- guardian.co.uk, Tuesday 30 June 2009 22.39 BST
Tesco will face accusations from Britain's biggest trade union this week that it is damaging race relations and social cohesion by allowing the exploitation of foreign agency workers in its UK meat and poultry supply chains.
Shareholders at the supermarket chain's annual general meeting in Glasgow on Friday will vote on a resolution tabled by the Unite union alleging the company has failed to meet its own ethical standards and is fuelling racial tensions that have been exploited by the far right.
According to the union, agency workers in meat factories supplying Tesco, most of whom are migrants, are routinely paid less and treated worse than permanent staff, who are mostly indigenous.
Unite's resolution 23 states: "There appears to be a gap between the company's commitments and some practices." This poses a "significant risk to shareholder value".
"The exploitation of migrant agency workers and undercutting of indigenous workers has divided workplaces and is fuelling racism, exploited by BNP boot boys in suits," Unite's deputy general secretary, Jack Dromey, told the Guardian. "We've organised workers around fair and equal treatment . Now we are taking their cause to the AGM of Tesco shareholders and holding Terry Leahy, their chief executive, to account."
The three-page motion to the AGM calls for Tesco to make a non-executive board member specifically responsible for eliminating discrimination against foreign workers by suppliers, and says the Tesco board lags behind its peers in oversight of human and labour rights in its supply chain.
The move comes after the high-profile publicity campaign by the TV chef Hugh Fearnley-Whittingstall, defeated at last year's AGM, to raise standards of chicken welfare in Tesco's supply chain.
Although unlikely to be passed, the Unite resolution is expected to attract more heavyweight support from shareholders – it has already been backed by one of the leading local authority pension funds, West Yorkshire, with others expected to follow. The influential investment consultancy Pensions and Investment Research Consultancy, which advises institutional investors with about £1.5trn of assets on corporate governance, has recommended shareholders vote for the resolution too.
The Tesco board opposes the resolution and has recommended that shareholders vote against it. It says the union has provided no evidence of problems in its meat chain. "Despite requests, those behind this resolution have provided no evidence that [any ethical guidelines] have been breached by our suppliers … Tesco has a strong and proactive approach to ethical issues throughout its business and supply chain."
The board says that its guidelines for suppliers around the world go beyond legal requirements and ensure that all workers are treated fairly and without discrimination. It also argues it has played a leading role in tackling problems through groups such as the Ethical Trading Initiative (ETI), which awarded it the status of "Achiever", the second highest level of progress, in 2008.
As market leader, Tesco will not be surprised to be targeted again, but the chain feels it is unfair that it should singled out over issues that it says apply right across the meat industry. The company argues that it operates in a competitive market and that conditions therefore have to be tackled at industry level.
Nor does it accept that large numbers of agency workers, needed to meet seasonal variations in demand or local labour shortages, are of themselves a problem or impact on race relations or social cohesion. "We do not believe that bringing this resolution at one company's AGM is the best way to progress what is an industry-wide debate," the board has written.
Resolution 23 represents the culmination of a four-year campaign by Unite in which the labour movement has been forced to reinvent itself as it tries to find new levers of power in a globalised, post-Thatcher world.
Embarrassing companies one at a time at their AGMs is part of an effort to shift the balance of power back from dominant multinational corporations to ordinary people who work for them directly or indirectly.
Today's meat industry is concentrated in the hands of a few global processors and supermarkets, so the union decided to adopt a new strategy of negotiating across the whole sector rather than arguing over terms one factory at a time. It also decided to take the argument to the retailers at the top of the chain.
Unite started in 2005 by employing new officials, including Polish and Portuguese organisers, in a major drive to recruit workers of all nationalities in all UK meat factories to the union. It has quietly built up its position so that it now represents over three-quarters of workers in the British poultry industry, many of them migrants.
The campaign began in 2005 with the first agricultural workers' strike in Britain since the 1920s. When migrant strawberry pickers downed tools over pay and conditions in Herefordshire, Unite took up their cause and launched demonstrations outside Tesco and Sainsbury's stores to push the retailers and their fruit supplier into talks to tackle complaints.
Buoyed by the success of that strategy of public embarrassment, it then planned a longer campaign to persuade the big retailers to change their buying practices.
Unite also made detailed submissions about inequality and abuse of foreign workers in the British supermarket meat industry to the regulator, the Equality and Human Rights Commission (EHRC), persuading it to launch a formal inquiry into alleged systemic discrimination in October last year.
The EHRC has taken extensive evidence, and a well-placed source told the Guardian that it had heard "some really shocking allegations", although it would not identify particular suppliers. It is expected to report at the end of the year.
Unite blames the way supermarkets order food at short notice and put pressure on suppliers to cut costs.
As well as an independent audit under the auspices of the ETI, it says a further survey it conducted last summer of 48 meat factories that supply UK supermarkets found more than half used agency labour all year round.
The union survey reported that agency workers, who were overwhelmingly migrant, were paid less than permanent local workers, who were mostly indigenous, with the result that there had been some form of conflict or racial tension at the overwhelming majority of sites. Tesco categorically denies it has been given any evidence of that by Unite in factories where it is a customer.
Unite has bought sufficient shares in more than one supermarket group to table resolutions, and acknowledges that the problems it alleges are industry-wide. It says it has focused on Tesco because the company would not work with it to resolve the problems, whereas other supermarkets have begun to do so.
Unite targeted Marks & Spencer over what it said was discrimination against migrants that was undermining local workers at one of its meat suppliers, Dawnpac (which also supplies Tesco), in December 2007. The union subsequently signed agreements with M&S to work towards introducing equal terms for all workers .
"Tesco jointly commissioned an independent report with us that proved there was a two-tier labour market in their supply chain. They then walked away from the table. Now the evidence of structural discrimination is so strong that the EHRC is conducting it first statutory inquiry into this sector," Mr Dromey said.
Tesco gave us a different account of discussions with the union. "We have always been happy to engage on the issue of workers' rights, and indeed have been doing so through the ETI with various stakeholders including Unite. As we have said before, these issues are industry-wide and are therefore appropriately and effectively pursued through multi-stakeholder engagement. We therefore welcome the EHRC review of the UK meat and poultry supply chain, in which we are fully participating.
"We last met Unite in November 2008 when they requested that we sign up to an agreement which would commit our suppliers to specific contractual arrangements for their workforce. We declined as we felt that this would prejudge the outcomes of the EHRC review and was a conversation more appropriately had at an industry level.
"Unite moved away from these discussions and started a bilateral approach through their AGM resolution."
Ian Greenwood chairman of the West Yorkshire Pension Fund, said it had been persuaded to support the resolution after representations from Unite. "We don't enter these things lightly but there's no question there is evidence of problems in many, many supply lines. It is not unreasonable to ask for board-level supervision. If Tesco see no problem, there's no reason why they shouldn't support the resolution.
Tesco are an extremely good company that create long term value for their shareholders. I have no doubt they are dealing with it in good faith, but they should show markets the way and be aware of potential damage to their brand."