In light of these risks, it would be tempting to conclude that supermarkets and other large retailers are better off not enquiring too closely into practices at other levels of their value chain. Tempting, but wrong. A court will not be sympathetic to defendants who have wilfully turned a blind eye to practices of which, in the court's view, it should have been aware. A more constructive response would be for supermarkets and retailers to address their known legal risk in the value chain.
From a contractual perspective, the primary focus should be on the codes of conduct and supply chain principles which large retailers habitually impose on their suppliers. These standard form documents may benefit from a fresh look in light of changes to the customer's risk profile, as well as a dose of realism. Are these codes and principles identifying the right risks and prescribing realistic and practical measures to ensure compliance? Policy, as ever, needs to be backed up by practice. If retailers expect to hold suppliers to promises they have made in the due diligence process, audit rights in contractual documentation should be carefully scrutinised and customised, if necessary, rather than being regarded as boilerplate.
Caution also needs to be exercised when making public statements about supply chain standards and sustainable and ethical practices, because as explained above, these may be exploited. That said, it is almost certainly unrealistic for large retailers to effectively take a vow of silence on these issues for fear of encouraging litigation – particularly against a background of both increased reporting requirements and growing customer awareness of ethical issues, leading to heightened expectations of "good citizenship" from businesses. The answer, once again, lies in having robust processes for ensuring that public statements can be backed up by properly audited information and policies which are actually enforced in practice (rather than merely appended to the contract as an afterthought).
What is clear is that supermarkets and major retailers will need to confront these new litigation strategies and be prepared to address novel allegations relating to their value chains going forward. They must also be clear-sighted and prepared about the reputational risk that attends such claims. They should certainly give careful consideration to any public statements they make about value chain oversight or control, including any certifications schemes or auditing schemes which they may endorse or use. This "good hygiene" is important to maintain in order to avoid unforeseen litigation risk. For more on this, please see our recent article on refreshing human rights corporate policies and procedures.
Finally, it should not be overlooked that regulators are also taking a look into the sector, using their existing powers, and this may have an impact on the relationship between UK retailers and their value chains. In the UK, the Competition and Markets Authority (in common with regulators in other jurisdictions) has begun to dig deeper into consumer-facing claims to eco-friendliness and ethical business practices, calling into question whether businesses are making misleading claims about the sustainability of their products. This may result in higher scrutiny over value chains, as businesses look to tighten value chain control in response to heightened regulatory pressure.