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Ethical trading and sustainable business

Introduction
Tate & Lyle PLC is an international manufacturer of food and industrial ingredients. The company formed in 1921, when the families of co-founders Henry Tate and Abram Lyle agreed to merge their businesses. These families both owned sugar refineries in London. By combining their businesses, the new company was able to lower its costs and merge its customers. This meant it could compete more effectively against other sugar refiners. The companys vision is to create the worlds leading renewable food and industrial ingredients business and today Tate & Lyle has more than 45 production facilities throughout the Americas, Europe and South East Asia. The company uses innovative technology to turn agricultural products, corn and sugar cane, into valuable ingredients for customers. It has over 6,000 corporate customers and delivers to more than 13,000 industrial locations worldwide. It has developed new products such as the sugar alternative SPLENDA Sucralose. Although Tate & Lyle products are familiar on supermarket shelves, the company itself does not sell directly to consumers. The company operates primarily in business to business (B2B) markets. It supplies sugar products to large food companies such as soft drink manufacturers and provides finished products to wholesalers and retailers like supermarkets. As well as its food and catering products, the company also manufactures products for many non-food industries, such as the brewing and pharmaceutical sectors. Molasses is produced as a by-product of the sugar refining process and is used in making animal feeds. Tate & Lyle Sugars is one division of Tate & Lyle PLC. It is a household name in the UK with products such as Tate & Lyle Fairtrade Sugar and Lyles Golden Syrup. The basic raw ingredient it processes is sugar cane. This is a giant grass, which is grown in tropical countries. The cane is cut, crushed and the juice evaporated to make raw cane sugar. Raw sugar is then shipped to refineries and made into refined sugar products. In 2008 Tate & Lyle factories refined over 2.3 million tonnes of raw cane sugar, with just over 1 million tonnes of this being refined at Tate & Lyle Sugars Thames Refinery in East London. This case study describes how Tate & Lyle Sugars demonstrates the Tate & Lyle Groups commitment to corporate social responsibility and ethical business practice.
CURRICULUM TOPICS Business ethics Corporate social responsibility Standards Ethical trading

GLOSSARY Vision: a summary in words, setting out what an organisation is striving to achieve. B2B: transactions between companies rather than between companies and consumers. Corporate social responsibility: the responsibility of an organisation to wider society, to a range of stakeholders including the community and society at large. Values: what a company stands for. Stakeholders: Individuals and groups with an interest in an organisation and the decisions it makes.

Corporate social responsibility

All businesses look to make a profit. This is the key aim of any business enterprise and is essential for survival and growth. But all companies must also make decisions about the way they do business. In other words, they must determine their values. These will shape how they will treat their suppliers, employees and customers. They will define a business ethics. Increasingly businesses are paying greater attention to their ethical stance. Corporate social responsibility (CSR) means treating fairly all the people involved in and affected by the business and behaving responsibly towards the environment. It means considering all stakeholders in the business. Suppliers The environment Competitors Stakeholders Local communities Customers Employees Shareholders

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For Tate & Lyle, one important focus for corporate social responsibility is the way it deals with its suppliers. Sugar cane is grown in some of the poorer countries of the world. Tate & Lyle has built up long-standing relationships in some countries. For example, the company has purchased sugar cane from Belize in South America for over 35 years. Sugar is Belizes main crop and over 40,000 people in the country rely on the sugar industry for their income. Tate & Lyle has decided that it will source all of its cane sugar for retail use under Fairtrade conditions. This means that Tate & Lyle will only buy sugar cane from producers who meet certain social, economic and environmental standards set by the Fairtrade Foundation. These standards mean that growers receive an extra premium on the price paid. They can use this to invest and develop their businesses and communities. By meeting these standards, Tate & Lyle sugar products can be sold with the Fairtrade label on the packaging. This is good business practice. It appeals to those consumers who want reassurance that companies treat suppliers in the developing world fairly. It also ensures sustainability. Tate & Lyle needs to know it can rely on a supply of the best sugar cane for the long term. By ensuring suppliers get a fair price for sugar cane, Tate & Lyle helps them to invest for the future. Tate & Lyles CSR measures do not only concern its relationships with suppliers, they affect all parts of the organisation. The focus is on four core values: safety - for all its workers, contractors, customers and visitors knowledge - applying, sharing, understanding processes, products and markets being innovative - in the way the company works, processes used, products produced having ethical integrity - towards workers and trading partners and the environment. Tate & Lyles code of conduct shows how these interact: This involves achieving the highest standards of safety; assessing the environmental impact of every aspect of what we do; and treating our employees, business partners and local communities with dignity and respect. This interaction produces win-win situations across the whole supply chain. This means that Tate & Lyles suppliers, workers and customers all benefit and it is good for Tate & Lyles business. By listening to and acting on the needs of customers and consumers Tate & Lyle can grow sales and increase revenues. By providing good working conditions and upholding ethical business practices, employees are more motivated and productive. This can reduce costs of staffing or overtime. Ethical business behaviour, such as supporting Fairtrade initiatives, benefits growers and workers in the developing world. It can also make Tate & Lyle different from its competitors, attracting more customers.

GLOSSARY Fairtrade: a set of standards about how companies should source raw materials and products from small growers usually in the developing world. The aim is to provide suppliers with a fair price that enables them to pay workers a living wage, to invest in their businesses and to introduce sustainable practices. Fairtrade Foundation: a notfor-profit organisation that licences the use of the Fairtrade label on products in the UK. To be able to use this label, producers must adhere to a set of agreed standards in their dealings with their suppliers. Win-win situation: a policy or transaction that benefits all parties concerned. Whistle-blowing: a person who informs on someone engaged in an illegal activity.

Corporate standards
To ensure responsible business practices, Tate & Lyle has put in place company-wide initiatives and standards. It has introduced a code of conduct to help employees and partners understand and meet these standards. All parts of the business, as well as Tate & Lyles partners, must follow this code.

Vision and values

Health and safety

Environment

Legal compliance The code of conduct covers Workplace rights

Food safety and quality

Bribery and corruption

Community

Fair competition

Whistle-blowing

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Each section of the code details specific policies that must be followed and practices that must be avoided. For example, under workplace rights, Tate & Lyle does not allow the use of child labour by any of its suppliers under any circumstances. To prevent bribery and corruption, company workers must register any gifts that they are offered. To ensure fair competition, Tate & Lyle forbids any collaboration with competitors on pricing. Tate & Lyle has implemented an audit programme with Cert ID, a European certification body. This measures the business practices of Tate & Lyles raw cane suppliers against internationally recognised standards for corporate social responsibility. Cert IDs standards provide a set of criteria for ethical businesses. These help Tate & Lyle to evaluate those suppliers that are performing up to the standard and to identify where improvement needs to take place. Tate & Lyle is committed to the highest standards of food production. To ensure its food is of the highest quality, the company is audited by customers and independent certification bodies who check that production sites meet industry standards. These consultants assess standards and production systems. Production sites are benchmarked against each other to keep quality standards high with the Group presenting an annual quality award. Managers and employees are all involved in making sure that the sugar produced meets its quality targets. In the workplace, Tate & Lyle motivates employees by treating them fairly, providing equal opportunities and fair pay and conditions. It also has a key focus on making sure that its workers are safe. For example, it has reduced the number of injuries in its London plants from 170 in 2002 to 44 in 2008. The aim is to have zero accidents. To improve its environmental impact, the company aims to minimise its use of water, reduce waste to landfill and improve energy efficiency. For example, Tate & Lyle Sugars is installing new biomass boilers at its Thames Refinery. These are special boilers which use the husk of wheat grain as fuel. The new boilers will cost the business more than 20 million but will reduce carbon emissions from fossil fuels by 70%. The boilers will also generate some surplus electricity. Some of this green energy can also be sold back to the UK national grid, providing some additional income. The company also aims to play a positive role in all the communities in which it operates through building long-term partnerships with local organisations to assist regeneration and the building of strong, safe and healthy communities. Activities include: a particular focus on education. One project run in conjunction with Tate Britain, VerbalEyes, uses art to enhance the development of the literacy skills of local primary age children. This is celebrated at Tate Britain with an annual event for participating children, teachers and parents supporting with funds, office and warehouse accommodation an organisation called Community Food Enterprise, a social enterprise that seeks to improve access for everyone to affordable healthy food support in the form of on-site office and warehouse space for Auction My Stuff - a social enterprise that generates cash for its founding charity by using eBay to sell stuff donated by businesses.

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GLOSSARY Benchmarked: using an index, standard or point of reference to measure or judge a quality or value. Unique selling point: specific benefits of a product or service that competitors do not or cannot offer.

The switch to Fairtrade

It can take time to implement new approaches. In Belize, Tate & Lyle buys sugar cane from over 6,000 smallholder farmers. Working with the Belize Sugar Cane Farmers Association and Belize Sugar Industries, the sole sugar processor in the country, Tate & Lyle has helped these farmers to meet Fairtrade standards. Tate & Lyle is happy to invest the time in the project because it delivers a real business benefit and gives the company a unique selling point (USP). It also allows farmers to adopt a more sustainable approach. Fairtrade contracts allow producers to make long-term plans, knowing they will be paid fairly. This enables farmers to enhance the quality of their products, improve working conditions and introduce safer and more environmentally-friendly practices. There is also a benefit for the local communities. Tate & Lyle is helping to fund schemes in schools which will enhance the lives of communities in the sugar cane regions. The company estimates that in the first year alone, the move to Fairtrade will produce an additional benefit of at least 2 million for sugar cane farmers.

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The cost of operating ethically

www.thetimes100.co.uk Behaving ethically and with consideration for the environment means that Tate & Lyle incurs additional costs. Producing raw sugar under Fairtrade standards costs a little more. Tate & Lyle believes that extra costs will be absorbed by increased sales. This is part of a virtuous circle. The diagram explains this circle. Using Fairtrade or organic sources gives the farmer or grower a better deal. This premium can be invested, bringing benefits in terms of a better harvest and a road to a better future for them. By providing a good deal for farmers, by acting ethically, Tate & Lyle gets good publicity. This will provide customers with an additional incentive to buy Tate & Lyle products. In turn, this will translate into increased sales and greater profits.

GLOSSARY Carbon footprint: the quantity of carbon created by individuals, businesses or countries as a result of their activities e.g. using heating and lighting, using a car or mobile phone charger. Secondary carbon footprint: the quantity of carbon created during the whole life cycle of a product including manufacture, packaging, distribution and disposal.

Tate & Lyle purchases Fairtrade/organic

Premium gives investment to grower

Increase in sales and profit

Better quality supply

Ethical sourcing gives good PR Customers choose Tate & Lyle over competitors

Conclusion
Tate & Lyles business is led by its business ethics. In the light of these, the company has reviewed its operations. One major result of this review has been the decision to switch to Fairtrade sugar cane for all its retail products. This allows the company to offer customers an ethically-produced product range and provide its suppliers with an improved standard of living through developing their businesses and communities. The company has also reviewed the way it uses and produces energy, investing in new technology for a long-term benefit to the business and the environment. Tate & Lyles ethical stance is now reflected in the way it manages resources, reducing the environmental impact of its operations. For the last 10 years Tate & Lyle has been looking at ways of reducing its carbon footprint by reducing energy consumption per unit of output and developing alternative energy sources. In 2008 the secondary carbon footprint of raw cane sugar refined through Thames Refinery was 0.38 tonnes of CO2 per tonne of sugar refined. This is expected to reduce by more than 20% as the new biomass boilers are commissioned in 2009. The Group as a whole has also reduced energy use by 20% since 2000. In making these changes, Tate & Lyles managers have considered their suppliers, their employees and their customers. The strategy is designed to appeal to customers and to improve the profitability of the business. It also supports Tate & Lyles sustainable resources policy, which will provide long-term security in its supply chain.

The Times Newspaper Limited and MBA Publishing Ltd 2009. Whilst every effort has been made to ensure accuracy of information, neither the publisher nor the client can be held responsible for errors of omission or commission.

Questions
1. What are business ethics? Describe three examples of how Tate & Lyle is showing an ethical approach to business. 2. What is meant by corporate social responsibility (CSR)? Using the case study and the Tate & Lyle website, describe how and why Tate & Lyle is taking CSR seriously. 3. Explain how switching to Fairtrade will affect Tate & Lyles suppliers of sugar cane. What could it mean for their lives as well as their businesses? 4. Tate & Lyle is making its production methods more environmentally-friendly. Evaluate the wider environmental impact of these changes for all stakeholders involved.

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