EROSKI

Always with you, we share your dream

Sunday 2 June 2013

3 inspired

A. The main facts about the activities of the company.

Eroski is Spanish supermarket chain founded in 1969 in the regions of Biskay and Guipuzkoa as a cooperative between ten supermarkets in the regions. As a cooperative they have a socio-business model different to others, trying to seek to generate sustainable and high quality employment. They support the “triple corporate balance”: business responsibility must be combined with growth and generating value, to contribute to the social development where they operate, doing so with the least possible impact on the environment. Moreover, it is one of the largest retail companies in Spain, formed by more than 35,000 people and with more than 2,000 points of sale.
They offer consumer products and a wide range of services to his customers. It is the perfect example of a multiformat company. They started selling food and not long afterwards they added linen, footwear and electrical appliances. Nowadays the range of services has widen a lot comprising travel agents, leisure and sports stores, perfumeries, opticians, petrol stations, insurance, mobile telephony, etc.
Finally it is important to say that Eroski is committed to Social action: since its foundation, they have returned 10% of their profits to society through social action initiatives. They channel most of this social action through the EROSKI Foundation.

B. The Ethical challenges this company is addressing.

● Working for the environment

Eco packaging: In order to reduce production costs and minimize the environmental impact of the packaging of their products, Eroski has improved the design and control of the packaging by reducing the weight of the packaging, eliminating raw material and replacing some materials with others.
Reusable bags: It is the only supermarket that clearly incentivizes the use of non-plastic bags, they replace these bags, completely free of charge, if they break or deteriorate, so our customers only pay the first time.
European Retail forum: Eroski joined in 2001 the European Retail Forum, a platform created to exchange best practices in sustainability in the European retail sector and to identify opportunities and barriers that could encourage or hamper sustainable consumption.

● Investing in social actions

Eroski allocates 10% of their annual profits to Corporate Social Responsibility initiatives. The purpose of this investment is to support the community and to be an active player in the areas in which they operate. Within the CSR action they inform and they aware consumers, do charitable work and sustainability.
Charitable work: Since 1996 they collaborate with the Spanish Federation of Food Banks collecting food for most disadvantaged people. Also they have a program for donating products that consists in donating new items, such as toys, footwear and clothing, to those most in need. These products mainly come from the EROSKI hypermarkets (surplus at the end of the season) and from the purchasing centre (samples of products used to choose the range in our stores).
Among the charity programs, it is also really interesting the activities aimed to improve equality and integration at all levels for people with disabilities. They set aside financial contributions and work with around ten organizations that help disabled people, taking part in organizing events and helping to develop programs to improve the quality of life.

● Sustainability

Eroski works with FAIRTRADE and Intermón Oxfam to organise a campaign to support Fair Trade their hypermarkets. This initiative involved holding educational talks to explain what is involved in Fair Trade and giving guided tours of the stores to find out about and taste the Fair Trade products. Moreover, Eroski is member of United National Global Compact. The purpose of this international initiative is to obtain a voluntary commitment from companies in terms of social responsibility, through introducing Ten Principles based on human, employment and environmental rights and the fight against corruption.

● Support for regional economies
Last year Eroski bought from more than 4,500 local suppliers and spent a total of more than €5,144m, a clear commitment to support local industries. Among the initiatives aimed to support the local development we can find:

- Ease those small local suppliers to deliver their products directly to our platforms instead of delivering to the stores or regions, which makes their distribution process easier and reduces their costs as fewer journeys are required.
- They guarantee a reserved space on the shelves of our stores for items from local suppliers.
- Eroski reached agreements with public bodies and other institutions to assure the proper development of local distributors and products.
- In keeping with our desire to strengthen and support regional economies, each year
EROSKI holds meetings with local suppliers in the Autonomous Regions.

C. What makes you believe this company is really ethical and why you trust it?

As we have explained before, we have chosen Eroski because it is a company that combines a successful business model with ethics. In other words, it means that the ethical part is not separated from the main activity; in fact, ethics are the key for their success. From our point of view, fully integrating ethics in the business activity is the best proof of the Eroski’s goodwill; it says that without this ingredient – ethics – the company would not be successful. In addition, they practice transparent and regulated governance through the “Internal regime for the Board of Directors and the Advisory Council” and the “Internal regulations for the conduct of the Eroski Group”, which are Good Governance regulations. These are the main reasons because of we trust in Eroski’s ethics.

So, regarding the ethical part of the company, it could be perfectly justifiable with its Corporate Social Responsibility and with all the projects in which it takes part (FAIRTRADE, Intermon Oxfam, profit donation, etc.): they widely invest in social action. But despite and beyond this, we have found extremely interesting this firm because of their worry about the environment in which it performs. In Eroski there is an excellent collective mentality: they work for a better planet; they care about both the society and its country (Spain); and they are always willing to grow sustainably. We believe that all these are hard concepts to engrave in the current business mentality because most of the companies only decide to get the job done in order to make money, without further implications and concerns. Following this line, there is obviously the general tendency of trying to get profits at any costs and, if there is some money left, then something ethical could be started. It is very difficult to make companies be concerned about their framework of action, and Eroski is a paradigmatic example to follow day after day since they found the way of being at the society’s service without losing the sense of profitability.

Summarizing, we think that Eroski is really ethical because very few companies are willing to get such a fruitful combination in both fields – ethics and profitability –, and because they opted for being a very important and committed agent inside our society, becoming part of it and always trying to improve it in a sustainable way.

D.The possible challenges facing the company in the future and how you think this company may improve.

One of the consequences of the current financial situation has been the decrease in the purchasing power of consumers and change in the consumption patterns. Demand has shrunk, the same as production. Consumers are now more price sensitive. This has led to a more fierce competition among supermarkets and a need of decreasing margins, which were already low before the economic turmoil (between 2 and 3%). The market is mature; however, an international expansion is unfeasible because of high entry barriers and the presence of strong and consolidated companies in other countries.

In light of this situation, there is a need to increase efficiency. However, it will be challenging to achieve higher levels of efficiency without cutting costs that represent less investments in the corporate social activities that the company is carrying. Also, the company could be tempted to proceed to a layoff with the aim of lowering operating costs. Any decision of this kind needs to be evaluated not only with economic knowledge but also with some social and moral criteria.

One solution to the situation, and a challenge for Eroski, is to create even stronger and sustainable relationships with suppliers, collaborating with them and making an effort to provide solutions that better solve the needs of the consumer. Another challenge is to give the consumer what he needs, focusing on those activities and products that provide him with more value and would differentiate the company. Also, Eroski has to keep an eye on the new trends in the market and continue exploiting them (for example, increasing demand for products that are respectful with the environment or health as well as higher demand for local products).

As introduced before, we consider that the most important challenge for Eroski is trying to be more efficient and profitable but remaining faithful to its commitment to society and to its values (cooperation, participation, social responsibility, innovation and commitment). In every decision is made, they should be guided by what is stated in the mission of the company: “Tenemos un gran compromiso con la salud, el bienestar y el desarrollo sostenible de la sociedad.” (“We have a big commitment with health, welfare and sustainable development of society”). Despite the unfavorable climate, Eroski needs to make an effort in order to continue to be an example to follow and also to inspire those with responsibilities in other companies to build companies where money is not the only aim of its activities. Companies that feel responsible of its activity and that are aware of the so important role they play in society. Companies that never forget its social and ethical dimension and that make decisions respecting a set of unshakeable values.

Bibliography

Eroski: Memoria Responsabilidad Social 2005-2006, 2006
Eroski: Eroski Report 2011, 2012
Alejandro Martínez Berriochoa: La Responsabilidad Social en Eroski, 2009
http://www.eroski.es
http://www.compromisorse.com/entrevista/director-de-rsc/eroski/alejandro-martinez/

Location: Elorrio, Vizcaya (Spain)

Sector: Manufacturing, Other service activities

Official website: http://eroski.es

Key figures:

Country of operation: Spain
Annual Revenues: 1.847.222 K€
Capital: 1.418.262 K€
Number of employees: 38.420 (12.620 are worker partners)
Number of stores: 2.110
EROSKI foundation: Eroski returns 10% of annual profits to society and most of this money is managed by the foundation.

Nbr. visits: 977

Nbr. inspires: 3