Last updated: January 2015
Turning supermarket deals into fair deals
Franziska Humbert, corporate social responsibility policy advisor at Oxfam Germany, on the German supermarket campaign to improve trading and working conditions in supply chains.
Supermarkets have become an essential part of our life. We can buy ever cheaper food from a steadily growing number of countries as well as lots of other products in their stores, from clothes to electronic devices.
But while we enjoy our cheap bananas in the UK and Germany for less than one Euro per kilo, farmers and workers in banana-producing countries such as Ecuador and Colombia suffer from low incomes, health problems caused by pesticides, and the systematic violation of trade union rights.
Supermarkets have become central players in the food market across Europe. In Germany, just four supermarkets – Edeka, Rewe, Schwarzgruppe (Lidl and Kaufland) and Aldi – dominate 85% of retail sales. And with such market power, they can squeeze their suppliers in order to get even higher market shares – with dire consequences for farmers and workers.
German supermarket chains are amongst the most powerful in terms of price cutting. A banana in Germany costs on average 30% less than in France or Italy. Discount retailers lead the way: whereas the multinational fruit companies such as Dole and Chiquita used to determine the price, the industry now takes its cue from the ‘Aldi price’.
Civil society response
This is why, in 2008, Oxfam Germany together with 25 other non-governmental organisations (NGOs) and trade unions started the supermarket initiative. They wanted to fight the abuse of the buying power of supermarkets and advocate for binding human and labour rights throughout the whole supply chain.
This ambitious aim has not been reached yet. While the issues of buying power and unfair working conditions have become more mainstream topics, the bulk of the work remains to be done.
Cutting-edge studies by Oxfam and the Christliche Initiative Romero, revealing exploitative labour conditions on banana and orange plantations, have reached over a million viewers on TV in Germany. They have led to higher sales of fair trade products and better Corporate Social Accountability communication. But they do not change the abusive business model of supermarkets which lies at the heart of the problem.
Having said this, the initiative has achieved a lot. One of its main policy asks – a sector enquiry of the retail trade conducted by the German Federal Cartel Office – has been fulfilled. In September 2014, the office published its report stating that there tends to be an imbalance in power between supermarkets and suppliers (to the detriment of the latter) when negotiating prices and terms of trade. The supermarket initiative can now use this result to mobilise policy makers to act, by working on better competition rules for combating unfair trade practices in the supply chain.
There has also been some progress as regards to supermarkets. Contrary to their former practice, Edeka, Rewe, Lidl and, surprisingly, Aldi now promptly reply quite comprehensively to questions from NGOs on their suppliers and their social performance. All have CSR policies in place and require their suppliers to fulfil social and environmental criteria. Their range of fair trade products has grown.
They co-operate with standards such as Social Accountability’s SA 8000, Rainforest Alliance and Supplier Ethical Data Exchange (Sedex).
More work to be done
However, visible changes on the ground are rare. A recent study on bananas by Oxfam Germany has shown that, in Ecuador, 75% of banana workers still have salaries below the poverty line. One of the main reasons is the price pressure from German supermarkets, which is partly responsible for substantially undercutting the legal minimum price for bananas in Ecuador paid by local buyers.
This lack of progress also reveals the shortcomings of focusing on CSR policies alone, instead of also changing trade practices with suppliers. Without fair rices, suppliers cannot pay fair wages.
But until now, German supermarkets deny being unfair to suppliers; they even contest their buying power and unfair trade practices. Thus, a lot remains to be done for the German campaign to convince German supermarkets to start similar projects and change their buying practices.