How to end human suffering in supermarket supply chains

Tim Gore Food & livelihoods, Private sector

Last week Tim Gore introduced Oxfam’s new research and campaign focused on the problem of human suffering in food supply chains, here he outlines solutions.

If problem analysis captures media headlines (like these ones from Germany, the UK, the Netherlands and the US last week) it is evidence of solutions and a sound theory of change that wins campaigns.

Our research sets out what can be done to help rebalance the inequality of power driving widespread human suffering in supermarket supply chains. And we think that our campaign design, coming at a period of flux for the supermarket sector, can ensure that those who need to act will do so.

A decent standard of living for farmers and workers is within reach

First, some good news: enabling small-scale farmers and workers in supermarket supply chains to earn enough for a decent standard of living is within reach. Across the 12 everyday food products assessed in our reports, the gap between prevailing incomes or wages and approximate benchmarks of a living income or wage amounts to no more than a few percent of the end consumer price.

But what is more, consumer prices may not even need to rise by such marginal amounts. In nearly all the cases we looked at, supermarkets or other lead firms in the chain have actually increased their share of the end consumer price in recent years, by an amount that is greater than the cost of closing the living income or wage gap.

Of course, we can’t assume that increase is all profit – costs may have risen in that time too. But it does suggest there is sufficient value in many food supply chains to enable small-scale farmers and workers to earn a decent living – if the means can be found to distribute it more fairly. Doing so, however, requires a rebalancing of bargaining power within these chains. Our research points to various options for doing so.

Governments have a key role to play

Governments can make a big difference by investing in small-scale farmers, protecting workers’ freedom of association and setting adequate minimum wages and agricultural commodity prices.

Across our 12-product basket, we show that the gap between prevailing wages and living wages was much lower in countries where governments had set higher minimum wages (defined here as exceeding 50% of monthly GDP/capita).

Similarly, in the cases in which governments intervened to set minimum prices for agricultural commodities, small-scale farmers earned a much higher share of the end consumer price of their goods.

Governments can help on the demand side of the problem too by reining in the buying power of supermarkets. The European Commission’s proposal to regulate unfair trading practices, and the growth of national legislation requiring companies to undertake human rights due diligence in their supply chains, are promising steps in this direction.

Collective action can boost bargaining power

Across our 12-product basket, we show that small-scale farmers who organise in cooperatives can achieve economies of scale up to the point of export that significantly increase their share of the end consumer price of their goods. And we know that where workers in global supply chains organise and bargain collectively they can boost wages and cut working hours.

Supermarkets can and should do more to respect the rights of people in their supply chains

There is much that supermarkets can and – in line with the UN Guiding Principles on Business and Human Rights – should do. For example, a recent survey of global supply chains found that where buyers pay at least the cost of production, hourly wages at their suppliers were nearly 10% higher (compared to 11% lower where they do not).

Our new Supermarkets Scorecard, however, shows how much further they can go (explore the raw data). Most companies have codes of conduct for their suppliers, backed by third party audits. But we know these routinely fail to pick up infringements of human and labour rights, let alone identify their root causes.

We are calling on supermarkets to move beyond this compliance-based approach to one in which they take steps to ‘know and show’ their impacts on the rights of people in their supply chains, and work proactively to address their root causes.

None of the supermarkets we assessed come out as high achievers. The biggest gaps are in the ‘Women’ theme, where all but four companies scored nothing at all. As Winnie Byanyima notes, that sounds negative, but is really a call to action. Our intention is that these companies will use this scorecard to drive a race to the top on social standards in their supply chains – just as we saw among the big food manufacturers in our previous Behind the Brands campaign.

The supermarket sector is ripe for change

We expect the scorecard to help supermarkets chart a different course – and the early responses to our campaign from companies, from the Netherlands, to the UK and US, for example, seem to confirm that many of them see it that way too.

Even if they choose to ignore our research reports, supermarkets care deeply about what their customers think and won’t ignore their demands for long.
But we know a scorecard alone won’t drive change. We are already mobilising tens of thousands of supporters to raise their voices from Europe to the US and beyond. Even if they choose to ignore our research reports, supermarkets care deeply about what their customers think and won’t ignore their demands for long.

And we think the timing is good. The sector is facing a period of major disruption – it is ripe for change. In the next years, grocery shopping is going to change beyond recognition for millions of consumers – more online, more personal and more convenient. Our question is what that will mean for the people producing our food.

Increased market concentration versus fairer and more sustainable businesses

Two paths are opening up. One sees further market concentration among retailers and increased bargaining power over suppliers in the drive for ever lower consumer prices. Look no further than Amazon’s take over of Whole Foods in the US, or the proposed merger of Sainsbury’s and Asda in the UK, to see signs of the sector doubling down on its existing model of squeezing suppliers.

But another trend points to the vulnerability of the current supply chain model. From climate change and social unrest adding new costs, to customers and investors demanding more information about food provenance, and new norms of responsible business taking hold, the case for a fairer and more sustainable way of doing business is only strengthening.

We think all this means the time is right for this campaign, and that – with enough support – we can help ensure it is the second path that is chosen. Our research gives us confidence that – if it is – we can see an end to the worst forms of human suffering behind our food.

Read the Ripe for Change report

Niko Wanders