Carrefour- a Comparison of the behaviour of Carrefour in and outside China in terms of CSR

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Table of contents

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Executive summary

I. Chapter – Introduction

1. Purpose of the Study
2. Objective of the study
3. The setup of the study

II. Chapter – Carrefour’s position in China

2.1 Chinas retail market at a glance
2.2 Carrefour’s role in China

III. Chapter – The purpose of CSR for multinational companies

3.1 The definition of CSR
3.2 The growing importance of CSR in China
3.3 The importance of Human Rights
3.4 Human Rights in China
3.5 Carrefour’s general employment practice standards
3.6 Carrefour Europe vs. Carrefour China
3.7 Conclusion

VI. Chapter – Environmental concerns and CSR

4.1 Environment
4.2 Environmental Problems in China
4.3 Carrefour Europe vs. Carrefour China

V. Chapter – Food Safety problematic and CSR

5.1 Food Safety
5.2 International Food Standards and Initiatives
5.3 Food Safety in China
5.4 Carrefour Europe vs. Carrefour China

Literature

Internet

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Executive summary

China is one of the countries where globalisation has led to a significant change of the economical as well as the social frameworks. Multinational corporations are expending in a very dynamic way in order to participate in this new market environment. In countries like China, where the jurisdictional framework is not as evolved as in most of the western states, the pace of economical development can exceeds legal regulations. This has increased the expectations from the part of the civil societies that multinational corporations do not only focus on profit maximization. It is being expected that the companies develop a corporate social responsibility strategy, which can be implemented into their day to day business.
This paper is analysing the CSR- policy of the world’s second largest retailer Carrefour in- and outside of China. In order to do so, it is elementary to describe to what extent the importance of CSR in China has increased and which aspects of it are crucial to a retailer’s business strategy. The setup of this study will therefore focus on the following three core aspects of a CSR- policy: Labour standards, environment and food safety. Before relating these elements directly with Carrefour the reader shall obtain a theoretical background about these aspects. Further to that, we shall describe to what extent labours rights, environmental standards as well as food and safety signify for a developing country such as China.
Finally these aspects will be connected to Carrefour’s CSR- policy in order to analyse in which part the multinational corporation could still improve its activities. As the biggest retailer in China such a company is being critically observed by several NGOs as well as by the Central Chinese Government. On the other hand the company is operating in a highly competitive market, in which the slightest error could cause a significant loss of market share.

I. Chapter – Introduction

1. Purpose of the Study

The extraordinary growth of the Chinese foreign trade over the last two decades has influenced the international trade relations between the country and the rest of the world in a significant way. Due to the increasing degree of globalization and the competition on the world’s trade market multinational corporations are more and more interested to be able to participate in a profitable way, when it comes to developing new foreign markets such as China. As a result of Chinas entry into the World Trade Organization it is being expected that the Chinese custom regulations as well as many tariff barriers will be decreased. In that sense, one can say that China needs to evaluate the optimal balance between protecting its local economy from foreign competitors and to open its boundaries in order to enable foreign investments. This study is analyzing the impact of these foreign investments of the multinational firms on the degree of responsibility they take by doing so. To that extent this study is based on the world’s second largest retailer Carrefour, which has already over 90 hypermarkets all over the country and is still planning to expand its business.

2. Objective of the study

One of the main objectives of this study is to understand the differences between the company’s CSR- policy in China and in Europe. In order to do so, it is necessary to evaluate the discrepancies between the regulatory frameworks of the two markets. The purpose of this study is therefore to analyze the degree of which Carrefour is acting as a socially responsible corporation and how the different legislations as well as economical circumstances between Europe and China influence the company’s CSR- policy. Furthermore the reader shall obtain an overall view of the Chinese retail market, particularly of its largest foreign players as well as theirs implemented corporate social responsibility strategies. The causes and factors for a different CSR- strategy, that is being followed by Carrefour in China shall be described and analyzed.

3. The setup of the study

The content of our paper is divided into five major chapters. The first chapter includes the general introduction to the purpose and the objectives of this study, whereas the second part explains the situation of the Chinese retail market as well as Carrefour’s position. After providing the reader with the necessary information the third chapter is mainly focused on the importance of Human Rights in China. In order to relate this aspect to Carrefour it will be explained how the company has established an employment practice standard and the way it is has been implemented. The fourth chapter emphasizes the second major element of a company’s CSR- policy: Environmental Standards. The setup of this theme is similar to the first one. The reader will understand the general purpose of this aspect of CSR and its enormous importance in China. Furthermore it shall be described what standards and norms have be implemented by Carrefour in order protect the environment in China.
The most important CSR- element for China’s second largest retailer consists of the food safety problematic. We shall therefore describe the way international food standards and certain initiatives have influenced China’s perception in general and Carrefour’s in particular, when it comes to that delicate subject. It will be analysed why the company had been involved into some significant food safety scandals in China and what steps and measures had been undertaken to prevent these problems. All three CSR- aspects are being related to Carrefour’s own policy standards. At the end of each part it will critically analysed, whether the company is behaving differently in and outside of China. Given the fact the behaviour is different the reader will be obtained with possible causes for this behavioural bias as well as with the authors recommendations to a better CSR- policy.

II. Chapter – Carrefour’s position in China

2.1 Chinas retail market at a glance

The number of consumers in China alone is greater than Europe and America combined. Therefore many of the major retailers are willing to enter into the Chinese market. The Chinese market was primarily opened to foreign investors in 1992. With the country’s entry into the WTO in 2001 a second wave of multinational corporations settled into the market. By the end of 2001 there were already more than 300 large retail stores in China. While foreign retailers such as Carrefour are expanding in a dynamic way many local retailers are claiming that these multinational are growing at “zero” cost through delaying payments or charging different kinds of fees.
In 2001, Carrefour – currently the biggest retailer in China – had been accused of infringing the regulations imposed on foreign retailers. It was said that the corporation had never formally applied to the central government for the right to open its 28 stores. Despite the fact that the local communities had formally approved for these shops it is still the central government that needs to give its final approval. The company had to sell its excessive shares to local partners according to the regulated 65% limit. Some of the giant retailers are being blamed for exploiting their suppliers as well as the employees by using their power when it comes to price setting. Some organizations such as NGO consider overtime shifts or dumping wages as unethical, others argue that this circumstance as simple a phenomena of the free market. Nevertheless, the main reasons that have to be analysed are certainly the impact of the oversupply of cheap labour as well as the complicity of the Chinese government.

2.2 Carrefour’s role in China

Carrefour could announce the recent opening of its 98th hypermarket in China, namely in the city of Zhuzhou. The company employs over 456,000 people and is currently the largest foreign retailer in China. The company is present in over 22 cities in the Chinese mainland with about 23,000 employees. Although Carrefour has experienced a very dynamic growth in the last five years in China, its reputation has been damaged due to the violation of the Chinese law. As mentioned, the company has not only a negative record of infringing the government regulation but also selling fake products. Therefore, the company has been trying very hard to improve its image in the civil society by increasing its efforts in public welfare. This included supporting Beijing in the bid for the Olympics as well as supporting Shanghai for the World Expo. Furthermore the company helped setting up schools, hospitals and donating funds to disaster stricken areas. These contributions to the local Chinese society could be established through Carrefour’s international foundation.
By the beginning of the year 2000 the President of the Carrefour group had announced the founding of an organization that should not only undermine the company’s economical but as well social responsibilities towards society. The projects main purpose is to ensure a high degree in terms of ethics, transparency, progress, responsibility, solidarity. Therefore its role does not just stop with its commercial activity.
In order to emphasize Carrefour’s activities in regard to China following example shall be illustrated. Due to climatically changes and a growing pressure on water resources in China in the year 2004 the company had decided to actively develop new technologies together with the FAO to encourage a conversion of irrigated rice towards rain-fed rice, to ensure a lasting food security in China. Furthermore the company provided an overall emergency aid during the floods in the year 2000. The Chinese employees offered 500 tons of rice as well as renovations of destroyed buildings to the local society.

III. Chapter – The purpose of CSR for multinational companies

3.1 The definition of CSR

Corporate Social Responsibility includes the entirety of responsibilities a company should have towards all of its stakeholders. To that extent the responsibility of a multinational company has to be defined in a much broader way than just profit maximization. One of the key aspects includes the credibility a company has towards all of its stakeholders. The tenors as well as the firm’s moral and ethical values have to be exercised and fully implemented in the company’s day to day business. In order to do so a company should establish a mandatory code of conduct. These guidelines should be able to combine the firm’s business objectives with the necessary values and interests of its employees.
It is therefore of great interest for a multinational company to develop a business model, which can specify its economical goals without violating its ethical values as well as its integrity. Only by implementing such a strategy it will be possible for a multinational company to fulfil its social responsibilities and to build up a positive reputation in the civil society.

3.2 The growing importance of CSR in China

In general a globally acting company can be considered as an independent system, which consists of an internal and an external element. The first one is mainly focussed on the relationship between the employees and the board of management. The external element describes the relationship between the board of the company and the systems, which it is interacting with. These can be divided in three categories: Environment, economy and society. Due to the significant economical growth that China has experienced in the last two decades the relationships among these elements have changed in an interesting way. By joining the World Trade Organization China had experienced a massive increase in foreign investments. The opening of its doors has not only influenced the basic economical structures, but also the values in the civil society. One of the main results of this rapid growth includes the fact that a new middle class segment has evolved in the Chinese society. To that extent the Chinese had to adapt new emerging values in order to be able to realize their business strategies in a reasonable way. These values include more materialistic aspects than before; especially the importance of self- actualization, individualism and direct communication has increased significantly.
It is important to understand that the mentioned systems – Economy, society and environment – are constantly interacting and can therefore not be isolated from one another. That leads us to the conclusion that economical growth as an independent variable is being influenced by various aspects such as labour rights, environmental standards or cultural values. Therefore these aspects should be considered as rather elementary in each company’s CSR- policy. In spite of the fact that China has made economically as well as technologically a significant progress many multinational companies still apply different CSR- policies once operating in China compared to the rest of their business fields. This phenomenon is being mainly driven by the different legislations and jurisdictions that exist in China. If we take the Chinese wooden floor producer as an example - that had pretended to be a German manufacturer although the goods were entirely produced in China in order to keep prices at a high level - it is obvious that the legal framework is not as evolved as in Europe. The punishment that this company had faced by deceiving the consumers was far less than the profits that had been generated during this period. As long as there is not a serious adjustment in Chinas regulatory framework some companies will continue to take advantage of this biased circumstance.
In the following the reader shall obtain a detailed comprehension about the three core elements a CSR- policy of a multinational company such as Carrefour should consist of. The main elements can be titled as follows: Human Rights, Environment and Food Safety. We would like to provide the reader with a theoretical background about the mentioned themes in order to apply them on Chinas current situation and to be able to compare Carrefour’s different strategies in- and outside of China.

3.3 The importance of Human Rights

Due to the rapidly globalizing economy and the technological improvement multinational corporations can deflect their cost- intensive activities into less regulated countries such as China. Although the Human Rights have been internationally declared in 1948 by the Universal Declaration of Human Rights there still exist significant discrepancies between some countries by applying them. Generally speaking it has to be said that the Human Rights are not being authorized by a certain institution. They are rather defined as supranational rights, which each individual receives by the simple fact of being born. Therefore is has to be emphasized that these rights are absolutely independent of the individuals religion, colour, language, sex, political motivation as well as nationality.
The meaning and purpose of the Human Rights has evolved and therefore changed over the last two decades. This transformation can be – according to Leisinger - divided into three generations :
The first generation includes the citizens’ rights of liberty, which can be considered as a purely defensive right of the state. That includes the fact that the state itself does fulfil these rights by merely refraining from acting directly. To make it more clear what exactly these rights might include one could consider the protection of torture, personal freedom as well as political rights as examples of the rights of the first generation. The protection of these rights does not require additional resources. It is therefore being expected – even by the countries of the third world – that slavery, torture and genocide are being strictly forbidden.
The second generation includes the claim for a life in dignity. Most of the rights which make part of the second generation are being considered as rights of solidarity of each individual as well as rights of groups in regard to the state. In general these rights include economical, cultural and social rights such as adequate standard of living, which guarantees a certain level of health. Furthermore, clothing, supply of food, shelter and medical care. In order to establish these rights the state must provide certain resources. In contrast to the rights of the first generation poorer states can not always guarantee these rights. In that case the dependence for external helps – from other states or NGOs - rises.
The development in peace and justice make part of the rights of the third generation. The concrete content of these rights is currently still being debated as is therefore not yet clearly defined. Nevertheless the major part of the rights of the third generation include a balanced environment, an own language, and the right to culture and natural resources.

3.4 Human Rights in China

The globalization of the economy is one of the main reasons why the Human Right’s issue is getting more attention nowadays. This development shows the vital importance of this topic. Many citizens of modern societies fear that the ongoing globalization is responsible for the social and environmental decadence some countries are facing. Equally they feel that multinational corporations have the possibility to establish a certain standard in the countries they are operating in. Therefore it is being expected, that multinational corporations integrate as well environmental aspects into theirs daily business decisions. This so called “values management” can be described as “company specific instruments designed to define the moral constitutions of a team or organization and its guiding values and live them all day- to- day practices.”
So, if we connect the described theory of the three generations by Leisinger it must be admitted that unfortunately not even the Right’s of the first generation can be fully implemented and established in China. But how exactly should foreign corporations and states behave in order to resolve the problem of Human Right’s violations in China in a reasonable way? The option to sanction the wrongdoers or to even punish them can – in our opinion – not be the right answer to the problem. One of the reasons is that even very limited actions are quiet difficult to enforce. Furthermore it is unlikely that these short term actions could influence China’s Human Rights policy in a sustainable way. Therefore, it would be more appropriate to use the leverage of the free market, which allows increasing competition and lets democracy and law evolve naturally. “…the advanced Western countries would contribute more to the welfare of poor nations by exporting their economic systems, notable property rights and free markets, rather than their political systems, which typically developed after reasonable standards of living had been attained. If economics freedom were to be established in a poor country, then growth would be encouraged, and the country would tend eventually to become more democratic on its own. Thus, in the long run, the propagating of Western- style economics systems would also be the effective way to expand democracy in the world.” (Barro 1994) Nevertheless, it is each multinational corporation’s responsibility to set the required standards in order to guarantee a satisfying level of Human Rights. It is therefore of great importance, that these companies apply the same business conducts – not only in terms of Human Rights – in and outside of China to theirs daily business activities. Adapting the CSR- policy of a multinational corporation to China builds the basis for a solid evolution of Human Right as well as environmental standards.
In the following it shall be analysed to what degree the multinational retailer Carrefour is applying the same business conduct in China as in Europe. The basis of the discussion will consist of the labour conditions the company offers on the two continents.

3.5 Carrefour’s general employment practice standards

The following comments will be mainly based on the company’s seven core values, which can be seen as the major guidelines in terms of Carrefour’s attitude towards its employees. Therefore it’s the company’s aim is to translate these values into each business unit around the world and include them into their daily business operation.

The seven core values are:
• Solidarity
• Responsibility
• Respect
• Integrity
• Progress
• Sharing
• Freedom
Beyond these guiding principles the company is participating in the U.N. Global Compact. The Compact includes ten principles, which include as well the mandatory abidance of the Human Rights. The 3451 companies which are following the guidelines of the U.N. Global Compact have to deliver a yearly based audit report about its activities involving these principles. The mentioned seven core values of Carrefour establish the bases to promote diversity and equal opportunity within the company. Furthermore, they shall guarantee the respect for Human Rights within the company as well as the safety of their employees. As far as their external stakeholders are concerned, Carrefour wants to promote a fair relationship with the suppliers.
What sounds good and responsible in the company’s sustainable development report can still differ significantly, when it comes to the implementation of these guidelines and principles. We shall therefore contemplate how a multination corporation such as Carrefour manages to adapt these rules to each of its countries it’s operating in.

3.6 Carrefour Europe vs. Carrefour China

In order to have a closer look to Carrefour’s CSR- policy regarding the labour standards in- and outside China, it is important to define the Sphere of influence as well as the degree of Complicity the company is exposed to. The first aspect involves all stakeholders that exist in the company’s environment and get influenced by it. These can include direct stakeholders such as employees, suppliers, shareholders and customers as well as business partners or indirect stakeholders such as communities or the state. The closer the position of a stakeholder to the company, the more influence and importance he has. Thus, if a multinational company operates in a country, in which labour rights are being abused, the responsibility increases automatically. It is therefore of great importance that a firm like Carrefour observes the environment constantly. That leads us to the definition of the term Complicity. Let’s assume that Carrefour’s suppliers would exercise child labour. Although the company would not have any knowledge about this circumstance it would automatically become complicit. That’s one of the reasons why the civil society in third world countries expects the multinational to use their power in a reasonable way by avoiding these practices.
But where does the sphere of influence of a multinational corporation end? Does it stop with the fence the production base is surrounded with or does it include the community or even the boundaries of the country?
In order to analyse to what extent Carrefour is guaranteeing the required labour standards not only for its own employees but also for its suppliers it is important to emphasize that the company is aiming to enter a long term cooperation with its partners. It has to be said, that the company has developed a remarkable system, through which the suppliers labour standards as well as product qualities and safety can be verified. In 1997 Carrefour had decided to enter a partnership with the FIDH (International Federation for Human Rights). This wide ranged co-operations aim was it to guarantee, that non of Carrefour’s suppliers were either allowing forced or child labour and that the general labour conditions were applying to international standards. This setting has been developed constantly through out the last ten years. In 2000 the company has implemented a Social Charter for its suppliers, which includes a set of benchmarks as well as a three step audit system. The first audit is being completed by Carrefour’s quality teams. This reflects an internal audit as the company is controlling its own suppliers. The second audit is being accomplished by an external, thus independent audit team. These professional auditors announce yearly re- audits. The last auditing mechanism is being provided by random audit checks. This audit team consists of members of the FIDH as well as of Carrefour’s auditors.
Thanks to this three step model - especially the follow up audits - it is possible to improve working conditions in the production bases of the suppliers. Furthermore, Carrefour has developed a “Suppliers” Charter in 2000. Each supplier has to enter a formal commitment by signing this charter and accepting the Carrefour’s fundamental labour standards. The following six mandatory pillars have been developed in accordance with the FIDH as well as the ten principles of the U.N. Global Compact:
1. To immediately eradicate slavery, servitude for debt and the use of forced or compulsory labour and to no longer use this in any form whatsoever.
2. Not to employ or make children work who are under the age of 15 for production, manufacturing and assembly tasks.
3. To ensure workers have the right to organise themselves freely into unions and be presented by organisations of their choice so as to carry out collective bargaining.
4. To give workers remuneration which satisfies their basic needs and those of the members of their family who are directly dependent on them.
5. To guarantee workers des conditions working conditions particularly with regard to the duration of working hours, enabling us to ensure their health, their safety and their moral integrity.
6. To respect equal opportunities in terms of recruitment and remuneration by not practicing any discrimination based on ethical groups, colour, gender, political or religious convictions, belonging to a union or a specific social environment, to respect cultural diversity.

3.7 Conclusion

The world’s second largest retailer is employing over 456,000 people. The variety of each country’s specific culture as well as the norms that exist in their civil societies is enormous. Nevertheless, the company has managed to establish a system which can be applied to each region all over the world in an equal way. Carrefour is not only responsible for its own employees but also for its suppliers its working with. One main aspect of the company’s philosophy is to build up long term relationships with its suppliers. We believe that these sustainable cooperation agreements support the adherence of the company’s standards in a fundamental way. Another important reason builds the setting of Carrefour’s employment practices. One the one hand they consist of their own employment guidelines, on the other hand they include the globally accepted standards of the U.N. Global Compact. Furthermore, Carrefour has been able to establish the previously mentioned three stage audit plan, by which each supplier is being examined on a regularly basis. The fact that one part of this audit plan is being accomplished by an independent third party shows the seriousness as well as the objectivity the company is devoted to.
Our analysis leads us to the conclusion that Carrefour is operating on a strongly evolved level, when it comes to the preservation of theirs own labour right standards. The company is obviously operating in a highly competitive sector. In order to be able to distinguish itself from its competitors it has to build its business on long term relationships, not only with its own employees but also with its suppliers.

VI. Chapter – Environmental concerns and CSR

4.1 Environment

The environment is providing us with all the resources that are crucial for our survival, the air we breathe, the water we drink and the food we eat. Its protection should be seen as a natural precondition for the future existence of mankind. The key for sustainable development lies in the worldwide economic activities.
The economy is dealing with scarce resources, mainly the production, processing, distribution and allocation of scarce goods to satisfy the needs of the humans. The global economical behavior therefore has to develop in a sustainable manner such that it saves the natural environment and thus the fundamentals of future generations. Environmental stress has to be minimized over the whole ecological product cycle; recoverable resources should only be used at an extent that can be naturally regenerated. Furthermore environmentally hazardous substances should not be set free more than they can be handled by the ecosystem.

The significance of ecological problems has grown rapidly over the past decades and now has reached a formerly unknown dimension. Urging global environmental issues such as global warming and the CO2 debate, the clearing of the rain forest or the worldwide reduction of biodiversity comes together with the growing relevance of regional and local environmental problems.
This development increasingly mobilizes many groups of critical stakeholders and is leading to stronger regulations by environmental laws, contracts and standards.
The European Commission has established a set of policies that will be characterized in the following paragraph.

Since 1973, the European Union has launched a series of action programs that define the future direction of EU policy in the environmental field. In 2002, the EU adopted a new strategic program that provides a framework for environmental policy up to 2012. The sixth Environment Action Programme (6th EAP) identifies four key environmental priorities: climate change, nature and biodiversity, environment and health, and natural resources and waste. The main challenges will be to set a common baseline for all EU countries by effectively implementing and enforcing environmental legislation and to establish an integrated, efficient and effective approach that not only considers legislation but also promotes the participation and involvement across society and their various stakeholders like NGOs, business and citizens.
An important part and relatively new approach of this program are the Seven Environmental Thematic Strategies which work with themes rather than specific pollutants or economic activities as it has been the case in the past. They are founded on research and science and will provide a stable framework and clear environmental goals up to 2020.
All these strategies are meant to contribute to the protection of the four main environmental target areas air, water, nature and soil that are described in the following.

Air. Clean air is essential for human's health and the well-being of the environment, but since the industrial revolution the quality of air has deteriorated considerably. The rise of industrial and energy production, burning of fossil fuels and a dramatic increase of road traffic contribute to the air pollution which is responsible for various diseases. In the last 20 years the number of people suffering form asthma has doubled. Despite a lot of effort of the EU to improve the air quality and much progress in tackling air pollutants such as sulfur dioxide, lead, nitrogen oxides, carbon monoxide and benzene, the are still problems like summer smog and fine particulates.

Water. Another precondition for human's health is the access to clean water for drinking and sanitary purposes. Water indeed plays a significant role in all ecosystems. Unpolluted water is essential for plants and animals living in lakes, rivers and seas as they react very sensibly on changes in their natural habitat. These changes can either be caused by pollution through hazardous substances or oil, or the can result from physical disturbance like damming, canalization and dredging of rivers. Many human activities have a negative impact on water; major sources of pollution are urban and industrial waste waters and agricultural pollutants like nutrients, pesticides, sediment and fecal microbes.

Nature. A big issue for nature protection is halting or at least significantly reducing the loss of biodiversity. The main causes of biodiversity loss are changes in natural habitats due to intensive agricultural production systems, construction and extractive industries, overexploitation of forests, oceans, rivers, lakes and soils, invasions of alien species, pollution and global climate change.

Soil. The top layer of the earth's crust is a non-renewable resource performing many vital functions, like the production of food, storage, filtration and transformation of substances including water, carbon and nitrogen. It is a provider of raw materials and serves as a platform for human activities. Soil degradation in form of erosion, landslides, contamination and loss of organic matter is accelerating and has negative effects human health, natural ecosystems and climate change, as well as on economy.

4.2 Environmental Problems in China

“China’s development over the last few decades has been characterized by high rates of economic growth, large-scale migration from rural areas to the fast-growing cities accompanied by changes in lifestyles, and steady population growth. These developments have left deep marks on resource availability and quality.” In their article, Hubacek and Sun are analyzing the future development of water use in China and point out some major structural problems. The following paragraph will show up the most important factors to this development.

China has got relatively scarce water resources, and they are unequally spread over the nation. While the northern part of the country is short in supply, the South is rich in water. Although agriculture has consumed most of the water in the past (about 80% in the 1990s), there has been a low increase in the recent years, the amount of water used for irrigation even declined. The most dramatic increase in water use has been in the industrial sector (+94%) and in urban water supply (+256%). This rapid increase leads to a decline in water quality, shortage of drinking water in the big cities and therefore causes serious problems for humans and the environment. China has one of the highest concentrations of water pollutants in the world, caused through untreated waste, wastewater and the growing use of agricultural fertilizers and pesticides. According to recent studies, one third of all rivers and even 90% of rivers flowing through cities are polluted, major lakes are getting eutrophicated and seawater intrudes the coastal regions. Another big problem is the inefficiency of water use throughout all sectors. “For industrial production, China is using some 10-20 times more water than advanced nations to produce the same amount of value added.” Due to fragmented responsibilities of local governments there is still low effort in managing these urgent and complex problems, integrated political approaches to their solving now have to be developed to achieve a stabilization of water consumption as it happened in western countries. Future lifestyle changes (increasing water demand) therefore have to be compensated through technological progress (water saving).

4.3 Carrefour Europe vs. Carrefour China

As a member of the Global Compact, Carrefour has committed itself to “[...] support a pre-cautionary approach to environmental challenges; undertake initiatives to promote greater environmental responsibility, and encourage the development and diffusion of environ-mentally friendly technologies”. We will show that Carrefour is doing a god job in environment related issues and is on the right way regarding its effort that is being made in China. Due to its commitment to sustainable development, Carrefour has developed its Quality Lines at the Group level since 1992 that contribute to environment protection in all the regions where the group operates. When we consider the strong regulatory background of European countries and the EU, lots of companies already adopt high standards by only complying to the local and regional laws. To make a difference in CSR behavior they have to go still further and therefore it is obvious that Carrefour has got different priorities in Europe and in China, where the legal environment is not so strong and environment protection has to be developed yet. In its Sustainability Report of 2005 and the company website, Carrefour introduces to some best practices, most of them being adopted in Europe. To give some examples, Carrefour has recently signed to prioritize certified wood for the production of its furniture products, has initiated a Responsible Fishing approach in France and Belgium and is encouraging environmentally friendly farming practices. Great effort is also being made in recycling and energy management. The density of respective labels within Europe is remarkable. With regard to China we can also observe a positive development. In 2002, Carrefour has become a member of WWF China’s Corporate Alliance, helping local communities living in the Minshan panda habitat to market environmentally friendly products and therefore contribute to a sustainable environment in these natural reserves. In March 2007, as the first retailing company, Carrefour has won the Green Market Certification from the nation’s “Thee Greens Project”, a certification that is given to businesses that, among other criteria, have high standards in regard to environmental protection. Finally, great efforts in the field of environmental protection are also being encouraged by the Olympic Games in 2008 and its big media interest, which will be a welcome opportunity for many companies to make PR and showing themselves in the best light. Carrefour has not missed this chance and is building its first “green” store in Beijing. This environmentally friendly supermarket will use 30% less electricity and water than other Carrefour stores, which is a seminal approach regarding China’s water supply problematic.

Our conclusion is that Carrefour is taking on seriously its global commitment towards progress in environmental protection both in and outside China with slightly different local strategies taking into account the different societal and regulatory conditions.

V. Chapter – Food Safety problematic and CSR

5.1 Food Safety

The topic of food safety is an enormous field with a lot of facets. In the context of globalization and international food trade it becomes increasingly more important. The focus of this chapter will be on some specific problems along the food supply chain in regard to the current development in China. The beginning of all food production lies in nature and a well functioning ecosystem. As shown in the chapter about environment, there are four principle aspects to be considered. Unpolluted air, clean water, diversity of nature and fertile soil are very important to the sustainable production of clean food sufficient to feed an ever growing world population. The food supply chain in urban regions normally leads from agricultural production potentially over some industrial treatment to food retail stores and the customers. Agriculture as the primary source of food production increasingly gets under pressure.
The Food and Agriculture Organization of the United Nations (FAO) recently released a report on environment and agriculture, showing some crucial challenges for the coming years. Human activities to meet the demand for food, fresh water, timber, fiber and fuel have changed the ecosystems extensively in the past 50 years and the degradation and unsustainable use of resources might even get worse during the first half of the current century. Food security is threatened by the climate change and a resulting modification of biodiversity, as well as by a shift to bioenergy production that takes land and other productive resources from the food production. The role of agriculture will be to manage a difficult trade-off between guaranteeing food security for the growing global population, providing the environment with ecosystem services and meeting also the future demand for biofuels. This means that there has to be gradually produced more with less, a sustainable environment is no longer an option for agriculture but an imperative.
The pressure on food security has got a direct impact on its safety. More efficient production leads to an increasing use of fertilizers, pesticides, antibiotics and the application of biotechnology. Pesticide residues and genetically manipulated organisms (GMOs) are released to the food chain which might have severe consequences for the health of consumers. In urban regions the number of people suffering from allergies is increasing, possibly as a final result of changing characteristics and ingredients of their foodstuffs. For these reasons a legal framework, regulations and rigorous controls are very important to protect the customers from unintended risks.

5.2 International Food Standards and Initiatives

The International Food Standard (IFS) has been developed since 2002 by German and French retailers in order to create a common food safety standard. Through certification and therefore higher transparency, the work of the auditors gets facilitated and audit costs can be saved, which is a benefit for both retailers and suppliers. In the past, supplier audits have been performed by retailer’s quality insurance departments, but the growing demands of consumers and an increasing number of incidents as well as the globalization process have led to the need of a uniform standard. A first general audit framework had already been set up in the Global Food Safety Initiative (GFSI). Through a consistent evaluation system for the suppliers of retailer branded food products with uniform procedures, the IFS aims to raise the mutual acceptance of the audits.
A central part of these standards is the Hazard Analysis of Critical Control Point System (HACCP) which has been developed in 1959 by the NASA for the production of safe food for the astronauts. The HACCP program is based on seven established principles which are designed to prevent problems before they occur and to correct deviations as soon as they are detected. “Such preventive control systems with documentation and verification are widely recognized by scientific authorities and international organizations as the most effective approach available for producing safe food.” The HACCP is now also included in EU regulation.
Another important initiative is the Codex Alimentarius (CA), a food safety program that has been established 1962 by the FAO and WHO. It is a collection of international food standards containing common and specific norms that have been approved by the CA commission and can be applied on national and international level. The program’s goal is to work out safety norms to protect the consumer’s health and to guarantee fair food trade practices.

5.3 Food Safety in China

Over the last few years, there has been a big number of food safety related incidents and scandals in China, also involving multinational companies like Carrefour. Recent cases of spoilt food are dating back to 2006. In the beginning of April, after an alert from a consumer, investigators found 153 boxes of expired pork chops at the Carrefour Quyang store in Shanghai. Although they were still on sale and labeled with “fresh pork” stickers, it came out that they were actually expired for about four months. The investigators immediately sealed the boxes and ordered the store to recall the already sold pork, but when they returned few days later the box had been illegally unsealed by the staff. Another report states that Carrefour Shuangjing store in Beijing sold bad smelling bred to a customer, labeled with a 2007 date on the package. Similar occurrences unfortunately happened again in September, when two Carrefour stores sold sushi containing too much bacteria. In the Guangzhou store the level of mildew in sushi products found in its shelves was even 23 times above the normal level.
Besides product freshness there is another big problem, mainly related to fruits and vegetables. An exposure by Greenpeace reveals that such produces sold in three major supermarket chains, including Carrefour, are containing illegal pesticides or pesticide residue exceeding legal standards. The test results reflect that illegal pesticides are still widely used in agriculture, also causing serious environmental problems.

For a deeper understanding of the food safety problematic in China, we have to go back and have a look at the historical background as well as the current legislation.
The first regulations on food safety were issued in 1965, after China’s three-year famine. However, these regulations covered the security of food supply rather than its safety and soon failed due to the breakdown of the legal system. For the following years until the end of 1970s the economy has been centrally planned. Not only all food factories but also the entire food production chain were owned and controlled by the state. Although there existed only some simple food standards in this period, traditional production with little use of chemical fertilizers, pesticides and additives did not cause many problems. Surely there have been some few incidents, but they had no impact on the general perception of food safety. Economic reforms in the time after the Cultural Revolution in the end of the 1970s accounted for the development of many new laws and regulations. Based on the 1965 food safety regulations, the government issued the Regulation of the Administration of Food Hygiene in 1979, considering the new economical environment. Continuing economic reforms demanded for the trial implementation of the 1982 Food Hygiene Law which basically focused on food hygiene concerns like rotten, dirty and poisoning food and food procession that was not clean. Although the scope of the law has been extended in the revised and current 1995 Food Hygiene Law, it still covers only very basic practices and a definition of “food hygiene” is yet missing. The law furthermore does not take an integrated “from-land-to-table” approach, there is no reference to planting and breeding that is also relevant to the overall food hygiene. Another point is that this law “[…] did not establish a system to deal with major food safety incidents, such as the outbreak of the bird flu in China in the spring of 2004” .
Many regulations dealing with the issue of food hygiene have been released in accordance with the law, covering the main areas of food safety like material, production and processing, packaging, containers and equipment as well as supervision, inspection and testing. But the effectiveness of all these standards is in question. Different ministries can release new regulations what often leads to conflicting jurisdiction. “In fact superfluous laws and regulations impair rather than enhance administration on food safety, and increase law enforcement costs, leaving food producers confused” .
The problem of overlapping duties and missing coordination among the administrative organs seems to be the major problem of law enforcement. Although the Ministry of Health (MOH) apparently is the most important organ for governing food safety, there are many other organs responsible for jurisdiction in this area. The State Food and Drug Administration (SFDA) was instituted in 2003 as an integrating and coordinating force to organize investigation and impose penalties for serious violations of the law, but unfortunately has little power among the ministries.

The Chinese government has finally realized that only legislation cannot ensure adequate food safety, there has to be a rather bottom-up approach, involving consumers, food industry and other stakeholders in food safety control activities for establishing a strong national food safety control system and improving the understanding and confidence of consumers to food safety. “Food safety regulations and risk management measures could be well implemented and enforced, only if consumers, food industry and other stakeholders of the society could fully understand those regulations and measures, and play active roles in the development and enforcement” .

5.4 Carrefour Europe vs. Carrefour China

Meeting food safety and quality standards is one of the top priorities in Carrefour’s business as well as CSR- strategy, a strategy that does not vary among the different countries. Carrefour has even taken part in developing the IFS to harmonize food treatment practices worldwide and enable auditors to inspect supplier’s hygiene and quality equally. Long-term relationships with its suppliers and continuous training of its workforce should finally guarantee food safety. What might be working well in Europe obviously over and over again causes difficulties in China. The main reason for these problems seems to be closely connected with China’s past. Public food safety discussions have been absent during the time of planned economy and therefore the general awareness of the risks of spoilt food has remained low. Take the pesticide case that was exposed by Greenpeace. The use of dangerous and illegal pesticides in agriculture that might result from both ignorance and economic pressure causes serious problems already at the beginning of the food supply chain. What are the implications for Carrefour in this case? Should the company choose and supervise its supplying farmers more carefully or is there even a way to improve the current agricultural situation generally? One possibility might be the promotion of “green food” by supporting the green food program that was launched by the Ministry of Agriculture (MOA) in 1992, making higher demands on the production environment and restricting the use of pesticides and chemical fertilizers. Carrefour could then market this green food under a special quality line resulting in a slightly higher price, similar to the bio- products that are sold in Europe. What about the other cases of expired pork, mildewed sushi and ugly smelling, wrong labeled bread? These problems are all related to store hygiene and the freshness of products on the shelves inside the store and undeniably in the full responsibility of Carrefour. Obviously some workers and even store managers don’t care too much yet about these issues. The general implication for Carrefour is to provide more training and education to both suppliers and its workforce and increase control activities at the store level. Carrefour already made a step in the right direction by instituting its Food Safety Foundation. Seminars and training sessions on food safety and quality management are conducted, open to local and provincial government representatives, farmers and suppliers. Furthermore a TV program on food safety is being prepared to be broadcast on the agricultural channel.

Our conclusion is that Carrefour in fact engages in the development of local standards, but can and should do even better, mainly in training of its own workforce and making further efforts to raise the awareness about food safety topics.

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Internet

All the internet links below have been last checked for their actuality on 12. May, 2007.

http://www.fifoost.org/allgemein/China/aussenhandel/ http://www.carrefour.com/cdc/group/our-group/ http://www.fondation-internationale-carrefour.org/pages/actions/details.php?id=91 http://www.wto.org/English/news_e/pres01_e/pr243_e.htm http://www.humanrightsbusiness.org http://de.wikipedia.org/wiki/Global_Compact http://www.carrefour.com/docroot/groupe/C4com/Commerce%20responsable/Publications/carrefourrdd2005ang.pdf http://www.carrefour.com/cdc/responsible-commerce/our-social-and-ethical-approach/the-group-and-its-suppliers/ http://ec.europa.eu/environment/newprg/index.htm http://ec.europa.eu/environment/newprg/strategies_en.htm http://ec.europa.eu/environment/index_en.htm http://www.wwfchina.org/english/loca.php?loca=265 http://www.chinafranchiser.com/2007/03/08/509-carrefour-wins-green-market-certification-in-shanghai/ http://www.chinadaily.com.cn/bizchina/2006-05/31/content_604757.htm http://www.fao.org/ag/magazine/0704sp1.htm http://www.food-care.info http://en.wikipedia.org/wiki/Hazard_Analysis_and_Critical_Control_Points http://www.fsis.usda.gov/OA/background/keyhaccp.htm http://www.bag.admin.ch/org/01044/01207/01840/index.html?lang=de http://www.chinacsr.com/2006/04/05/404-carrefour-shanghai-store-to-be-punished-for-selling-expired-pork/ http://www.chinacsr.com/2006/06/01/510-beijing-carrefour-sells-bad-bread-with-future-date/ http://www.chinacsr.com/2006/09/26/757-carrefour-sushi-contains-too-much-bacteria/ http://www.chinacsr.com/2006/06/13/537-greenpeace-exposes-guangzhou-pesticide-contamination/
http://www.fao.org/DOCREP/MEETING/004/AB447E.HTM