Supermarket sweet?

Long labelled as the villain in the eco-drama, supermarkets are increasingly keen to claim green credentials for their products and performance. A year on from Wal-Mart’s well-publicised conversion, Andrew Purvis scans the shelves for signs of lasting change.

It’s an exclusive interview of sorts. I’m talking to Andy Ruben, vice-president of corporate sustainability at Wal-Mart Inc. But not quite face-to-face: he’s on the speakerphone from Bentonville, Arkansas. And we are not alone: he is flanked by his head of communications, having been tracked down via a cast of media minders called Shannon, Amy, Karen and Jami.

Mind you, Ruben might be forgiven for thinking he needs all the protection he can get. In the week I requested an interview, Wal-Mart was boycotted by the world’s largest pension fund (the Norwegian government’s oil fund) for alleged “serious and systematic abuses” of human and employment rights. In Britain, where the documentary Wal-Mart: the High Cost of Low Price was already making mock of the company, its subsidiary Asda was threatened with legal action over alleged union busting.

“Look at our Kid Connection toys,” Ruben offers bravely, when I ask about Wal-Mart’s environmental progress. “We made the plastic packaging a third of an inch less deep - and that saved us $3.5 million a year, 1,000 barrels of oil and 4,000 trees. We fitted auxiliary power units [motors that cool the cab instead of using the engine] to our 7,000 trucks. Every year that saves us $25.5 million: that’s 10m gallons of diesel and 100,000 tonnes of CO2. All our wild-caught seafood in the US and UK will be certified by the Marine Stewardship Council in the next three years.”

It’s tempting to dismiss it all as so much green froth, but the size of the numbers gives an idea of the sense of scale involved. For a decade, Wal-Mart had largely ignored campaigners’ brickbats. Now it appears not only to be listening but using high morals, rather than low prices, to compete. And Wal-Mart’s merely the latest to come to the (green) party. Sainsbury’s, Waitrose and Tesco’s have, in roughly that order, been making increasing play of their green credentials - whether it’s recycling carrier bags, pushing organics, or powering stores with renewable energy.

“This isn’t new territory for us,” says Alison Austin, head of brand policy and sustainability at Sainsbury’s. “We’ve been working on sustainable forestry and fishing for years [see p20]: we stock more Fairtrade bananas than anyone else, and we’re aiming to be the largest purchaser of Fairtrade cotton.”

Sustainability or bust

For Rita Clifton, chairman of Interbrand, the race to green the aisles is hardly surprising. “Businesses have a reputation to protect, and a company like Tesco will go out of its way to do the right thing. If it produces the right products in a responsible way and gives consumers what they want, people will buy from it. If it gets greedy, complacent or too bullying, they will punish it.” Supermarkets, she concludes, have to be sustainable in order to stay in business.

It’s a view shared - for very different reasons - by Felicity Lawrence, Guardian journalist, author of Not on the Label, and long-time scourge of supermarket power.

“You have to question the timing of all this, because the price of oil is rising. What supermarkets are mainly talking about is fuel and plastics made from crude oil. With oil prices spiralling, they have this huge incentive to deal with things they weren’t bothered about before. It’s not about being a good neighbour, it’s about the bottom line.”

While welcoming recent green initiatives, she believes they fail to address the issue of a business model that is deeply unsustainable. “You have to question the timing of all this,” she says. “What supermarkets are mainly talking about is fuel and plastics made from crude oil. With oil prices spiralling, they have this huge incentive to deal with things they weren’t bothered about before. It’s not about being a good neighbour, it’s about the bottom line.”

Muscle and clout

But what if their sheer muscle, allied to bottom line nous, could make supermarkets a lever for change? In his speech, Lee Scott argued that vast corporations such as Wal-Mart (4,000 outlets, 100 million customers a week, a new store opening every three days) could be exactly that. “What if we used our size and our resources to make this country and this earth an even better place for all of us?” he asked. “What if the things people criticise us for - our size and reach - became a trusted friend and ally to all?” Where Wal-Mart leads, Scott implies, others will follow. Ruben points to its success in improving the fuel-efficiency of its trucks by 20% (against a target of 25% over three years). “All you have to say is ‘Wal-Mart is saving $25.5 million a year on this,’ and you no longer have to convince anyone. It’s happening, it’s rippling.” Size and reach is a major factor, agrees Sainsbury’s Alison Austin. “Wal-Mart are doing it on a mega-scale: we’re a large company, but economically speaking, they’re the size of a small country. And that’s bound to have an effect.”

Similarly, Wal-Mart’s decision to ‘democratise’ organic food (“making it available to more people, at an acceptable price and as efficiently as possible”) is catalysing the big US food manufacturers. Kellogg and Kraft were already developing organic versions of products in the spring; Pepsi and General Mills (maker of Cheerios) began work on chemical-free alternatives later in the year.

It’s a situation not entirely welcomed by campaigners, who believe Wal-Mart may treat organic farmers much as it has treated the non-organic kind: driving down retail prices, paying farmers less and putting hundreds out of business.

“We have not found that,” Ruben insists, “because we provide so many opportunities for innovation and improvement.” With organic cotton, he explains, Wal-Mart suppliers have been encouraged to cultivate a secondary crop in the six months of the year when cotton does not grow. “We purchase both the rotation crop and the cotton,” he says, “offering the farmer more stability.”

Sainsbury’s has also been pushing organics, but Austin sounds a sceptical note on Wal-Mart’s ‘democratisation’. “Organic farming is intrinsically more costly: yields are generally lower and production costs often higher, so our prices really should give a fair reflection of that. Consumers should recognise the true costs of production. If Wal-Mart are disguising [those], then it’s not fair to the customer or the grower.”

So can big beasts like Wal-Mart really use their muscle to bring about positive change? “Supermarkets could become vehicles for sustainability,” says Bill Vorley of the International Institute for Environment and Development, “and some of them will.” But they won’t do it alone. For their part, NGOs have been pushing for transparent auditing of performance and benchmarking progress across the industry [see right]. And the government’s Food Industry Sustainability Strategy, launched by Margaret Beckett in April, sets supermarkets targets for carbon emissions, water use, domestic transport and food waste. Not everyone’s impressed. “It’s a weak response to the problems caused by the industry,” says Vicki Hird, senior food campaigner at Friends of the Earth. Progress might not be measured and reported on a regular basis, she says, and adds: “[While] it’s important that the food industry reduces its energy use, it must also address crucial problems such as how supermarkets treat suppliers, here and overseas.” Lawrence agrees:

“We’re still left with the essential problem - that supermarkets depend on this globalised food system that is not only incredibly extravagant in terms of fossil fuel, but constructed on a system of ordering that creates the need for exploited labour.”

Supplier demand

How supermarkets treat their suppliers is the key issue for British farmers, says Robin Tapper, head of food and farming at the National Farmers Union (NFU). “Someone will tap you on the shoulder and say, ‘We’ve had a fantastic year; to help continue that, we’re going to reduce your price by 1%.’ Because small producers invariably have just one supermarket as their main customer, they have nowhere else to turn.”

For Austin, though, it’s not that simple: “There will always be tough negotiations with a supplier, sure - but if we pay so little that he goes bust, or can’t invest in the next generation of his product, then that’s not much good for us, is it? The ability to have a good relationship with our suppliers can actually help differentiate us from our competitors.” Often it’s a case of working with them to make changes over time, she says. “We’ll invest part of our margin in helping them raise their standards, in return for some investment on their part.” But, she insists, “if we have reason to suspect our suppliers aren’t treating their workforce decently, then we’re quite prepared to drop them until they do”. Sainsbury’s did just that with one of its biggest strawberry suppliers this summer, she says.

Tapper, though, believes more intervention is required. “The coming Competition Commission inquiry could be our last chance,” he says, “and we are pleased with its scope.” It will look beyond market dominance and hear evidence from aggrieved suppliers. The NFU hopes it will lead to regulation forcing retailers to reform the way they do business. Felicity Lawrence of the Guardian is less optimistic. “Its response in the past has been feeble,” she says, “and the coming inquiry will take two years - by which time more damage will have been done.”

Elsewhere in Europe, governments have experimented with laws banning below-cost pricing, when retailers use their market dominance to force farmers to sell food for less than it costs to produce. “France even tried dual pricing once,” Bill Vorley points out, “where consumers see the price farmers are paid as well as what they are paying.” In Argentina and Mexico, codes of practice govern trading relationships between supermarkets and suppliers. In Turkey, legislation forces supermarkets to buy from regional wholesalers. In Thailand, no hypermarket can be built within 15 kilometres of a town centre.

Retailers are past masters are finding ways round awkward legislation. But it is this last approach - town planning - that excites Andrew Simms, policy director at the New Economics Foundation. He argues that councils already have the authority to constrain supermarkets. For example, they could insist that small independent butchers, bakers and fishmongers be given good sites dotted around a shopping centre dominated by an Asda. But, he cautions: “In theory, councils wield a lot of power,” he says. “In reality, they have to make judgements about whether they can absorb the cost of fighting the supermarkets through protracted legal processes.”

“If you want businesses to behave differently you have to write it into law. At the moment, supermarkets will always choose to do what they are set up to do - extract the maximum possible value for their shareholders.”

“If you want businesses to behave differently,” says Simms, “you have to write it into law. At the moment,” he says, echoing Clifton, “supermarkets will always choose to do what they are set up to do - extract the maximum possible value for their shareholders.”

But what if there are no shareholders? Waitrose is part of the John Lewis Partnership and, as such, co-owned by staff. According to CSR head Nick Monger Godfrey, “The democratic way in which we work enables us to make decisions which, if we were listed, would be harder to make.” He cites the Waitrose Foundation, which finances social projects in South Africa from the profits made on citrus fruit. Unlike Fairtrade, where customers pay a premium, the cost is absorbed by the company. “It’s a kind of philanthropy. Waitrose is giving up its profit to make a real difference to the communities where we trade.”

Ruling it in

Which is all well and good, but philanthropy can only take you so far, surely? “We need legislation,” Monger Godfrey agrees, “we need to enforce it, and then we need incentives. Organisations like ours, which are prepared to go the extra mile and invest in the future, need to know they are supported by long-term public policy. What we want is long-term vision from all parties and the government on what sustainable retailing looks like. Then we can factor it into our business plans.”

Austin agrees. “Where there’s a competitive market, it’s extraordinary how much voluntary initiatives can achieve. But they come at a cost. And if what you’re dealing with isn’t really of great interest to the customer - energy efficiency being the classic example - then you need regulation.”

For Vorley, too, tougher legislation is the answer. “Put in some wise, smart regulation behind some of the best players,” he suggests, “and make sure you reward innovation rather than making it a cost for those leading companies.”

Lawrence also believes in regulation, but fears the government is not enforcing existing rules with sufficient determination “because there are such close ties”. Supermarkets deliver low inflation and high employment, she argues, which makes government reluctant to interfere.

But change may be in the air. Environment secretary David Miliband met with supermarket chiefs from Asda, Morrisons, Sainsbury’s and Tesco in July, and told them he wanted progress on everything from carbon reductions to local sourcing of seasonal produce. “The food industry has the potential to significantly affect our fragile environment,” Miliband said, “but it is also in the unique position of being able to make a major positive contribution to reducing our environmental footprint.”

For Lawrence, though, “there is a wider problem, which national governments on their own can’t solve. We are dealing with emerging global monopolies - and we don’t have the global institutions to tame them.”

Our best hope, she believes, is the public’s desire for a more ethical retail industry. “I’m optimistic, on one level, about the strength of the consumer backlash,” she says. “Supermarkets know they are under attack. You’ve got this Wal-Mart film, you’ve got the protestors, the Women’s Institute, MPs and the Church expressing concern about the supermarkets’ power. That criticism has reached a critical mass. So the industry must act.”

Back at Sainsbury’s, Austin seems, at least partially, to agree. “Our customers expect us to have a decent supply chain, where suppliers are paid properly and their workers get a decent living wage.” She says that customers fall “along a spectrum”: some “have zero interest” in green issues, but others are already using their purchasing power, and that’s increasingly reflected on the shelves. “There’s a much greater appetite [within Sainsbury’s] now to offer customers something other than strict end performance and price… We want to move them all along that spectrum, so more are asking questions of us, and challenging us, too.”
 Auditing the aisles“Retailers are happy to brag about their green credentials, but unwilling to have them scrutinised by a third party,” says Bill Vorley of the International Institute for Environment and Development. Independent auditing could remedy that. Four years ago, when Vorley set up Race to the Top - a scheme to track the ethical performance of UK supermarkets - it failed partly because some key players refused to provide data. “They’ll do sustainability on their own terms,” he says, “but they won’t make the objectives and reporting transparent. I’d like to say, ‘OK Tesco, you’ve got a ten-point good neighbour policy. How about involving a third party in benchmarking progress towards that? Otherwise, years down the line, you’ll find yourself accused of greenwashing.’”

Not everyone believes benchmarking is a good idea. Nick Monger Godfrey, of Waitrose, says that contrasting the environmental performance of a big out-of-town retailer with a fresh-food store in a town centre is “apples and pears” and can be misrepresented. “We’re not nervous about sharing information,” he says, “but you have to make sure you are comparing like for like.”

Nevertheless, Waitrose and others have agreed to be audited by the National Consumer Council (NCC) in its Greening Supermarkets project, which reaches fruition this autumn. “We’ve done an initial independent survey,” says NCC’s Sue Dibb, “and we’re asking supermarkets what their policies are on climate change, biodiversity, waste and chemicals.” The results will be published as a league table, so consumers can judge for themselves.
Andrew Purvis is principal investigative writer on food issues for The Observer Food Monthly.

9 October 2006

Andrew Purvis