Responsibility in the Supply Chain. What's that?

An interview with Dr Klaus Mayer, who oversees quality management, risk management and Green Products at REWE Group

What does "responsibility in the supply chain" mean for a trade company that has dedicated itself to sustainability?

Mayer: We have no intention of buying any ordinary products and then selling them for a cheap price. Rather, we select our suppliers very carefully. They must demonstrate to us that they, too, are committed to sustainability. We talk to them about so-called hot spots, which are critical environmental and social aspects of the supply chain, and ask them whether they can address these issues.

For our PRO PLANET products, we systematically apply this philosophy and have taken the lead in such areas as chicken farming. In this process, we have set standards that are now applied by the entire industry. At the moment, we are supporting projects that are designed to end the practice of trimming the beaks of laying hens – it is a painful procedure that is generally unnecessary in large-scale operations. We are also the pacesetter in this area. But our competitors are also catching up.

Quality, social standards in production, animal welfare – the requirements are multifaceted. What influence does a trade company have?

Mayer: When it comes to our store brands, our influence extends far down the supply chain. This process begins with intensive discussions with suppliers. It then extends to contracts, specifications, separate accords and exclusive agreements. The dairy Marburger Molkerei is a good example of our approach. Up to 70 per cent of its volume flows into our supply chain. Special requirements have been placed on the feed used by this dairy, and we pay a higher price for its products as a result.

We consider ourselves to be a pioneer in the effort to set up such alliances that are designed to verticalise the value chain. In taking this approach, we go one step farther and avoid taking purchasing decisions simply on the basis of price, offer and quality specifications. But our influence on the makers of brand products only goes so far.

How can conditions for more sustainability in the supply chain be changed? What role do industry initiatives play?

Mayer: Of course, each legal regulation that applies the same basic standard to everyone is helpful. But you simply cannot wait for this happen. Our specialists work in many business committees and organisations to refine sustainability standards. One example of our work is the animal welfare organisation Initiative Tierwohl, to which we have made a massive commitment.

We see ourselves as being the driving force behind industry solutions and play a leading role as the co-initiator of the Palm Oil Forum and the Cocoa Forum. To bring about change on the political level, we maintain good relationships with non-government organisations that, above all, can apply a certain amount of pressure internationally.

Global supply chains are complex – the greater the number of suppliers, the greater the problems associated with the transition to more sustainable production practices. How do you address this issue?

Mayer: This is a really special challenge. For instance, we now use cage-free eggs in approximately 250 products that contain eggs. We were the first trade company to give up battery-cage eggs for its store brands. A similar approach was taken with the more than 300 products that contain palm oil. These products are now based on more sustainable ingredients. But we are a little over our heads when it comes to a frozen pizza that has 32 ingredients from 32 different suppliers.

The process involving such products with complex supply chains will take several years. Above all, we have no intention of dismantling supply structures. Rather, we want to help to make the production operation more sustainable. Of course, fundamental conditions like complying with local labour laws already apply. We are very reserved when it comes to those areas where we know that these conditions are endangered.

Sustainability is becoming an increasingly higher priority for consumers. Are they your ally in this work?

Mayer: In every project, we ask ourselves what we as consumers, who we also really are, would expect when we buy the product of a company that had dedicated itself to sustainability. In the beginning, the expectations may be somewhat diffuse. But as the project moves forward, these expectations quickly become clearer and help us to take a decision: Yes, we have to do something. There may be some problems here that we must examine. …

This is one aspect of the work. Another one is always "price": The products should definitely be more sustainable, but not more expensive by any means. But if you apply real standards and comply with them, you cannot do it for the "lowest" price. This attitude still has a way to go. But I am convinced that sustainability will become part of an enhanced definition of quality. And quality has its price.