Examination of Witnesses (Questions 140
- 159)
TUESDAY 13 MARCH 2007
MS JUDITH
BATCHELAR, MS
HILARY PARSONS
AND MS
EMMA REYNOLDS
Q140 Richard Burden: How do the checks
work?
Ms Parsons: What the certification
process involves is, first of all, it is being done with the University
of Ghana and other stakeholders.
Q141 Richard Burden: Let us say,
the Ivory Coast, because that is where the allegations have been?
Ms Parsons: It will be similar.
It is slightly behind, in the Ivory Coast, in terms of progress,
compared with Ghana.
Q142 Richard Burden: Has there been
any checking, as far as you know; you do source stuff from the
Ivory Coast?
Ms Parsons: We do not source any
cocoa directly from the Ivory Coast but we will source our product
via international trading organisations. With the certification
process that we are funding, with industry, there is work about
to start on the ground in the Ivory Coast, and what it involves
is, first of all, that data is collected, to see the extent of
the problem, and then remediation is put in to tackle those issues.
During that process, if any children were found in difficult circumstances
they would be rescued and dealt with, and that is the role of
the International Cocoa Initiative working with local authorities
so the work is underway.
Q143 Richard Burden: I am sorry,
I do not understand. What does that mean, if you find children
in difficult circumstances you rescue them and deal with them;
what does it mean?
Ms Parsons: During the data collection
process, so when the researchers went out into the farms, to talk
with the farmers, to talk with the village elders, etc., if they
came across an instance of an abusive practice then measures would
be put in place to deal with that, so remediation would take place
as quickly as possible. If they came across other practices, such
as children were not attending school as regularly as they should,
then again remediation would take place to deal with that. That
is how the certification process would work.
Q144 John Bercow: Hilary, precisely
because you do not own any plantations or factories in developing
countries but rather your products are sourced either directly
or indirectly from some of the factories or plantations about
which there is some suspicion, I put it to you, that actually
increases the onus of responsibility upon you, as a company, to
be absolutely sure that good practice is promoted and bad practice,
gradually but preferably quickly, eradicated. Of course, how your
company operates is a matter for you, and I was struck by the
fact that you were able to reel off a litany of different organisations
and initiatives, all of which I do not doubt is very impressive,
but I have got two, very specific questions to put to you, and
I hope you will not take offence at either. First, a moment ago
you referred to all these researchers busily toppling around and
picking up information and deciding whether good practice is being
observed, or frowning on bad practice if it is evident, but can
I put it to you that, as you are Head of Corporate Social Responsibility
for Nestlé—no mere operative you—you are Head
of these important matters, would it not be good if you went there,
and have you been?
Ms Parsons: I have been four times
to Ethiopia and four times to El Salvador. I have met personally
with the farmers who supply our Partners' Blend product. I am
going to Ghana at the end of May and I will go out to Farmer Field
Schools, so I agree fully that Nestlé needs to do absolutely
everything it can to deal with this issue, and we are doing that.
The approaches are slightly different in coffee and cocoa but
the commitment is absolutely fully there, because it is in our
interests, as a company, to make sure that these practices are
dealt with. We have increased our funding, we have people who
get involved on the ground, and it is not just myself, we have
other people who are involved on the ground.
John Bercow: I am glad to hear
you say that because I welcome the initiative that you have taken.
You are experienced enough to know that there is cynicism in some
quarters, partly because of some of the difficulties you have
had in other sectors, so there will be people who say, "Well,
you know, they're doing it for impure motives," or whatever,
but I believe in trying to play the ball rather than the man,
if I can put it that way, as one would in football, with allowance
made for the fact that I am addressing a group of women this morning.
I say there is no need to be sexist about football, as Joan has
said, and she is quite right; play the ball rather than the woman.
I apologise.
Chairman: You are getting yourself into
deeper waters.
Q145 John Bercow: I am getting myself
into deeper waters. Hilary, what I would like to know quite simply
is this. If you take a typical such plantation or factory, what
is the person paid and for how long does he, or she, work?
Ms Parsons: For coffee and cocoa,
there is not necessarily a plantation or factory; that is the
point I was trying to make. It might be a small family farm and
they are the farmers who are most likely to be part of the Fairtrade
system, because they are small by definition, and in West Africa
most cocoa comes from farms of that size, so there is not necessarily
a bigger plantation with a controlling management unit and workers.
In fact, under the Fairtrade Foundation standards, you are not
allowed to employ more than one permanent worker; so there are
not wages paid, in that sense, and the income is based very much
on what products are produced on the farm, the price that can
be obtained for them and whether they can diversify into other
products.
Q146 John Bercow: It does seem to
me, if I may say so, from your point of view as a big company,
that, yes, there is a potential opportunity, and if you do it
properly you are doing the right thing, but it is a potential
minefield. If you will forgive me saying so, it does seem to me
fairly obvious, or it would have seemed to me fairly obvious at
the initiation stage, that it would prove to be a minefield and
therefore that you would have had this enormous responsibility
to devote every muscle and sinew to ensuring that every single
part of the process was fireproof. In the light of the experiences
you have had, baby milk and so on, it was blindingly obvious that
a newspaper, sooner or later, would look into your claims and
would make a study and say, "Well, this isn't right, that
isn't right and the other isn't right". I think it would
be marvellous if you were able to come back to us, if we were
conducting a follow-up inquiry, in six months' or a year's time,
and demonstrate, on every single stage of the process, that Nestlé
was beyond criticism?
Ms Parsons: I think that is why
we are spending so much time in creating traceable supply lines
and it is why we have committed ourselves on coffee, for example,
to the Common Code for the Coffee Community, which will be very
much traceable. We are committed to increasing the amount that
we buy, we are working very hard to achieve just that, so we very
much acknowledge that.
Q147 Richard Burden: Just a factual
thing really. If we were conducting that follow-up inquiry which
John Bercow mentioned and we came to Nestlé and said, within
the Nestlé organisation, who was responsible for ensuring
that ILO labour standards, for example, were adhered to, what
would be the answer to that? In terms of independent monitoring
of Nestlé, who would you say would go to that independent
monitoring body?
Ms Parsons: We have a compliance
committee and we have a person on the Executive Board in Switzerland
who is responsible specifically for ensuring that Nestlé
complies with corporate business principles, and markets also
have similar mechanisms, so there are specific people who are
responsible. Obviously, it depends on which aspect of the company
is being looked at, but in the case of coffee purchasing we have
a coffee purchasing department which is also responsible for dealing
with suppliers. We have agronomists on the ground who, practically,
will go out to deal with people; so we do have a system of compliance,
making sure that we live up to the commitments and the corporate
business principles.
Q148 Richard Burden: Who is the head
of that area?
Ms Parsons: David Frick, is his
name.
Q149 John Barrett: I would like to
move on to Sainsbury's, who are clearly in the lead, selling a
larger volume of Fairtrade products than any other retailer, up
90% in the last year, £55 million worth of Fairtrade products.
What percentage of your total sales—the figures seem very
large but I guess your total sales also are very large—is
accounted for by Fairtrade products? Also, bearing in mind that
you had a 90% increase last year, what are the projected trends
for the future? I notice that you are moving your entire banana
range onto being 100% Fairtrade produce later on this year; what
other initiatives are you planning to take in the future to maintain
that trend?
Ms Batchelar: The answer to your
first question is that it is a significant business for us, £53
million and growing, and growing very fast. The reasons for that
are, basically, our customers are particularly aware of Fairtrade,
so Sainsbury's was first into Fairtrade back in 1994 with the
Green & Black's Maya chocolate and has grown pretty rapidly
ever since to the position we are in now. That business though
is still less than 1% of our total sales, so it is still relatively
small, but, as I say, increasingly important for us. Customers
who shop at Sainsbury's do particularly like Fairtrade products
so the demand is probably greater than the supply at the moment,
and perhaps we can talk about that later. If you look at our customers,
historically this was the older customer, who bought tea and coffee
and who was buying into something quite different; that customer
has changed over the last 10 or 13 years, and it is very much
a more universal customer and younger customers who are buying
into a whole breadth of products, for a number of reasons. If
you look at our customers in total, against an index of 100, we
over index, at about 208, in terms of our customers' demand for
Fairtrade products. In terms of growth and what we are projecting,
we believe that 53 million will be 130 million this year coming,
and next year will be 200 million and a couple of key things are
driving that. I think this is where you start to look at the breadth
of what Fairtrade is doing now and where it has come from and
where it is going. A lot of what has driven that is some of the
big projects, things like Fairtrade roses and flowers in general,
things like Fairtrade bananas, and indeed clothing, where we have
moved into Fairtrade cotton, versus, historically, there have
been a lot of smaller businesses. What we have got now is how
you manage those two diverse sectors really, because they have
got very different needs and very different requirements and that
indeed puts a pressure on Fairtrade Foundation to help us deliver
to those very different needs and very different issues for those
different kinds of businesses. Plans for the future: probably
I cannot share all of them but I would be happy to do that in
writing, because obviously some of that is quite commercially
sensitive, but I am happy to put that in a letter to you and the
detail around that, but very ambitious plans because it is truly
consumer demand. I think very ambitious plans, because one of
the things that is becoming more important to people, and particularly
our colleagues as well as our customers—we have 16 million
customers every week but we have 153,000 colleagues—is what
constitutes worthwhile work for them and being a great place to
work. We have about 3,000 of what we call `local heroes' who are
people who volunteer in their communities to do work, and some
of those volunteer around Fairtrade. In fact, 20 of them we are
sending out to Africa to look at some of the Fairtrade products
that they have been supporting. We have also got full-time colleagues
out there now for four months, looking at some of the projects
and building those going on. Not only is there customer demand
but I think people working for Sainsbury's feel a sense of pride
in supporting some of those initiatives; so there are lots of
drivers. I think the last driver is probably the quality of the
products themselves, in terms of, I suppose, no offence to anybody
here, but in the original days of Fairtrade you were buying very
much into the way the product was produced rather than the quality
of the product itself. I think what has been the marked success
of some of the businesses which have given evidence this morning
is that they have produced quality products which do earn their
place in a very competitive marketplace, which I think is a big
trend. Not only are we producing something which connects with
what concerns and motivates customers about the way that products
are produced but actually we produce some damn fine products too.
Q150 Joan Ruddock: If I may, I would
like to turn to your competitors, Tesco but also Nestlé.
Hilary obviously has tried to convince us that there are many
other schemes, certification schemes, and that these undoubtedly
will produce fairer trade, but we particularly like to think that
Fairtrade adds even greater value than some of the certification
schemes which you yourselves have suggested. The percentage of
your trade that is Fairtrade is important to our inquiry. I would
like to ask both of you if you could give that, as Sainsbury's
has done, as a percentage of total sales?
Ms Reynolds: As with Sainsbury's,
it is less than 1%, less than 1% of our sales are Fairtrade sales,
but again it is a growing proportion. We have got plans to extend
the ranges in which we currently offer Fairtrade products and
there are some areas in particular where we are seeing really
very rapid growth, so we anticipate that will increase.
Q151 Joan Ruddock: Do you want to
enlarge on that; which areas are growing rapidly?
Ms Reynolds: We have launched
a clothing range. In fact this week, Katharine Hamnett, the ethical
designer and campaigner, has got a range coming to store of T-shirts,
with the "Choose Love" and "Save A Future for Me"
motifs, which we hope is going to be very successful. We have
got Fairtrade socks in store as well, as part of our clothing
range, and next year actually hope to convert a third of our standard
T-shirts into a Fairtrade line, which will be Tesco branded.
Q152 Chairman: Is that Fairtrade
cotton or Fairtrade manufacturing as well?
Ms Reynolds: It is altogether;
it is everything.
Q153 Joan Ruddock: There is a distinction;
we do know that people can have Fairtrade cotton, in terms of
production, but then the manufacturing process has got nothing
to do with Fairtrade?
Ms Reynolds: No; this is a Fairtrade
brand.[6]
Q154 Joan Ruddock: Throughout the
whole process?
Ms Reynolds: Exactly. That is
just an example. There is a lot of growth in nuts in particular;
we are seeing customers really buying into our nut ranges. These
come from Bolivia, Mozambique and Malawi. There is a lot of interest
in those products. There is also the point that Judith was making
about quality products that customers like being where we see
a big drive.
Q155 Joan Ruddock: Can I ask about
the range of services, because we had a conversation with the
other people giving evidence earlier this morning about producing
a jacket, and what I observe is that T-shirts are easy, socks
are easy, but do you have any plans to produce more substantial
items, which obviously have a much higher sales value?
Ms Reynolds: It was a relatively
recent launch into a Fairtrade clothing line, so I think it will
be a case of seeing how it develops from here, how our customers
respond, how we can build our relationships with our suppliers
and take it from there. At the moment, we have not got fixed plans
to launch into different lines but it is not the case that we
will not want to do so in the future.
Q156 Joan Ruddock: Can you tell us
what has been the annual growth, can you go back a few years.
You say it is still way below 1%, but at what rate has it grown
annually?
Ms Reynolds: At the moment, it
is about 5%.
Q157 Joan Ruddock: Hilary, do you
want to add anything to what you said before?
Ms Parsons: Two per cent Nescafé
in the UK, as I explained at the start, is from Fairtrade co-ops
and sustainability projects in Ethiopia and El Salvador.
Q158 Joan Ruddock: What are your
plans to increase, if there are any?
Ms Parsons: Certainly that has
increased since we launched, but really it depends, I think, on
consumer acceptance.
Q159 Chairman: You do not have a
strategy to increase it, you are waiting to see how the consumers
respond?
Ms Parsons: I cannot give you
commercially confidential plans, but obviously we have other markets
which also are interested.
Chairman: Your secret will be safe with
us.
6 By way of clarification, in order for a cotton farmer
to be certified by the Fairtrade Licensing Organisation, they
undergo a six to nine month study. This is to ensure that their
method of growing cotton fibre, getting this to market and the
money they are paid are all within the rules of the FLO, including
provision of the social premium. All subsequent links in the chain
then have to demonstrate that they have been audited to ETI Base
Code standards. They also have to pay a licence fee and be "Fairtrade
certified". Our Fairtrade clothing suppliers are vertically
integrated and therefore hold one licence for all the elements
of the process, from ginning cotton fibres to the end of the manufacturing
process. The licence therefore covers the entire process, although
only the cotton fibre is formally classified as Fairtrade by the
FLO. Back
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