Tag: supply chain

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Is Plan A a stitch-up? Or just over-spun?

Labour Behind the Label has released a report that criticises the achievements of H&M and M&S in their clothing supply chains.

M&S in particular comes off in a bad light. Its 2010 Plan A commitment to deliver a living wage appears to have failed. What the report establishes is that workers in key parts of M&S’ supply chain are still living in poverty. But as the report acknowledges, M&S cleverly did not actually commit to delivering people from poverty – what they committed to was more like ‘enabling’ fair wage conditions to arise. And in 2015, when the commitment was supposed to have been completed, it just turns out that they haven’t arisen.

Of course M&S is not alone in this. It is a widespread failing of much CSR that public statements are carefully crafted to convey the impression of responsibility while actually, technically allowing the company to avoid blame if things don’t work out. That way the PR gain is maximised – at least in the short run.

In the long run people will simply not believe them.

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Supplier abuse

Tesco has been roundly criticised by the Grocery Code Adjudicator over its treatment of suppliers. The adjudicator investigated “the length of time taken to pay money due to suppliers, unilateral deductions from suppliers and an intentional delay in paying suppliers”. The findings leave no doubt that Tesco was engaged in substantial supplier abuse. In fairness it has to be said that, miraculously, Tesco is now ‘a very different company’ from the one described by the adjudicator, according to its CEO.

Yet the real issue is not just Tesco’s practices, but those of all the supermarkets.  I doubt that Tesco is unusual, it is just that since its wider financial malpractices were exposed, it became an easy target. The problem is that there are so few supermarkets that it is no wonder that they exploit their suppliers. And given the opportunities for suppliers to find new customers is so limited, it is understandable that they make few complaints.

But the problem goes even wider than this. While supermarkets may be repeat offenders in terms of supplier abuse, many large companies also work hard to maximise cashflow at the expense of suppliers. Very lengthy payment periods built into contracts are commonplace.

Who is going to bite the hand that feeds them when there are so few hands to go round?

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Tesco: capitalism at the end of the road?

Tesco seems to have been cannibalizing not only its own supply chain but also itself – or at least its own accounting practices. Its accounting was designed to push up profits. And that relentless push for profits has also lead to ever-increasing pressure on supermarkets’ supply chains. As a result suppliers pay in every sense to have their products sold in big stores. The awful results of this for small suppliers in the developing world are well-known. Now we are aware of the awful results for Tesco itself.

Of course it is unlikely that Tesco is alone in this. All the big supermarkets tend to treat their suppliers badly. So should we assume that all of them are also indulging in creative accounting? It would not be very surprising if they were.

Tesco’s aggressive accounting culture expresses the hungry logic of unfettered capitalism. And how much future can there be for a capitalism that starts trying to consume itself?

Well, capitalism may not be quite at the end of the road quite yet, but it is certainly at the end of its tether. Tesco’s behaviour is an example of the sort of things companies find themselves doing when capitalism is pushed too far.

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You've outsourced your ethics – but they haven't gone away…

After the disastrous factory fires in Pakistan last year, a general review of the effectiveness of CSR approaches to supply chain and workers’ issues was needed.  A new report by the US union body, AFL-CIO, shows how poorly current supply chain auditing is serving workers. The report is particularly critical of SA8000 and the Fair Labor Association, both of which are the mainstay of international brands trying to improve the treatment of workers by their suppliers.

So how should companies react? This is a wake up call – the companies that use supply chain auditing standards should ensure that the standards bodies honestly review their effectiveness, as the ETI courageously did some years ago. The results are unlikely to be comforting and may well lead to a modest rise in prices of the goods involved.

But the report also makes the point that both governments and unions need to be properly involved. The solution to a major social problem is unlikely to be the result of just one social actor – the companies – doing their own thing.

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Horse-riding lessons

How can you supply horsemeat responsibly?

The UK has a long history of food scares and scandals – think mad cow disease, salmonella and listeria. But the horsemeat affair is on a different scale and appears to involve a significant part of the European meat supply chain. It also goes beyond health, raising several important issues. The most important being about transparency: processed meat foods do not necessarily contain what it says on the label. And you have to wonder whether the non-processed cuts of meat are what they are sold as.

This has real implications for corporate responsibility. Last year Tesco donated £74.5m to charitable causes at the same time as its lengthy supply chain was compromised. Yet corporate responsibility should begin with core operations rather than charity – and there is little more core than a functioning supply chain. Yet after 20 years of outsourcing, companies in a number of sectors are being forced to realise that responsibility cannot be outsourced. The retailers involved in the horsemeat affair are doubtless considering legal action against their suppliers – all the way down to the abattoirs. Yet even if it is proved that it is all the fault of one party in the supply chain, that will do almost nothing to restore the retailers’ reputations with the public back home.

The main lesson seems to be that the complexity of modern supply chains means that a universal traceability system is essential. And it clearly needs to be more robust than that currently in place for meat supply, even if the reason the supply train has broken down is due to retailers piling on the pressure.

A further lesson for all of us, retailers included, might be: ‘buy local’. Those retailers that source primarily within the UK such as Morrisons and the Co-Op, seem less vulnerable. At least for their own-brand products and particularly where they retain a vertical structure and own their own farms.