Co-op: 'sound sourcing' is possible and profitable

Related tags Supply chain Supply chain management Management

Supermarkets in the UK come in for a lot of criticism about their
business practices, with the pressure exerted on suppliers in order
to boost retailers' margins the most recent flashpoint.

But if Tesco, Wal-Mart and other retailers highlighted by Oxfam's report​ last week still apparently have a lot to do to convince many observers about their ethical credentials, other chains are already playing an increasingly pivotal role in improving the lot of suppliers from across the world.

Not surprisingly given its growing support for one ethical trading scheme, Fairtrade, the British retailer with the most impressive credentials in this area is the Co-op. Ian Burgess, group quality control manager at the chain, told​ that while Fairtrade was the most obvious example of its ethical stance, Co-op also went to great lengths to support suppliers not included in this scheme.

"The retailing of Fairtrade products is only one part of the strategy; we are also committed to addressing the greater part of the supply chain by working with our numerous suppliers to consider the workplace standards they operate to and to agree standards which meet international conventions. This we term ethical trade or sound sourcing,"​ Burgess said.

The Co-operative Group is a founder member of the Ethical Trade Initiative (ETI) - a partnership of businesses, development organisations and the Trade Union movement with some governmental input, but while it works closely with this organisation, the Co-op also has its own code of conduct as well, Burgess explained.

"Whilst essentially similar to the ETI base code, the Co-operative Group code does in certain areas go further. We aim to work with our suppliers to deliver continually improving workplace standards and we are seeking to put sound sourcing in the same light as quality management and other issues where we work closely with our suppliers. Much of our work to date has demonstrated the effectiveness that good supplier relationships can bring to developing ethical trade solutions."

But Burgess explained that the code was not set in stone, and that any discussions with suppliers had to offer them the opportunity to raise their own concerns. "Effective implementation of ethical trade needs to be through partnership with suppliers, with ongoing dialogue about issues and solutions."

But with consumer demand for Fairtrade and other products growing rapidly - ethical food and drink sales in the UK reached £1.77 billion last year, with Fairtrade accounting for £59.5 million of this total, according to the Co-op Bank's latest Ethical Purchasing Index - the Co-op retail group is looking to extend the range of products in this category away from primary food products such as coffee or fruit.

"Implementing our code of conduct has to date considered our food and non-food product range as a priority. However, we are now seeking the inclusion of the wider supply chain, such as for example plastic shopping bags,"​ said Burgess.

Time-consuming but worthwhile

But strengthening ethical relationships is a lengthy and complicated business, he added. "When we started down the route of ethical supply chain management we might only have considered a factory which provides canned fruit for our shops, but with the progressive development of our approach, we are now also including a sample of the farmers who supply the produce to the cannery, significantly increasing the number of sites we have to consider."​Site visits in fact play a key role in the process of assessing whether Co-op will work with suppliers. These visits are either carried out by members of the Co-op's own team (who have received appropriate training) or by external audit bodies.

The criteria on which potential suppliers are assessed have also been refined over time. "We aim to develop strong partnerships with suppliers which have been ground breaking. For example, the relationship with our tea suppliers has proved invaluable, since the work enabled us to confirm that all plantations providing our tea meet our standards.

"Considering the supply base implications of this commodity market, this was a major coup. The relationship demonstrates how retailer/supplier/product relationships can function effectively on a long-term basis to monitor and improve workplace standards. There may be parallels we can take from this to address similar commodity products,"​ said Burgess.

"Of course any assessment is only of value if subsequent follow-up action is both constructive and reviewed. We develop (not impose) action plans with our suppliers, agreeing and monitoring them, and we have found that ongoing dialogue is invaluable if improvements are to be sustained."

According to Burgess, this sustainability stems from the development of systems within the supply chain that ensure the basic standards the company is aiming for become an integral part of the way the Co-op works with suppliers - and more importantly the way they organise themselves.

"This requires a broader awareness of the issue, and we are working to build this via what we have termed our 'workbook' approach. We have already organised seminars for our suppliers in several countries, such as India, Kenya and Colombia.

"This approach revolves around the supplier taking ownership of the issues and we work with them to deliver what should be common shared goals, linking this to long-term business relationships, either directly or through our agents. In so doing we are working with our suppliers to create partnerships that support the ongoing maintenance of standards, both in terms of quality and social responsibility. This is an approach we are taking both overseas and within the UK."

Burgess concluded: "We appreciate that we are on a learning curve and that the approaches we are taking to ethical supply chain management are continually being reviewed and refined to take account of our and other people's learning and experiences.

"Helping to develop our approach throughout the supply chain is an area where we welcome input from a wide range of sources."

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