An investigation into the unethical supply chain

management of UK supermarkets

Leon Winter 12004116

BA (Hons) Marketing Management

11th April 2016

Word count 10,868

This research project is submitted in part fulfilment of the requirements for

the degree of BA Honours in Marketing Management at the Manchester

Metropolitan University Business School

Statement of Originality

This Research Project is an original and authentic piece of work by me. I have fully

acknowledged and referenced all secondary sources used. It has not been

presented in whole or in part for assessment elsewhere. I have read the

Examination Regulations, and am fully aware of the potential consequences of any

breach of them.

Signed…………………………………………………..

Date……………………………………………………..

Acknowledgements

I would like to thank my tutor Dr Costas Theodoridis for his help via drop in sessions

and via email to guide me towards my chosen area. Without him I am sure this topic

would have been too broad and I’m sure I would have struggled to get this finished.

Also to my parents, Nigel and Sue for believing in me and supporting me throughout

my life. Without them I would not be in the current position where I am about to

graduate.

Finally, two friends Beth Portland and James Alexander who have been there since

the first day. They have always motivated me and been by my side every step of the

way.

Table of Contents

Abstract ........................................................................................................................ 0

1.0 Introduction .......................................................................................................... 1

1.1 UK Supermarket Industry ................................................................................... 1

1.2 Problems Affecting UK Supermarkets .............................................................. 1

1.3 Current Key Issues in the UK Supermarket Supply Chain ................................ 3

1.4 Research Aim ..................................................................................................... 6

1.5 Research Objectives .......................................................................................... 6

1.6 Chapter Synopsis ............................................................................................... 7

2.0 Literature Review ................................................................................................. 8

2.1 Introduction to Literature Review ....................................................................... 8

2.2 Supply Chain Management ............................................................................. 8

2.3 UK Supermarket Supply Chain ......................................................................... 9

2.3.1 The Tesco Role ........................................................................................... 9

2.3.2 Aldi & Lidl: The German Discount Model.................................................. 12

2.4 Ethics ............................................................................................................... 14

2.5 Business Ethics ................................................................................................ 14

2.6 Business Ethics of UK Supermarkets .............................................................. 15

2.7 Business Ethical Standards ............................................................................ 16

2.8 Ethical Policies in Business ............................................................................. 16

2.9 Unethical Business Practices .......................................................................... 18

2.9.1 Discounter’s Ethical Issues ...................................................................... 18

2.9.2 EU Working Conditions ............................................................................ 19

2.9.2 Modern Day Slavery ................................................................................. 19

2.9.3 Exploitation of Migrant Workers in the UK ............................................... 20

3.0 Methodology ....................................................................................................... 22

3.1 Introduction to the Methodology....................................................................... 22

3.2 Research Philosophy ....................................................................................... 23

3.3 Research Approach ......................................................................................... 24

3.4 Strategy ........................................................................................................... 25

3.5 Research Design ............................................................................................. 25

3.6 Questionnaire Design ...................................................................................... 26

3.7 Data Collection ................................................................................................ 27

3.8 Sampling .......................................................................................................... 28

3.9 Data Analysis ................................................................................................... 28

4.0 Findings and Analysis ....................................................................................... 29

4.1 Introduction to Findings and Analysis .............................................................. 29

4.2 Online Questionnaire Findings......................................................................... 29

4.2.1 Questions 1 & 2 – Respondent Demographics ......................................... 29

4.2.2 Questions 3 - 8 – Consumer Buying Behaviour ........................................ 31

4.2.3 Questions 9 - 15 – Consumer Ethical Perceptions ................................... 36

4.2.4 Questions 16 - 19 – Perceptions of Supply Chain Management .............. 42

5.0 Conclusion and Recommendations ................................................................ 45

5.1 Objective One ................................................................................................... 45

5.2 Objective Two ................................................................................................... 46

5.3 Objective Three ................................................................................................ 48

5.4 Objective Four .................................................................................................. 49

6.0 Critical Reflection............................................................................................... 52

7.0 References .......................................................................................................... 53

Abstract

The primary aim of this dissertation is to investigate the unethical practices that exist

within the supply chain management of the UK’s leading supermarkets.

These companies have acquired enormous power and wealth and exercise huge

control over the tastes and buying habits of the British public. In the process, this

has led to unethical financial practices between the supermarkets and their

suppliers, built up over many years, and created complex and extended supply

chains, many to distant places, that are difficult to monitor and open to abuse.

This dissertation will show how the market rivalry between the UK’s traditional

supermarket chains to source products as cheaply as possible, exacerbated by the

arrival of the German ‘discounters’ Aldi and Lidl, has led to worker exploitation

within those supply chains and a further erosion of ethical values.

This investigation will examine the initiatives being taken, and the pressures being

placed on the supermarkets to improve standards, as they are forced to respond to

the demands of a new breed of ethical consumer.

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1.0 Introduction

1.1 UK Supermarket Industry

The phenomenon of self-service food shopping came to Britain 68 years ago on

January 12th 1948, when the London Co-operative Society opened the first full-scale

self-service grocery store in Manor Park, London. The concept had started in the

United States 32 years earlier in Memphis, Tennessee with the opening by its

creator, Clarence Saunders, of the Piggly Wiggly store. It boasted many of the

original features we see in supermarkets today. There was a wide selection of

products, each item was individually priced, there were shopping carts, checkout

counters and of course, self-service.

The concept spread rapidly in the UK and names with which we are familiar today

were soon established and became market leaders. Family grocers, Sainsbury’s,

opened their first supermarket in 1950, Tesco in 1954, the Morrison family in 1961

and Asda in 1965.

Figure 1.1: The ‘Big Four’ UK supermarkets

From the beginning, the UK supermarket industry was oligopolistic and has been

historically dominated by the ‘Big Four’ (Figure 1.1). These companies acquired

enormous power and wealth as they grew, exercising huge control over the tastes

and buying habits of the British public. In the process, they established highly

complex supply chains, which stretched across the world. At one time, Tesco alone

sourced as many as 90,000 different product lines through its supply chains (The

Guardian, 2015).

1.2 Problems Affecting UK Supermarkets

In 2008, the established UK supermarket landscape began to change with the

beginning of the global recession and the financial pressures it placed on the whole

retail sector. It changed shopping habits. Consumers wanted to save money and

went in search of bargains, resulting in less loyalty to any one particular

supermarket brand.

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They became increasingly price conscious. Some were driven by economic

necessity, for others it was a lifestyle choice. It gave birth to a new fashion trend,

and the individual known as the ‘thriftanista’, the savvy shopper, who is admired for

their ability to hunt down the best supermarket bargains.

Rise of the Supermarket Discounters

At the heart of this change in UK shopping habits were the two German discount

supermarket chains, Aldi and Lidl. Despite their presence in the UK for 26 and 22

years respectively, their impact on the “Big Four” - Tesco, Sainsbury’s, Asda and

Morrison’s - had been limited until the 2008 global recession. Since then their

growth has been phenomenal. They now jointly control 10% of total British grocery

sales – double their market share of three years ago (Kantar Worldpanel, 2015).

These gains have been made at the expense of their traditional British rivals. They

seem unstoppable.

Change in British Consumer Shopping Habits

The seismic changes in the British consumers’ supermarket shopping habits is not

due solely to the competitive challenge posed by discounters like Aldi and Lidl.

1) There has been an explosion of small convenience stores in the high street,

petrol stations and in new property developments, many of them created by

the major supermarkets. Their purpose is to entice the busy office worker,

the person on the move. They are local, convenient and easy to access, with

a limited product range.

Consumers have embraced this ‘top up’ shopping concept. It has created a

whole new lifestyle for many, who buy only for their immediate needs and

who reject the traditional big supermarket ‘shop’. The proliferation of these

convenience stores has extended consumer choice and heightened the

competition between the warring factions.

2) UK on-line grocery shopping is on a

rapid growth curve. Over the next five years

it is predicted it will be one of the fastest

growing parts of the retail food industry

(Figure 1.2). By 2020, it is estimated this

sector of the market will double in value to

£17.2bn (IGD, 2015). The recently

Figure 1.2: Growth of online-grocery shopping in the next five years

Source: IGD, 2015

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announced partnership between Amazon - the world’s largest online retailer

and Morrisons - the supermarket chain, to supply an online delivery service

to UK consumers, is an indication of the growing importance of this sector of

the market (Financial Times, 2016). It has created an additional area of

competition between the rival supermarket chains to gain market share and

is also a further example of shifting consumer tastes.

1.3 Current Key Issues in the UK Supermarket Supply Chain

Historically, the UK supermarket industry has made some significant attempts to

behave ethically in its supply chain management. Tesco’s Carbon-labelling initiative

(2007) and Sainsbury’s Fairtrade bananas (2012) made headlines when they were

first introduced. However, as the mainstream UK supermarkets have had to slash

prices to compete with the discounters, there is evidence that in the competitive

price war ethical commitments are being eroded.

Treatment of Britain’s Dairy Farmers

A classic example is the typical British dairy farmer, who for many years was placed

under enormous pressure to supply the supermarkets with milk at an unsustainably

low price level. As a result, over the last ten years, half of Britain’s dairy farmers

have gone out of business – many of them small family enterprises (The Guardian,

2015).

With the main supermarkets’ price cutting wars with the discounters, this situation

reached a crisis point in early August 2015. It led to ugly protests, when farmers

herded cattle through supermarkets in protest at the rock-bottom prices they were

being paid for their milk (BBC News, 2015). There was widespread criticism of the

gouging price policies of all the supermarket chains by the press. They finally had to

bow to this pressure, unilaterally agreeing to pay a guaranteed minimum sum to the

farmers for all milk sold in UK supermarkets (The Telegraph, 2015).

Horsemeat Scandal

One of the biggest scandals to hit UK supermarkets occurred in January 2013.

Various frozen beef products at the lower end of the product range were found to be

adulterated with horsemeat. Data revealed Tesco, Asda and ‘discounter’ Aldi were

the biggest culprits (BBC News, 2013).

This occurred at a time when suppliers’ costs had been soaring and beef prices

were at a record high, because of the price of grain needed to feed cattle (The

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Guardian, 2013). According to the product, manufacturers had secretly used, in

varying degrees, horsemeat in place of beef, as a cheaper substitute.

The scandal did not end there. It also exposed weaknesses within the

supermarkets’ extended supply chains. In a survey commissioned by the global

supply chain risk management firm, Achilles, it was discovered that 40 per cent of

food manufacturers had “never mapped out their entire supply chain to find out

exactly who their suppliers are” (CIPS, 2014). It was determined, the longer the

supply chain, the greater the risk of malpractice. With a shorter supply chain, things

were less likely to go wrong.

Tesco’s Bullying of their Suppliers

‘Power corrupts; absolute power corrupts absolutely…’ (Historian and moralist Lord

Acton, 1887).

Tesco’s dominance of the supermarket business had grown to such an extent by

2007, that it controlled 31 per cent of the total UK grocery market. In that year, it

was estimated that one pound in every seven spent in British shops went into a

Tesco till (The Telegraph, 2007). This huge commercial power had given birth to a

bullying corporate culture, which Tesco exercised without restraint when dealing

with many of its suppliers. Its ruthlessness became legendary.

This led to an investigation into Tesco’s activities

by the supermarket watchdog, the Groceries

Code Adjudicator (GCA), whose findings were

finally published in an 84-page report in January

2016. Led by Christine Tacon, the GCA has the

power to name and shame companies who

behave unethically and then issue public

recommendations. In the GCA Report, Tesco were censured for having

“intentionally delayed” paying suppliers, in order to “improve its own financial

position” and “prioritising its own finances over treating suppliers fairly” (Figure 1.3).

Tacon said the most shocking thing she discovered was how widespread the

practice of delaying payments was, sometimes for years and arbitrarily deducting

major sums from payments to suppliers, in order to meet Tesco’s own financial

targets (Groceries Code Adjudicator Report, 2016). A clearer case of ‘chiselling,

devious and code-breaking behaviour’ would be hard to find, commented Nils

Pratley, The Guardian’s financial editor (The Guardian, 2016).

Figure 1.3: Christine Tacon, Groceries Code Adjudicator

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Under new management, Tesco has promised to mend its ways, especially as they

now stand accused by the Financial Conduct Authority (FCA) of major financial

irregularities, an extremely serious offence. Evidence of this first emerged in late

2014. It was discovered Tesco had artificially inflated profits by £263m in its half-

year results. Although the case is ongoing, it would appear the supermarket chain,

in order to boost its profits, had embarked on a policy of what is known as

‘aggressive accounting’. This involved Tesco seeking agreements from its suppliers

to defer payments owed to them, in order to temporarily inflate its profit margins.

Reports also suggest Tesco booked supplier contributions that were conditional on

hitting sales targets that were unachievable (The Telegraph, 2014). At the heart of

this scandal lay Tesco’s attempts to cover up the decline in its market share of the

UK supermarket business, as ‘discounters’ Aldi and Lidl made further inroads into

its once dominant position.

“It is this slide that lies at the heart of the aggressive accounting scandal but, rather

than fix the growing problems, Tesco pushed its numbers to make things appear

healthier than they actually were” (Acca Global, 2015).

Tesco is likely to pay a heavy price for its unethical behaviour. In its most recent

annual report, the company stated any legal investigation into its financial dealings

with its suppliers and its overstatement of its profits “could have a material and

adverse impact on the group’s financial condition” (The Guardian, 2015). It currently

faces a £500m fine from the Serious Fraud Office (SFO) over the accounting

scandal, but further investigations are ongoing (Marketing Magazine, 2016).

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1.4 Research Aim

1.5 Research Objectives

Figure 1.4: Research Aim and Objectives

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1.6 Chapter Synopsis

Figure 1.5: Chapter Synopsis

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2.0 Literature Review

2.1 Introduction to Literature Review

2.2 Supply Chain Management

The term ‘supply chain management’ was a phrase first used by Keith Oliver, a

leading British logistician and consultant, in a landmark interview with the Financial

Times on 4th June 1982. Prior to that time, businesses used terms such as ‘logistics’

and ‘operations management’ instead (Hugos, 2006).

McKellar (2014) defines the term ‘supply chain’ as “a metaphor used to represent all

the individual firms, their personnel, and the physical infrastructure required to

create and transport products to customers” (see Figure 2.1).

The management of such supply chains has been described by the professional

body the American Production and Inventory Control Society as: “the design,

planning, execution, control, and monitoring of supply chain activities with the

objective of creating net value, building a competitive infrastructure, leveraging

worldwide logistics, synchronizing supply with demand, and measuring performance

globally” (APICS).

In the 34 years since Keith Oliver’s creation of the phrase “supply chain

management”, the term has been redefined, as supply chains have become

increasingly more sophisticated. Hugos (2006) describes these changes as follows:

“SCM acknowledges all of traditional logistics and also includes activities such as

marketing, new product development, finance and customer service”.

Supply chains have become an essential and integral part of modern, successful

organisations. “Businesses depend on their supply chains to provide them with what

they need to survive and thrive” (Hugos, 2003)

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The main focus of every supply chain is on “total system efficiency and the equitable

monetary reward distribution to those within the supply chain. The supply chain

system must be responsive to customer requirements” (Hines, 2004).

Figure 2.1: Basic linear supply chain model (McKeller, 2014)

2.3 UK Supermarket Supply Chain Management

2.3.1 The Tesco Role

In the year to March 31st 2015, the UK grocery market was worth £177.5 billion and

accounted for 51.3p in every £1 of UK retail sales (IGD, 2015). As the industry

leader, Tesco’s share of the UK supermarket business was 28.7% (Kantar

Worldpanel, 2015).

“It is generally recognised that Tesco has one of the

most effective and efficient grocery supply chains in the

UK, if not the world. The transformation of the company

has been remarkable since the early 1980s, and this has

been supported and driven in part by its development of

its supply chain management function” (Sparks, 2010).

Tesco’s supply chain management had been guided by

its core purpose of creating value for customers in order

to earn their lifetime loyalty. The favourite slogan of

Tesco’s founder, Jack Cohen, was “Pile it high, Sell it

cheap” - but this changed (Figure 2.2).

Figure 2.2: Jack Cohen, Founder of Tesco

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“The key period for Tesco's supply chain initiatives was between 1983 and 1996;

during this time, the company introduced several systems including point of sale

scanning, centralized ordering, centralized distribution, automated warehouse

control and electronic data interchange (EDI)” (IBS Center for Management

Research, 2006).

Jones & Clarke (2002) identified that much of this was based on lessons learned

from Toyota, the Japanese car manufacturer. With its ‘just-in-time’ initiative, Toyota

had pioneered methods of dramatically reducing its stockholding of parts and

reducing the lead time in securing them from its suppliers.

The most significant of Tesco’s supply chain initiatives was the establishment of

regional distribution centres (RDC). “Supply chain management was re-aligned to

ensure that these distribution centres around the country more closely matched the

requirements of the retail stores” (Birmingham City Council Business

Transformation Case Study, 2007). Where Tesco led, other supermarkets followed.

In effect, this “marked the removal of manufacturers and suppliers from controlling

the supply chain” … “and reinforced the switch of power to the retail end of the

channel. This period of centralization enabled retailers to reduce lead times,

minimize inventory and give greater product availability to customers in their stores”

(Sparks, 2010).

The supermarkets then took on “other responsibilities that were once the sole

domain of the manufacturer e.g. product development, packing logistics, branding

and advertising” (Sparks, 2010).

This supply chain model proved to be highly effective, not just for supermarket

chains and their customers. It was adopted by retailers from other business sectors

in the UK and overseas, notably the electronics giant, Best Buy in the United States

(Best Buy, 2007).

Tesco continued to be the market innovator in refining its supply chain model. It

established an analytics department staffed largely by science and engineering

graduates, who were then trained in retail expertise and programming skills. By

applying sophisticated analysis to its supply chain, it was able to save millions by

“allowing it to plan stock better, cut waste, optimise promotions and match stock to

fluctuations in demand” (The Operational Research Society, 2014).

In another innovation to improve quality standards, Tesco began to monitor its

supply chain performance through its ‘steering wheel’ approach. “Distribution

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centres are assessed on their operations (safety and efficiency), people

(appointment, development, commitment and values), finance (stock results,

operating costs) and customer satisfaction (accuracy, delivery on time) (CIPS,

2014).

Jones & Clarke (2002), writing in their predictive study of 2002: ‘Creating a

customer-driven supply chain’ focused on two areas of Tesco’s supply chain

development:

1) In a landmark study into the traditional value stream (Figure 2.3), they

discovered that it took 319 days for a can of cola to travel through the

company’s supply chain, in which only 2 hours was actually spent making

and filling the can. This led to the creation of compressed value streams

(Figure 2.4) that flowed more efficiently, and introduced the concept of lean

thinking “in which every aspect of the value stream has been rethought from

scratch”. Jones & Clarke (2002) envisaged “a ‘right-sized’ store, close to the

customer’s home...that carries a customised range of fresh and fast-moving

products and can obtain anything from the complete range of slow-moving

products from the RDC or local superstore to order within a few hours”.

2) They also foresaw, as described by Fernie and Sparks (2004), “a variety of

scenarios for grocery supply chains. All have at their heart a move away

from the current system of bigger, centralised and dispersed, to a model of

faster, simpler and local”. These would be customer-driven supply chains,

which above all, would be “aligned with the demand patterns of consumers”.

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Figure 2.3: Traditional Value Stream model (Jones and Clarke, 2002)

Figure 2.4: Compressed Value Stream model (Jones and Clarke, 2002)

2.3.2 Aldi & Lidl: The German Discount Model

“A discount store is a retailer that competes on the basis of low prices, high

turnover, and high volume” (Lamb et al, 2011).

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“They focus on a small selection of items, moderate hours of operation (compared

with other supermarkets), few services, and limited manufacture brands” (Berman

and Evans, 2009).

The impact of the world’s two pre-eminent discount

grocery chains, Aldi and Lidl, on the traditional UK

supermarket business has been unprecedented

(Figures 2.5 & 2.6). Aldi and Lidl’s discount models

enable them to offer good quality products at

extremely low prices. They operate out of relatively

small stores (on average 1,250sq/m), with limited

product lines (1,500) and few staff (35). It has led to a

fierce price war and struggle for market share. To stay

competitive, all the traditional UK supermarkets have

had to lower their prices, but leaders Tesco, Morrisons and Asda continue to lose

market share to these ‘discounters’ (Business Insider, 2015).

At the heart of Aldi and Lidl’s discount models are their

own-brand goods, which make up 90% of what they

sell.

“Discounters can offer great value because they have

worked closely with food manufacturers for decades.

They control how their products are produced, who

can produce them and what trade-offs to make”. With

businesses in several countries, they have the

advantage “of working with regional manufacturers who are artisanal experts, e.g.

pasta from Italy, which they can sell with great provenance across their entire

estate”. It has made Aldi and Lidl “the number one and number two sellers of own-

brand grocery products worldwide” (Oliver Wyman Report, 2015).

A further aspect of their discount model is the relentless pursuit of efficiency at

every level of the business to drive down costs and maintain quality. Cox and

Brittain (2004) have written of the following characteristics: low gross margins, high

degrees of self-service, low-cost store fittings, stores located in cheaper rent areas

and no home deliveries.

Both Aldi and Lidl are skilful in adapting their working model to local needs and

tastes. “In Switzerland there is a big focus on local provenance of fruit and

Figure 2.5: Aldi Logo

Figure 2.6: Lidl Logo

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vegetables – while in the US stores are a bit bigger, with more stock keeping units

(SKUs), but still fundamentally stick to the core business principles” (Berner, 2014).

In the UK, both ‘discounters’ lay great emphasis on their support for locally sourced

farm produce, claiming 40% of their overall product ranges come from Britain. The

discount supermarket chains are capitalising on what consumers want, according to

Jonathan Neale, the joint managing director of buying at Aldi UK:

“We’re seeing a permanent, structural change in the shopping habits of UK

consumers. They now know they can get all the products they want at significantly

cheaper prices than at other supermarkets” (This Is Money, 2016).

“Our only consideration when we

are working out a product’s price is

how cheaply we can sell it” – Karl

Albrecht, Aldi co-founder (Figure

2.7).

Aldi plan on opening 80 new stores in 2016 in the UK, 23 percent more than the

previous year (Marketing Magazine, 2016). This will be its fastest ever rate of

growth in the UK.

2.4 Ethics

Ethics can be defined as “a branch of philosophy that deals with thinking about

morality, moral problems, and judgements of proper conduct” (Frankena, 1973).

“Ethics is a systematic approach to understanding, analysing, and distinguishing

matters of right and wrong, good and bad, and admirable and deplorable, as they

relate to the well-being of, and the relationships among, sentient beings” (Rich,

2011).

2.5 Business Ethics

The history of business ethics goes back as far as both ethics and business.

However, it was the Greek philosopher, Aristotle, who gave the first recorded

definition of ethics in business, when he wrote of justice and fair treatment of all

parties in a transaction (Ferrell and Ferrell, 2008). Ethical behaviour in commercial

Figure 2.7: Karl Albrecht, Co-Founder of Aldi

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transactions has been variously defined through the ages by philosophers, such as,

John Locke (1690), famous for his treatise on the justification for private property

ownership, Adam Smith in his Theory of Moral Sentiments (1759) and John Stuart

Mill’s Principles of Political Economy Theory (1848).

However, it was not until the 1970s that the specific term ‘business ethics’ first came

into widespread use, initially in the United States and then in Europe and Japan. “It

represents the widely-held belief that ethics applies in business just as it applies in

all areas of life. The scandals about bribery, insider trading, false advertising and

the like…constitute what is generally regarded as misconduct in business and what

the general public associates with business ethics – or more precisely, with the

failure of business to act ethically. The moral norms that are violated apply to all

sections of society” (De George, 2011).

2.6 Business Ethics of UK Supermarkets

The UK supermarket industry is one of the most established and competitive in the

world. In their codes of practice, they all state their adherence to high ethical

standards in terms of their supply chain networks and their treatment of workers.

Tesco, Sainsbury’s, Asda, the Co-op and Marks & Spencer are all members of the

Ethical Trading Initiative (ETI) (Figure 2.8).

The ETI is a UK-based organisation which was

set up in 1998, establishing a code of practice

for its members that supports ethical trading in

their UK and global supply chains and commits

them to providing safe and fair conditions of

employment for their workers. It is also

intended to assure customers that their food is

produced and sourced ethically.

In Tesco’s Code of Business Conduct Report 2015, they state:

“We use the Ethical Trading Initiative (ETI) Base Code as a mechanism to promote

better and more consistent global standards. Our customers expect that we will only

work with suppliers who share our Values and treat their people the right way.

Decent working conditions are important to people everywhere, even in developed

countries” (Tesco’s Code of Business Conduct Report, 2015)

Figure 2.8: (ETI) – Ethical Trading

Initiative

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All ten major supermarkets in the UK are also

governed by The Groceries Supply Code of

Practice (GSCOP) which was first introduced

in 2009 (Figure 2.9). Its legally binding codes

were designed to regulate the relationship

between the supermarkets and their suppliers

with the power to arbitrate, investigate and

fine any retailer who fails to comply with those

codes (Gowling WLG, 2013).

In supporting the GSCOP, Sainsbury’s also has its own Code of Conduct for Ethical

Trade, in which it states:

“Sainsbury’s are conscious of the responsibility we share with our suppliers to

further the rights of workers who produce the goods we sell…we seek to develop

long-term partnerships with suppliers who share our values and who are prepared

to commit themselves to our Code of Conduct for Ethical Trade” (Sainsbury’s Code

of Conduct for Ethical Trade, 2013).

2.7 Business Ethical Standards

For the past 30 years, UK supermarkets have been under pressure from a variety of

powerful environmental and social groups to improve their ethical standards in all

the key areas of their operations relating to: supply chains, workers’ rights,

sustainable sourcing, animal welfare and environmental issues.

“The holy grail for social and environmental campaigners is markets where

companies try to compete against each other on ethics as well as price…

Successive reviews of UK supermarkets have revealed increasingly sophisticated

management and reporting systems operating around social and environmental

impacts” (Ethical Consumer, 2014).

2.8 Ethical Policies in Business

There have been successes large and small, according to Ethical Consumer, the

non-profit UK magazine which, since 1989, has published information on the social,

ethical and environmental behaviour of the major UK supermarkets.

Figure 2.9: (GSCOP) - The Groceries

Supply Code of Practice

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1) Sainsbury’s has been a world leader in the

Fairtrade movement since 1994, in which

farmers are guaranteed a better deal on their

produce (Figure 2.10). It began with bananas

and now extends to hundreds of basic food

products. “Fairtrade offers consumers a powerful

way to reduce poverty through their everyday

shopping” (Fairtrade International, 2011).

2) Marks & Spencer, Tesco and the Co-op are consistently praised for their

recycling, plastic bag policies, food redistribution schemes and reduction of

waste to landfill. (The Guide to Sustainable Spending, 2013).

3) Waitrose and Marks & Spencer have made strong commitments to animal

welfare issues such as free-range eggs, a ban on animal testing and

hormone-free products. “These companies demonstrate the strongest

commitments to farm animal welfare and have developed management

systems and processes” (Business Benchmark on Farm Animal Welfare,

2016).

4) All the major British supermarkets are

signatories to the Roundtable for Sustainable

Palm Oil (RSPO), which helps tackle the

problem of deforestation in Asia and Africa and

sets environmental standards and criteria for

the production of palm oil. (Roundtable for

Sustainable Oil, 2016) (Figure 2.11).

Figure 2.10: Fairtrade

International

Figure 2.11: (RSPO) – Roundtable for Sustainable

Palm Oil

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2.9 Unethical Business Practices

Despite these achievements, the UK supermarkets score very poorly in most areas

of ethical behaviour. Based on environmental

efficiency, animal rights, workers’ rights, product

sustainability and financial practices, the Ethical

Consumer organisation, in its 2016 review of

ethical practices, placed the Co-op supermarket

chain at the top of their score table with a 5.5

rating out of a possible 20. Marks & Spencer

followed closely behind. At the bottom of the

table was Asda, making it the least ethical

supermarket in the UK, with a rating of 0.5,

closely followed by the German discounter Lidl,

with a score of 1.5 (Retail Gazette, 2016)

(Figure 2.12).

2.9.1 Discounter’s Ethical Issues

Both German discounters, Lidl and Aldi, are businesses with a weak commitment to

addressing ethical issues. It is argued that their aggressive pricing and rapid growth

at the expense of the UK supermarkets, who are fighting to maintain their market

share, is leading to a lowering in ethical standards right across the industry.

In April 2016, Lidl came under

widespread criticism for the

heavily advertised jeans they

were selling for £5.99, made in

Bangladesh. It was calculated

the garment workers making the

jeans were being paid less than

10p per pair. They were

accused of worker exploitation

(Figure 2.13). “When your

business model is based on offering the lowest possible prices, someone has to

subsidise that, and that someone is the worker stitching those jeans” (The

Guardian, 2016).

Figure 2.12: Ethical Consumer’s 2016

Review of Ethical Practices

Figure 2.13: Bangladeshi garment workers stitching Lidl

jeans Source: Ethical Consumer (2016)

19

2.9.2 EU Working Conditions

Three of the UK supermarkets who claim to have some of the highest ethical

standards in the industry are not above criticism. In 2015, a Channel 4 television

documentary revealed the deplorable working conditions of certain migrant workers

in southern Spain who produce and supply vegetables and salads for Waitrose,

Marks & Spencer and Sainsbury’s. It was discovered workers were frequently

exposed to dangerous pesticides in the course of their labours. One of the

accusations raised in the programme was that competition in the UK, sparked by

Aldi and Lidl’s low prices, had led these supermarkets to engage in exploitative

practices in a bid to slash the cost of their produce. (Channel 4, 2015).

British MP’s described the evidence uncovered by Channel 4 as “appalling” and that

it revealed “slave labour” working conditions in the supply chains of these major UK

supermarkets (Reuters, 2015).

2.9.3 Modern Day Slavery

One of the worst examples of human exploitation in the UK supermarket supply

chain has been exposed in Thailand, which is the world’s largest shrimp and prawn

provider, with an annual £4.6 billion seafood export industry (The Guardian, 2015).

One of its largest and most powerful companies is CP Foods, who describe

themselves as “the kitchen of the world”. They supply Tesco, Morrisons, Aldi and

the Co-op with frozen and cooked shrimps, as well as ready meals.

Extensive investigations by The Guardian have exposed CP’s unacceptable

practices, which include so-called ‘slave ships’ where many workers are held

captive in horrific conditions and made to work excessively long hours.

In 2000, the United Nations made such activities

illegal by creating the UN’s Global Compact, to

curb unethical behaviour worldwide (Figure 2.14).

Its main principles include human rights, labour

rights, environment and anti-corruption

(Parboteeah and Cullen, 2013). Despite such a

powerful initiative, local Thai authorities seem

powerless to intervene. Figure 2.14: United Nations

Global Compact

20

“If you buy prawns or shrimp from

Thailand, you will be buying the produce

of slave labour” states Aidan McQuade,

Director of Anti-Slavery International

(The Guardian, 2014) (Figure 2.15).

All the named UK supermarkets

involved in this trade agreed that eradicating such practices in their supply chains

was challenging and required a concerted effort on the part of everyone to bring it to

an end. In the harsh world of supermarket competition, their response illustrates the

constant tension that exists between being ethically responsible and remaining

commercially competitive.

2.9.4 Exploitation of Migrant Workers in the UK

There is evidence of unethical business practices closer to home. The UK’s first

Anti-Slavery Commissioner, Kevin Hyland,

has spoken of ‘extremely’ shocking

exploitation in the British agricultural

products supply chain which he has

witnessed in food plants in Lincolnshire,

Cambridgeshire, West Yorkshire and the far

north of Scotland (Figure 2.16).

Many immigrants working as pickers and factory

workers, have poor language skills and are

ignorant of labour laws. Gangmasters and

criminals take advantage of this. There is a

Gangmasters’ Licensing Authority (the GLA) -

created in 2005 to protect migrant workers from

exploitation (Figure 2.17). Because of austerity

cuts in its £4.3m budget, it has been ineffective in

bringing transgressors to justice.

Locked in their price wars, supermarkets place ever greater pressure on the farmers

to meet their changing demands and to supply produce at the lowest possible price.

Figure 2.17: (GLA) – The

Gangmasters’ Licensing Authority

Figure 2.15: Aidan McQuade, Director of Anti-

Slavery International

Figure 2.16: Kevin Hyland, Anti-Slavery

Commissioner

21

This in turn puts greater strain on the low paid, largely immigrant workforce

(Financial Times, 2015).

22

3.0 Methodology

3.1 Introduction to the Methodology

Figure 3.1: ‘The Research Onion’ model (Saunders et al, 2009)

The research design is aimed at meeting objective (2): to identify current key issues

within the UK supermarket business that are affecting those ethical policies and

objective (3): to compare the major supermarkets by exploring how effective and

ethical their individual supply chain models are.

The outmost layer of ‘The Research Onion’, which is not included (in Figure 3.1) has

three main categories: ontology, epistemology and axiology. These are the three

different approaches to the research philosophy. This dissertation took an

epistemological approach, as the researcher was seeking to establish individuals’

knowledge and understanding of UK supermarket supply chains and their ethical

23

dimensions. “Epistemology concerns what constitutes acceptable knowledge in a

field of study” (Saunders et al, 2012).

3.2 Research Philosophy

There are four main approaches to the research philosophy: positivism,

interpretivism, pragmatism and realism (Saunders et al, 2012).

This study will focus on interpretivism in relation to the research method of

epistemology (Figure 3.2).

Figure 3.2: Comparison of the research philosophies (Saunders et al, 2012)

Interpretivists understand the world from a point of view that allows different

interpretations which are subjective. Saunders et al (2012) states, “It is necessary

for the researcher to understand differences between humans in our role as social

actors”. In the social world, it is argued that “individuals and groups make sense of

situations based upon their individual experiences, memories and expectations”

(Flowers, 2009).

Additionally, Pasian (2015) adds that interpretivism “holds the view that observation

cannot be pure in the sense of altogether excluding the interests and values of

individuals”.

However, Mack (2010), criticises interpretivism, “for producing findings which lack

reliability. This criticism takes credence from its inherent subjectivity…by selecting

your paradigm, you are being subjectively oriented towards one way of doing

research”.

24

3.3 Research Approach

Saunders et al (2012), state there are two research approaches: deductive and

inductive (Figure 3.3). According to Ketokivi and Mantene (2010), deductive

reasoning “occurs when the conclusion is derived logically from a set of premises,

the conclusion being true when all the premises are true”. This is in contrast to

inductive reasoning where, “there is a gap in the logic argument between the

conclusion and premises observed, the conclusion being ‘judged’ to be supported

by the observations made” (Ketokivi and Matene, 2010).

Figure 3.3: Deductive & inductive: from reason to research adapted from (Saunders et al, 2012)

The deductive approach was selected for this study, as it best suited the

interpretivism philosophy (Figure 3.4). Bryman and Bell (2015) define deductive

theory as, “the most common view of the relationship between theory and research”.

Figure 3.4: The process of deduction adapted from (Bryman, 2004)

25

3.4 Strategy

The research strategy used a quantitative method. “Quantitative research is

essentially about collecting numerical data to explain a particular phenomenon,

particular questions seem immediately suited to being answered using quantitative

methods” (Sukamolson, 2005). Saunders et al (2012) state that quantitative

research “is normally conducted through the use of a questionnaire or structured

interviews”.

3.5 Research Design

Parahoo (2014) defines research design as, “a plan that describes how, when and

where data is to be collected and analysed”.

This study was exploratory in nature, as it relates to interpretivism and focused on

primary research conducted in the form of an online questionnaire. “An exploratory

study is a valuable means to ask open questions, to discover what is happening and

gain insights about a topic of interest” (Saunders et al, 2012).

The use of an online questionnaire in this study allowed the researcher to establish

what a sampling of over 50 consumers, who shop in UK supermarkets, know about

the industry. It determined their views on the supermarkets’ management of their

respective supply chains and their ethical behaviour. The questionnaire also

gathered detailed information about these same consumers’ shopping habits,

choices and preferences.

DeVaus (2002) defines questionnaires as, “techniques of data collection in which

each person is asked to respond to the same set of questions in a predetermined

order”.

According to Saunders et al (2012), questionnaires differ, based on delivery and the

amount of contact you have with the respondents (Figure 3.5). For the purposes of

this dissertation, the researcher chose a web-based questionnaire as the most

effective means of engaging as large a number of respondents as possible, within

the time constraints imposed by the project.

26

Figure 3.5: Types of questionnaire (Saunders et al, 2012)

3.6 Questionnaire Design

This questionnaire (Figure 3.6), focused on two main research objectives:

Objective (2): to identify current key issues within the UK supermarket business that

is affecting ethical policies.

Objective (3): to compare the major supermarkets by exploring how effective and

ethical their individual supply chain models are.

Figure 3.6: Questionnaire Design

27

3.7 Data Collection

Collecting data, via an online quantitative questionnaire, was considered the most

effective means of analysing respondents’ views on ethics and the part they play in

the UK’s supermarket supply chains.

Wheaten and Granello (2004) state that “there are several methods for collecting

data online. The two most common are e-mail surveys and Web-based surveys”.

Participants will give more honest answers to a computer or via an email response

than to a person or paper questionnaire (Phellas et al, 2012).

Garton et al (1997) adds, that online questionnaires, “take advantage of the ability of

the internet to provide access to groups and individuals who would be difficult, if not

impossible, to reach through other channels”.

Dillman et al (2008) argues that, “internet browsers and display screens can all

result in the image being displayed differently, emphasising the need to ensure the

questionnaire design is clear”.

When designing an individual questionnaire, researchers should do one of three

things:

1) “adopt questions used in other questionnaires”

2) “adapt questions used in other questionnaires”

3) “develop their own questions” (Bourque and Clark, 1992).

For the purposes of this study, the researcher chose option three, with nineteen

original questions. These were based on the extensive reading and detailed research

requirements surrounding the central issues of this dissertation.

Most questionnaires include a combination of open and closed questions (Saunders

et al, 2012). Open questions, also “referred to as ‘open ended’, allow respondents to

give answers their own way” (Fink, 2009). Closed questions, “provide a number of

alternative answers from which the respondent is instructed to choose” (Fink, 2009).

This study used the latter. It was decided that the ‘closed question’ approach best

met the criteria of this particular investigation. Responses are “easier to compare as

they have been predetermined” (Saunders et al, 2012) and ‘close-ended’ questions

“limit the respondent to the set of alternatives being offered” (Foddy,1994).

28

3.8 Sampling

Saunders et al (2012) states that, “sampling saves time, an important consideration

when you have a tight deadline”.

There are two types of sampling technique: probability and non-probability (Saunders

et al, 2012). This study focused on non-probability sampling (also known as non-

random sampling). This form of sampling “provides a range of alternative techniques

to select samples, the majority of which include an element of subjective judgement”

(Saunders et al, 2012). Lynch (2011), adds that non-probability sampling techniques,

“aim to construct a sample that can generate the most useful insights that can be

gained by the researcher into that study’s particular focus”.

This researcher used the haphazard sampling method, (also known as convenience

sampling), for its simplicity and effectiveness (Saunders et al, 2012). This is an

approach that has been widely used in Facebook polls.

3.9 Data Analysis

This study used SurveyMonkey to help create a high quality, online questionnaire.

This online survey system then analysed the subsequent data supplied by the

respondents and produced graphs and pie-charts, which were then exported to

Microsoft Excel.

29

4.0 Findings and Analysis

4.1 Introduction to Findings and Analysis

The primary data aims to reach objective (2) & objective (3) and to support the

secondary data themes from the literature review objective (1) (see Chapter 2.0).

Objective (2): to identify current key issues within the UK supermarket business that

is affecting those ethical policies.

Objective (3): to compare the major supermarkets by exploring how effective and

ethical their individual supply chain models are.

4.2 Online Questionnaire Findings

4.2.1 Question 1 & 2 – Respondent Demographics

Figure 4.1: Question 1 Findings

Question 1 and Question 2 aimed to find out the demographics of the respondents.

59%25%

6%

2%8%

0% 0%

Q1 - What is your age?

18 to 24 25 to 34 35 to 44 45 to 54 55 to 64 65 to 74 75 or older

30

For Question 1 (Figure 4.1), the majority of the respondents were between the ages

of 18 to 24 (59%). This was due, in great part, to the researcher using his personal

Facebook account in order to carry out this survey, which resulted in a limited cross

section of participants consisting mainly of students living in different parts of the

UK.

However, Smith (2008), states that in general “more educated and more affluent

people are likely to participate in surveys than less educated and less affluent

people” and adds that “younger people are more likely to participate than older

people”.

Question 2 (Figure 4.2) found that out of the 51 respondents, only 44% of females

responded to the online questionnaire compared to that of 56% of males.

Figure 4.2: Question 2 Findings

44%

56%

Q2 - What is your gender?

Female Male

31

4.2.2 Questions 3 - 8 – Consumer Buying Behaviour

Questions 3 to 8 focus on the consumer preferences and decision- making

processes of the respondents in this survey, in relation to their supermarkets of

choice and their purchases.

Figure 4.3: Question 3 Findings

Question 3 (Figure 4.3): The majority of respondents (49%) showed a preference for

a twice weekly shop, as opposed to the traditional single ‘big shop’, which was

supported by 25% of those questioned. 18% of respondents preferred to shop daily,

reflecting a growing trend for supporting small convenience stores in the high street,

with a limited product range. Many of those stores have been created by the

mainstream supermarkets, carrying such names as Tesco Express, Sainsbury’s

Local, Little Waitrose and M&S Simply Food. It is their response to the ‘top up’

concept of shopping where consumers buy only for their immediate needs. Further

evidence of this trend is shown in recent action taken by the Co-op chain. It plans to

axe 300 of its larger stores and focus on expanding its more profitable, core

convenience businesses where sales are up by 3.8%. “The Co-op opened 97 new

convenience stores in 2015 and refitted a further 264, with plans to open another

100 convenience stores and refit 150 in 2016” (City A.M., 2016).

18%

49%

25%

6%

2%

Q3 - How frequently do you visit a UK supermarket?

Daily Twice a week Weekly Every fortnight Never

32

Q4 - T ick the sup e rma rke ts yo u v is it.

Figure 4.4: Question 4 Findings

The respondents answers to Question 4 (Figure 4.4) give support to the general

trends in supermarket shopping. Tesco, with its huge number of stores - 3,520, of

which 2,500 are convenience stores, remains the market leader, despite its recent

financial mis-steps. 78.4% of those questioned still shop there. Their answers to the

questionnaire also reflect the market in-roads made by the German discounters Aldi

and Lidl, with almost half of the respondents shopping at Aldi (49%), closely

followed by Lidl (39.2%).

78.4%

64.7%

39.2%

25.5%

39.2%

49.0%

15.7%19.6%

35.3%

17.6%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

90.0%

33

Figure 4.5: Question 5 Findings

Question 5 (Figure 4.5): suggests there is still significant support for shopping at

large supermarkets with their multiplicity of choice. 39% of respondents indicated

this preference. Sainsbury’s, number two in the supermarket league behind Tesco,

still have a significant number of large stores. Out of its total portfolio of 1,312

outlets, 598 remain full-size supermarkets. However, a larger number of

respondents (53%) preferred the opportunity of shopping at large supermarkets as

well as the new style convenience stores.

Figure 4.6: Question 6 Findings

Large supermarket39%

Convenience store8%

Both53%

Q5 - Do you prefer to visit a large supermarket with an extensive range of

goods or one of the new-style convenience stores with a more limited range of products?

Large supermarket Convenience store Both

34%

66%

Q6 - Have you shopped for groceries online in the last 6 months?

Yes No

34

Question 6 (Figure 4.6): shows that traditional shopping habits are changing, with a

third of respondents (34%), stating that they have bought groceries online in the last

six months. In a survey conducted by the Institute of Grocery Distribution (IGD) in

2015, “27% of British shoppers claim to shop online for their groceries monthly,

compared to 22% in 2010”. There is a close correlation between the answers given

by respondents in this survey in 2016 and the (IGD)’s findings in 2015. On current

estimates, the online grocery market is set to double in value by 2020 to £17.2bn

(IGD, 2015c).

Figure 4.7: Question 7 Findings

In Question 7 (Figure 4.7), almost half of the respondents (49%) stated that both

location and price were important factors in their choice of grocery store. Store

location (28%) came slightly ahead of price (23%) in deciding the individual

consumer’s choice.

Location28%

Price23%

Both49%

Q7 - Is it location or price that motivates you to purchase grocery items from a particular

store?

Location Price Both

35

Figure 4.8: Question 8 Findings

Question 8 (Figure 4.8) below, showed that respondents were open minded about

their purchase decisions, with 43% opting to buy both own-brand and established

named goods. At the heart of Aldi and Lidl’s success are their own-brand goods,

which make up 90% of what they sell. It has made them “the number one and

number two sellers of own-brand grocery products worldwide” (Oliver Wyman

Report, 2015). With huge economies of scale, they are able to sell their products at

astonishingly low prices. 41% of respondents were happy to buy these own-brand

goods, while only 16% of respondents insisted on established named products. This

consumer acceptance of the Aldi and Lidl discount models explains, in great part,

their considerable commercial success.

41%

16%

43%

Q8 - Aldi & Lidl’s success is based in great part on their own-brand goods which are cheaper than the more expensive, established named

goods, which they copy. Which would you prefer to buy?

Own-brand goods More expensive, established named goods Both

36

4.2.3 Questions 9 – 15 – Consumer Ethical Perceptions

Questions 9 to 15: They focus on the consumer’s perceptions of ethics in relation to

UK supermarkets.

Figure 4.9: Question 9 Findings

Question 9 (Figure 4.9) indicated a division of opinion amongst respondents in their

consideration of the relationship between supermarkets and their suppliers. A

significant 41% gave a definitive ‘No’, but a third of those questioned - 33%, gave a

positive response to the question, with some support - 26%, from the less

committed. Overall, this would suggest a growing interest in this issue on the part of

respondents.

Further indication of the above trend (Figure 4.9), is found in the respondents’

answers to Question 10 (Figure 4.10) below, in which two-thirds of those questioned

– 67%, expressed an awareness of unethical practices perpetrated by the

supermarkets on their suppliers.

Yes33%

No41%

Sometimes26%

Q9 - Do you ever consider the relationship between the supermarket where you shop

and their suppliers?

Yes No Sometimes

37

Figure 4.10: Question 10 Findings

However, in response to Question 11 (Figure 4.11) below, it would seem awareness

of such malpractices does not necessarily translate into direct action by consumers,

in the form of boycotting supermarkets who behave unethically. An ambivalent 61%

- almost two- thirds of those questioned - were open to such a suggestion, but

reserved judgement, or perhaps would be hesitant in taking such action.

Figure 4.11: Question 11 Findings

Yes67%

No33%

Q10 - Have you ever heard of any unethical practices perpetrated by the supermarkets in

their relationship with their suppliers?

Yes No

Yes , definately

33%

Maybe61%

No6%

Q11 - Would you boycott a UK supermarket if you believed it was behaving unethically?

Yes, definately Maybe No

38

Figure 4.12: Question 12 Findings

Question 12 (Figure 4.12): Over 50% of the respondents regard themselves as

being ethical consumers. This is consistent with their responses to Question 9 (see

Figure 4.9) - in which they showed awareness of the sometimes troubled

relationships between the supermarkets and their suppliers, and Question 10 (see

Figure 4.10) – in which respondents showed knowledge of unethical practices

committed by the supermarkets in their relationship with their suppliers.

27%

55%

18%

Q12 - Do you consider yourself to be an ethical consumer?

Yes Sometimes No

39

Figure 4.13: Question 13 Findings

This is further evidenced in the respondents’ answers to Question 13 (Figure 4.13)

in which they were asked about their purchasing habits in relation to ethically and

organically sourced products. They scored highly in these categories, with a

remarkable 92.2% of respondents having made Fairtrade purchases and 82.4%

having purchased organic products. These high scores may well have been

influenced by the fact that 64.7% of respondents had shopped at Sainsbury’s and

35.3% at the Co-op – two supermarkets that, historically, have laid a heavy

emphasis on ethically sourced products (see Figure 4.4). Sainsbury’s has been a

world leader in the Fairtrade movement since 1994, in which farmers are

guaranteed a better deal on their produce (as stated in Chapter 2.0). It began with

bananas and now extends to hundreds of basic food products. The Co-op has

always been in the forefront of good ethical practices. In its 2016 review, the Ethical

Consumer organisation placed the Co-op chain at the top of their score table (see

Chapter 2.9), based on environmental efficiency, animal rights, workers’ rights,

product sustainability and financial practices.

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

90.0%

100.0%

Fairtrade Organic Vegan Eco-friendly None

Q13 - HAVE YOU EVER PURCHASED ANY OF THE FOLLOWING PRODUCTS:

40

Q14 - W hich UK supermarket do you consider to be the least ethical and most ethical?

Most ethical Least Ethical

Supermarket No. of respondents

1) Waitrose

2) The Co-op

3) Sainsbury’s

4) Aldi

5) Lidl

6) M&S

7) Morrisons

8) Tesco

9) Asda

10

9

4

3

3

2

2

2

1

Supermarket No. of respondents

1) Tesco

2) Asda

3) Lidl

4) Aldi

5) Morrisons

6) Waitrose

7) M&S

8) Sainsbury’s

15

7

7

3

2

2

1

1

36 respondents out of 51 answered this question 38 respondents out of 51 answered this question

Figure 4.14: Question 14 Findings

Question 14 (Figure 4.14): The respondents’ answers to the question of which UK

supermarkets do they consider to be the most ethical and least ethical, mirrors

many of the conclusions (but not all), of the Ethical Consumer’s annual score table

for 2016, which rates the ethical and environmental records for the eleven leading

UK supermarkets (see Figure 2.9). Both surveys place the Co-op at the top (or next

to the top in the case of the respondents), as being the most ethical supermarket.

Both agree on Asda’s position – at the bottom of the charts, with Lidl only slightly

above. In the case of Tesco, the respondents were more critical of the

supermarket’s record than the Ethical Consumer’s findings. 60.5% of the

respondents considered them to be the least ethical supermarket of all.

41

Figure 4.15: Question 15 Findings

Question 15 (Figure 4.15): A fragmented response was received from those

questioned, regarding the major reasons for the intense competition between the

UK supermarkets. Two equally important factors were judged to be the recession

and the increase in online-shopping – 10% each. 37% of those polled, believed a

variety of factors had led to the intense competition between the supermarkets and

no single element was responsible.

However, the two most significant factors for creating the intense competition

between the UK supermarkets would seem to be the challenge from the German

discounters, Aldi and Lidl – (20% of respondents) and the changes in consumer

shopping habits – expressed in the growth of ‘convenience style’ shopping (23% of

respondents). Put together, they created a potent partnership of 43% of

respondents views.

10%

20%

23%10%

37%

Q15 - Which of the following do you think are the major factors in the intense competition between

the UK supermarkets?

The recession Competition from Aldi & Lidl

Changes in consumer shopping habits Increase in online-shopping

All of them

42

4.2.3 Questions 16 - 19 – Perceptions of Supply Chain Management

Questions 16 to 19 deal with the complex supply lines that exist between the

supermarkets and their suppliers, the ethical issues involved in these relationships

and the consumers’ awareness of abuses in the system.

Figure 4.16: Question 16 Findings

Question 16 (Figure 4.16): It has already been established in this questionnaire (see

Figure 4.9), that there is a significant interest in the relationship between the

supermarket and their suppliers (33% of those questioned). Knowledge of this

relationship is further reinforced by the response to the above question, where 42%

claimed an awareness of the extended and complex nature of the supply chains

between supermarket and supplier.

Yes42%

No58%

Q16 - Are you aware of how extended and complex some of the UK supermarket supply

chains are?

Yes No

43

Figure 4.17: Question 17 Findings

Question 17 (Figure 4.17): The widespread media attention given to the issue of the

mistreatment of workers in both national and international supermarkets’ supply

chains over the last 15 years has helped to increase public awareness of these

abuses. This would help explain why over half of those responding to this question

(53%), replied in the affirmative.

Q18 - Are you aware of these recent supply chain issues involving Tesco?

Answer Options Re sponse

Pe rce nt

Re sponse

Co unt

Intentionally paying their suppliers late 19.6% 10

Intentionally deducting major sums from payments to suppliers 9.8% 5

Pressurizing British dairy farmers into supplying milk at an

unsustainably low price level 60.8% 31

Horsemeat scandal 78.4% 40

Misleading customers by putting fake farms on their products 29.4% 15

None 9.8% 5

Figure 4.18: Question 18 Findings

Question 18 (Figure 4.18): In this dissertation the power and success of Tesco has

been established, as well as some of its blatant abuses of that power. Over 60% of

the respondents in this survey believe them to be the least ethical of all British

supermarkets (see Figure 4.14). Two issues in Tesco’s recent history received the

highest negative rating in this survey – the horsemeat scandal (78.4%) and the low

Yes53%Maybe

41%

No

6%

Q17 - Do you think UK supermarkets are aware of the mistreatment of workers’ involved in

some of their supply chains?

Yes Maybe No

44

prices paid to British dairy farmers for their milk (60.8%) - despite the fact Tesco

were not alone in these abuses (see Chapter 1.3). The respondents – as

consumers - clearly felt most affected by these two subjects. In the poll they seem

less interested in the questionable morality of Tesco’s poor payment records with its

suppliers.

Figure 4.19: Question 19 Findings

Question 19 (Figure 4.19): Opinion was almost equally divided between those

respondents willing to pay more for their supermarket purchases, if it meant more

effective enforcement of the ethical rules governing supply chains (45%) and the

(49% of respondents) who were less committed. Overall, it would seem that

respondents were generally keen to establish their ethical credentials (see Figure

4.12), but were less enthusiastic when it came to paying for them.

Yes45%

Maybe (depending on the rules)

49%

No6%

Q19 - Would you be in favour of greater enforcement of the ethical rules governing

supermarket supply chains, if this meant an increase in the price of the products you buy?

Yes Maybe (depending on the rules) No

45

5.0 Conclusion and Recommendations

5.1 Objective One – To review current literature surrounding UK

supermarkets supply chain management in relation to ethics.

Reviewing the literature revealed a broad understanding of supply chain

management in relation to ethics.

The researcher explored the timeline of “supply chain management” and how it has

evolved over the years – starting with (Hugos 2006) stating the phrase was first

used in 1982 by Keith Oliver, to McKellar (2014) defining the term “supply chain” as

“a metaphor used to represent all the individual firms, their personnel, and the

physical infrastructure required to create and transport products to customers”.

The researcher looked at primary authors Jones and Clarke – who, in 2002,

produced a predictive study on Customer-driven supply chains, and authors Fernie

and Sparks’ journal entitled ‘Logistics and retail management: Insights into current

practice and trends’. Both works foresaw today’s grocery supply chains as “a move

away from the current system of bigger, centralised and dispersed, to a model of

faster, simpler and local” (Fernie and Sparks, 2004).

There have been two major resources for monitoring the social, ethical and

environmental behaviour of UK supermarkets – their successes and failures. The

Ethical Consumer Association, based in Manchester, has since 1989 published

regular reports and called for boycotts of companies deemed unethical by its

findings.

The Guardian newspaper, through several extensive investigations, has exposed

some of the worst examples of human exploitation within UK supermarket supply

chains – most notably the Thai shrimp and prawn industry (2015).

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5.2 Objective Two –To identify current key issues within the UK

supermarket business that is affecting those ethical policies.

In this dissertation, it has been shown that the UK supermarket industry, over the

past 30 years, has become one of the most established and competitive in the world

– yet despite its achievements, scores very poorly in most areas of ethical

behaviour.

There have been successes in the ethical arena, some of which have been

described earlier (see Chapter 2.8), but these advances are in danger of being

eroded by the price wars between the supermarkets and especially the German

discount stores, Aldi and Lidl. As Louise Valducci, of the Fairtrade Foundation

recently stated:

“As the price wars intensify, there is a risk that ethical commitments might be

reconsidered, or suppliers might be squeezed, in a race to sell at the cheapest

possible price” (Ethical Consumer, 2014).

One of the current key issues to be addressed is the means by which good ethical

practices can be protected and maintained in this highly competitive environment.

There is no shortage of legislation already in place to safeguard those practices.

Tesco, Sainsbury’s, Asda, the Co-op and Marks and Spencer are all members of

the ETI - Ethical Trading Initiative, which since 1998 has established a code of

conduct that supports ethical trading in their UK and global supply chains. Since

2009, all ten major supermarkets in the UK have been governed by GSCOP - the

government-backed Groceries Supply Code of Practice, which was designed to

regulate the relationship between the supermarkets and their suppliers. There is

also the GLA – the Gangmasters’ Licensing Authority, established in 2005, to

protect migrant workers in the UK from being exploited.

The central problem has been in policing the rules and regulations enshrined in

these initiatives.

“The GLA has struggled to cope with cuts in its £4.3m national budget… staff

numbers have dropped by more than a quarter… and the authority carried out only

three prosecutions in 2014” (Financial Times, 2015).

Much of the legislation has been strong on intent, but has lacked the powers of

regulatory enforcement. For example, in the recent GSCOP investigation led by its

47

Adjudicator, Christine Tacon, into Tesco’s bullying tactics and unethical treatment of

its suppliers, her powers of punishment were limited to naming and shaming the

guilty parties and making recommendations for better compliance in the future.

However, in tough new government-backed legislation, the GCA can now fine a

supermarket up to 1% of its annual revenue for serious Code transgressions, which

if put into practice would be a powerful tool for ensuring better ethical behaviour in

the future (The Guardian, 2016).

In recent years, an increasingly significant role has been played by the UK’s

mainstream media, both press and television, in naming and shaming those

supermarkets that have failed to maintain high ethical standards in their supply

chains.

Two television chefs have been particularly

effective in creating public awareness of these

shortcomings. Hugh Fearnley-Whittingstall

has been in the forefront of exposing the

supermarkets’ poor ethical standards in

animal welfare, beginning in 2008, with his

successful television campaign against

battery-raised hens and the widespread sale

of eggs from caged birds (Figure 5.1). As a

result, Sainsbury’s became the first of the ‘Big

Four’ supermarkets in the UK to end the sale of battery caged hens – three years

before an EU-wide ban came into force.

More recently, celebrity television chef Jamie Oliver

(with co-host Jimmy Doherty), targeted the huge

wastage of fruit and vegetables produced by UK

farmers and rejected by the supermarkets (up to

40%) on the grounds that the public would only buy

perfect looking produce.

“When half a million people in the UK are relying on

food banks, this waste isn’t just bonkers – it’s

bordering on criminal” stated Doherty in the

programme. (Channel 4, 2015).

Figure 5.1: Television Chef, Hugh

Fearnley-Whittingstall

Figure 5.2: Television Chef, Jamie Oliver

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Jamie Oliver challenged the Asda supermarket chain to encourage its customers to

buy perfectly edible produce - but with “knobbles and blemishes” – at a reduced

price. The ‘Wonky Fruit and Vegetable’ range was created. Asda saw an

“unprecedented” response to its ‘wonky veg’ boxes, selling the equivalent of 162

tonnes of such produce in two months, that under normal circumstances would have

gone into landfill or become animal feed.

Asda’s initiative has since been copied by its rivals. Tesco has launched its own

successful version of ‘wonky veg’ – ‘The Perfectly Imperfect’ range (Figure 5.3). It is

ironic that the two supermarkets that were rated the least ethical by respondents in

this dissertation’s questionnaire (see Figure 4.14), have received widespread praise

for these actions and in the process have improved their ethical standing.

5.3 Objective Three - To compare the major supermarkets by exploring

how effective and ethical their individual supply chain models are.

In this dissertation, it has been established that certain UK supermarkets, namely

Waitrose, the Co-op and Marks and Spencer have a more ethical track record than

the others. Although Tesco, as the UK’s biggest retailer, has received widespread

criticism in the media for unethical business practices, its smaller rivals are not

without guilt.

In January 2016, following an internal assessment, it was revealed that Waitrose

had been taking three times longer than Tesco to make payments to some of its

suppliers. The supermarket is now reforming its payment systems (International

Business Times, 2016).

The Co-op, which has traditionally boasted high ethical standards, found itself

embroiled (with other UK supermarkets), in the global shrimp supply chain scandal

(see Chapter 2.9.3).

Figure 5.3: Asda & Tesco’s ‘wonky veg’

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Marks and Spencer sullied its reputation in October 2015, when a Channel 4

investigative documentary exposed the shocking working conditions of Romanian

migrants packing apples in Kent for some of the UK’s biggest supermarkets – which

included M&S.

Each of these cases reflects problems intrinsic to the industry as a whole. Unethical

financial practices, between the supermarkets and their suppliers, built up over

many years; complex supply chains to distant places that are difficult to monitor;

and the perennial competition between the supermarkets to source products as

cheaply as possible.

These issues directly affect supermarket customers. Brand trust is everything. In an

increasingly consumer-led society, good ethical behaviour by supermarkets and

their suppliers is increasingly important. 55% of those questioned in this

dissertation’s survey regarded themselves as ethical consumers (see Figure 4.12).

“Consumers like discounts, but not ones that leave a bad taste in their

mouth…exploitation should not be the true cost of cheap food…consumers are just

as likely to avoid you if the ethics of your brand are bad” (Marketing Magazine,

2015).

Supermarkets are having to respond to the demands and standards of these new

ethical consumers for whom the source of their food and its quality is a first priority –

not the price. The sales of organic food are rising dramatically, with sales in the UK

reaching £1.7b in 2014. This trend was confirmed in this dissertation’s survey – a

high 82.4% of respondents had purchased organic goods (see Figure 4.13).

“Millenials, (18-35 year olds) represent the biggest growth in organic sales, and

most of these shoppers have only come into the market in the last five years” (Food

Navigator, 2016). Even Aldi are catering to these ethical shoppers, with their own

organic vegetables’ range.

5.4 Objective Four - To recommend an ethical approach for UK

supermarkets in order to build and maintain an improved relationship

with their suppliers.

1) In the light of the GCA’s investigation into Tesco’s heavily criticized

relationship with its suppliers, in the future, UK supermarkets need to pay

closer adherence to the Groceries Supply Code of Practice by paying

suppliers on time, not making arbitrary deductions from money owed for

goods delivered and by adopting a generally more open and collaborative

50

approach in their dealings with suppliers. They need to be aware that any

breaches of the Code after April 2015, can for the first time, incur severe

financial penalties.

2) Greater efforts need to be made by the UK supermarket industry as a whole

to tackle known human abuses in the global supply chain system. The

exploitation of workers in the Thai prawn industry – described as ‘modern

day slavery’ - is a particularly shocking example and requires a more robust

response. A joint collaborative effort between British supermarkets, with

support from the (ETI) – the Ethical Trading Initiative and the United Nation’s

Global Compact (which undertakes to curb unethical behaviour worldwide),

could form a powerful international alliance for change.

3) All the UK supermarkets publish individual ethical statements, which

describe in detail their relationships with their suppliers. These should be

under constant review by the individual supermarkets to ensure they practice

what they preach. In the case of Tesco, their Code of Business Conduct

bore little relationship to the manner in which they treated many of their

suppliers. With the ethical consumer in the ascendant, honesty, trust and

transparency have become key factors in the relationship between

supermarket, supplier and consumer.

4) Supermarkets can strengthen their ethical credentials by building a closer

relationship between the supplier and the consumer. The origin of many

supermarket products in the supply chain remain anonymous or unidentified.

Aldi and Lidl’s own-brand goods rarely credit their source. By contrast,

Waitrose and the Co-op make efforts to ‘personalise’ many of their products.

They give a ‘face’, an identity to the supplier in the labelling or packaging of

many of their goods, thereby establishing a closer relationship between

producer and consumer.

5) Greater efforts need to be made by all the supermarkets in the UK to shorten

their supply chains and wherever possible, source products closer to home.

At the time of the horsemeat scandal, it was determined the longer the

supply chain, the greater the risk of malpractice. With shorter supply chains

things are less likely to go wrong.

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6) ’We’ve got commitments in our constitution to always do the right thing…we’ve

become even more concerned about environmental, sustainability and animal

welfare issues, and supporting the communities in which we trade and our

customers live’ – Mark Price, former Waitrose MD.

Waitrose has managed to grow its ethical business practices during tough

economic times – as well as its profits - by rolling out its green token

scheme, Community Matters and also the Waitrose Foundation, which helps

farming communities in Africa. Good ethical practices can make good

business sense.

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6.0 Critical Reflection

For further in-depth investigation into the issues raised in this dissertation the

following would be helpful:

To enlarge the scope of the questionnaire, by widening the age range of

participants and by seeking responses from a more diverse number of media

platforms - not just Facebook. This would be a further means of validating

the current findings.

Much of the literature dealing with the discount models of Aldi and Lidl is

only available in the German language. Given the significant challenge they

pose to the UK supermarket business and to wider ethical issues, it would

be helpful to have access to the insights that this body of German research

could bring to the subject.

Google Scholar – which has a tantalisingly large number of research papers

on supply chain management, proved to be a frustrating resource tool. Most

of these documents are only available for a fee and can only prove their

worth (or otherwise) when downloaded.

53

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