Globally, the term ESG (Environmental, social, governance) has been getting airtime in the media — and it’s now a bigger consideration for WA producers to manage.

Words Joel Dinsdale, Quality Assurance Coordinator, vegetablesWA

EDUCATED investors and customers with sound values want assurances in relation to ESG. They want to know that horticultural producers are factoring in the environment, socially responsible and have sound, business governance.

Food safety and environmental assurances are covered by producers that are certified to Freshcare’s food safety and environmental programs (via independent third-party audit reporting). Other GFSI systems also provide assurances on food safety and elements of the environment via their programs.

For a while now, WA producers have been asked by some larger customers, to provide social compliance assurances, so vendors have chosen to measure their compliance against SEDEX SMETA (SEDEX Members Ethical Trade Audit) or Fair Farms. (For the record, you can see the list of Fair Farms approved businesses on their website.)

So, what factors did the producers consider when looking to adopt one of these systems?

The predominant driver for businesses is likely the customer. Pre-COVID, the major retailers, started the push to get their suppliers to onboard an ethical systems audit.

Across the country, most (if not all) Tier 1 producers1 (suppliers with a major retailer vendor number) have now adopted a system to continue supply to their retailer(s). This is driven by the financial sector, as the majors who are publicly listed companies are considered “ethical”. This explains why ethical superannuation funds invest heavily in these companies, as they bring supply chain assurances.

The major supermarkets are now focusing on Tier 2 suppliers (those supplying finished products via a Tier 1 business, such as market agents with major retailer supply contracts). At some point, the majors will likely work towards closing the gaps on Tier 2 and Tier 3 producers. Many Tier 2s have already been told to ‘fall in line”’ with requirements if they wish to continue supplying.

This means that if a supply contract includes social compliance assurances, compliance becomes nonnegotiable. It’s reasonable to expect that Tier 3 growers may eventually need to follow this pathway, especially where customers perceive risk.

To grease the wheels, some of the majors offered to pay for their suppliers to have an initial audit. Many producers saw this as an opportunity to adopt a system while not having to foot an extra expense.

For those that demonstrated (at audit) that they have robust ethical systems and records, their risk has been deemed to be low risk. The recertification frequency is longer due to the low-risk nature. Those deemed to be higher risk, will require more frequent reviews to satisfy the compliance criteria.

Some WA producers are supplying into export markets, which means that they are subject to the same supply conditions which stipulate that they have ethical/social compliance assurances. (It’s worth noting that international exporters that are supplying horticultural products from overseas into Australia, are required to have ethical trade certification to supply our major retailers).

In the northern hemisphere, programs like SMETA and GlobalG.A.P. G.R.A.S.P (GlobalG.A.P. Risk Assessment on Social Practices) audits are heading towards standard practice in horticultural businesses, so Australia is a follower in relation to social compliance. By adopting these systems our producers can maintain market access which is good for business continuity.

It’s also worth noting that Fair Farms, unlike SMETA and G.R.A.S.P. (which are overseas developed systems) is an Australian developed and owned system.

This is both a strength and a limitation for the system, in that it’s nationally accepted but is not yet widely accepted on a global scale.

If your customer(s) are commencing discussions with your business in relation to social/ethical compliance, then you should do your due diligence.

Obtain all the information that you can, so that you can plot a satisfactory pathway towards a compliance system that satisfies your customers.