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Executive Perspectives

EXECUTIVE PERSPECTIVE: Oxfam update on Big 10 food companies

Erinch Sahan

26 Feb 2014

It’s a year since we launched our scorecard. Having clawed through company reports, analysing every commitment and policy of the world’s 10 largest food and drinks companies (‘the Big 10’), we scored companies on a range of issues impacting the lives of people living in poverty around the world. A year later, having rigorously updated the scorecard, we reflect on how companies are tracking on the seven issues we cover: workers, farmers, women, land, climate, water and transparency.

Most are improving

The companies are on the right track. All but General Mills have improved their overall scores since February 2013. The top three (Nestle, Unilever and Coca-Cola) separated themselves further from the pack and saw the biggest jump in scores with overall increases of 10 percent, 14 percent and 13 percent. The companies in the middle of the pack (Danone, Mars, Mondelez and PepsiCo) saw mild improvements. There were some improvements also at the bottom of the scorecard. Associated British Foods and Kellogg’s – previously ranked 10th and 8th respectively – saw increases in scores of 7 and 6 percent respectively. As a result, General Mills is now at the bottom of the rankings.

High performers emerging

A year ago, no company could be classified as having “Good” policies on any issue (scoring 8 or above out of 10). There are now two that achieve this feat. Unilever, with its score of 8 for farmers, has shown true leadership in pursuing supply chains that are inclusive and fair for smallholder farmers. Nestle (scoring 8 on climate) continues to lead all companies on climate, where we assess both efforts to reduce emissions and to help farmers adapt to a changing climate. In both cases, the results mirror broader assessments of these companies. The Carbon Disclosure Project’s Leadership Index puts Nestle first among its peers, and Unilever is widely recognised for its work on dealing more fairly and inclusively with smallholder farmers.

No longer ignoring land and women’s rights and improvements on climate

A year ago, it was clear that the industry was failing on two key issues: how it addresses women’s inequality and land rights. Scores were woeful and none of the Big 10 had an approach that addressed the plight of women working on farms around the world and none were making suppliers respect the rights of communities over land.

In response, we spent the last year reminding companies about these blind-spots, asking supporters (nearly 400,000 supporters spoke up), investors (representing billions of dollars asked the companies to act) and civil society to join us in urging the Big 10 to start addressing gender and land issues.

The results are encouraging. Led by Coca Cola, six of the Big 10 now endorse the principle of Free, Prior and Informed Consent on land acquisition. This is key in ensuring communities have a say over what happens to the land they depend upon. Seven of the Big 10 have signed on to the UN Women’s Empowerment Principles, which demonstrates a commitment to ensuring the industry starts addressing the barriers faced by women on farms and markets around the world. Similarly on climate, companies have started putting in place targets to reduce emissions and start disclosing more about their carbon footprint.

Too many issues remain unaddressed

While we saw impressive improvements on women’s rights, land and climate change, we didn’t see the same level of movement in the workers, farmers and water themes. On these themes, (apart from Coca Cola on water), no company showed significant improvements.

On water and workers issues, companies had already picked off the ‘low hanging fruit’ and taken some steps to strengthen their commitments. For instance, a year ago, most companies had already recognised the International Labor Organization’s labour rights conventions and were disclosing key water information through the Climate Disclosure Program’s Water Program. But a year later, still only PepsiCo recognises the UN Human Right to Water and no company has set a specific target to reduce its water use along its whole supply chain. On farmers, only four companies (Danone, General Mills Nestle and Unilever), mildly improved their performance over the course of the year. Most continue to ignore the importance of ensuring dealings with farmers are fair and inclusive (e.g. through transparent contracts and ensuring farmers are paid fairly).

What is not being disclosed?

The industry has started to disclose a little more about their agricultural sourcing, but many still shy away from revealing who they buy from. Allowing consumers, the public and communities to work out which producers connect to which global brands is key for accountability. Though the Big 10 are by-and-large preventing this.

The updated scorecard now also assesses a critical new component of transparency – taxes –  focusing on whether companies disclose information linked to the use of tax havens.  New indicators on transparency  now ensure that we better capture this important theme.  Through our new tax indicators Oxfam aims to identify which companies are most open and accountable in their tax dealings.  With the exception of Unilever and Coca-Cola, all the companies fail  in tax disclosure. This helped drag the transparency scores of four companies down by 1 point, with only Unilever slightly improving its overall transparency score over the course of the year.

What next?

We’ll continue to score the companies on these issues, highlighting where they improve and drawing attention to where they don’t. We’ll also keep talking to supporters, investors, civil society and governments to get others to also deliver the message on fair and sustainable agriculture to the Big 10. If companies are to show leadership on these issues (and see their scores improve), they have to start taking on some of the tougher challenges, such as:

1.  Paying a sustainable price

Addressing sustainability comes at a cost, In many circumstances it may seem to costs more in the short term to grow ingredients in a way that respects rights, pays farmers and workers fair prices and wages, and protects the planet. But the farmers who grow the ingredients capture a tiny amount of the value of the prices paid by consumers [e1] , with cocoa farmers receiving as low as 3.5 per cent of the price of a chocolate bar, coffee growers receiving as little as 7 per cent of the price of coffee in supermarkets and tea farmers getting as little as 1 per cent of the price of tea.  With so little of the final price going to the farmers, ensuring farmers get a fairer and more sustainable price for their producer won’t necessarily require consumers to pay more. It can be covered by a marginal shift in how value and profits are shared between farmers and the rest of the food system.  For company commitments to be more meaningful, they need to assure stakeholders that they intend to pay the price for fair and sustainable production.

2.  Proactively finding and addressing problems

The UN Guiding Principles on Business and Human Rights (‘the Ruggie Principles’), which are quickly becoming the consensus on how responsible companies approach human rights, ask companies to be proactive in finding human rights risk. It is no longer acceptable to wait passively for problems to pop up. Too many companies are still struggling to show they know where the problems are in their operations and remain uncomfortable opening up their supply chains to scrutiny.

3.  Focusing on rights and giving the poorest a real voice
Emerging issues like land and women’s rights are rising up the agenda. Rights is the ‘new black’ in sustainability and recognising and respecting rights should be core business for any company. However, ‘voice’ is quickly joining the rights agenda as the ‘next black’. Giving marginalised people a say over their lives (like on land rights where 6 of the ‘Big 10’ are moving to giving communities the right to free, prior and informed consent) is critical. Whether it’s workers having a say in their working conditions through collective bargaining, farmers able to control their destiny through producer organisations or women able to raise concerns via women’s organisations, there are many ways the ‘Big 10’ can use their immense power to give people with little power a real voice.

4.  Avoiding catastrophe on climate change
Climate change is already having a terrible impact on the lives of agricultural communities around the world. Extreme weather is also impacting the supply chains and operations of the Big 10. The Big 10 need to both reign in their own emissions and those of their suppliers) whilst also helping farmers adapt to a changing climate. More broadly, the planet needs them to use the power of their voice to get behind broader action to tackle climate change. Oxfam will be increasingly speaking up on this issue.
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[e1] http://www.fairtrade.org.uk/includes/documents/cm_docs/2013/F/FT_smallholder_media_report_2013_v3.pdf

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