Benchmarking could be viable if a morepragmatic/consensus based approachwere adopted.”

“It is difficult to see how the project could have been built differently and in a way that would have brought more supermarkets on board withoutcompromising value and integrity.”

“I don’t think that this emphasis [on being objective; on cooperation andcollaboration] is intrinsically doomed tofailure – all it means is that a different wayfor achieving goals … needs to be found.”

“It was far too conciliatory to supermarkets’stalling tactics… Business is more likely toparticipate in initiatives if they feel they arelosing out by not joining. In this case theyfelt they were being wooed and that theyhad nothing to lose by saying ‘no’.”

“Not critical enough of supermarkets”

“Maybe public policy threat would have got supermarkets on board.”

“It was fairly obvious that the retailerswanted to scupper the project if at allpossible because it could have beendamaging to themselves.”

between supermarkets and their stakeholders, but theproject suggests that this alone is not enough.

7.3 Over-reliance on industry data

The project relied heavily on data disclosed by theretailers themselves. Attempts were made to comple-ment the data from supermarkets themselves with datafrom external surveys. The latter can be powerfulmeasures of supermarket performance, especiallywhere they demonstrate observable change ratherthan aspiration or company policy. However, externalsurveys, such as store surveys for local food, orsurveys of supermarket suppliers, are expensive, highlylabour intensive, and methodologically problematic.

7.4 The lack of company resources

Committing to a process such as RTTT requires stafftime and technical resources. But in order to staycompetitive against Asda and discount supermarkets,rival companies feel obliged to squeeze costs in boththeir supply chains and offices. Companies such asSainsbury’s have radically cut staff and technicalcapacity in order to match Asda’s cost structure andprofitability. It is ironic that the increasing pressure onsupermarket companies to improve the quality andtransparency of data that they release on environ-mental and social impacts comes at a time whencompanies have a declining ability to collect thatinformation. But it should also be noted that two of thesmallest and therefore comparatively most thinly re-sourced retailers – the Cooperative Group andSomerfield – were able to compile and report on RTTTdata, while the largest retailer Tesco was not. So theproblem is not necessarily one of resources per se, butone of priority setting under conditions of resourcescarcity.

“The biggest difficulty was that the data beingasked for was not already collated by thebusiness as it didn’t have any business value”.

7.5 The diversity of the sector

As described earlier, the UK supermarket sector is veryheterogeneous in terms of scale, ownership andcustomer base. All of these factors affect the ability ofcompanies to be successful in certain aspects of ‘sus-tainable’ business, such as the marketing of organic orhigh animal-welfare produce. There is a risk that in ourselection of indicators and monitoring data, we aremeasuring customers rather than companies. For in-stance, if up-market stores like Waitrose are comparedwith lower-end stores such as Somerfield on sales ofFairtrade or high animal welfare produce, there is a riskof endorsing the performance of the high-end storeeven though it is their consumer base ‘pull’ rather thancompany ‘push’ which is making most of the difference.

7.6 Industry upheaval

The Race to the Top project took place by chance at atime when the market and its investors and regulatorswere in a period of upheaval. The proposed takeover ofSafeway and associated Competition Commissioninquiry shortly after the 2000 report and proposedCode of Conduct, and the crisis at Sainsbury’s, allconspired to inject uncertainty and instability into thesector at the time that the project was to go public withcomparative information.

“The RTTT project was unlucky in timing in the 2003 project in that an area of extremecompetition emerged with the Safeway/Morrisonmerger/takeover; Tesco assertive and gainingmarket share; Walmart ever more intrusive and Sainsbury’s feeling vulnerable.”

7.7 Wal-Mart has changed the rules

The UK supermarket sector had been quite innovativein approaches towards greener and more ethicalsupply chains, partly because it was running on higherlevels of profitability than US and continental Europeanequivalents. The entry of Wal-Mart into the UK was aturning point in the way in which the domestic foodretail market operates. Only Tesco has really been ableto match it in terms of growing its share of the masscustomer market under fierce price competition. In theWal-Mart model, savings captured from highly leveragedsuppliers (and in turn from primary producers andlabour) are now being passed to customers to protector increase market share.

The ‘spiral of supermarket growth’ is therefore workingdifferently now. The problems encountered by Sains-bury’s in recent years may show that investing revenuesof the ‘growth spiral’ in improved facilities and im-proved environmental performance may not be as wellreceived by consumers and investors. This is a keyfactor in the business case for or against strategies forsustainable development in the supermarket sector.Supermarket executives point to the example ofIceland, the UK supermarket chain which went into atailspin after a very costly attempt to go 100% organic,following its success with 100% GM-free, as evidencethat taking the strategic eye off the ‘business of doingbusiness’ is the road to poor financial performance. Alook at industry winners and losers in the UK wouldsuggest that this association is becoming even morepronounced. And in talking with the investment com-munity, it was apparent that CSR is a factor which mayinfluence investment choices in mid-sized super-markets with mediocre financial performance, but lessso the industry giants like Tesco, which are seen asessential components of many investment portfolios.

The poor financial payback on investing in social andenvironmental performance is in part explained by the

7 ▲ Examining what went wrong: the external environment


fact that expectations that regulation would followbehind innovative companies have not transpired.Sainsbury’s was quoted in 1997 as saying that “Itwould be a great testament to the vision of managershere at J Sainsbury plc if legislation were to be agreedat the national and international level… By setting newand higher environmental standards, we establishtargets for both our competitors and the Governmentto aim for” (Bendell, 2004). In fact the opposite hashappened – those companies which have done theleast on formal CSR have had a free ride, coming underneither activist nor Government pressure. And theindustry associations lobbied against even the most‘lite’ third-party regulation for sustainability – the DefraFood Industry Sustainability Strategy. In the meantime,Sainsbury’s has been weakened by intense price com-petition from Tesco, Asda, Morrisons, and the deep

discounters. The technical resources needed to worktowards greater sustainability, for instance withsuppliers and primary producers, and to collectinformation from inside the corporate structure inresponse to civil society demands, may well be seen asa luxury which cannot be afforded in the race togenerate consumer value and gain market share.

The drive to squeeze the supply base to maintain com-petitiveness has even reached into the most upscaleretailers. Part of Marks and Spencer’s strategy to fightoff takeover by retail entrepreneur Philip Green hasbeen to bear down on its supply chain. Chief executiveStuart Rose is now renegotiating arrangements with itskey clothing and food suppliers. Analysts believe that£100m savings will be achieved through increasing dis-counts from 3.75% to 7.5% initially and then to 10%.

7 ▲ Examining what went wrong: the external environment


The RTTT experience highlights three fundamentalissues that have deep implications for future sus-tainability benchmarking initiatives and for governmentpolicy alike:

8.1 The conflation of customers and citizens

The supermarket sector prides itself on being customer-oriented in the extreme. The focus on creating cus-tomer value has underpinned the business strategies ofthe most successful players. But this has reached apoint at which it is in danger of crowding out theinterests of some other stakeholder groups. For thesecompanies, concerns about their social and environ-mental impacts only become significant when theyaffect customer trust.

RTTT attempted to create a mechanism by whichsupermarkets could be benchmarked according totheir impacts on society – on the environment, onworkers and communities, within their supply chains,and so on. Some of these issues may well chime withconsumers, but many of them do not. The aim of RTTTwas therefore to explore whether sufficient incentivescould be established, by creating a framework forgreater accountability and transparency, to encouragesupermarkets to tackle a range of social and environ-mental issues, not only those that are perceived to addto consumer value.

But some supermarkets appear unable or unwilling toengage with this broader notion of stakeholderaccountability. They argue that their primary respon-sibility is to be accountable to their customers, who arevoting continuously with their wallets and purses in ahighly competitive (and they would add, highlydemocratic) marketplace. Tesco wrote to RTTT in July2003, suggesting “currently the project overlookscustomers and we believe that it could be significantlyimproved by adding a customer focus to the ques-tionnaire in its entirety, and in terms of understandingwhat customers want from supermarkets.” This was, ineffect, asking RTTT to endorse as an element ofcorporate responsibility what supermarkets do veryefficiently anyway – serving their customers.

Some supermarkets are thus attempting to change theparameters of debates about what it means to be aresponsible retailer, by conflating the notions of ‘cus-tomer’ and ‘citizen’; ‘stakeholder accountability’ and‘customer accountability’; and ‘public good’ and‘customer value’. The risk is that certain stakeholders’

voices are drowned out of these debates. Influencingchange on those issues that are not automatically inline with supermarkets’ perceptions of consumerdesires thus becomes increasingly challenging.

“The consumer and the citizen are generallynot the same person, and supermarketcompanies listen to the former first and thelatter a long way second.”

“The financial dynamics of ‘big box’ retailingare such that price comparisons withimmediate competitors overwhelm all otherconsideration.”

“Sustainable development is for retailers lowin their list of priorities.”

“Sustainability and CSR are often marginalizedand are not integrated into core businessoperations.”

“NGO arguments about reputation, customerinterest, etc. cut no ice with a company thatis highly successful and absolutely convincedit knows its customers well and knows whatkind of reputation it needs for the future.”

“There remains a conflict between [businesspractices and sustainable development]where shareholder pressures remain.”

8.2 The buck stops … where?

RTTT explored what it is reasonable to expect ofsupermarket companies. But much of the content ofthe project looked at supermarkets not only as actorsin their own right, but also as gatekeepers of the entirefood system. The hypothesis was that influencingsupermarkets would in turn influence the actions ofmany other actors. Supermarkets are perceived tohave the power to define the way our food is producedand consumed. Indeed, many of the RTTT indicatorsmeasured what retailers were asking or demanding ofothers, e.g. their suppliers, rather than what they weredoing themselves.

However, the RTTT experience shows this gatekeeperrole to be a double-edged sword. Not only does it offerpotential shortcuts and access to positive change, itcreates a mechanism for companies to pass responsibility


Lessons and conclusions8

on to other, often less powerful, actors. It allows super-markets to push social and environmental requirementsup the supply chain, along with any associated costs,both related to implementation and certification. And itmakes any discussion of the respective allocation ofresponsibility between retailer and consumer exceedinglydifficult.

Discussion often centred on the different circum-stances faced by companies operating in a hetero-geneous sector, and the particular challenges that thisraises for particular retailers. For example, a companywith a higher proportion of low-income customersargued that it is unrealistic to expect it to sell as manyfree range eggs as a company with a relatively affluentconsumer base. This raises difficult issues. It could beargued that it is unethical to stock any eggs from cagedhens, and even if a company loses custom by onlystocking free range eggs, or has to sell eggs at a lowermargin, not doing so in the name of affordability andcustomer choice is unacceptable. But one could alsoargue that low-income consumers have a right tocheaper alternatives, as long as these products aremeeting legal standards.

The extent to which a company is able to influence itsbusiness environment, in order to overcome the con-ditions that apparently limit action on social and environ-mental issues, was perhaps even more contested.During the life of RTTT, it was an oft-cited mantra thatthe best that supermarkets can do is to offer a diverserange of products to the consumer, who takes the ulti-mate decision whether or not to purchase sustainably-produced goods. This paints a picture of benign organi-sations, with little or no influence over their customers’purchasing decisions. But many of the NGOs involvedin RTTT rejected this analysis as buck-passing, pointingto the huge marketing expertise and effort expended inconvincing consumers to buy particular products.

Furthermore, this argument that ethical decisions shouldbe left to the consumer is criticised for expecting toomuch of the individual shopper. Making informeddecisions would be hard enough even if all productswere labelled according to environmental or socialimpacts. And many consumers simply would not wantthe responsibility, even if such mechanisms weredeveloped. Faced by an unprecedented degree ofchoice already on each trip to the supermarket, it isunderstandable that consumers would simply beoverwhelmed. A further extension of this critique is thatethics are increasingly marketed as consumer choicerather than a corporate standard; fairness and justice intrading, for example, is niched as Fairtrade labelledspeciality products and not mainstreamed into businesspractice, where many would argue it should be.

This debate is particularly incongruous in an era inwhich supermarkets are increasingly investing incorporate-level branding. The aim of this is to en-courage consumers to buy in to a set of values identi-

fied with the company, reassuring them that once theyare in the store, they can rest assured that anything thatthey put into their trolleys has been produced to astandard in line with these values. This conflictssomewhat with the argument that consumers should beexpected to make individual product-based selections.

The allocation of responsibility between retailers, sup-pliers and consumers is inherently problematic, but thismust not be used as an excuse for inaction. The keychallenge is to ensure that the gatekeeper role thatsupermarkets play within the food system is used todrive positive change, rather than to pass responsi-bilities on to other, less powerful, actors.

8.3 Governance gaps in an environmentof self-regulation

Ultimately, RTTT was about governance of the foodsystem. So what does the project tell us about therelationship between the supermarket sector, civilsociety and the state, and how this relationship can beinfluenced for positive social and environmentalchange?

As noted earlier, the project relied on securing datafrom supermarkets themselves, and this significantlyinfluenced the relationship between the civil societyand industry players. Future attempts to build stake-holder accountability across the supermarket sectorwill either require a coordinated civil society thrust togather external data, or will require a stronger pushfrom the state. The cost implications for civil society togo it alone are very considerable. If benchmarking is tosucceed without retailer self-reporting, in a way whichhas at least some scientific rigour, then large numbersof trained researchers will have to be mobilised tosurvey the supermarket shelves, and ways will have tobe found to scrutinise supply chains to measuretrading relations, animal welfare, labour standards, etc.A further problem is that civil society organisations findit very hard to organise effectively around holistic issuesof sustainability, as they must respond to membershipsand constituencies that are often focused on singleissues.

Civil society partners in the Race to the Top initiativewere stunned by the hubris and lack of commitment ofthe largest supermarkets in dealing with what wasperhaps the most powerful stakeholder alliance yet toengage supermarkets on issues of accountability andsustainability. From their perspectives, leading com-panies could play along, attend some of the meetings,and even give (conditional) written agreement toparticipate, and then not submit even one byte of data.There has followed a hardening of attitudes, and therules of engagement between supermarkets and civilsociety appear to have changed irrevocably. While stillacknowledging the need for spaces that allowconstructive engagement between supermarkets and

8 ▲ Lessons and conclusions


their stakeholders, some have seen the demise ofRTTT as a signal that only command-and-control regu-lation can tame the supermarket sector, marking anend to a period of openness to work through voluntary,collaborative initiatives.

This line of argument points towards a stronger role forthe state. But the drive to a more competitiveregulatory environment in the UK, as in many othercountries, has handed regulatory responsibility forimportant areas of the food system to supermarketsthemselves. Defra’s support for RTTT was sympto-matic of this hands-off approach. The move to partialself-regulation is justified by the argument that super-markets have higher standards, e.g. on food safety andhygiene, than baselines set by national legislation. Forachieving the goals of sustainable development,however, having supermarkets in the driving seat is

effective only for those areas that create consumervalue for the supermarkets, such as pesticides,hygiene, GM, or animal welfare – and even then, only incertain segments of the market. Those aspects ofsustainability that do not resonate strongly with mostconsumers, such as trading relations with farmers orlabour rights, fall into a governance gap which is simplynot addressed by the current mode of self-regulation.

The conclusion is clear: in such a relentlessly consumer-oriented industry, self-regulation and voluntary initia-tives are only likely to be appropriate for concerns thatare aligned with the mainstream consumer interest.Creating incentives for supermarkets to drive positivechange on other aspects of sustainable developmentimplies a more robust role for the state. Whether thisbasic insight is accepted by the food industry’s regu-lators remains to be seen.

8 ▲ Lessons and conclusions


> Bendell, J. (2004) Barricades and boardrooms: a contemporary history of the corporateaccountability movement, UN Research Institutefor Social Development UNRISD, Technology,Business and Society Paper 13.

> Burt, S.L. and L. Sparks (2003) ‘Power andcompetition in the UK grocery market’, BritishJournal of Management, 14 (3), 237–254.

> Competition Commission (2000) Supermarkets:A report on the supply of groceries from multiplestores in the United Kingdom, Cm 4842,Competition Commission: London.

> Dobson, P.W. (2002) Retailer Buyer Power inEuropean Markets: Lessons from GrocerySupply, Loughborough University BusinessSchool Research Series.

> Kumar, N. (1996) ‘The power of trust inmanufacturer-retailer relationships’, HarvardBusiness Review, Nov–Dec.

> Wrigley, N. and M.S. Lowe (2002) Reading Retail:A Geographical Perspective on Retailing andComsumption Spaces. New York, Arnold:London and Oxford University Press.


Bibliography

This is an important report at a significantmoment in the corporate responsibility

agenda. It charts the course of the Race tothe Top project, an innovative collaborationto track supermarket progress towards sus-tainability. The report outlines the features ofthe UK supermarket sector that made theproject so timely – and so challenging: marketconcentration, the supremacy of shareholdervalue delivered through customer satis-faction, and the pace of business strategyoutstripping the capacity or will of publicpolicy makers to play catch-up. This reportis a primer for the strategic and tacticalchoices that now need to be made. There arelessons for coalition-building, for collabo-ration between businesses and NGOs, andfor the future of sectoral regulation.

Race to the Top Alliance Partners

British Independent Fruit Growers’ AssociationDepartment of Health Management and Food Policy,

City UniversityCompassion in World Farming

Council for the Protection of Rural EnglandCountryside Agency

English NatureFairtrade Foundation

Farm Animal Welfare NetworkFarmers’ Link

Forum for the Future Marine Conservation SocietyMarine Stewardship CouncilNational Consumer Council

National Federation of Women’s InstitutesNew Economics Foundation

Royal Society for the Protection of Birds (RSPB)Small and Family Farms Alliance

Soil AssociationSustain: the alliance for better food and farming

Traidcraft ExchangeTransport2000

Transport and General Workers’ (Rural, Agricultural and Allied Workers) Union

USDAW (Shop, Distributive and Allied Workers) UnionWorld Society for the Protection of Animals (WSPA)

WWF–UK

For further information on the Race to the Top project,

visit www.racetothetop.org or email [email protected]

ABOUT IIED

The International Institute for Environment and Development (IIED) is an independent, non-profit research institute working in the fieldof sustainable development. IIED aims to provide expertise and leadership in researchingand achieving sustainable development at local,national, regional and global levels. In alliancewith others we seek to help shape a future thatends global poverty and delivers and sustainsefficient and equitable management of theworld’s natural resources.

International Institute for Environment and Development (IIED)3 Endsleigh StreetLondon WC1H 0DD, UKTel: 020 7388 2117Fax: 020 7388 2826Website: www.iied.org

IIED is a registered charity no 800066

Race to the Top was supported by the

Esmée Fairbairn Foundationand Defra

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