New approach for more transparent supply chains?

Some of the biggest supermarkets in Germany have developed a working group “to take a proactive role” in the scope of the Agenda 2030.

Their goal is to contribute to a more sustainable and transparent supply chain.

This major supermarket group is made up of: ALDI Nord, ALDI Süd, dm Drogeriemärkte, Kaufland, LIDL, tgut … and REWE. Their main concern is “to address the systemic causes of low income and low wages. How?  By increasing traceability. Moreover, they consider that it is mandatory to maintain “dialogue and cooperation with all relevant supply chain actors”.  This includes “ suppliers, sub-suppliers, trade unions and farmer organizations as well as farmers and workers themselves”.

According to the Commitment by The German Retailers Working Group on Living Income and Living Wages, although “many standard setting organizations incorporate measures towards living income and living wages into their certification criteria”, that is not enough. They “understand that sustainability standards currently cannot guarantee a living income for farmers or living wages for workers, neither in the agricultural sector nor in other industries”.  

A few weeks ago, we had the opportunity to attend a virtual Presentation of this working group entitled: “Towards Living Wages in the Banana Sector”, where the largest German supermarkets introduced their pilot project that will kick off this plan. The project will start by establishing new control standards in the banana sector of Ecuador. Here you can find the complete presentation: Project roadmap.

In this last post of the year we want to highlight the debate that took place after the presentation. A  member of the Ecuadorian banana sector was also invited to speak for the sourcing countries. The following were the participants:

  • Alistair Smith, International Coordinator at Banana Link.

Transparent supply chains

Some of the ideas offered follow:

Juan José Pons began by reading a  statement published by the banana cluster in Ecuador, a cluster that represents the 100% exporters and 70% of growers. You can find their statement here “Position of the Ecuadorian banana cluster”. 

Mr Pons pointed out that Ecuador is a pioneer in applying proper living wages and a lot of progress has been made in relation with workers conditions.  Besides, all bananas sold in the EU, especially in Germany, are GG (Global Gap) certified, a certification that implies that living wages are being paid.  

He also believes that the current global situation is the greatest obstacle to guarantee decent wages throughout the supply chain. Indeed, in early December 2021, the contracts with the large supermarkets are not signed yet. The reason? The significant increases in production costs were not being recognized.

A fair price is needed to guarantee the rights of all stakeholders. This requires a coordination between the social responsibility and purchasing  departments.

Another important factor, according to Mr Pons, is how the low-price campaigns of retailers affect the sourcing. Consumers should be aware of the implications of their demands.

Sarah Bollermann noted that, as retailers, they have a large responsibility. Retailers are a key driver for accelerating this approach, which can only be achieved by working jointly. 

The collaboration must also involve all stakeholders in the supply chain. She highlighted the importance of trade union representation for workers. She believes this is an element that must be better monitored by retailers to guarantee proper living wages.

In her opinion, current certifications like RA (Rainforest Alliance) or GG (Global Gap) do not assure that workers have a right to a decent wage. Therefore, collaboration is once again an important factor to strengthen worker representatives. 

Regarding the final customers, Mrs Bollerman stated that retailers place great trust in them. Individual consumers will probably go for more sustainable bananas. Hence, they will be able to choose between “living wage bananas” and “not living wages bananas”. Mrs Bollerman suggested that the question is not just about awareness, but also about education. Educational institutions must also contribute to the awareness process. 

Mrs Bollerman wishes that this ambitious project may foster an open dialogue of all stakeholders and that retailers can prove that their project in the banana sector is scalable to other markets.

Alistair Smith expressed that, from the viewpoint workers in the field, with a few exceptions,  they do not believe to be earning a living wage. So, it is necessary to reach collective agreements and workers’ statutes in this sector.

In his experience, a minority of workers has direct contracts, which was not the case 5 years ago. Workers are now earning less than 3 or 4 years ago. He points out that migrant workers from Venezuela and flexibility tend to result in lower wages, leading to more informal contracts.

The key is to achieve strong working organizations. Mr Smith claims that, to achieve sustainability in the value chain, legislation is required.

Regarding consumer responsibility, he believes that prices are very low for a product that comes from the other side of the world and we must pay more for it.

His wish for the future is that,  in 3 or 4 years, a national collective agreement be achieved with the maximum number of banana producers involved.

Sebastian Lesch, stated that the German government has the commitment to work with the retailers to achieve this goal. They do believe in the collaboration between governments and companies. And even more with all the supply chain disruptions created by the covid-19 pandemic. In fact, living wages are human rights.

In a nutshell, the main conclusions gathered by the debate moderator were:

🍌 We need more transparency in the whole supply chain. 

🍌🍌 Retailers, self-described as key drivers, must be the pioneers in this aspect.

Some questions may arise when discovering the new approach of some of the largest German supermarkets:

Will new certifications be needed in the future for German retailers? Will it be enough with other certifications like GG or RA? Why not enhance the current certifications rather than introducing new ones?

It is very important for the whole value chain to work together to address the challenges posed by the modern world. It seems that 2022 will require even far more work and effort than 2021. So let’s cut the mustard and have a happy, healthy 2022!! 🎄.