International wholesaler METRO means big business. While headquartered in Germany, METRO also operates in Eastern Europe, Western Europe, Russia, and Asia. Last fiscal year, the company turned over around €25bn.
As an international distribution company, human rights due diligence is already a ‘core element’ of its sustainability strategy, explained Illa Brockmeyer, Public Policy Manager at METRO AG. “We stand strong for ensuring human rights within our own operations and our value chain. Our products should be safe, socially and environmentally sound, and meet our customers’ expectations.”
METRO has committed to achieving ‘equitable working conditions’ throughout its procurement channels until 2030. Yet with a presence in 34 countries around the world, it is unsurprising that a key challenge facing the company is the complexity of its supply chain.
‘Due diligence is not a one-off thing’
The wholesaler’s due diligence process is best described as ‘recurring’, suggested Brockmeyer at a recent European Food Forum (EFF) event. “Due diligence…is not a one-off thing. It’s something that has to be done continuously.”
METRO’s principles and standards cover fair working conditions and social partnership; stakeholder engagement; assessment; training; remediation, prevention, and mitigation; and monitoring and reporting.
They are based on principles and guidelines championed by the United Nations Guiding Principles, OECD Guidelines, Key ILO Labour Standards, and the Consumer Goods Forum’s Resolution on Forced Labour.
METRO has incorporated due diligence into its own operations, as well as in its value chain. “I think that’s where the most difficulty lies when it comes to due diligence,” revealed Brockmeyer. “Simply because our value chain is not as easy going or as straightforward as other sectors.”
Indeed, METRO’s value chain covers sourcing to logistics, onto operations, and finally, sales. “We have quite a complicated supply chain. And still, of course, it is our objective that with our business partners we ensure that we have equitable working conditions. So our goal is to achieve that until 2030.”
What does METRO demand of its suppliers?
To achieve its objective, METRO has developed a code of conduct and social standards clause. The latter is integrated into contracts with its business partners.
“We not only make them sign contracts, but we also have a so-called social compliance process, which means that we require our producers to do an audit,” the Public Policy Manager explained.
This means that companies can only become suppliers if they undergo an audit according to an approved supply chain management standard, such as amfori BSCI or Sedex SMETA.
METRO also accepts third party certification from bodies such as the Ethical Trading Initiative (ETI), Fair Trade, and the Roundtable on Sustainable Palm Oil (RSPO).
“It’s very important to be engaged with other businesses who are active in our sector, because these challenges are systemic and we cannot approach them by ourselves,” Brockmeyer continued.
Concerning child and forced labour issues, METRO has enforced a ‘deal breaker’ process. If the supplier is associated with such violations, the wholesaler will ban new contracts and follow up contracts with the business partner in question.
Key challenges
Of course, establishing the code of conduct and social standards clause is not enough, stressed Brockmeyer. Implementation is key, yet challenging due to the complexity of the company’s supply chain. “We have a lot of suppliers, we have a lot of products, and it’s difficult to establish the processes for all of the supply chain.”
As a result, METRO is currently focusing on due diligence in its own brands. “We are, of course, aware that this is not enough, and we have to work on the entire value chain. But it’s something that we are working on step-by-step,” she explained.
Another key challenge is that of leverage. It’s a ‘simple fact’ that METRO’s leverage decreases as its moves beyond Tier-1, because in those instances the wholesaler may not have direct contracts with the business partners involved.
It’s something the company is ‘aware of’, the public policy manager revealed. “It’s something that we need to highlight, that just for practical reasons, our leverage decreases the further down we go in the supply chain.”
Brockmeyer also highlighted another challenge: that of awareness and capacity. “While one might that that it is obvious what [these] human violations mean, in fact there is a lot to be done about awareness raising on the ground with suppliers…but also inside the company.”
METRO calls for ‘purposeful EU legislation’
The European Commission is preparing to enforce a new human rights due diligence law, which would set binding requirements for businesses. The proposal is expected to be tabled this summer.
At the EFF event, Brockmeyer outlined METRO’s demands concerning the impending mandatory legislation. “What we say is we understand that voluntary initiatives have not been enough, and we support purposeful EU legislation,” she told delegates.
However, METRO has certain stipulations, she continued. Firstly, the legislation should be pragmatic and clear, acting as a supportive tool building on existing international guidance.
METRO wants the regulation’s scope to be ‘realistic’. As explained, responsibility and leverage decreases beyond Tier-1, she said. “Responsibility and leverage for the entire value chain is something that we understand, but you also need to understand that our leverage decreases significantly, so it has to be levelled.”
The wholesaler is also calling for proportionate liability. “We want to make sure that there are positive incentives and that progress is not punished,” she continued. Elsewhere, METRO wants an acknowledgement of the ‘many’ voluntary initiatives that exist, in addition to the impending legal framework.
Digital solutions are another demand, so that data can be easily exchangeable. And finally, METRO is demanding an adequate transitional period. “We want to point out that it requires a lot of time to implement these processes, and that’s why we need sufficiently long transitional periods.”