Talking Tesco: UK Competition Commission

A letter written by Ben Birnberg, Company Secretary of War on Want appeared in the Guardian newspaper last month. In his letter Mr Birnberg raised concerns about working conditions in Bangledesh. Lucy Neville-Rolfe, Executive director, corporate and legal affairs, issued the following response:

Tesco: every little helps Bangladesh develop

Friday April 27, 2007

Guardian

I am pleased that War on Want's company secretary, Ben Birnberg, is seeking to engage with us on the issue of trade with Bangladesh (Letters, April 26). He raises important issues. War on Want has committed significant resources to telling us all that conditions in Bangladesh are hard and that standards differ from those in the UK. I can assure Ben that we know this, although we do not accept War on Want's specific allegations about Tesco's practices. We believe that, in the face of these challenges, the right response is to trade with developing countries. This is the way to grow local economies and lift people out of poverty. So we have stuck by Bangladesh, continued to invest in modern factories with high standards and good conditions and done all we can to ensure that those are maintained by the most thorough third-party audits.

The alternative - and believe me, it would be easier - would be for us to stop sourcing in countries that have economic and social problems which are beyond the capabilities of any organisation alone to fix. But I don't think that is right for the people of Bangladesh or is what our customers would expect us to do. So I would say to Ben Birnberg and War on Want: decide whether you agree with us on the principle of trading with countries like Bangladesh. If you do, we would be delighted to work with you on the hard task of raising economic and social standards there and elsewhere.

Lucy Neville-Rolfe

Executive director, corporate and legal affairs, Tesco

Ethical trading - questions and answers

We have two over-riding priorities on ethical trade – the welfare of workers in our supply chain, and ensuring a sustainable environmental impact. There have been a number of reports in recent months claiming that workers in supermarket supply chains based in developing countries are particularly vulnerable to poor pay and conditions because of the way supermarkets operate with suppliers.

In our experience this is not the case. By setting clear standards, auditing against them to ensure compliance, and supporting suppliers to maintain and improve performance, we are helping to raise the bar in developing countries.

Q: What are the standards that Tesco applies on ethical trading?

A: As a founder member of the Ethical Trading Initiative (ETI) we use the ETI Base Code as the standard against which we evaluate labour standards in our supply chain.

The ETI Base Code states:

  • Employment is freely chosen

  • Freedom of association and the right to collective bargaining are respected

  • Working conditions are safe and hygienic

  • Child labour shall not be used

  • Living wages are paid

  • Working hours are not excessive

  • No discrimination is practised

  • Regular employment is provided

  • No harsh or inhumane treatment is allowed

Q: How does Tesco know they are being enforced in the supply chain?

A: We take a risk-based approach to managing labour standards in our supply chain, in addition to the due diligence work we do on legal compliance, product safety, quality and capability for product development. We assess ethical risk using three criteria:

  • The risk inherent in the country where the supplier is located and/or source from, using a country risk matrix developed by Tesco and verified by an independent ethical consultancy

  • The risk inherent in the industry and employment types, e.g. use of seasonal workers, homeworkers and subcontractors

  • Our own knowledge of the risks posed by the site and supplier, based on supplier history

We write to suppliers to inform them of their risk rating and confirm our requirement that they promote the ETI Base Code in their supply chain. Over the past year, we conducted more than 3,000 risk assessments covering over one million workers.

We use independent companies or organisations with a verified track record of experience in conducting ethical audits, to conduct the ethical assessments, highlight non-compliance and manage the verification of corrective actions with the supplier sites to ensure implementation. If an instance of non-compliance has not been verified as resolved by the third-party company six months after the assessment date, a Tesco technical manager will assess the suitability of the site to continue supplying us. Where full rectification may take longer than six months, an ongoing status summary report is maintained by Tesco. When problems with compliance emerge, our aim where possible is to work with the supplier to resolve the issue. During 2006 over 1,000 independent audits were conducted. We also work with our suppliers less formally to identify and resolve issues covered by the ETI Base Code, and use information from NGOs and others to investigate alleged breaches.

We organise ethical trading training courses and workshops for our suppliers. These courses explain our standards, raise awareness of ethical issues and build supplier confidence in managing ethical issues in their own countries and industries.

Over the last year senior management including managing directors, account managers and human resources managers from 613 suppliers underwent 16,600 hours of training by Tesco staff and specialist consultants.

Q: Why do some NGOs claim that these standards are not being followed in your supply chain – doesn’t this show your processes do not work?

A: Our experience on the ground is that we make a positive difference to worker welfare in the countries that we source from. We are determined to maintain the standards set out in the ETI Base Code and will investigate immediately any claims that these standards are not being met.

Recent reports from War on Want and ActionAid have made claims about the impact of supermarkets such as Tesco on individual workers and factories without naming them. This makes it very difficult for us to investigate the alleged breaches of our standards and to work with our suppliers to help them improve conditions for the people that these organisations claim are affected. Based on our reports from independent audits and by conducting additional investigations in the countries identified we have not found evidence to substantiate the allegations that have been made. Where NGOs have been willing to share information, we have been able to work together with the suppliers involved to improve worker welfare. We hope that this approach can be adopted more widely.

We believe that voluntary codes backed up by rigorous third-party auditing are the best way to raise standards. Recent research from the University of Greenwich (commissioned by the Department for International Development) found a range of positive impacts created by the Ethical Codes of Practice used by UK supermarkets and others. In particular researchers found higher wages, greater security of employment, better housing conditions, and better access to water and amenities at Code-adopting farms.

Q: But don’t supermarket buying practices lead to exploitation of workers in the supply chain?

A: All Tesco buying staff for the UK are expected to understand and reflect ethical considerations in their purchasing practices – their job description makes this clear. All buying staff must attend an ethical trading training course which teaches them how to recognise potential problems and employ purchasing practices that minimise ethical risk.

As in the UK, our aim is to build long term relationships that are mutually beneficial for Tesco and the supplier, while maintaining our commitment to ethical trading. This means that we need to build trust with the supplier and to help them improve their capability. We therefore seek to avoid practices that undermine these aims and make it more difficult for suppliers to meet our requirements.

Q: Why don't you support the proposed resolution for your AGM from War on Want on ethical trading?

A: We have made clear to those seeking to put the resolution to the AGM that the statutory mechanism for requiring a company to give notice of a resolution moved by requisitionists is clear and that, without the necessary support, their request is not valid and the resolution will not be put to members. We have made no comment on the validity or otherwise of the resolution being proposed, but we disagree with a number of the points being raised in the resolution and its preamble.