Ms Christine Tacon:

I thank the Chairman for inviting me to attend this committee hearing. I welcome the opportunity to update the members on my work in the UK.

My role as Groceries Code Adjudicator, GCA, is to monitor, ensure compliance with and enforce the UK groceries supply code of practice. The code exists to ensure that the UK’s 13 regulated retailers treat their direct suppliers lawfully and fairly across a range of supply chain practices. Direct suppliers are covered whether they are based in or outside the UK.

I have been in the post for six years. From the beginning, I have adopted a modern regulatory approach, working collaboratively with the retailers to respond to issues raised by suppliers and others and bring about beneficial change in the sector. I have greatly enjoyed the role and am proud of the significant changes in the sector that have been achieved in that time.

I have statutory powers to investigate suspected breaches of the code and to arbitrate in disputes between suppliers and retailers, but my primary objective is to strengthen the supply chain and make a difference that suppliers notice. Accordingly, I measure progress through improvements in the sector rather than the number of investigations carried out. I do this by listening to what suppliers tell me and carrying out an annual survey asking suppliers for their view on how well retailers are complying with the code. The survey is now one of the most important activities that I do each year.

In 2019, a record 1,417 direct suppliers completed my survey, providing valuable information about retailer compliance with the code which showed continuing improvement in retailer behaviour. When I did the first survey in 2014, eight out of ten suppliers said they had experienced a breach of the code in the past 12 months. It is now down to only four out of ten.

Across every paragraph of the code the incidence of reported issues has fallen year-on-year. When I took on the role of GCA, the biggest issue was forensic auditing, with 45% of suppliers reporting concern in my 2014 survey. This year, only 7% of suppliers reported forensic auditing as an issue of concern. Forecasting is now the issue most reported by suppliers and this, too, has declined to 15% from 33% in 2014.

Every year, I ask suppliers to score the retailers they supply based on their perceptions of those retailers’ overall compliance. In the first year, the worst score was 58% compliant and the best was 90%. Now, only two of the retailers captured in the survey are below 90% and the highest score is 97%. This squeezing of performance into significantly higher levels of compliance is testament to the effectiveness and impact of my collaborative approach. It is also a mark of the positive work and engagement by the retailers.

I have established a good working relationship with every one of the retailers and much of the progress made can be attributed to the work of their retailer code compliance officers, CCOs, acting as my ears and eyes within their business. I have regular meetings with the retailer CCOs to discuss progress and I meet the chief executives and the audit chairs on an annual basis.

From March 2018 to March 2019, my main focus was on the investigation into Co-operative Group Limited, Co-op. This was the second investigation that I have carried out in six years. The first was into Tesco plc and that was concluded in 2016. In each investigation I found evidence that the relevant retailer had breached the code and I made recommendations to them.

The investigation report into the Co-op identified the root causes of the breaches and made robust recommendations for urgent action. This was an important investigation because it firmly established the role of governance and corporate culture in ensuring code compliance.

I am monitoring closely how the Co-op implements the recommendations I have made and am working with all the regulated retailers to ensure they, too, are taking a whole-organisation approach to compliance risk management. This should be embedded into retailers’ overall governance structures, their legal and audit functions as well as their internal systems and processes, and into their training and communication with suppliers. That is the best way to make sure that breaches of the code do not happen and if they do, that they are quickly picked up by the retailers and put right.

One of the main challenges of the role has been encouraging suppliers to speak to me. Awareness of the code is generally high among suppliers at more than 90%, but I have put a lot of effort into encouraging suppliers to get trained on the code and to tell me when they are experiencing issues with retailers.

I have always reinforced to suppliers my statutory duty of confidentiality as well as encouraging suppliers to be trained in the code. In 2017, I launched a code confident campaign which encouraged suppliers to Know the Code, Get Trained and Speak Up to me and to the regulated retailers code compliance officers. This message has reached thousands of suppliers and is supported by retailers and trade associations.

One of the best ways of raising awareness of the Groceries Code Adjudicator has been attending events at which grocery suppliers are present, and I have made a commitment to attend at least one event a month. This enables my Code Confident message to get direct to suppliers and provides an opportunity for suppliers to share their experiences of dealing with the retailers. I also publish a regulator newsletter, the link to which is on the screen.

I now hear from suppliers more frequently even though the survey tells me that they are experiencing fewer code-related issues. I am pleased the number of suppliers trained in the code has increased, with approximately 50% of suppliers responding in the survey.

The first statutory review concluded in 2017 that the Groceries Code Adjudicator was "an exemplary modern regulator with an international reputation" and many other countries look to the UK as a leader in this area.

My term as Groceries Code Adjudicator ends in June 2020. In my final year, I am committed to working with each of the 13 retailers to ensure that all their practices, systems and behaviours are designed and structured to meet their obligations under the code. However each of them is set up, I want to see the retailers build for themselves a whole-organisation approach to code compliance. It means retailers doing the right thing, not only because that is what is required of them but because it makes good business sense.

I thank Ms Tacon for her opening statement. I will now take questions from members. Deputy McConalogue will start and he will be followed by Deputies Stanley and Cahill in that order.