Indicator 3.4

Issue: Labour standards in the supply chain

Indicator: Existence and application of labour standards code of conduct

Supermarket supply chains are like mazes – the huge number of suppliers and sub-contractors send them in all directions and extend them all over the world. The supermarket’s drive to lower input costs and increase the amount and variety of food needs to be balanced against the social costs that result for the workers involved in the process.

Issues affecting UK supermarket workers and their unions have been looked at under indicators 3.2 and 3.3. It is clear that where national labour law is effective and unions can operate this produces meaningful change in labour standards.

A proportion of food products come from UK suppliers in sectors where trade union recognition is not very likely. For example, in fruit farms which rely on a tiny workforce plus a larger number of seasonal pickers. The issue of ‘gangmaster’ labour on farms where casual labour for crop picking and packing are often supplied by small, informal employment businesses is another issue of concern. Many ‘gangmasters’ operate in breach of Agricultural Wages Orders as well as breaking rules about payment of income tax and NI contributions.

The situation of workers in countries where labour law is weak or not implemented and where there is no trade union recognition can be much more serious, even life threatening. As the ILO steps up its work on Decent Work and the Informal Economy, informal workers, many of whom are women working in the supply/value chains for food production in developing countries, are highlighted as a huge proportion of the workforce who need empowering to claim their rights. Supermarkets are beginning to address these problems through codes of conduct. The Ethical Trading Initiative (ETI) has established a Base Code, derived from the core ILO Conventions and several supermarkets have used this as a base for their own codes.

The ETI is a UK-based alliance of companies, non-governmental organisations (NGOs) and trade union organisations committed to working together to identify and promote good practice in the implementation of labour practice in global supply chains, including the monitoring and independent verification of the observance of code provisions.

The ETI ‘Base Code’ of labour practice contains provisions on the following broad areas:


What can supermarkets do?

For the vast majority of UK consumers a supermarket's commitment to social responsibility is important and many say that they would be willing to pay more for this. There is the counter argument that what consumers say does not always turn into purchasing behaviour, although examples like Fairtrade-labelled coffee provide evidence that this is already happening in some niche markets.

According to the EC Green Paper on Corporate Social Responsibility, two of the issues European consumers care most about (source MORI 2000) are:

"protecting the health and safety of workers and respecting human rights throughout company operations and the chain of suppliers (e.g. not using child labour)"

Their codes should be seen as part of a range of measures to secure and safeguard labour standards that complement domestic and international labour law and trade union collective bargaining. There is a danger that supermarket codes will be expected to solve problems that also need an international, legal and government response. As is stated in a recent UNRISD paper: there is a

"fear that codes of conduct will replace government regulation and remove the pressure for government control of corporations. ...However, the growth of codes has not led to the reduced role of the state, although the reverse may be partially true. ...It would be a mistake to see codes as a substitute for government regulation"[13]

Several supermarkets are using the ETI standards as a benchmark against which they can assess labour practices of their suppliers in developing countries and they are also beginning to use this as a yardstick to assess fair conditions for UK farm workers. In April 2002, the Local Authority Pension Fund Forum reported that Tesco and Safeway have the most comprehensive codes on labour rights.


Supermarkets and the ETI

Sainsbury's, Safeway, ASDA, Co-op, Marks and Spencer, Somerfield and Tesco are members of ETI. For example, Sainsbury's is a founder member of the ETI and has been actively involved with its activities since it was established. Consumers can learn about the ETI and Sainsbury's socially responsible sourcing policies from the supermarket's web-site.

Sainsbury's "have policies covering all aspects of ethical trade and personnel responsible for managing and co-ordinating the work being carried out by ourselves and our suppliers. Our socially responsible sourcing initiative focuses on looking at the welfare and labour conditions of workers within the supply chain of own brand products to Sainsbury's."

Sainsbury's initially established a Code of Practice on Socially Responsible Sourcing in early 1998 and this has been issued to all the company's own brand suppliers. They now have a programme visiting suppliers to begin to look at and monitor some of the issues associated with it. This is carried out as part of the normal monitoring and inspection process. Suppliers are expected to take responsibility for sub-contractors.

Sainsbury's has also carried out a study evaluating a number of external social auditing companies in order to understand how they operate and the advantages of working with them.

The Co-op has been a leader in social accountability and adopted their Code of Business Conduct in March 1997 and revised it in February 2001. It articulates the values and standards the Society expects to apply in the course of conducting its business. Every employee is given a copy of the code and it also forms part of the terms of employment and breaches may lead to disciplinary action, including dismissal.

The Co-op has made a recent decision to move away from monitoring the company’s performance against their Code and is developing a core set of social performance indicators although the Code will continue to be used to guide employees on the values and standards they should apply when conducting Co-op business.

Other important points that should be made here are that the people who the codes have been designed to protect need to know about them, that companies in the supply chain actually comply with them and that this is independently verified.

Supermarkets have a range of experience on these issues and some have devoted considerable time and resources to trying to find the best way forward. For example, Sainsbury's problems with monitoring are summed up as follows:

"Sainsbury's supply chain is typical of many large UK supermarkets. "We have about 2,000 suppliers providing our 'own-brand' goods and we accept responsibility for monitoring labour standards in those," says Liz Fullelove. "Many of these suppliers also source from within their own supply chains, be these factories or farms…So, even among the suppliers providing own-brand goods, we are probably taking the produce of a million farms across the globe."[14]

ETI member companies have made progress in this area and have increased their monitoring activity. In 2001 there was an increase in absolute numbers of evaluations by 18% although as companies identify more suppliers the proportion of suppliers evaluated has fallen in real terms from 64% to 55%.[15] All members would acknowledge that the practicalities of establishing verification systems and independent complaints mechanisms still have a long way to go. The number of significant corrective actions has shown a modest increase since 2000 but as ETI says, “But in many ways this is the crux of what ETI is about – being able to make a real difference to workers by sustaining improvements in working conditions”.[16]

How this indicator will be measured

Company policy based on core labour standards is taken as the benchmark for this indicator. The adoption of the ETI base code (or equivalent) by supermarkets demonstrates commitment to decent wages and labour standards throughout the supply chain (which includes the UK) by implementing core ILO conventions.

There are however, other factors that need taking into account when measuring this indicator. These include the breadth of product range to which the company applies the code and how far down the supply chain it reaches. Also training for managers and employees on implementing the code and how it is communicated to suppliers and sub-contractors and disseminated to workers. The training received by buyers is particularly critical here as it is they who control many of the aspects of production through the supply chain ensuring that the producers meet quality standards, delivery dates etc.

For example, a recent article in the Guardian[17] highlighted problems for Kenyan workers in the horticultural sector which included excessively long hours, damaging exposure to pesticides and evidence of deception of company auditors. Supermarket members are working with the ETI to improve conditions but as Angela Hale, Director of Women Working Worldwide points out, “Since the ETI report (on the Kenyan horticultural sector) there has been pressure on employers to change things. But the real pressure comes from the production schedule..It is the production schedules which have the potential to lead to abuses.”

Finally, this indicator will look at the extent to which supermarkets have developed monitoring systems and priorities for further implementation and independent verification through social auditing to ensure compliance.


13 Jenkins, Rhys Corporate Codes of Conduct. Self-Regulation in a global economy. Technology, Business and Society Programme Paper No. 2. UNRISD, April 2001

14 ETI Annual Review 2000-01

15 ETI Annual report 2001/02

16 Ditto

17 Lawrence, Felicity Growers' Market. May 17, 2003

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