Tesco has opened a can of worms, admitting that when dealing with suppliers, it likely breached the grocery industry’s code of practice. The troubled retailer, Britain’s biggest, has exposed itself to a severe warning from the watchdog.
In February, The Groceries Code Adjudicator announced the opening of an investigation into Tesco’s treatment of suppliers, including claims that it had delayed payments, and demanded cash for product placement within stores.
In the small print of the company’s annual report, the big four grocer cites: “Regrettably, we have concluded that there have been a number of instances of probable breaches of the Code which fall short of the high standards we expect to uphold in our dealings with our suppliers.”
The investigation by the GCA is not the only one concerning Tesco. The Serious Fraud Office is also looking into the profit overstatement that led to an unaccountable £326m black hole in profits last year.
It’s linked to irregularities in how Tesco booked payments from suppliers and when the scandal was uncovered last September, newly recruited CEO Dave Lewis launched an internal review into the company’s supply chain, subsequently informing the GCA of “some areas of concern”.
The annual report’s statement in the annual report is the first time however, that Tesco has formally stated the possible code breach, adding: “We are taking effective action to prevent this arising again. We are fundamentally changing the way we work with our suppliers to deliver a more sustainable and collaborative business model for everyone in the supply chain. In addition, we are significantly up-weighting our Code compliance programme.”
Tesco cited that it will employ new training, “deep dive audits”, and bi-annual compliance declarations.
A spokesman for the supermarket chain said: “The annual report repeats what we said in February, which is that following our announcement last September regarding commercial income, we worked with the Adjudicator to identify any relevant GSCOP issues.
An internal review which we shared with the Adjudicator identified some areas of concern. We have taken action to strengthen compliance and, as we have announced, we are changing the way we work with our suppliers.”