Dutch retail giant Royal Ahold has been slow to act on social and environmental matters, but is starting to make progress in the ethical sourcing of tea, coffee and seafood
Campaigners say Europe’s fifth largest food company, Royal Ahold, put its sustainability work on ice after a financial scandal in 2003. Accounting irregularities led to a senior management shakeout that distracted the Dutch firm from thinking about its social and environmental impacts, says Johan Verburg from the Dutch affiliate of Oxfam. “They understandably looked inward for a period of time,” he says.
Nico Roozen, managing director of Dutch non-governmental organisation Solidaridad, recalls that the financial crisis stalled many projects for one or two years. However, Roozen says these scandals are far behind the company now and may have led to improved conditions. “Ahold has established core values, one of which is sustainability,” he says.
Certainly Ahold’s 2007 corporate social responsibility report boasts projects, ranging from “whisper” trucks for local deliveries in quiet Dutch residential streets to ecologically grown strawberries in Spain and certified coffee bought from some of the most remote farmers in the world.
Ahold has been a “first mover” in ethically certified coffee, Roozen says. The retailer recently launched the Cafe Oké coffee brand, aiming to help Dutch fair trade coffee break the 3% market share barrier. Ahold has also supported Utz Certified, an ethical certification scheme aimed at the mainstream coffee market that emphasises traceability.
Ahold, which reported €13.3bn in net sales for the first half of 2008, builds long-term relationships with coffee producers to buy products in large volumes and at higher rates, typically paying between 3% and 5% more than farm-gate prices, Roozen says. Sustainable sourcing of coffee started in Ghana and Kenya in 2007 and was recently extended to other countries such as South Africa and Zimbabwe. Roozen adds that Ahold is working with farmers to reorganise its supply chain for other commodities such as tea in Kenya and India, and cocoa in the Ivory Coast and Ghana.
The brew of coffee and tea projects is part of four key corporate responsibility themes launched in 2007 by Ahold, which owns Albert Heijn, the largest Dutch supermarket chain, Stop & Shop and Giant-Landover Food Stores in the US, as well as joint venture ICA in Sweden and the Baltic states, and JMR in Portugal. The four key pillars are sustainable trade, healthy living, climate action and community engagement.
Roland Waardenburg, vice-president of Ahold’s corporate responsibility programme, says engaging suppliers and consumers is the area where the group can be most effective. “Milton Friedman said that the aim of capitalism is to make money for shareholders, but today we see that there are other important stakeholders shareholders, especially customers,” he says.
The healthy living theme helps customers choose healthier food by deploying logos on products with voluntary certification from national food authorities such as the Dutch Food Centre.
Climate action aims to reduce energy used by transportation, distribution centres and in stores. Although Ahold has not published its targets yet, the company recently agreed at the European Retail Round Table to axe energy consumption per square metre in commercial premises by at least 20% before 2020. The company will next look at energy use by its suppliers, and is in the process of developing new targets, according to Ahold’s head of media relations, Caro Bamforth.
Ahold is starting to do some good sustainability work, although it still lags behind other Dutch companies, says Wouter Scheepens, a partner at Hague-based Triple Value Strategy Consulting. Leading the pack in the Netherlands are Unilever, TNT, Shell, Akzo Nobel and Heineken. It is difficult to compare Ahold with rival retailers in the Netherlands because most are much smaller.
Observers say that Ahold is yet to catch international retailers on managing its social and environmental impacts. The UK’s Marks & Spencer is widely regarded as the company to beat because of its Plan A initiative – a five-year, 100-point sustainability drive. Tesco and Sainsbury’s, two of the largest European food retailers, are still ahead of Ahold in areas such as organic food and fair ethical trade, Roozen says.
Sustainability from the sea
Sustainable seafood is an area where Ahold is making good progress. The company was the first supermarket in the Netherlands to develop a public, sustainable seafood policy. Ahold still trails UK supermarkets, but is on a par with French rival Carrefour and the world’s largest retailer Wal-Mart in making sure that the fish it sells comes from sustainable sources, says Carel Drijver, head of WWF’s head of oceans and coasts programme.
The Albert Heijn supermarket chain in the Netherlands last year cooperated with WWF to promote sustainable seafood products. According to Drijver, the Dutch supermarket chain introduced seven Marine Stewardship Council certified fish products and will add another eight before the end of this year. “Given the huge volumes of fish sold by Albert Heijn, this is very important and makes a bigger impact than the smaller chains and shops,” he says.
Ahold has developed rules to protect over-fished species such as sea bass and works to reform suppliers in the Netherlands and overseas. The company has helped WWF gain access to suppliers in Indonesia and elsewhere in Asia, where otherwise non-governmental organisations may have faced closed doors, Drijver says. “The company has really stuck its neck out.”
Albert Heijn has faced major challenges when readjusting its product lines, Drijver says. He warns that smaller, more nimble Dutch supermarket chains Deen and Jumbo have overtaken Ahold’s sustainable seafood campaign. “It’s not that they’re not motivated, but it takes time – they sell big volumes and they are slower in renegotiating orders or changing their supply chain,” he says. The supermarket chain should also increase its advertising to inform cost-conscious Dutch customers that sustainable seafood costs the same as competing products, Drijver says.
Greenpeace’s Femke Nagel says Ahold is putting a lot of effort into increasing its range of sustainable seafood products and giving customers information about how fish are sourced. The weakness, she says, is that the company only takes responsibility for its own brand products, even though its sells many other brands. “They still have a lot of work to do,” Nagel adds.
Observers are most concerned by Ahold’s failure to publish clear targets that could focus dialogue with stakeholders and give outsiders a means of holding the company to account. Oxfam Novib’s Verburg says Ahold should open up more to engage with social groups. “They also need to set clear targets and report against them,” he says. Scheepens adds it’s very important for a company to identify relevant key performance indicators and to manage those in order to improve performance. “This may lead to tough internal debates,” he says. Kavita Prajash-Mani of UK thinktank Sustainability stresses that retailers must identify goals and establish a clear timeframe for achieving them.
Indeed, Ahold is moving in this direction. Waardenburg says the company will work on a complex plan to understand its entire footprint and establish goals. For instance, Ahold is studying ways of cutting carbon dioxide emissions from electricity or refrigeration in stores, while also slashing customers’ and suppliers’ energy use. “Ahold’s next report in 2009 will give detailed targets,” Waardenburg says.
Welcome as these steps are, Ahold has a long way to go before it convinces the public that it is as committed to fighting climate change and promoting ethical trade as its counterparts in the UK.