UK3221#1103#2 (A)

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1 Sustainable Procurement at Tesco Plc Name Course Name Tutor Institution Date Word Count: 3530

2 Abstract CSR is also termed as corporate citizenship, corporate conscience, or responsive business framework. CSR policy for an organization operates as a strategic business regulatory tool in which the business monitors and assures its active adherence to the spirit of ethics, law, standards, and global or national norms. It aims at increasing long-term profits and the trust of shareholders via positive public relations and high ethical criteria to minimize legal and business risk by being accountable for company actions. The report examines a case study of Tesco Plc.’s influence on CSR performance and recommends assisting Tesco to prevent such issues in the case study in the future. The report also explores other recommendations for Tesco to enhance its sustainability performance from the procurement view.

3 Table of Contents Abstract ....................................................................................................................................................... 2 Introduction ................................................................................................................................................. 4 Case Study Analysis ..................................................................................................................................... 4 The effect of this case study story on Tesco’s corporate social responsibility performance ........................ 5 Recommendations to help Tesco Plc prevent such incidents in the future .................................................. 8 Recommendations for Tesco to improve its sustainability performance from the procurement perspective .................................................................................................................................................................. 11 Conclusion ................................................................................................................................................. 12

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4 Introduction In the past recent times, the business case has been established for corporate social responsibility (CSR) across the world. This has been a business case for CSR may be considered as needing firms to maximize profits via operating legally in competitive markets. CSR is also termed as corporate citizenship, corporate conscience, or responsive business framework (Ahmed, 2014). CSR policy for an organization operates as a strategic business regulatory tool in which the business monitors and assures its active adherence to the spirit of ethics, law, standards, and global or national norms. It aims at increasing long-term profits and the trust of shareholders via positive public relations and high ethical criteria to minimize legal and business risk by being accountable for company actions. It supports the company to create a positive influence on the ecosystem and stakeholders comprising employees, consumers, community, government, and investors (Altenburger, 2018). The report examines a case study of Tesco Plc.’s influence on CSR performance and recommends to assist Tesco to prevent such issues in the case study in the future. The report also explores other recommendations for Tesco to enhance its sustainability performance from the procurement view. Case Study Analysis Tesco Plc is experiencing a lawsuit over allegations of coercing its migrant employees to 99 hours weekly on unlawfully low pay in its F&F fashion brand. A team of former workers at its Garment factory in Thailand is suing the company for alleged negligence and unjust enrichment. This was made by employees who produced denim jackets, jeans, and other apparel for children and adults for its Thai Branch Business between 2017 and 2020 (The Guardian, 2022). The factory is located in Mae Sot and focuses on Burmese migrant employees as its predominant workforce. The migrant workers were paid £4 daily and worked for the whole week being trapped in the forced labor cycles. Besides, the workers were subjected to poor working conditions even being forced to sleep on cement floors with no privacy or little because there were no walls, locks, or ceilings (Times Series, 2023). Further, the workers alleged being coerced to work from 8 am to 11 pm from Monday to Saturday, while only on Sundays were allowed to work up to 5 pm other orders given may mean they have to work for a longer time (Times Series, 2023). In addition, although Intertek, an audit

5 firm, and Tesco were conducting audits at the company, the illegal activities were noted to have been happening and not spotted. Tesco Plc was not engaged in the daily operation of the factory; however, the supply chain employees are nonetheless bringing the case directly against the company (Aiman Bin Rosnizam et al., 2020). The effect of this case study story on Tesco’s corporate social responsibility performance A corporation that integrates CSR may influence all of its stakeholders and may generate benefits. There is a positive correlation between corporate citizenship and employee productivity, customer loyalty, reputation, corporation stock price, and competitiveness (Beal, 2013). Currently, Tesco Plc is dealing with a set of sophisticated issues, for example, restoring consumer trust following the landmark lawsuit over assertions that migrant employees were compelled to work more than 99 hours weekly on unlawfully low pay. The degree to which the stakeholders are being served by the company’s actions is termed CSR (Bonnafous-Boucher and Rendtorff, 2016). Through the story, Tesco has the poor performance of its CSR, in which the bargaining power of its workers in its F&F fashion brand in Thailand was lower. The employees were subjected to poor working conditions while Tesco and Intertek were negligent and generated unjust enrichment in hands of lowly-paid employees (Borneck, 2016). Based on the stakeholder theory, emphasizes the significance of a company’s relationship with its stakeholders as it needs to act in their best interest of them. The company exploits its workers to maximize the value of consumers. Practically, several companies create an effort to perform well based on CSR, to enhance the correlations with their stakeholders (Buckley et al., 2022). Establishing optimal work conditions for its workers or engaging in the corporation’s project that assists third world nations are good examples of investing in CSR, for example, Tesco operations in Thailand. Companies that have invested in CSR experience both benefits and costs and the influence on its performance is always company-specific. Typically, the benefits will take some time to emerge because they should be large to cover the CSR investment cost; thus benefits are non-linear in their shape (Dodd, 2022). However, Tesco has failed to invest in its employees in the Thailand branch dealing with manufacturing of F&F fashion brand for the organization as the company considers it a liability.

6 The workers are housed in poor conditions places. This contributes to a decline in Tesco’s CSR performance as it has neglected its employees who are key stakeholders in its operations to ensure consumer satisfaction with its products. In addition, only high positive CSR levels can create value for shareholders to improve (Eweje, 2014). The company despite having environmental performance and charitable contributions that are considered to be positive, it can also depict misdeeds, for example, guilty verdicts for the pending landmark lawsuits facing the company (Freeman et al., 2018). It is a negative CSR that can negatively influence the company's performance in the long term. Thinking of Tesco being found guilty of mistreating its employees in the story, it will be a case in which the firm will suffer from the poor performance of CSR. This will in turn affects its shareholder value in the market as consumers will begin to have resentment over the operations of the company. Therefore, negative CSR events such as this always influence the consumer. When an organization involves in negative CSR that affects workers, there will be a negative response to the share price for Tesco. The response will be weaker, even though it is still important and relevant to find educating companies to invest in worker diversity and relations (Gillan et al., 2021). Furthermore, the landmark lawsuit for Tesco has a severity in the influence of negative CSR issues. Severe instances have a strong negative influence on the share price of the company. There is a positive correlation between CSR performance and organizational performance, the initial has a positive influence on the latter and vice versa. A better CSR contributes to robust organizational performance and more resources due to strong organizational performance may be invested in CSR (Himme, 2013). The correlation between stakeholder values that are developed via CSR, this influence of stakeholder value is compelled by employee relations and environmental performance. Since Tesco has poor working conditions that imply inferior employee relations that contribute to low CSR, which in turn affects the stakeholder value in the organization reducing the performance (Islam, 2014). Strongly governed companies outpace poorly governed corporations as ranked based on the corporate governance scores. CSR serves as an essential asset in the company. The low CSR performance of Tesco will have an effect on the cost of capital for the organization. Better CSR performance has lower equity funding costs; therefore, lower performance of CSR will imply that Tesco has to experience a higher cost of equity capital. It shows that the perceived company’s riskiness to investors increases when the

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7 corporation reduces its effort to become more socially accountable in terms of employee relations leading to lawsuits over mistreatment and poor working conditions (Javaid, 2014). Moreover, organizational reputation is closely associated with CSR; hence, a company with low CSR performance as Tesco will have a negative reputation that affects its cost of equity capital. In addition, based on the stakeholder theory, a company has to act in the best interest of all its stakeholders and not only its shareholders. Thus, some factors are more significant than the maximization of profits. The company has to adhere to the values and norms of companies (Kaiser, 2017). A business should not only operate to generate profits for its shareholders but also be driving stakeholder value and the state of the world. The case has revealed that Tesco has no social responsibility towards other stakeholders, in this case, workers. The company has low CSR with a higher financial performance than other companies in the retail industry (Kotiswaran, 2017). Low CSR negatively influences consumer satisfaction and company value if the company has low innovativeness capacity due to poor employee relations. The case study has shown that Tesco has a CSR strategy that entails both the environment and the supply chain leading to a negative effect (LeBaron, 2018). Further, Tesco’s stock price could decline because of negative or poor CSR events. Tesco’s current case of events, if they are deliberate, could cause a stronger response than the accidental instances, because people typically feel that it is more severe if the company deliberately carried out such allegations of illegally low pay to its employees who were working in poor environments. The company might be seen to have neglected its safety rules and policies to ensure workers are well-remunerated and work under good conditions (Malecki, 2018). These events are could repeat themselves as they may be seen as a way of operation for the company to enrich itself at expense of exploiting its employees. Therefore, deliberate negative CSR cases have a stronger negative influence on shareholder value as consumers and other stakeholders will start to avoid the company because of the event. In the end, it damages the company's reputation and affects its goodwill in the business world (McCastle, 2022). However, without accounting for demographic or industry information, the correlation between the company’s CSR performance and worker wages was negative. A company with a robust CSR performance pays its employees lower pay than a company with a poor CSR reputation or performance (Newman et al., 2020). But in the case of Tesco, despite having a good reputation in

8 terms of CSR, the company faces cases of underpaying its workers in its F&F fashion brand in Thailand that may further derail its CSR and its reputation among other stakeholders. Therefore, workers working in the Thailand’s VK Garment factory encounter an inhumane working environment. For example, having to sleep on the floors without walls and being paid low wages. The frustration and discontent of workers may seriously affect shareholder value (Nolan and Boersma, 2019). Recommendations to help Tesco Plc prevent such incidents in the future It has been recommended an incentive for Tesco to shun circumstances that harm its correlation with its stakeholders such as employees, consumers, suppliers, and investors to sustain a robust firm value. Mostly, in the relationship, employees and customers are significant, and missteps that influence them have to be controlled or prevented (Nyborg & Zhang, 2013). The company should invest in CSR to profit from the cheaper equity. Tesco's CSR strategy should be changed to a supply chain (suppliers/customers) and employees (human resources) that present a positive effect on organizational performance than that involving both the environment and the supply chain. The corporation needs to make endeavors to optimally treat its employees and serve its consumers, and shun negative CSR responses that harm the correlation with the stakeholder group. The company should aim at meeting consumer satisfaction and improving employee relations (Pellegrini et al., 2022). In Tesco Plc, employees meet and play a significant role. The company needs to commit to serving the stakeholder group excellently, shunning a negative working atmosphere, and investing in proper diversity initiatives. Tesco asserted that the protection of the rights of everybody working in its chain of supply is critical for the survival and growth of the company (Rasche et al., 2017). The company does not allow any human rights abuses. However, when in rare cases such as this one, in which they are spotted, Tesco should take great care to assure they deal with it appropriately, and employees have their freedoms and human rights respected. In the future, the company persistently should not uncover new approaches to circumvent regulations in policies to improve their business profitability at the expense of their workers. Tesco Plc should not engage in precarious work, which implies the company shifts responsibilities and risks onto employees (Reuters, 2022).

9 Consequently, precarious work may have several faces; it is typically defined by ambiguity as to the employment duration, multiple potential employers or ambiguous or disguised employment relationship, the lack of access to the social benefits and protection generally related to low pay, employment, and substantial practical and legal barriers to bargaining collectively and joining the trade union. Therefore, to shun future cases of employee lawsuits over illegal low pay and poor working conditions, Tesco plc should avoid the use of precarious job instances (Rühmkorf, 2015). Furthermore, Tesco has to avoid employees being put on temporary contracts of different durations. The company should directly hire employees via the agency. It is because the workers can benefit from the work in the short term, even though live with uncertainty. After all, they do not comprehend if their contract may be extended. The current employee lawsuit at Tesco has emanated from the use of temporary contracts in its supply chain (Salcines et al., 2013). Temporary contracts always offer a lower wage and workers do not often confer similar benefits, which often come with time and are directly connected to the status and length of the employment relationship. The outcome is a circumstance where employees cannot plan for their future, and lack certain security forms of social protection. Hence, the company in the future may avoid cases of employee lawsuits over pay and poor working conditions by embracing good employee contracts along its supply chain that comes with the precarious job (Smith et al., 2021). In the future, Tesco should ensure that it has clarity of an employer in its contract with workers along its supply chain. In the complex multilateral correlations and the traditional bilateral association between Tesco and employees, the company should ensure that employees who are hired by a subcontractor or an agency but who conduct their responsibilities in or for the company are not in a precarious condition (Sorajjakool, 2013). Tesco should ensure that between the two parties, there are clear lines on who is held accountable and responsible for the benefits and rights of an employee. The company has to ensure it has strong legislative frameworks and enforcement tools to create the circumstance where employees in disguised or triangular employment associations have virtual ways of protecting their human rights and benefits at employment (Tesco PLC, 2023). Consequently, Tesco Plc to ensure that its workers are protected and enjoy their human rights, must avoid precarious work because it is featured by inadequate or total lack of trade union

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10 rights. These subject workers to lack of access to collective bargaining rights and weak legislative models present a significant legislative issue to precarious employees and trade unions (Times Series, 2023). The company should also understand that certain countries forbid employees via a third party from joining permanent employee unions. Therefore, while the user business determines the conditions and pay under which the employees are employed, employees hired via subcontractors or agencies either may not join the permanent workers’ union or are excepted by a collective bargaining unit; hence, denied the right to bargain collectively with the company (Tsai, 2019). Subcontracted and temporary employees; thus have a restricted capability of joining trade unions, contributing to decreasing trade union membership, and deteriorating the trade unions’ collective power. In the future, Tesco should allow these workers to join permanent workers’ unions to strengthen their bargaining power at the user enterprise, if not they should terminate their services to the user company (Vunderink, 2014). This will help in alleviating the current issues of lawsuits over illegally low pay and poor working conditions from workers who were under an agency or subcontractor. Further, trade union campaigns should be state-specific demands, for example, championing secure, direct employment other than consideration for all employees as subjected to various extents of precariousness. If the company avoids precarious jobs in its supply chain in the future, it will prevent issues of low wages, lack of access to social benefits and protection typically related to full-time standard employment and poor protection from dismissal, and limited or lack of access to employees to exercise their rights at the workplace (Weber and Wasieleski, 2018). Moreover, the company needs to reduce one temporal form of job opportunities’ expansion to formal employment. It is because it is related to fears that it can enshrine dual labor markets in which the company would growingly only offer permanent status to key workers while sustaining a pool of dispensable employees without security, poor benefits, low wages, and little avenue of professional growth. Nonetheless, Tesco should even provide these benefits to temporal contract employees to avoid future lawsuits (Wettstein, 2022). The company should also increase incentives geared towards temporal jobs if they are in its supply chain to uplift their lives. It must aim at providing superior conditions due to its contractual obligations. No one comprising suppliers, consumers, governments, or investors want to see individual living in

11 abject poverty and working for Tesco, therefore, the company ought to permit employees to enhance their situations through better pay and good working conditions in its subcontractors or agencies along its chain of supply (Vunderink, 2014). Recommendations for Tesco to improve its sustainability performance from the procurement perspective Tesco has to ensure that it sources its subcontractors or agencies that provide services along its supply chain are sourced concerning the persons who assist make their products. The company has to ensure that everybody at a minimum must have access to and can afford the basic needs needed for them and their family to thrive (Tsai, 2019). Tesco has to ensure that the user enterprise provides legal minimum wages that can leave families capable of affording all their basic needs, for example, education, food, decent accommodation, and healthcare. Employees earning decent incomes and wages is a vital aspect of attaining sustainable livelihoods; hence, sustainable procurement of agency or subcontractor to provide services or products to the company (Tesco PLC, 2023). The company has to assure that their work is on wages and that everybody is paid based on their employment contracts, for all the hours worked without any exploitation, the wages should be legally compliant and there must be no unfair deductions. Tesco Plc out to review its procurement practices to assure they support subcontractors or agencies to pay living wages to employees and for contractors to get a fair income (Smith et al., 2021). It involves considering how Tesco may guarantee quoted prices depict the costs of ethical and sustainable production, and how the company’s associations with contractors support positive transformation. Further, by working together with stakeholders, comprising governments, unions, NGOs, and other agencies, the company can identify potential means to determine wage gaps and improve incomes and wages. Tesco should be committed to fostering employees and user enterprise agency to plan collectively and it is a key aspect of its approach (Salcines et al., 2013). Further, as their direct monitoring, audits evaluate whether employees are aware of what their representatives are and when they are fulfilled with their effectiveness. Therefore, Tesco should as part of its work on the living wages of its workers under subcontractors or agencies, the contractors will be anticipated to involve employee representatives in the wage improvement

12 schemes’ development (Rasche et al., 2017). Being part of the sustainable procurement of labor approach, the company will be exploring the actions it may take to particularly support subcontractors. They will concentrate on comprehending the dispersing of value in the chains of supply, what is needed to improve the wages and incomes for user enterprise, and the way they may support workers to organize collectively (Nolan and Boersma, 2019). Conclusion Tesco Plc is experiencing a lawsuit over assertions that the group of VK Garment factory employees in Thailand is complaining of its illegally low pay and long time working for its F&F fashion brand between 2017 and 2020. The company has been alleged of being negligent and having unjust enrichment. Tesco ought to protect the rights of all its partners in the supply chain comprising employees as they provide significant services to its products. Tesco has been recommended to avoid shifting more towards precarious work as it exploits workers creating damage to its reputation. Further, to promote sustainable procurement, Tesco has to review its procurement practices to assure they support subcontractors or agencies to pay living wages to employees and for contractors to get a fair income.

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13 Reference List Ahmed, S. U. (2014). Corporate social responsibility and financial performance linkage: A preliminary study for the conceptual framework . Aiman Bin Rosnizam, M. R., Hung Kee, D. M., Shahqira, M., Hanif Bin Mohd Yusoff, M. A., Budiman, R. S., Alajmi, A. M., and Haikal Bin Mohammad Akhir, M. E. (2020). Market Opportunities and Challenges: A Case Study of Tesco. Journal of The Community Development in Asia , 3 (2), pp.1-56. Altenburger, R. (2018). Innovation management and corporate social responsibility: Social responsibility as competitive advantage . Springer. Beal, B. D. (2013). Corporate social responsibility: Definition, core issues, and recent developments . SAGE Publications. Bonnafous-Boucher, M., and Rendtorff, J. D. (2016). Stakeholder theory: A model for strategic management . Springer. Borneck, T. (2016). Evaluation of franchising as a mode of entry by analyzing subway's expansion strategy . Buckley, P., Enderwick, P., and Voss, H. (2022). International business 2E P . Oxford University Press. Dodd, A. (2022, December 20). April Dodd on LinkedIn: Tesco faces lawsuit by factory workers over 99-hour weeks on low pay . https://az.linkedin.com/posts/april- dodd_tesco-faces-lawsuit-by-factory-workers-over-activity-7010887833074688000- 2NVB Eweje, G. (2014). Corporate social responsibility and sustainability: Emerging trends in developing economies . Emerald Group Publishing. Freeman, R. E., Harrison, J. S., and Zyglidopoulos, S. (2018). Stakeholder theory: Concepts and strategies . Cambridge University Press. Gillan,, S. L., A Koch,, A., and Starks, L. T. (2021). Firms and social responsibility: A review of ESG and CSR research in corporate finance. Journal of Corporate Finance , 66 (2), pp.1-65. The Guardian. (2022, December 18). Workers in Thailand who made F&F jeans for Tesco ‘trapped in effective forced labour’ .

14 https://www.theguardian.com/business/2022/dec/18/workers-in-thailand-who-made- ff-jeans-for-tesco-trapped-in-effective-forced-labour Himme, A. (2013). Drivers of the cost of capital: The joint role of non-financial metrics . Islam, Z. M. (2014). Corporate social responsibility and financial performance linkage: Evidence from the banking sector of Bangladesh . Javaid, J. (2014). Corporate social responsibility & corporate financial performance relationship: Evidence from UK s food industry ́ . GRIN Verlag. Kaiser, C. (2017). Corporate social responsibility (CSR) of multinational companies. The impact of CSR on corporate financial performance . GRIN Verlag. Kotiswaran, P. (2017). Revisiting the law and governance of trafficking, forced labor and modern slavery . Cambridge University Press. LeBaron, G. (2018). Researching forced labour in the global economy: Methodological challenges and advances . Proceedings of the British Aca. Malecki, C. (2018). Corporate social responsibility: Perspectives for sustainable corporate governance . Edward Elgar Publishing. McCastle, S. A. (2022). The Vaxxed: Culture war in the workplace . McCastle Press. Newman, C., Rand, J., Tarp, F., and Trifkovic, N. (2020). Corporate Social Responsibility in a Competitive Business Environment. The Journal of Development Studies , 56 (8), pp.1-14. Nolan, J., and Boersma, M. (2019). Addressing modern slavery . UNSW Press. Nyborg, K., and Zhang, T. (2013). Is corporate social responsibility associated with lower wages? Environmental and Resource Economics , 9 (2), pp.12-118. Pellegrini, C. B., Pellegrini, L., and Catizone, M. (2022). Climate change adaptation, governance and new issues of value: Measuring the impact of ESG scores on CoE and firm performance . Springer Nature. Rasche, A., Morsing, M., and Moon, J. (2017). Corporate social responsibility . Cambridge University Press. Reuters. (2022, December 19). Tesco facing legal claim over worker conditions at Thai clothing factory . https://www.reuters.com/business/retail-consumer/tesco-facing- legal-claim-over-worker-conditions-thai-clothing-factory-2022-12-19/

15 Rühmkorf, A. (2015). Corporate social responsibility, private law and global supply chains . Edward Elgar Publishing. Salcines, J. L., Babiak, K., and Walters, G. (2013). Routledge handbook of sport and corporate social responsibility . Routledge. Smith, N. C., Scholz, M., and Williams, J. (2021). Does your business need a human rights strategy? Sorajjakool, S. (2013). Human trafficking in Thailand: Current issues, trends, and the role of the Thai government . Silkworm Books. Tesco PLC. (2023). Sustainable livelihoods - supply chain strategy . https://www.tescoplc.com/sustainability/documents/policies/sustainable-livelihoods- supply-chain-strategy/ Times Series. (2023). Tesco faces lawsuit over conditions for migrant workers making F&F jeans . https://www.times-series.co.uk/news/national/23199748.tesco-faces-lawsuit- conditions-migrant-workers-making-f-f-jeans/ Tsai, W. (2019). Modelling and analysis of sustainability related issues in new era . MDPI. Vunderink, A. (2014). Strategic management: A stakeholder approach . CreateSpace. Weber, J., and Wasieleski, D. M. (2018). Corporate social responsibility . Emerald Group Publishing. Wettstein, F. (2022). Business and human rights: Ethical, legal, and managerial perspectives . Cambridge University Press.

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