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ALL PARTY PARLIAMENTARY GROUP ON OVERSEAS DEVELOPMENT MEETINGS
HOUSE OF COMMONS, LONDON SW1A 0AA
Chair: John Battle MP; Vice-Chairs: Tony Baldry MP, Baroness Whitaker;
Secretary: Baroness Northover; Treasurer: Ann McKechin MP
Executive Committee: Tom Clarke MP, Lord Dubs, Mike Gapes MP, Cheryl
Gillan MP
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Supermarkets and Standards
Wednesday 23 November (2pm-3pm Portcullis House)
David Gregory, Head of Food Technology, Marks and Spencer
plc.
Dr William Vorley, International Institute for Environment
and Development (IIED)
Chair: John Battle, MP
The Chairman welcomed those in attendance to today's meeting and explained
the role of the APGOOD series. The Chairman then introduced the two
speakers of the event. David Gregory was to speak first, followed
by Dr. William Vorley. |
Audio (listen to the meeting)
David
Gregory
William Vorley
Discussion (part 1)
Discussion
(part 2)
You'll need Windows Media Player to listen to these clips. You can
download the correct version here
David
Gregory's presentation
William Vorley's
presentation
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David Gregory set out to both differentiate
Marks and Spencer from other supermarkets-alone, it sells only
its own brands-as well as give a brief outline of how supply chains
work, namely where supermarkets intervene and where they do not.
Marks & Spencer recognises and supports the
DEFRA model for sustainable development with the five key principles
of environment, society, economy, governance, and science. These
values have been embedded in the business principles of Marks
& Spencer since its establishment in the 1932. Marks &
Spencer attaches importance to Quality, Value, Service, Innovation,
and Trust and prides itself in being a 100% own brand with complete
command of its supply chain. They have full knowledge and control
of the production and raw materials lending to superior quality
and innovation. This also requires that Marks & Spencer seek
differentiation in the market place which it is able to do through
its long-term supply-side partnerships, some of which have been
in establishment for 20 to 40 years.
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Marks & Spencer places great importance on where
they buy their raw materials: 53% from Great Britain, 27% from the
rest of Europe, and 6.1% from Africa, making Africa it the third
most important trading partner. Work in Africa has enabled Marks
& Spencer to create long term partnerships with many of the
nations, especially those with historic links to Great Britain.
They see it both as a means of poverty reduction and wealth creation.
There are several supply-side models that Marks &
Spencer uses: direct supplier, indirect suppliers, smallholders,
certified supply chains, and others. Direct suppliers are the preferred
method of working and also add to the development of a national
economy. Packing at source enables wealth creation at the point
of production, coupled with providing the best quality and value
product. For example, the Home Grown project in Kenya has allowed
the farmers to produce predator bugs as a means of bio-control for
export all over Africa, creating jobs and wealth at the source.
The model of indirect suppliers is a more complicated
area. He gave the example of UK milk prices. They work with the
UK dairy producers to set up a long-term contract for milk prices
to help farmers plan for the future with set forward milk prices.
Smallholders are those very small farmers that are
very important to the African economy, especially if these small
farmers can gain market access and grow their own business. Marks
& Spencer is aware that some of the high standards that they
set for their products can be detrimental to these small scale farmers.
This is why they have been actively involved in the Ethical Trading
Initiative (ETI) to develop practical guidelines to ensure they
both meet the standards and that Marks & Spencer can gain better
knowledge of the needs of these farmers.
The Certified Supply Chain model, a Fair Trade model,
is an interesting one. Marks & Spencer did not sell Fair Trade
products for many years but currently is enacting an initiative
exclusively to sell Fair Trade coffee and tea in their coffee shops,
the third largest coffee chain in Britain. The Fair Trade Foundation
has said that Fair Trade sales have increased substantially since
this initiative was undertaken.
Marks & Spencer is now developing another form
of partnership, one with the Shell Foundation, aimed at working
with a charitable foundation to develop sustainable SMEs in the
developing world to alleviate poverty and drive innovative trade
links, initially through the production and shipping of flowers.
IT systems are another means through which Marks &
Spencer works with producers. Social conditions are very important
to consumers, which is the reason why Marks & Spencer was at
the forefront in establishing SEDEX, an approach to managing excessive
numbers of expensive social audits being imposed on small suppliers.
The leading issues can be categorized under four headings:
standards, innovation, long term relationships as a barrier for
access to others, and stable political climate. The standards set
by Marks & Spencer, both non-negotiable (pesticides and food
safety) and aspirational (social standards), are completely necessary.
Innovation is necessary because, if people merely develop more of
the same product, this increase in supply simply drives down prices.
It may be that some supermarkets do do this in food trade, but it
is not a policy which succeeds in broadening and deepening markets.
Long term relationships may not allow new or smaller farmers to
gain market access because of these already established ties. Finally,
a stable political climate is crucial for making partnerships work.
A few years ago Zimbabwe rather than Kenya, etc., would have featured
in such a presentation as this, as an example of a pioneering partnership.
This is not currently the case.
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David then gave the floor to Dr. William Vorley,
who presented the work of a group at IIED which worked also with
DFID and the Natural Resources Institute.
The supermarket retail market is one in which provides
opportunities for the poor, connecting producers to value-added
markets, exploiting comparative advantage of small farmers, and
allowing them to escape the volatility and low prices of commodity
markets. At the same time, voluntary private standards, although
a value-added domain, are becoming a de facto condition for market
entry as standards are exclusionary. There are also new forms of
private sector governance moving the supply chain to a demand chain,
which is a tougher environment in which to work despite some success
stories in Africa. The OECD and the Africa Commission have recognised
the sometimes constricting impact of private standards and have
produced statements on this issue.
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Standards come both private and public. Private standards,
themselves, can be broken down into two categories: collective standards
(ie. EurepGAP) and retailer-specific standards (e.g. Tesco's Nature's
Choice). These can either be pre-Farm Gate or post-Farm Gate. Those
standards to be talked about will be collective standards at the
pre-Farm Gate level. He gave the example of EurepGAP as a development
by a coalition of retailers.
The drivers of private standards are essential to
explore. It is not just about consumers, but also about government
policy passing the responsibility and liability to the private sector
through the privatisation of food safety. Reputation and brand protection,
global sourcing, differentiation in the marketplace, and control
and rationalisation of supply are also important drivers.
There are benefits, not just costs, to private standards.
These include health benefits through reduction of chemical, enforcement
of labour standards through minimum wages, and spill-over into the
domestic market.
The convergence of standards from the public and private
sectors is something IIED found to be important. This is currently
being initiated through the New European harmonised framework for
food and feed hygiene, a 'farm table'
approach with what looks like a mission of full traceability.
It is important to note that compliance with standards
is not the only barrier to market entry or sustained market access.
Supermarkets want reliability, consistency of supply, quality, and
scale. All of this requires capital, technology and infrastructure,
and organisation at the farmer level.
Standards are supposed to be exclusive, but how can
we approach some sort of equity within the framework? Much of the
investment has gone into training small farmers and promoting producer
organisation. In terms of the standard setter, there has been adjustment
of protocols and standards. From the angle of the buyer, we should
look at modifying procurement policies. As a government or state,
attention should also be paid to investing in alternative chains
and applying development tests to the new [European] standards.
This is all easier said than done. In reality, the
buyer tends somewhat to stalemate this process as he or she takes
comfort in large producers and expects low costs with high quality.
There is also an asymmetry of power between supermarkets and suppliers,
not necessarily through collusion but through partnerships. This
leads to opportunistic behaviour, unfunded demands for services
and standards, and annual price deflation. Importers say that supermarkets
have little concern about UK development policy, yet company policy,
like Fair Trade, can certainly also operate favourably.
There is currently on IIED-NRI-DFID project underway
exploring dialogue in the supply chain, information about standards
and links between markets, and good practice in procurement.
This is not just an export story. Nor is it a question
of taking refuge in domestic markets as they too are changing, less
so in Africa. Supermarkets are growing in overseas markets, especially
in India, Russia, and China, and changing the way food works nationally.
What, then, can the UK government and development
agencies do?
Become informed and create policy that anticipates change.
There should be direct dialogue between supermarkets and DFID about
getting a better development impact from African procurement.
Join the debate about purchasing practice and mainstreaming
fairness and justice in trading beyond the Fair trade labels.
Develop a greater European lobby on these rules.
Establish coherence between departments; eg. DFID should not
be expected to do it all.
The developing country agenda is about strengthening
voice in standard-setting, as there is so little inclusion of developing
countries in the way standards are set, although things are beginning
to change, even in the trade facilitation area, and DFID has made
some valuable anticipatory investments.
The Chairman then opened the floor to discussion and
questions. In the discussion that followed, the following points
were made:
One observed that is not just about standards in horticulture;
the standards now apply to things like bread and cereal. He commented
that the standards debate makes very little mention of small scale
farmers and asked the speakers to discuss what they believe these
standards truly mean for them. The speakers responded by agreeing
with the sense of romance surrounding the referenced competitive
advantage of small scale farmers, but do believe that small farmers
are benefiting from the schemes. They agreed that there is a need
for more research to be done to better understand the evidence and
to further compare the impacts on large and small scale farms. A
member from the audience added that the reason why some companies
decide to stick with small farmers is to diversify their risk. The
speakers responded by saying there is another argument for this,
increasing the food bank.
Another asked whose responsibility it is to deal with
diversification and the supply being larger than the demand. The
speakers said it is the responsibility of all parties involved,
the farmers, the supermarkets, and the consumers.
Another brought the debate back to equity and standards.
He pointed out that the poorest people in the supply chain are not
the producers, but are the seasonal workers and women, even in a
developed country. He asked why there is a lack of voice for workers.
The speakers responded by saying they too agree that voice and organisation
are key in the corporate social responsibility movement, but also
believe that the models need to be implemented here first before
applying them to developing countries. They pointed to the Gangmasters
Bill and their support of it.
A member of the Fair Trade Foundation thanked both
speakers for mentioning Fair Trade and its impacts, as sales are
steadily increasing. The foundation is working to educate buyers
more on the products and to invest in workers' representation in
larger scale farms. Retailers tend to practise their ethical models
at home first before transposing them into developing countries.
Another questioner, from McKinsey, asked the speakers
to comment on how this form of trade affects the regional trade
model. David gave the example of the Marks & Spencer partnership
with Woolworth's in South Africa as a stimulus for regional trade.
Bill said it was more about reinforcing the market position of those
companies that already have high standards. The man from the Fair
Trade Foundation pointed out that there is a growing Fair Trade
market within South Africa, with products both coming from there
and being sold across the region.
The debate was brought back to the question of how
concerned we should be about the likely demise of small scale farmers.
Another queried the supposition and underlying assumption
that standards are a good thing. They may be for northern retailers
and consumers, but were they in the interests of poor countries
and producers in the South? He asked if these are really appropriate
for developing countries, if we should be advocating this, and whether
we should, instead, be campaigning for the lowering or gradual implementation
of standards. The speakers pointed out that the standards are not
simply dreamt up-many of them are predominantly sanitary and phyto-sanitary-and
that people buy with their eyes. One woman pointed out that there
may be more of a problem with the supermarkets promoting the standards
to the consumers, than of consumers demanding these standards.
The final point was made that it is very difficult
to differentiate between the good and the bad in the supply chains
as consumers. Increasingly, even food products were being sold as
manufactures rather than as biological entities. In the end, there
were fundamental issues of ethics as well as product safety.
The Chairman closed the session by thanking both the
speakers and those in attendance.
Adrian
Hewitt, Research Adviser to the Group: Overseas Development
Institute, 111 Westminster Bridge Road, London SE1 7JD
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