How does the ALDI SOUTH Group buy, Mrs Roach?

ALDI sells many products that originate in lower income countries. What concerns do you draw from this?

Sally Roach: At ALDI, one of our main goals is to provide the best products at an affordable price for all while supporting the development of sustainable supply chains. Through our own operations and global supply chains, our business touches the spectrum of internationally recognised human rights.

And what does that look like concretely?

We're constantly conducting risk analysis and human rights impact assessments to make sure we are identifying the actual and potential risks within our supply chains. And in doing so, we've been able to identify some key raw materials that we focus on. These includes cocoa, coffee, nuts, tea, tropical fruits, produce from Italy and Spain, as well as fish and seafood. We have carried out our human rights impact assessments to ensure that we can identify, understand, and assess the potential and actual adverse impacts that any business activity would have on workers or rightsholders, such as community members, smallholder farms and women.

Do you see yourself as a single player in this respect?

We believe that the best way to protect the people and the environment is through joint initiatives and partnerships.

For this reason, we are an active member of various multi-stakeholder initiatives and projects on the ground. We do this to improve the situation of workers on banana farms as an example. In addition, we engaged in several initiatives such as the German Retail Working Group on Living Income and Living Wage, the World Banana Forum and the UK Banana Retail Commitment on Living Wage. In nuts, we have seen from our sustainable risk assessment that sustainability risks are higher in low-income countries. Therefore we pursue a risk-based due diligence approach and pay special attention to these high-priority supply chains.

We sell 11 different types of nuts; it's fair to say that each nut value chain comes with its own environmental and social challenges. The foundation for all our sustainability measures is supply chain transparency which we also work towards with our strategic partners on a day-to-day basis. Building on this foundation, it is key to understand the specific risks associated with an individual value chain step and identify appropriate actions. If we look at cashews, for example, which are mainly grown in West and East Africa, where smallholders harvest the nuts, these crops are used to supplement their household income. In contrast, the processing is mainly done in Vietnam, where the risks are very different in terms of human rights. The key is about understanding those different supply chains and their risks.

What does ALDI gain when you improve the living conditions of banana farmers?

It is our moral responsibility. We do not search for any benefit. When we talk about our work in developing sustainable supply chains and fair living conditions, we also talk about human beings and families who deserve life.  At the end of the day, it is vital for us as a business to work in a socially responsible way.

We can't run a business at risk of the people in our supply chain. It's not just about winning as a business. I think it's the right thing to do.

And when ALDI began looking at sustainability, what was the turning point?

If we focus on the banana sector, we've engaged in several of our own as well as multi-stakeholder activities and projects to improve sustainability in the last ten years. In 2017, we became a member of the World Banana Forum, which is coordinated by the Food and Agriculture Organization (FAO) of the United Nations that promotes best practices for sustainable banana production and trade. It provides a space where retailers, importers, producers, governments, research institutions, consumer associations, trade unions and more can come together to discuss the problems that the sector is facing and come up with combined solutions. It really shows that it is not a problem that can be tackled alone. Everyone must come together.

And then?

Since 2019, we've also engaged more widely in the important topic of living wage and living incomes for banana farmers and workers. We're part of IDH Living Wage Steering Committee. This ensures we can monitor the implementation of the IDH Roadmap to effectively act towards living wage and living income. Hence, we jointly work on solutions to harmonise the process and enable continuous improvement. For particularly our UK and German markets, we've also started to implement our first pilot together with our partners to improve the wages of banana workers. The aim of this is to fulfil a joint goal of working towards a living wage for 50% of our banana volume in Germany by 2025, as well as 100% of the volume for the UK market. This sectoral collaboration with other retailers is crucial, as we can only push for such causes if we establish a level playing field with our competitors.

What are the challenges with bananas in terms of sustainability, transparency, and fairness in the supply chain?

We attach great importance to sustainable product conditions in manufacturing food and non-food products. Without knowing where our products come from, we can't ensure that we're being compliant with our requirements. We can't analyse risk properly, and we can't monitor and implement projects. We've established full internal transparency for our banana supply chains, down to grower level and beyond this, we are also committed to making more information publicly available. In 2023, we published the names and addresses of all our tier one suppliers for bananas. We were also able to publish all countries of origin as well as the share of banana volumes we sourced from these countries in an effort to follow international best practices. To support this even further, since 2019 we've also assured that all our bananas come from certified sources like Rainforest Alliance or Fairtrade, as well as all our suppliers are measured against our internal sustainability (CR) performance.

At the end of the day, farmers want to be paid properly...

Since 2022, we've completely changed the model of how we buy bananas through partnerships and our supply chains. This practice has now been deemed as an industry best practice towards the sourcing of bananas. We developed a new banana sourcing approach jointly between the buying and the sustainability teams to support sustainable banana production and in support of shared responsibility along the supply chain. ALDI’s pricing in the past usually followed general market mechanisms. Suppliers would offer prices through tendering, which would cover all aspects of the supply chain from packaging, ripening, transport, etc. - and then prices were agreed, typically based on market supply and demand factors. Since 2022, we've applied our new buying process where we're looking to increase transparency of production costs and setting prices in partnerships using an open book costing approach with selected suppliers. Suppliers will disclose their costs. In return, we can offer commitments to long term supply relationships, which gives them security over several years. All of this is verified with public data validated by Fairtrade to ensure that minimum price changes are accounted for.

And what have been the positive results and challenges of these expert team's field trips? Why are local visits essential for your business?

Having been fortunate myself to do some on site and on the ground visits as well, I think it's just invaluable to get invaluable first- hand insight into the supply chains. Experiencing the value creation steps at source is key for us to understand the complexities that come with some of these global supply chains and fact-check third party information or industry knowledge. It also gives us the opportunity to strengthen our relationships with the key stakeholders on the ground and the chance to meet with NGOs, workers union and factory owners. Visiting our producer and suppliers allowed us to get that holistic understanding of the sector and to gather all the different perspectives that serve as a reference of the development of good actions and responses to the challenges that we see. Not only are we confronting these challenges firsthand, but it means we can come up with some good, promising opportunities to engage better in the future with these stakeholders. We also see it as key of our internal structure. Often, we go on these trips along with our global sourcing (buying) team.

Traveling hand by hand with our buying specialist bring both sides of the puzzle lays the foundation for collaboratively working on solutions.

Do you have an example for that?

One example that really brings this to life was the trip that the nuts team took to the Amazon rainforest. This is where our Brazil nuts are growing wild. Visiting that area gives you a true understanding of the logistics issues that such a product has. When my team was joining this sourcing trip, there were heavy rains and multiple transportation challenges. They were told two hours after passing a road that it had simply been washed away because of the heavy rains. In addition, some of the communities are in very remote locations that they were told that they could only be reached by canoes. We can scape those valuable experiences that we only get on the ground since it highlights that what we may think is simple day to day facilities, transportation, food and health offers, might not even exist in some of these places.

Is it possible to keep track of smallholder farmers? What are the challenges?

As previously mentioned, we have established full internal transparency of our banana supply chain, down to the grower level. So down to the grower level, I think it's fair to say that the banana supply chain is usually a bit simpler than some of our other products as well. Here we've managed to successfully implement the transparency in this commodity. As a result, we have a good understanding of where smallholder farmers are in our banana supply chain.

In the area of nuts, increasing the transparency of our nut supply chains is a key item on our agenda.  We work very actively to try and provide support, understand, and recognize overall smallholders as an important part of our supply chain. If we look at cashews in particular, there are thousands of smallholders day-to-day selling their crop into middlemen and aggregators. These then get sold to international traders and eventually foreign processors. Given the volumes that ALDI moves, it's a huge network of different actors.

Working towards this traceability and transparency is key to really keep an eye on our smallholder farmers, collecting the data and managing that through our system.

Hence, with nuts it is more difficult?

It's fair to say that nuts are slightly more challenging on getting that transparency, but we're working hard as a team to gather that data and make sure we have the visibility we need going forward. On cashews, we're already making good progress. So, we have good visibility of where our cashews are being processed. We are continuously working with our partners to keep digging deeper and deeper and getting that necessary understanding. Our knowledge about the processing facilities in the country of origin is rapidly increasing and we do have oversight – for example – on where our Cashews from Africa are processed.  

I learned that traceability is the key word for you. This is also touching another legal point: A supply chain law is in force in Germany. What are your experiences with it?

The introduction of this impact-orientated corporate mandatory due diligence in legislation is a very important building block for the realisation of human rights within such complex supply chains. ALDI, as a retailer, has been very publicly supportive of the both the German Supply Chain Due Diligence Law as well as sustainability-focused EU legislation. We actively welcome this because we believe it creates a level playing field and encourages all stakeholders to join the sustainability movement and step up with collaborative approaches. We've already seen the impact of this on our internal ways of working, as well as activities and measures we put in place regarding our supply chains.