Seminario: “Comercio Ético”

Ethical Trading Santiago, Chile

Brice Lamarque

15 May 2012

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About Tesco

TESCO is one of the world's largest retailers with operations in 14 countries, employing over 500,000 people and serving millions of customers every week.

Jack Cohen first opened a market stall in the East End of London in 1919, he began to sell surplus groceries from a stall in the East End of London.

• 1947 - Tesco Stores (Holdings) Ltd floats on the Stock Exchange with a share price of 25p

• 1956 - The first Tesco self-service supermarket opens in a converted cinema in Maldon

• 1995 - Tesco becomes the market-leading food retailer in the United Kingdom. Tesco enters Hungary.

• 1996 – 1998 Tesco enters Poland, the Czech Republic, Slovakia, the Republic of Ireland, Taiwan and Thailand.

• 2000 - Tesco.com is launched

• 2002 – 2008 Tesco enters Malaysia, Turkey, Japan, China and South Korea

• 2007 - Tesco opens Fresh & Easy in the United States

• 2010 - World's first zero-carbon supermarket opened in Ramsey, Cambridgeshire.

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Why does Tesco have an ethical trading programme?

• To meet our community promise of buying and selling our products responsibly. The community promises are Tesco’s way of ensuring that we retain customers’ trust. We do this in order to fulfil Tesco’s core purpose: to create value for customers, to earn their lifetime loyalty. Retaining that trust and loyalty is key if our trade – with customers and with suppliers – is to continue to grow and strengthen.

• To support great businesses and help ensurethat every company working with Tesco is a great place to work.

Ethical trading is about ensuring decent labour standards in our supply chain. Our aim at Tesco is to buy and sell our products responsibly – so our customers are assured that everything they buy is produced under decent conditions, and everyone involved is treated fairly.

Our Ethical Trading programme enables us to:

• Be a good partner to achieve the best with our suppliers and their staff

• Improve supply chain sustainability• Increase productivity• Strengthen our reputation with

customers and avoid potential damage• Be true to our values

Why ethical trading?Why ethical trading?

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What is ethical trading? According to buyers

‘Product is sourced in the most ethical and cost effective way’

‘Improve the quality of life for the people picking and growing the product’

‘All parties involved gain from the experience of the negotiation’

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Customers want to know that they can trust the products they buy from Tesco. As part of this they want to know that what they are buying was made under fair conditions, and the people who made it were treated decently. We seek to work with suppliers who share our values so that we can give this assurance to our customers.

We do this by: Communicating our values - Being clear about our expectations

is the starting point for our approach on ethical trade. We recognise that global supply chains are complex, spanning different continents and cultures. Consequently, we need to work hard to make sure staff and suppliers understand and share our values.

Setting strong standards - To enable our teams and our suppliers to meet these expectations, it’s vital we set strong standards. The Ethical Trading Initiative Base Code, based on the conventions of the International Labour Organisation which are ratified by every country that supplies Tesco, sets out the minimum standards for good workplaces around the world.

Qualifying new suppliers - We want to be confident we only develop trading relationships with new suppliers that share our values from the start. Identifying a supplier’s commitment to decent labour standards early on ensures a smooth transition into the programme and minimises the likelihood of issues arising later in the trading relationship.

VALUES Suppliers who share

our values

Communicate our values

Set strong standards

Qualify new suppliers

ValuesValues

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Once we’ve identified suppliers who share our values, it’s important to understand what’s working well in their workplace and what’s not. Independent assessments of working conditions highlight good practice and areas for improvement. Continuous improvement is a key part of our approach to these issues: as long as suppliers are committed to finding solutions we will work with them to address problems identified.

Monitoring

Assessing riskBy assessing whether the level of labour standards risk is low, medium or high, we ensure that we are taking a pragmatic, proportionate and targeted approach to ethical auditing.

Conducting auditsEthical audits are just one part of our programme. We believe audits should be independent, high quality and conducted in a consistent manner, so they can be shared with other customers at no further cost.

Understanding workers This part of our programme aims to find other ways – beyond audit – to understand conditions in the

workplace. This includes participatory assessments, working with worker organisations, using grievance mechanisms.

Identifying trendsUnderstanding the trends in our supply chain enables us to target our efforts in the high priority areas. The monitoring programme provides us with the data to do this, though we use external sources too.

We do this by:

MONITORING Get to the truth

Assess risk

Conduct audits

Understand workers

Identify trends

MonitoringMonitoring

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Not just from a labour standards point of view, but all round: better quality, higher productivity, better staff retention, faster innovation, higher growth. So where issues are identified, making changes to improve working conditions is key to the success of our suppliers.

Completing corrective actionsEnsuring issues are followed up and resolved is therefore vital – both to make sure suppliers and their staff get the most out of the process, but also so the changes our customers would expect are implemented in a timely fashion.

Building long, strong relationshipsIdentifying and investing in the changes we and our suppliers need for success requires long-term planning and commitment on both sides.

Developing skillsWorkshops with suppliers and must-attend training on ethical trading for all commercial and technical staff are key parts of our programme.

Assisting improvementThis element of our programme comprises a range of initiatives, from online guidance for specific sectors to dedicated ethical trading experts on the ground who are in place to work hand-in-hand with suppliers and other stakeholders.

Recognising successWe recognise that our suppliers work hard to drive improvements in the supply chain. As their customer it’s important we acknowledge this work and recognise this success. Doing this enables Tesco to learn as well – and share good practice more widely with other suppliers.

We do this by:

ImprovementImprovementBusinesses where staff know their rights and responsibilities, and are able to exercise them fully, are generally well-run and sustainable.

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TRANSPARENCY

•Customers, investors, regulators, trade unions, governments, NGOs and suppliers expect us to operate transparently.

•Being open and honest about our approach and performance on ethical trade is fundamental: without it we jeopardise the trust customers place in Tesco every time they visit our stores.

•Retaining trust requires suppliers to be open and honest too. Only with transparency in the supply chain are we able to give customers the assurance they need about how their product

was made or grown.

• Working with othersWorking in partnership means Tesco engages with other stakeholders about its approach and performance on ethical trade.

• Building awarenessPart of Tesco being open and honest about ethical trading is raising awareness: both amongst our colleagues in stores and distribution, and amongst our suppliers and customers.

• Being transparentReporting formally and publicly on our performance and progress on ethical trading is what our stakeholders and investors expect. Transparency throughout the whole supply chain is important to help customers identify with the people that made their product, and know they had a fair deal.

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The programme in a nutshell

VALUESSuppliers who share

our values

MONITORING Get to the truth

IMPROVEMENT Support & improve

TRANSPARENCY Be open and honest

“We buy and sell our products responsibly – so our customers can know that everything they buy is produced under decent conditions, and everyone involved is treated fairly”

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Information on Sedex 100% complete

Tescoissue risk

rating

Complete corrective

actions

MEDIUM

Audit every 2 yrs

HIGH

Audit everyyear

LOW

No audit

Site completes

info onSedex

Siteregisterson Sedex

Ethical Audit

Indicator 1:

Complete corrective actions

Indicator 3:

Conduct an audit

Indicator 2:

HOW TESCO USES SEDEX

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IMPROVEMENT

Corrective action plans: auditors agree practical steps for sites to improve standards

Ethical champions: expertise in category to support suppliers

Supplier workshops: share challenges and good practices throughout the supply base

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Expectations of suppliers

1. Join Sedex

– Keep SAQ up-to-date

– Link to Tesco and other customers

2. Regular audits

– According to risk rating

– Tesco recognised auditor

3. Continuous improvement

– Implement corrective actions

– Verification by independent auditor within 6 months

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Questions

Thank you