Behind the brands: ethical supply chains
An Oxfam campaign has uncovered unethical practices in some of the world’s biggest companies, but how can others avoid these pitfalls? Ceri Jones finds out more about ethical supply chains.
The International Food Policy Research Institute (IFPRI) says that smallholder agriculture supports up to two billion people globally. Yet, these same people are the most likely to be going hungry due to poverty.
In 2013, development charity Oxfam began it's ‘Behind the Brands’ campaign, which set out to expose the practices of the world’s ten biggest food and beverage companies to effect change.
By establishing a scorecard system based on publicly available data, Oxfam hoped to increase awareness of unethical supply chains through what is effectively public shaming. Also, it would give companies the insight they need to fix weak areas of their business, rather than simply holding their hands up in ignorance.
Oxfam said: "Given the inequalities and injustices in the food chain that leave millions of people at risk of being food insecure, especially small-scale producers, the ‘Big Ten’ must use their power to transform how food is produced, traded and processed."
Between them, these businesses generate $1.1bn per day in revenues, so every small change they make could have wide-reaching consequences for world hunger, leaving others to emulate or be deemed unethical. So what can smaller businesses learn from the experiences of the 'Big Ten'?
Playing the percentages: engaging with social and environmental impacts of consumption choices
In April last year, Oxfam released a report on the impact of its Behind the Brands campaign, titled ‘The Journey to Sustainable Food’. The global giants under scrutiny were Associated British Foods (ABF), Coca-Cola, Danone, General Mills, Kellogg’s, Mars, Mondelez, Nestlé, PepsiCo, and Unilever. They were assessed on climate change, water use, helping farmers' livelihoods, preventing land grabs by suppliers, worker conditions, gender equality, and transparency.
Unilever took the top spot from Nestlé in the overall scores (74%) but also made a great deal of change at 26%. Nestlé was second at 69% and Coca-Cola was third at 57%. Although Kellogg’s sits midway, it managed the largest swing at 30% improvement. On the opposite end of the scale, Danone scored the lowest in the initial assessment and made little progress, making it the only company to move less than 10%. Danone rated poorly across the board and decreased its levels of transparency and water issues.
Of the seven categories the standout issue was climate change, partly due to the COP21 Paris conference in 2015, where heads of state, politicians, and businesses pledged to address contributing factors.
Oxfam’s report states: “Consumers are starting to engage with the social and environmental impacts of their consumption choices, and some are starting to reject the current food system in favour of food economies, which are both environmentally and socially more sustainable.”
Aware of this, the 'Big Ten' have taken action to lower carbon emissions, prevent deforestation and / or reduce their environmental impact.
Social media sharing, mentions, and petitions have influence over consumer choices and this is evident in the issue of suppliers stealing land from native people. Following such reports, Coca-Cola stepped in to negotiate between the parties, and when news spread claiming Nestlé sourced its water from drought-hit regions, the company was pressured to change its water policies.
Behind the Brands campaign manager Monique van Zijl said: “Now it is crucial for the ‘Big Ten’ to substantially change their business models to make good on these promises, and challenge their suppliers to ensure that small-scale producers get fair and liveable wages.”
Women, workers and water: wage schemes
At the bottom of the chart sits farmers and workers, presenting more subtle and long-term challenges. Some workforce problems are obscured, even from companies themselves, due to inefficient reporting methods and use of contract staff, who are generally employed under separate terms. It can be extremely difficult to dictate the practices of associate businesses, but Oxfam believes this must happen and that the public has the right “to hold the Big Ten to account for what happens in their supply chains”.
As the top scorer in most categories, there is a lot to learn from Unilever. The multinational company owns such store cupboard staples as Flora, Hellman’s, and PG Tips. It partnered with Oxfam to tackle its issues head on and in 2011 allowed the charity to conduct an in-depth review of its Vietnam operations, from which a report was published in 2013.
While not damning, the report revealed human rights abuses within Unilever’s facilities and its suppliers’, including child labour, inadequate wages, and gender inequality. However, this spotlight meant that steps could be taken to make improvements in these areas.
International human rights and business consultant Liesbeth Unger wrote on the Oxfam website in July last year of the benefits of working with a charity to pre-empt problems: “Firstly, it confirms their leadership, not so much in performance on human rights but in transparency and willingness to learn. Secondly, it improves Unilever's risk management.”
The labour solution involved rolling out a training programme internally and externally for staff to understand why protecting worker rights is beneficial to the company and its operations. But there was a funding gap, as Unilever paid for this but only recommended the scheme to suppliers, which were unwilling to pay for training designed to persuade them to increase their overheads.
To overcome this barrier, Unger suggests that companies: “need to reconcile commercial and human rights requirements and show suppliers how to do the same”.
Also receiving mixed reviews were wage schemes. Unilever rolled out its Fair Compensation Framework in 2015 to ensure workers received a decent living wage, however, this failed to cascade through the supply chain. Unger reports that although Unilever Vietnam’s blue collar worker wages rose by 48% over four years, suppliers were still only paying the minimum wage so many people were working yet still starving.
In response to the report, Unilever’s global vice-president for social impact Marcela Manubens said: “Some of the issues raised by Oxfam are under our direct control but others are more systemic and require a more coordinated approach.”
Unger agrees to an extent, saying that it is hard to ensure all workers receive a living wage when the company’s business model is unchanged. Without a proper business case, increasing wages is often seen as throwing profit away, so a shift in attitude is required.
Oxfam said: “Unilever’s move to ban quarterly reporting, for instance, has played an important role in promoting a longer term perspective with its investors."
Unless suppliers are brought on-board in protecting human rights, it will remain a ‘nice to have’ depending on costs. A more aggressive approach may be to limit use of contract workers.
Getting engaged: operational transparency
While many of the Big Ten shy away from operational transparency, Manubens said: “Transparency is vital to tackle the challenges head on and to move towards more collaborative and best-practice sharing rather than a traditional ‘compliance’ approach".
It helps weed out the weaknesses and it reinforces brand integrity in the event of a public exposure through evidence of proactive practices.
van Zijl said: “Despite some strong progress over the past three years, the Big Ten still have a lot of work to do”.
However, Behind the Brands has demonstrated just how effective engagement and transparency can be, and confirmed that the public is watching. And while several of Unilever’s efforts have fallen short, the commitment itself is influential. If this is continued, alongside government policy changes and Oxfam’s additional campaign to support small-hold farmers to gain a foothold in global markets, it indicates a positive shift.
It will take years to balance the uneven scales but letting go a little will reap rewards, as van Zijl said: “Giving more power and economic value to farmers, workers, and food producing communities will not only be good for all of us, but also for the companies’ bottom lines in the long-run”.