Corporate Social Responsibility, Social Justice and the Global Food Supply Chain

Towards an Ethical Food Policy for Sustainable Supermarkets

Hillary Shaw, Julia Shaw

• Publisher: Routledge
• Year: 2019
• ISBN:
  9781317387855
• Edition: 1
• Topic: Negocios y empresa
• Subtopic: Ética empresarial

Food is a source of nourishment, a cause for celebration, an inducement to temptation, a means of influence, and signifies good health and well-being. Together with other life enhancing goods such as clean water, unpolluted air, adequate shelter and suitable clothing, food is a basic good which is necessary for human flourishing. In recent times, however, various environmental and social challenges have emerged, which are having a profound effect on both the natural world and built environment – such as climate change, feeding a growing world population, nutritional poverty and obesity. Consequently, whilst the relationships between producers, supermarkets, regulators and the individual have never been more important, they are becoming increasingly complicated.

In the context of a variety of hard and soft law solutions, with a particular focus on corporate social responsibility (CSR), the authors explore the current relationship between all actors in the global food supply chain. Corporate Social Responsibility, Social Justice and the Global Food Supply Chain also provides a comprehensive and interdisciplinary response to current calls for reform in relation to social and environmental justice, and proposes an alternative approach to current CSR initiatives. This comprises an innovative multi-agency proposal, with the aim of achieving a truly responsible and sustainable food retail system. Because only by engaging in the widest possible participatory exercise and reflecting on the urban locale in novel, material and cultural ways, is it possible to uncover new directions in understanding, framing and tackling the modern phenomena of, for instance, food deserts, obesity, nutritional poverty and social injustice. Corporate Social Responsibility, Social Justice and the Global Food Supply Chain engages with a variety of disciplines, including, law, economics, management, marketing, retailing, politics, sociology, psychology, diet and nutrition, consumer behaviour, environmental studies and geography. It will be of interest to both practitioners and academics, including postgraduate students, social scientists and policy-makers.

1 Feasting Cavemen and Responsible Giants

1.1 The Eternal Modern Feast of Supermarkets

The slogan ‘Just Eat’, which was once ‘Don’t Cook, Just Eat’ (YouTube, 2012), appeals to our inner Neanderthal; some of us may cook in postmodern kitchens, but we all consume like prehistoric cavemen. Pre-industrial humans, like all species in nature, lived Malthus-style perpetually on the edge of famine, breeding up their numbers when times were good and suffering the loss of the most vulnerable when food became scarce again. Our bodies were well-adapted for such an environment; every time food was plentiful, we gorged on it, because it would be famine tomorrow. Our biology ensures we are very good at absorbing and storing calories, and we only use up those calories at the very minimum necessary to maintain life once the plentiful times are over. This is precisely why it is so easy to gain weight and so hard to lose it. Prehistoric cavemen would have feasted on whatever large animal they managed to kill; eating quickly not just because their bodies said, “Store calories now!” but because if they didn’t consume it, other organisms would, from vultures and rodents to bacteria and fungi. If by extreme good fortune they managed to kill a second large animal tomorrow, that too must be quickly eaten. Fridges were scarce out on the savannah 20,000 years ago. The equivalent now of that large animal kill are the bright shining aisles of our supermarkets, and if feast tomorrow follows feast today, we still overconsume because your body can never be sure that famine won’t return. In fact, when ‘famine’ does briefly return in the shape of a whole day’s closure of the supermarkets for a public holiday, witness the frantic food buying as if prepping for some disaster, the terrifying prospect of no easy access to cheap plentiful food for a whole 36 hours.

1.2 The Growth of the Supermarkets

For some, it was more of a disaster when the supermarkets opened in the first place and then gained such market dominance that in many developed countries, just five large retail corporations often now sell over three-quarters of total food consumed. The obvious front-line casualties of supermarket expansion are the smaller retail players, many of who whom have either closed down or been absorbed, taken over by giants such as Tesco. The secondary effects on other small retailers caused by supermarket expansion are discussed in Chapter 3. These effects may include the closure of shops, such as ironmongers, that, whilst not directly competing with the supermarkets, nevertheless depend on High Street footfall generated by smaller everyday grocery shops now stripped from traditional retail areas. This denudation produces ‘clone’ or ‘zombie’ High Streets; retail areas that are either strings of identical banks, chemists, takeaways, jewellers, etc., or are populated by only the fringe retailers that peddle trades the supermarkets are not interested in, such as charity shops, gambling shops, vaping shops, personal grooming salons, cheap discount ‘99p stores’ or ‘Dollar stores’ and the like.

One measure of market dominance is the Concentration Ratio (CR), which is simply the sum of the percentage market shares of the largest companies, usually the biggest three, four or five of them. Australia is an exceptional case where just two supermarkets, Woolworths and Coles, control 80% of the grocery market between them. Larger countries, by area, tend to have less concentrated retail markets because distance protects from competition. However, even in the USA, the number of retailers accounting for 20% of sales fell from 33 in 1980 to just 7 in 2005. In 2005, Walmart alone took 9% of the US retail market and the share of the top three retailers, or CR3 (Concentration Ratio 3), was 13%. Walmart is so large that in 2006, with total sales of US$ 312.5 billion, it accounted for over 10% of total US imports from China (Zhen, 2007: 37). In European countries, the retail CR3 for 2005 was over 50%, rising to over 80% in the smaller-population Nordic countries of Norway and Sweden (Zhen, 2007: 11).

Table 1.1 gives the grocery market CR for selected countries and how this CR has evolved over time. A consistent measure of CR between countries over time is not possible because different countries use different CR numbers; as noted earlier, for Australia, a CR2 ratio is appropriate because just two supermarkets command the market there, whereas in many European countries, there are four or five major players. The other confounding factor as regards comparison over time is the rapid expansion of the discount chains Lidl and Aldi in many countries since 2000. Because these chains were small or non-existent in many national markets, but have now expanded to capture 10% or more of the market, the CR4 or CR5 in many regions has fallen; however, this can scarcely be taken as a retreat of the dominance of the supermarket phenomenon in general.

The interpretation of CR(n) figures is complex, especially when new smaller entrants are rapidly gaining ground, but the overall trend of these figures is that in all these countries, the supermarkets have a dominant and generally growing market position.

Table 1.1 Grocery Supermarket CR in Selected Countries; Changes Over Time

Country/Year	Ca. 2000	Ca. 2005	Ca. 2010	Ca. 2015
Australia			71% (2)^2011	80% (2)^2015
Austria			82% (3)^2009	87% (3)^2015
Belgium	72% (5)^2000		71% (5)^2011	71% (5)^2015
Brazil	62% (5)^2000	64% (5)^2005
Canada			75% (5)^2011
Czech Republic			63% (5)^2010	70% (5)^2015
Denmark	84% (5)^2000		80% (5)^2009
Finland			88% (3)^2011	80% (2)^2015
France	83% (5)^2000		65% (5)^2009	80% (6)^2015
Germany	76% (5)^2000		85% (4)^2011	85% (4)^2015
Hungary			55% (5)^2010	57% (5)^2015
Ireland		81% (5)^2006		89% (5)^2018
Italy	31% (5)^2000		40% (5)^2009	51% (5)^2015
Japan				65% (5)^2014
Netherlands	95% (5)^2000		65% (5)^2010	55% (2)^2015
Norway	84% (5)^2000		81% (3)^2011	96% (3)^2016
Poland			34% (5)^2010	47% (5)^2015
Slovakia			64% (5)^2010	70% (5)^2015
Spain	51% (5)^2000		70% (5)^2009	50% (5)^2018
Sweden	95% (5)^2000	95% (4)^2006		80% (4)^2015
Switzerland			76% (3)^2011
United Kingdom	71% (5)^2000	74% (4)^2004	76% (4)^2011	85% (5)^2015
USA	28% (4)^1999	35% (4)^2006	43% (4)^2010	55% (4)^2014

Source: Adapted from Bell & Cuthbertson 2004; Nicholson & Young, 2012; Ezeala-Harrison & Baffoe-Bonnie, 2016

Number of firms in CR is in brackets. Non-European Union (EU) countries (2018) in bold.

Notes: (1) Some CRs have fallen due to market capture by Aldi and Lidl and (2) Methodology not necessarily consistent between years.

The growth of the supermarket as the primary means by which most people in developed countries, also an increasing number in less-affluent nations, purchase their food, has been well-documented already, but from a CSR perspective it is worth reviewing the multiple dimensions of the one principle that has been central to this expansion: economies of scale. The basic premise of ‘economies of scale’ is simply that as an enterprise doubles in size, many of its costs rise by considerably less than that, if at all. A payroll system that can handle 100 employees can probably just as easily handle 200; a shop-floor manager can oversee 20 staff with not much more difficulty than she can manage 10. Some costs may even fall as the company doubles in size. Advertising becomes less necessary because the corporation and its products are already well-known, and the physical premises become its own advertisement as it creates a bigger physical footprint on the landscape. Perhaps the most significant cost to fall as size rises is raw materials costs, because in general a bigger customer can negotiate (force, demand) a lower price from suppliers. To an extent, supplier’s costs will fall as the order size increases because they too enjoy economies of scale—a more insidious discount arises when the order size is so large a monopsony situation arises. The supplier may become a ‘commercial colony’ of the corporation, dependent on it for all its trade, but lacking the support that a true subsidiary of the corporation would enjoy.

Worldwide, the top-30 supermarket chains control 33% of all global food sales (GRAIN, 2014).The top-ten chains alone have annual global sales in excess of US$ 1.3 trillion, sold through over 106,000 outlets, as Table 1.2 illustrates.

However, one interprets the figures, the message appears to be that a very few supermarket companies with massive economies of scale, less than one per thousand farmers, control most of the developed-world food sales and therefore possess huge commercial power. They are adept at using this power, as the rest of this book shows, and it is then essential that such power is harnessed for the good of wider society (a concept further explicated in Chapter 3) rather than left in the hands of a few huge private corporations.

The essence of gaining economies of scale is that unit prices of production fall, and therefore a virtuous circle (virtuous from the company’s point of view, at least, but perhaps not so good for society and the environment) can be set up whereby lower prices leads to further capture of market share, leads to further corporate growth, leads to more economies of scale and still lower prices. Economists recognize that there may be a point when economies of scale become diseconomies; administration becomes more complex as the company expands into different territories with varied currencies, customs, market demands, employee and customer theft rises, management becomes bloated and complacent, the corporation becomes so big it loses the capability to react swiftly to changing demand and is outmanoeuvred by smaller nimbler leaner competitors. To an extent, this has already happened with the largest supermarket chains such as Tesco losing ground since around 2005 to the German deep discounters Aldi and Lidl. British customers have also changed shopping habits, due to exogenous societal changes, such as more people living singly and in smaller homes, and a shift in attitudes away from planning ahead for the week towards a lifestyle of shorter time horizons and last-minute meal decisions. This has driven supermarket shoppers away from big out-of-town sheds towards both online ordering and smaller local shops; in response, the major supermarkets have heavily penetrated the convenience store market with chains such as Tesco Express and Sainsbury’s Local. Information communications technology (ICT) has drastically pushed back the frontiers of economies of scale, perhaps to the point where for many industries, the inflexion point, where diseconomies of scale kick in, effectively no longer exists because such a magnitude is beyond the size of planet Earth itself. Supermarkets have been outstandingly successful at giving consumers lower food prices, at least at the till. Of course, as we shall see, the till price is not the only price we pay for cheap food. ICT has enabled the supermarkets to gain economies of scale at the smaller end of the stores’ size range, whilst operating multiple small local neighbourhood convenience branches.

Table 1.2 The World’s Largest Supermarket Chains; Sales and Number of Ou...