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Tesco avocado supplier highlights issues within complex supply chains

European Investment Manager13 Oct 2020

Tesco was in the news for all the wrong reasons this weekend as reports emerged of alleged abuses taking place at its Kenyan supplier of avocados. We find this to be timely as we have, only last week, received a reply from the retailer over our questions on supply chain conditions.

Among a number of issues we addressed, including animal welfare and packaging, particular focus was given to supplier audits. We requested that the company provide more clarity on the results of such audits as well as details of who is responsible for conducting them. The reply pointed us in the direction of the presentation the company gave at their ESG day in 2019. Unfortunately, the data given in this presentation was far from complete.

This is something we are seeing time and time again from companies with complex supply chains with even those considered best in class failing to give a complete picture of the control and knowledge they have of their numerous suppliers. Many companies will proudly boast of the number of supplier audits undertaken but without detail of the percentage of goods, or indeed even the percentage of total suppliers, covered by these audits such statements are all but meaningless. Rarer still is detailed evidence of the results of the audits along with remedial actions taken to resolve any issues. The problem in many cases is buyers are often too far removed from the end supplier where, as was the case with Tesco and the avocados, one supplier will serve multiple retailers and the brand in question belongs to the supplier not the retailer.

This is precisely why we also asked Tesco to what extent they are attempting to align branded suppliers to the sustainability targets and commitments made for their Own Brand products. The reply was telling

“Many sustainability issues are complex and require a scale of effort across the whole industry”

This sounds like a clarion call to the industry to stop the piece-meal approach and use collective action to ensure that abuses such as those witnessed in Kenya are a thing of the past. SVM as shareholders are also committed to such an approach making the companies in which we invest positioned for a sustainable future. We will continue with our active engagement approach to help make this happen.

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