The news the Australian Food and Grocery Industry Code of Conduct has become legally enforceable and the UK’s Groceries Code Adjudicator has launched its first investigation prompts discussion of the role such codes have to play in fostering a sustainable food supply chain.
A prime question for some might be why are they necessary in the first place. The most cursory glance at the mission statements of major food retailers reveals how strenuously they seek to treat their suppliers fairly – that their businesses would be unsustainable were they not to do so.
However, the inquiries that preceded the creation of the Australian and UK codes – and the fact they led unerringly to a regulatory fix – suggest the retailers might need a little statutory help in achieving those ideals.
The complaints of food suppliers that prompted those investigations, moreover, are shared by counterparts in other countries. At a rather timely Westminster Food and Nutrition Forum (WFNF) Keynote Seminar last week, UK Groceries Code Adjudicator (GCA) Christine Tacon spoke of the interest her work is attracting from other countries and from the European Commission, suggesting the approach the UK has taken may be being viewed as a model worth following.
While the UK Groceries Supply Code of Practice (GSCOP) and its Adjudicator certainly have teeth, including soon the power to impose fines of up to 1% of turnover, Tacon places emphasis on changing an “embedded culture” rather than wielding a heavy regulatory hand. She speaks of the channels of communication she has established with retailers to ensure clarity on what is now expected of them under the Code, with the aim clearly of pre-empting or minimising contraventions and complaints.
Moreover, with regard to that culture shift, Tacon said there is evidence that “things are getting better”, based on what she is hearing from suppliers. The early indications in the UK therefore would appear to be the GCA is having a positive impact in changing the culture, suggesting such codes can indeed make a difference.
Concerns remain, however, and these were also discussed at the WFNF event, which aimed to discuss the “next steps for improving the UK food supply chain and priorities for the Groceries Code Adjudicator”. Chief among these perhaps is the prevailing “climate of fear” which makes suppliers reluctant to bring forward complaints.
Barbara Crowther, director of policy and public affairs at the Fairtrade Foundation, recounted “a cautionary tale” told to her by a Fairtrade licensee. The supplier had made a complaint to the GCA and had managed to recoup the cost of some deductions a retailer had made but had “almost immediately” received notice of delisting citing commercial reasons. The supplier had told Crowther it “felt like we’d won the battle but completely lost the war”.
A number of speakers referred to the important role trade associations can play in mitigating the climate of fear among suppliers. Tacon herself referred to her duty to protect the anonymity of complainants, which she said was extremely difficult to do if only one complaint has been made. The capacity for trade associations to make claims on behalf of numerous members could therefore be extremely significant. John Noble, director of the British Brands Group, also stressed the role trade associations had to play in this context.
And what of the retailer view? Naturally, Alex Simpson, code compliance officer and board member at Asda, stressed the grocer’s support for the GSCOP and how the UK’s second-largest food retailer is striving to ensure it is in full compliance, providing some interesting insight into how the retailer is going about educating and training its buyers.
Simpson was perhaps duty bound to emphasise Asda’s own ethical stance on dealing with suppliers – particularly in the context of its “raison d’etre” to be “Britain’s most trusted retailer” – was already in line with the tenets of the GSCOP. However, given the Code has been created because there has been found to be a huge gap between what retailers say and do in this regard, one might question how useful such protestations of a company’s scrupulous ethics are in the context of the debate.
In aiming to live up to its own ethical standards regarding the treatment of suppliers, Simpson said he was “drawn by” the principle of fair dealing as enshrined in GSCOP. He told the audience that this “very important principle” informs the way Asda trains its suppliers.
Simpson also touched on an issue addressed by other speakers and which also came up in Q&A sessions, namely the limitations created by the fact the Code only extends to the relationship between retailers and their direct suppliers. Tacon, who is always at pains to stress what the GCA was not set up to do when outlining its remit, emphasised this in her own presentation.
There are two causes of concern here. First, that rather than challenge retailers, suppliers may be more likely to exert pressure on their own suppliers. Secondly, that many of the direct suppliers to supermarkets are in fact huge companies in their own right that, just like the major retailers, hold unprecedented power over their own supply base.
Although Simpson prefaced his remarks by saying he did not intend to address the question of the extension of the GCA’s remit, suggesting this was “quite properly something for suppliers and the Adjudicator to discuss”, he did offer the following, clearly well chosen, words: “If it [the GCA remit] was to be extended into other categories it would inevitably have to look at large, principal manufacturers, like Coke, like Nestle, like Premier Foods, who perhaps in December you will recall was named and shamed for pay or stay arrangements with their own downstream suppliers.”
He concluded there is “nothing to prevent a very large food company from implementing very, very draconian terms with their own downstream suppliers, such as terminating supply immediately, unilaterally changing prices…, and that’s a concern”. So much for not going into that debate.
The UK and Australian codes may be very specifically about arrangements between major retailers and their direct suppliers, but they are also about mitigating the negative impact of a power imbalance. As such, discussion of extending their remit – or establishing other codes – to address the relationship between large and powerful food companies and their suppliers seems entirely fair and logical. Simpson was not the only speaker to refer to the furore over Premier Foods plc’s practices last December.
Within debates around diet and health, food integrity and food security, the pressure intense retail competition places on the viability of food suppliers is a recurring issue. If such codes represent an attempt by policymakers to secure a fairer – and therefore more sustainable – food chain, it seems perfectly legitimate for them to look at pressures placed on suppliers to major food manufacturers and, having perhaps benefited from protection under retailer codes of practice, such an evolution may be difficult for those companies to argue against.