Suppliers: corporate responsibility from field to fork

We are coming up against limits of what consumer driven labels can achieve, unless the business case can be demonstrated.

The supply chain is and will remain the centre of much corporate responsibility interest, if only because many of the issues of concern – employment practices such as child labour, human rights abuses and lax environmental standards – rarely now exist within the mainstream operations of large Western companies. They have been outsourced along with so much else in what has been a profound restructuring of the way many large companies organise around core functions only. The aim is almost totally cost driven, often through just-in-time efficiencies. At the same time and cutting directly across that trend is the growing concern in brand name companies about exposure from social risks and high-profile NGO campaigns. However three main factors limit what brand-driven supply chain good practice can achieve. First, there must be effective consumer choice and a real risk of boycott undermining this is growing confusion over labelling. The UK government is already active on green labelling, and the EU Commission sees a pan-European need to harmonise. Creative anarchy was a good place to start, but we need to move on. NGOs may not like the sort of state regulation they regularly call on for companies though. As we go to press, news broke that the Soil Association and Fair Trade Foundation reached voluntary agreement over use of competing terms such as ‘organic’. Second, it’s hard for many brand name companies to trace their sourcing route, even for vital items, where they are purchased on commodity markets without a link to named producers who can meet auditable standards. That’s why the coffee news reported above is significant. The challenge now is to move it from niche and into mainstream. Third is the crucial need to develop that ubiquitous ‘business case’. Procurement managers have tough targets (and personal bonus incentives) to strip X percentage of costs out of the supply chain. They inevitably resist CSR managers adding to their worries, and costs. So the need is to show – as we report opposite is done on the environment – that the extra costs of standard setting, auditing and certification are at least equalled by improvements in cost, quality and reliability. If this is just about adding social costs, there are real limits on what western consumers will pay for.

The world’s two largest coffee traders, Neumann Kaffee Gruppee and Volcafe Group are committing to working with the Rainforest Alliance to improve sustainability along the coffee supply chain. The companies signed a memorandum of understanding with the Alliance on May 22, setting out methods of co-operation, from consulting on best practices and standards in producing countries to cobranding and marketing agreements in consumer markets. Volcafe says the initiative will prove to consumers that the entire coffee community wishes to act in a responsible manner. Contact Kristen Earls, Rainforest Alliance, on 00 1 212 677 1900 (http://www.rainforestalliance. org)

Ethical supply policy

Dixons plans to step up its commitment to ethical purchasing with a new policy that will ensure the company buys its own brand products from factories demonstrating a measurable commitment to social and ethical standards, it announced on May 15. During the first year of the project, Dixons has carried out audits on more than two-thirds (70%) of Asian factories run by its supplier companies. Meanwhile Total, DHL and The Pensions Trust are the latest companies to achieve commendations from GoodCorporation, which requires ademonstrable commitment to spreading good practice down the supply chain. Developed in association with the Institute of Business Ethics, the Standard involves an independent verification process to measure how companies’practices are impacting their core stakeholder groups.Contact Clare Brine, Dixons, on 01442 354474 (http://www.dixonsgroup- plc.co.uk) ; Adrienne Margolis, GoodCorporation, on 020 7924 3994 (http://www.goodcorporation.com)

Buy British in a GM nation?

ASDA announced on April 24 that it is launching a Buy British campaign in 259 stores across England, Scotland and Wales, aimed at increasing sales for its farmer suppliers,whilst educating customers about where their food comes from. Meanwhile, the UK public are invited to have their say on GM foods as part of the UK government’s £500,000 national public debate, it was announced on May 13. Called GM Nation?, the campaign will be built around six regional conferences to be held in June in Birmingham, Swansea, Glasgow, Belfast,Taunton and Harrogate. This will be followed by debates and discussions on GM issues in towns and villages all over the country throughout the first half of July. Contact William Mach, on 020 7238 6043 (http://www.defra.gov.uk)

Labour chains

UK supermarkets including ASDA, The Co-op, Marks & Spencer, Safeway, Somerfield, Tesco and Waitrose are working together in a cross-industry group aimed at improving labour conditions for seasonal and foreign labour in the UK food industry. Coordinated by the Ethical Trading Initiative, the group is calling for the development of a code of practice and statutory registration for the providers of temporary labour. Contact Dan Rees, ETI, on 020 7404 1463 (http://www.eti.org.uk)

Retail savings

Eight UK companies, including Boots and Centre Parcs, are reporting potential savings of more than £1.9m through a partnership scheme by the government agency Envirowise to help companies improve environmental efficiency and maximise profit margins in their supply chains. A full report of the case study will be published by Envirowise later in the year. Contact Lisa Benson, Envirowise, on 01235 433 421(http://www.envirowise.gov.uk)

Double standards

One in four of the UK population now recognises the Fairtrade mark, compared to one in five who were familiar with the symbol in 2002, according to research commissioned by the Fairtrade Foundation to mark World Fair Trade Day on May 17. Meanwhile, British businesses are being invited to sign up to an electronic newsletter covering the latest developments in environmental marketing. Due to be launched by the government in June, the Pitching Green newsletter will coincide with new guidance from the government on green labels for business. In the US, the rapidly growing number of voluntary ethical standards and labels emerging into the marketplace makes it difficult to differentiate credible standards from other claims, according to a new consultation launched on April 1. The International Social and Environmental Accreditation and Labelling Alliance aims to create tools to improve how voluntary standards are set through a code of good practice project. Contact Charles Cox, Defra, on 020 7944 6576 (http://www.pitching-green.gov.uk) ; Patrick Mallet, ISEAL Alliance, on 00 1 250 353 7699 (http://www.isealalliance.org) ; Eileen Maybin, FF, on 020 7405 5942 (http://www.faitrade.org.uk)

Comment

The supply chain is and will remain the centre of much corporate responsibility interest, if only because many of the issues of concern – employment practices such as child labour, human rights abuses and lax environmental standards – rarely now exist within the mainstream operations of large Western companies. They have been outsourced along with so much else in what has been a profound restructuring of the way many large companies organise around core functions only. The aim is almost totally cost driven, often through just-in-time efficiencies. At the same time and cutting directly across that trend is the growing concern in brand name companies about exposure from social risks and high-profile NGO campaigns. However three main factors limit what brand-driven supply chain good practice can achieve. First, there must be effective consumer choice and a real risk of boycott undermining this is growing confusion over labelling. The UK government is already active on green labelling, and the EU Commission sees a pan-European need to harmonise. Creative anarchy was a good place to start, but we need to move on. NGOs may not like the sort of state regulation they regularly call on for companies though. As we go to press, news broke that the Soil Association and Fair Trade Foundation reached voluntary agreement over use of competing terms such as ‘organic’. Second, it’s hard for many brand name companies to trace their sourcing route, even for vital items, where they are purchased on commodity markets without a link to named producers who can meet auditable standards. That’s why the coffee news reported above is significant. The challenge now is to move it from niche and into mainstream. Third is the crucial need to develop that ubiquitous ‘business case’. Procurement managers have tough targets (and personal bonus incentives) to strip X percentage of costs out of the supply chain. They inevitably resist CSR managers adding to their worries, and costs. So the need is to show – as we report opposite is done on the environment – that the extra costs of standard setting, auditing and certification are at least equalled by improvements in cost, quality and reliability. If this is just about adding social costs, there are real limits on what western consumers will pay for.