Wednesday, August 30, 2006

August 2006 Horror of the Month - Organisation

Supermarkets – friend to the shopper or a consumerist nightmare? Discuss.

This sounds like an A-level economics question to be answered by callow youths imprisoned in dimly lit examinations halls in the height of summer. Ah, happy days! However, it is a question that should be answered by us all, for we are all consumers.

The press recently reported on the east Suffolk market town of Saxmundham, a community that voted a resounding NO to a new Tesco development in their historic town. By all accounts, the town economy is thriving despite the lack of twenty-four hour access to fluorescently lit, tightly packed aisle upon endless aisle of goods that we variously need, want and/or could do without. [1].

The main objection to the proposed new edge-of-town supermarket was the threat it posed to the local economy. The proposed store’s catchment area included 6 market towns, 19 villages and 81 shops. Activist Lady Caroline Cranbrook surveyed all of these shops and only 2 welcomed the proposed supermarket, 67 believed it would force them to shut. Crucially, those 81 shops employed over 500 local people and sourced supplies from nearly 300 local producers. Clearly, the arrival of a new supermarket, with its existing international network of suppliers would cast devastating ripples throughout the local economy, destroying the local social and business infrastructure and affecting thousands of lives and livelihoods.

So why should we all say ‘no’ to what has amusingly been described as ‘Tescopoly’?

As the Saxmundham research shows, local economies are diverse, complicated and can be largely self-supporting. Large national or international business concerns tend to be incompatible with these local economies. Until buying local is seen as a marketing advantage by the big supermarkets, local business and food networks will always suffer at the hands of the big organisations.

Try some research for yourself. Walk into your local supermarket of choice and try to find a locally produced honey, or any vegetable or even an egg. You will be hard pressed to find any of the above in most supermarkets, even in rural areas where such produce is readily available in local stores and farm shops.

Why is this? Well, it is down to profit margins and bulk buying strategies. The big supermarkets are locked into a strategy of selling cheaply. In order to do this and still maintain the healthy profit margin that keeps the board and shareholders happy they have to buy as cheaply as possible. This invariably means buying from the big producers and distributors. It is economy of scale: the more a producer can produce, the cheaper the unit cost. The cheaper the unit cost, the cheaper it can be bought by the supermarket’s procurement teams. The cheaper the supermarkets can buy it the healthier their profits are going to be.

And the profits are huge. Tesco announced record pre-tax profits of 2.2 billion for the 2005-2006 financial year [2]. That is a massive £70 per second. How much do you think Colombian coffee farmer earns per second for growing the beans that get turned into high profit margin coffee products?

Furthermore, the supermarkets fare very badly when assessed for ethical trading policies. Asda and Tesco score 0.5 out of 15 when scored for practices in workers rights, supply chain policy, human rights (Unfair Trade), animal testing, factory farming and genetically modified products. Sainsburys fair a little better with an ‘ethiscore’ of 1, Somerfield 2, Morrisons 3.5 and the Co-op topped the table with 5 out of 15 [source: CorporateCritic website].

Now big isn’t necessarily bad. However, big profits are often associated with environmentally and socially unsustainable practices. For instance, an article by Mark Goyder in Ethical Corporation magazine argues:

“The fact that multinationals are buying into the ethical concept means that there is an opportunity for the first time for this to permeate the mainstream. Tesco can claim to have done more for the organic movement – eventually – than any number of farmers’ markets.” [3]

To a point this is true; supermarkets such as Tesco have the power to promote organic produce – if they choose to. And they only choose to if there is a market advantage and a profit in doing so. Just ask the manager of your local store how much of their greengrocery produce is organic! And how much of that is Soil Association certified!

Using the same logic as Mr Goyder above, it can also be argued that the big supermarkets can claim to be responsible for the overuse of pesticides, over-fishing and intensive farming than any other sector of society by demanding perfectly formed fruit and vegetables, and ever increasing quantities of meat, poultry and fish.

Supermarkets are also contributing to global deforestation and biodiversity loss by their reliance on using cheaply produced palm oil in thousands of their products. Palm oil plantations are now the major cause of rainforest clearance in Indonesia and Malaysia, threatening some of the world's richest wildlife forests and endangering native species including the orang-utan.

The criticisms are stacking up against the big supermarkets; their influence extends beyond the homogenisation of the high street and the ruination of local economies through to the detriment of animal welfare, to environmental damage, to the suppression of foreign economies and the exploitation of workers throughout the world. Their impact is truly global.

Picking on Tesco as an example again, they claim:

“Corporate Responsibility is integral to our entire approach to business, from Board level to checkout. This is clear from the way we treat people, local communities and the environment...” [4]

At the surface level they do appear to be greening their business with investments of £100 million pounds in renewable energy technology for their stores, the introduction of “green” clubcard points in return for not using so many plastic carrier bags and other such initiatives.

But is this really enough? Sure, the successful implementation of renewable energy technology will reduce CO2 emissions, and reductions have already been reported, most notably in their ‘energy efficient stores’. For instance, their energy efficient store at Diss in Norfolk is 20% more efficient than comparably sized stores, thereby saving 310,000 tonnes of CO2 emissions per year [5]. But hang on, if that is a 20% saving, this flagship ‘energy efficient store’ must still be emitting 1,240,000 tonnes of CO2 per year, and comparable stores emitting 1,550,000 tonnes per year! That is a vast amount of greenhouse effect-inducing gas being let into the atmosphere BY ONE SHOP!

Add into that the imports of huge quantities of food from overseas, much of it by air freight, a distribution system that sends all goods to a central depot before it is then taken by road freight to regional stores, and the creation of a shopping culture that requires people to shop by car and the picture that Tesco paints is clearly not green. Studies show that it would take 60 greengrocery stores to match the CO2 emissions from a single average-sized superstore [6].

In order for supermarkets, any supermarket, to be environmentally sustainable the management must introduce a radical change to the way that they do business. They must reduce emissions, change their distribution strategy, promote local produce, drastically reduce the amount of goods they import, and pay a fair price for supplies. They must work WITH economies, both local and international, not fight against them.

So in answer to the original question; supermarkets are both a friend to the shopper as it makes shopping easy AND a nightmare for the environment, for producers, for distributors and local and global economies. They are a massive drain on the precious resources of the Earth, both human and environmental, so do the world and its inhabitants a favour and think again about buying sustainably produced local products wherever possible.

References

[1] Council for the Protection of Rural England (2002), Food webs. London: CPRE. This document is available for download here.

[2] Tesco PLC (2006), Annual report and financial statements. Cheshunt: Tesco PLC. This document is available for download here.

[3] Goyder, M. (2006), ‘The Body Shop and L’Oreal: why can’t big be beautiful?’ Ethical Corporation May 2006, p.49. Article available online at: http://www.ethicalcorp.com/content.asp?ContentID=4284. Last accessed 16th August 2006.

[4] See the Tesco corporate website here.

[5] Tesco’s own data, reported here.

[6] Friends of the Earth (2006), Tesco – the new green chameleon? Friends of the Earth Press Release 25th April 2006. Available online here. Last accessed 16th August 2006.

1 Comments:

Blogger Leighton Cooke said...

Excellent post. Wal Mart is probably the best example of what you are pointing out. All over the world producers have become slaves to the supermarket system.

7:06 am  

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