NFU takes supermarkets to task over CSR commitments

The UK’s supermarkets are used to having their every move scrutinised by the markets, financial analysts and shareholders.

This week it was the farmers’ turn to do the judging, as the NFU published its first major review of the top 10 grocers’ corporate social responsibility commitments.

The report tests supermarket commitments on criteria ranging from buying British to treatment of suppliers. With the Queen’s speech in May having confirmed that legislation governing the Groceries Code Adjudicator will be introduced this parliament, the report is a fascinating insight into how farmers view their relations with some of the UK’s biggest supermarkets. So what is the verdict, which retailers are sticking to their CSR pledges best and what does the NFU hope to achieve?

In many ways, the ‘NFU Review of Grocery Retailer CSR policies’ reads like a school report - though largely positive, it concludes that most retailers could do better in at least one or more area of their businesses.

It’s certainly not as critical as you might expect, given the regularly hostile stance the NFU takes in public utterances. Despite accusing the supermarkets of playing Russian roulette with milk prices, for example, the UK’s largest farming body holds dairy up as an instructive example of good practice in retailer-farmer relations.

Tesco is singled out for particular praise. “Tesco’s initiative taken in 2007 to establish the TSDG [Tesco Sustainable Dairy Group] we considered to be ground breaking at the time,” the NFU gushes, claiming Tesco led the field among the major multiples in developing a contractual relationship with liquid milk suppliers.

Sainsbury’s is described as “highly commendable” for introducing a cost-of-production model as the basis on which to pay its dairy farmers. Only yesterday it announced a 0.26ppl increase, to 30.56ppl, to its milk price following a raft of cuts to farmgate milk prices by others.

The only fly in the ointment for dairy is Morrisons, which the NFU names among the big five as the one that “could and should” be doing more. The NFU calls it an anomaly that - given Morrisons’ love of the integrated supply model - it has avoided setting up a dedicated pool of milk producers.

Morrisons, however, is sticking to its beliefs, maintaining in a statement: “We believe that this form of supply is a postcode lottery which excludes the majority of farmers and does not support the wider industry.”

Partnership
The dairy sector has arguably brought retailers closer to farmers than ever before. But just how far can, or indeed should, these relationships go?
The NFU believes that where business structures allow it, retailers should actually welcome them into the fold. Take Waitrose, for example. The NFU claims that it should take its “responsible and inclusive form of business” a stage further and extend partnership to suppliers.

“We believe there is scope for further exploration into how suppliers could become more fully integrated into the business,” the report states. Waitrose sidestepped the question somewhat in its never-say-never response: “We’re always looking at ways to build on these valuable relationships and certainly wouldn’t rule out any initiatives in future,” it told The Grocer.

The NFU also urges The Co-operative Group to use its sizeable banking arm to support investment in small-scale on-farm renewables and energy efficiency projects, including technologies such as anaerobic digestion.

In response, The Co-op claims that since 2007, its banking arm has leant more than £150m to the small-to-medium renewable energy sector, meaning it is already a “leading lender” to the sector.

Perhaps the most important suggestion is that retailers establish - and in some cases extend - dedicated groups of suppliers in areas outside liquid milk. At the very least, it hopes retailers will consider extending dedicated pools to other dairy products.

However, retailers are reluctant to do so, claiming that it is easier for farmers to supply liquid milk all to one retailer than to supply other, more heavily processed goods.

“Other products hold different complexities, with suppliers producing a variety of materials often for more than one retailer, so different approaches are needed,” says Tesco.

M&S, however, has already started the process, extending its Milk Buying Pledge concept - which guarantees a set price to farmers for their milk - to some lamb and pork.

Dangers
While the NFU encourages closer retailer-farmer relations, it warns that they must not increase the burden on farmers. “Few retailers appear to explicitly recognise that the need to ensure higher standards (that imply higher production costs) are reflected in higher prices to either producers or consumers.”

It also seeks to dissuade retailers from taking a “top-down” approach to supply chains and imposing higher standards on farmers without a dialogue. And it praises Asda and Morrisons for listening to their poultry supplying farmers and dropping their requirements to feed broiler hens only non-GM feed.

Above all, the NFU hopes the report will act as “a baseline in our understanding of the current state of play with regard to CSR” as well as a checklist for how retailers’ commitments can be developed.

But retailers beware: “it’s not a one-time deal,” says Lee Woodger, head of food chain at the NFU, who claims the NFU will be keeping an eye on CSR commitments in future.

“With farmers seeing greater integration with supermarkets and farmers wanting to engage with supermarkets in this arena, it’s up to us to hold them to account.”