UK retailer Tesco has admitted that it is likely to have breached the grocery industry’s code of practice in dealings with suppliers, leaving the company at serious risk of a reprimand from the watchdog.
The UK’s Groceries Code Adjudicator (GCA) said last February that it had opened an investigation into how the UK’s biggest supermarket chain treated its suppliers, including allegations that it had delayed payments, and demanded cash for prominently positioning products within stores.
In its latest annual report, Tesco admits that there were probably a “number of instances” where it breached the Groceries Supply Code of Practice (GSCOP).
The company says: “Regrettably, we have concluded that there have been a number of instances of probable breaches of the Code which fall short of the high standards we expect to uphold in our dealings with our suppliers.”
The GCA currently lacks the power to issue fines, but can ‘name and shame’ companies and issue public recommendations.
Tesco initially informed the GCA of “some areas of concern” in its treatment of suppliers last September, but the statement in the annual report marks the first formal admission that it may have actually breached the code.
The company added: “We are taking effective action to prevent this arising again. We are fundamentally changing the way we work with our suppliers to deliver a more sustainable and collaborative business model for everyone in the supply chain. In addition, we are significantly up-weighting our Code compliance programme.”
Tesco said it is introducing new training, “deep dive audits”, and bi-annual compliance declarations. The company also revealed that over the past 12 months it had received 18 complaints related to the Code. It resolved 17 through discussions with suppliers, and is still in talks with the remaining supplier.
A Tesco spokesman said: “The annual report repeats what we said in February, which is that following our announcement last September regarding commercial income, we worked with the Adjudicator to identify any relevant GSCOP issues.
“An internal review which we shared with the Adjudicator identified some areas of concern. We have taken action to strengthen compliance and, as we have announced, we are changing the way we work with our suppliers.”
In addition to the GCA probe, the UK’s Serious Fraud Office (SFO) is investigating accounting irregularities that last year led to Tesco reporting a £326m black hole in its profits.
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