The Business Case for Corporate Social Responsibility in the UK Food and Agriculture Industry

The Business Case for Corporate Social Responsibility in the UK Food and Agriculture Industry

There are few studies that actually show the financial rewards for compliance, but it is known from other industries that corporate social responsibility is profitable. Here's how the food and agriculture industry can increase value through CSR. By Marina Martin Curran.

For a long time farming was perceived as a romantic occupation by city dwellers. The farmer worked with the soil, produced healthy nutritious food, knew his livestock individually, and was a steward of the countryside. In recent years this image has been replaced by one of the farmer as a villain: pouring pesticides on his crops, polluting the water table with animal slurry, leaving machinery to rust and producing food that isn’t safe to eat. It is not just the farmer who has been tainted; the food supply chain is long and winding and butchers, abattoirs, hauliers, processors and retailers have also suffered from the poor image that the public has of British food.

The food and agriculture sector’s financial and social capital could be saved by the array of social and environmental schemes that it has at its disposal. Some of the schemes predate the modern problems of agriculture, e.g. organic farming started long before concerns about GM food made it so popular. Other schemes have been put in place specifically to counter the recent negative image of food, e.g. the Little Red Tractor label.

These socially and environmentally responsible schemes are entered into voluntarily and range from the highly regulated, e.g. organic farming, to the unregulated, e.g. businesses working in the community. The schemes cover a range of issues that have been identified by business and consumers alike. These include animal welfare, biodiversity, labour, regional sourcing, public health, sustainability, supply chain integrity.

As in other sectors, motivation for opting into these schemes is both financial and moral. There are few studies that actually show the financial rewards for compliance, but it is known from other industries that CSR is profitable. Businesses are able to command a premium for products that have CSR labels, their image improves, their share prices stabilise and they become eligible for socially responsible investment funds or industry awards, which can further enhance their value.

This article aims to provide the reader with an overview of the schemes available to the food and agriculture sector and the issues that they address. A brief description of the business case for adopting these schemes is provided.

Organic farming (biodiversity, sustainability)

Organic farming originally addressed the social and environmental responsibilities of food production. These days, the demand for organic food is such that it is produced in large quantities and the social aspects have been set aside and emphasis is placed on the environmental aspects of production. Consumers buy organic food for the perceived environmental and health benefits. Organic farming is now big business and the price premiums that farmers can charge are an incentive for conventional farmers to convert their farms to organic. There has, however, been a recent downward trend for organic milk prices.

Fair Trade (labour, supply chain integrity)

Fair trade products address the social responsibilities of trade. When consumers buy fair trade coffee or bananas they are ensuring that the producer in South America, for example, gets a fair price for his crop. Also, that the producer is free to participate in trade unions and that no forced labour is involved. Fair trade products are more expensive than conventionally traded products because the price fixed for the product is often higher than the current market price. Fair traders also include in the price a social 'premium' to be used by the producers to improve their living and working conditions. Starbucks have recently announced that they intend to supply fair trade coffee in their British outlets. This will provide Starbucks with a real market advantage; as it will encourage “ethical” consumers to shop there. Many of these consumers would have avoided Starbucks in the past as it is seen to be part of the globalisation of the High Street.

Quality Assurance schemes (animal welfare, public health)

The quality assurance schemes, of which they are dozens in the UK, assure the consumer that the meat or vegetable has been produced in an environmentally responsible way, that animal welfare standards are adhered to and that the product is safe. These standards go above and beyond the law. Though they are voluntary, there are very few producers who don’t belong to at least one of them. The scheme with the highest profile in the UK is the Little Red Tractor, this is the label of the Assured Food Standards. The AFS is an umbrella scheme for several different standards that exist for beef, pork, lamb, poultry, cereals and vegetables. Producers gain a price premium for opting into these schemes, but more importantly it assures them a market for their produce. Most of the UK’s multiple retailers won’t buy produce unless it has a quality assurance mark. This is to insure their supply chain integrity – both from a moral standpoint and from a financial or liability standpoint.

Codes of conduct (supply chain integrity)

Retailers have set up codes of conduct to insure supply chain integrity. Sainsbury’s, for example, have a Code of Practice for socially responsible sourcing which covers issues such as health and safety, equal opportunities and the protection of children. All the major supermarkets also subscribe to the Government’s Ethical Trading Initiative (ETI) as do the Tea Sourcing Partnership (an association of major tea packers). The business motive for the retailers is that consumers will choose one responsible business over a less responsible one. These companies often advertise their commitment to the ETI or their code of conduct on their products. A business can become eligible for inclusion in SRI funds if it can demonstrate adherence to its code of conduct.

Farmers’ markets (regional sourcing)

Farmers’ markets used to be central to British rural life. Once a week people went to the market to buy and sell their produce. In continental Europe, it is still quite normal to buy fresh produce from a market once a week. Consumers in the UK who want to avoid “food miles” and who wish to support local producers are once again heading to their local farmers’ markets. The stalls have changed in recent years, they are laden with organic, free range, GM free, and of course regionally branded food. The consumer has to pay a premium for this food, because it is produced and marketed in small quantities. However, there is a strong feel good factor involved in buying food directly from the farmer and farmers’ markets are set for a comeback. Regulation of farmers’ markets is needed and the Food Standards Agency has called for a definition of these markets.

Business in the community

Corporate social responsibility is often equated with a business’s interaction with the local community, the modern take on philanthropy. The supermarkets and food manufacturers have scored highly in this category, they are able to make use of their brand for cause related marketing. Examples include Walkers Snacks “Free Books for Schools”, Asda’s “Tickled Pink Campaign” for Breast Cancer care and Iceland Foods “Rocking Horse Appeal” for Alder Hey Hospital. These campaigns have raised huge amounts of money for charity as well as raising the profile of the company concerned.

Employee relations (labor)

Managers know that it makes good business sense to invest in employees. This is no different in the food retailing and catering sectors, which employs a vast number of people and has traditionally had a high turnover rate. Asda, for example, employs 109,000 people. They train their staff to become butchers, bakers, greengrocers, and vintners. They have set up numerous schemes to assist staff to do their job and maintain a suitable quality of life e.g. child care leave, shift swapping schemes, paternity leave, and school starter scheme. Employee relations are formalised in schemes such as the Investors in People. The business case for opting into regulated or unregulated employee schemes is clear: motivated, respected and well-remunerated employees are more productive than dissatisfied employees. They stay in their jobs and decrease the costs of recruitment.

Corporate Social Responsibility has many faces in the food and agriculture sector, perhaps because it is such a complex sector with such a long supply chain. From “farmgate to plate” the members of the food supply chain could make use of the existing schemes in order to address the many problems faced by the sector. Empirical studies are needed to assess the financial returns of adoption of corporate social responsibility schemes. In the meantime, based on studies in other industries, agribusiness can assume that opting into these schemes will be profitable in the long term.


By Marina Martin Curran.

This piece reprinted from Ethical Corporation magazine, a GreenBiz News Affiliate.