Aldi tells suppliers to meet ethical standards

ELI GREENBLAT
The Australian

German discount supermarket Aldi is plumping its corporate and social responsibility credentials by demanding its Australian suppliers sign up to rigorous ethical sourcing programs and auditing regimes, as it works on shaping community views that the chain is more than just about bargain basement prices.

The pitch to its own suppliers to sharpen their corporate social responsibility systems is viewed by industry experts as part of Aldi’s global initiative for the next five years that covers all of its regional operations, including Australia, and covers issues such as store modernisation, new private label strategy, local sourcing and ethical sourcing by its suppliers.

Aldi Nord and Aldi Sud, the two independent parent companies of the Aldi empire that in 1960 split to carve up separate global territories, are believed to have developed a joint strategy on some key initiatives, particularly around ethical and sustainable supply chains.

In a recent report to its industry clients, Britain’s IGD Retail Analysts warned that suppliers should take note of the growing importance of corporate and social responsibility to Aldi. 

“As ethical standards become more important for both Aldi businesses, suppliers should review their sourcing and make changes in production to meet Aldi’s growing focus in this area,’’ IGD said.

“Branded manufacturers will have to improve the health credentials of their products and invest in sustainable sourcing in order to better compete with Aldi’s own ranges.”

Now that framework and new production expectations has come to Australia, with Aldi’s local corporate responsibility manager, Stephanie Farrugia, recently presenting to local suppliers new rules, benchmarks and systems they must have in place over the next five months to meet Aldi’s standards. 

In documents distributed to suppliers, and obtained by The Australian, Ms Farrugia has laid out a timetable for Aldi’s grocery and merchandise suppliers to sign up to a range of international ethical sourcing groups as well as begin their own audits of their supply chain and manufacturing operations.

From August, suppliers to Aldi need to include key social audit information in all tenders and by November need to become a member of one of two leading corporate and social responsibility groups, Supplier Ethical Data Exchange (Sedex) and the Business Social Compliance Initiative (BSCI). 

In addition to Aldi’s social monitoring program, suppliers must provide an internal ethical sourcing policy, become a member of Sedex or BSCI and share accepted third-party audits for Aldi stores supply chain.

“All social audits for production facilities that supply product to Aldi stores must be carried out by one of the audit companies approved by the BSCI,’’ the presentation to local suppliers states.

“Suppliers must proactively review social audit reports and provide corrective action for non-compliances in a timely manner. It is the responsibility of the supplier and production facility to discuss the findings and provide supporting documentation or photos showing corrective actions for noncompliances.” 

Ms Farrugia warns in the presentation that Aldi reserves the right to take action and remedies as it believes appropriate for breaches of its ethical benchmarks, including suspending or terminating supplier relationships.

A spokesman for Aldi said its social standards in production were just one part of its commitment to corporate responsibility. “In addition to requiring high social standards throughout the supply chain, we also aim to source raw materials responsibly, lessen our impact on the environment, support Australian businesses and give back to the communities we operate in, and help make healthy choices affordable for our customers.”

Aldi is proving to be a crucial customer for many suppliers in Australia, providing an alternative to the two leading chains, Woolworths and Coles, with sales for 2017 expected to break through the $8 billion level.