“The EU is working to achieve world leadership in green policies and climate change commitments”
Christian Verschueren has been Director-General of EuroCommerce since July 2011. Heading a team of 20 professionals he represents retail and wholesale at EU level. Before joining EuroCommerce, Christian Verschueren led ACE, the alliance for the beverage carton industry. Between 2000 and 2007, he was Director-General of CropLife International, the global federation of the plant science industry. Prior to that, he occupied various management and leadership positions in FEDESA and COMISA (now IFAH– Europe and IFAH), the European and global associations for the veterinary pharmaceutical industry. He graduated as doctor of veterinary medicine at the University of Liège, Belgium. He holds a PhD from the University of Utrecht, the Netherlands. He is also an ambassador of WWF Belgium and a Board member of Natagora, a nature conservancy organisation.
What are the main concerns of retailers at the moment?
As the biggest private sector employer in Europe, retail and wholesale are a major factor in the EU economy. Yet it is a sector often subject to regulation which stops it delivering as effectively as it could the important service of providing 500 million consumers in Europe with the food and other products they need for daily life. A main current concern is the draft directive on unfair trading practices in the food supply chain which was put forward by the Commission in April. The proposed directive established a list of prohibited and restricted practices between farmers, SME suppliers and large buyers. Retailers and wholesalers around Europe are shaking their heads at what the European Parliament is seeking to change in the Commission proposal. The directive is meant to help farmers earn more, yet the latest changes risk offering highly profitable and very strong multinational corporations the ability to wring even more profits out of the European consumer. Large multinational corporations hold more power than retailers or wholesalers, and make net profit margins of up to 30%, while retailers’ margins are no more than 1-3%. Any retailer, whatever their size, represents a very small share of these brands’ global turnover, and has little choice but to stock their products. This is reflected in their respective negotiating power.
Protectionism inside and outside the EU is another real concern. In a number of Member States, protectionist policies against foreign retailers are holding back growth and harming consumers. We are looking carefully at the political developments in Europe, not exclusively, but in particular, in Central and Eastern European countries, where retail chains are faced with various forms of discrimination. These include unfair taxes, excessive food safety controls, or limitations on commercial establishment. Every form of protectionism makes everyone poorer, as it ultimately prevents customers from choosing freely and benefiting from competition. These populist tendencies are also fueling the present trade disputes sparked by US decisions on tariffs threatening a major trade war. I should also mention another issue which undermines the Single Market to the detriment of consumers – the restrictions imposed by manufactures on where retailers can buy their products. This is not what the Single Market should be about, and it causes real problems where consumers in some countries perceive that they are being given a worse deal than others in the quality or price of what they buy. These are missed opportunities for Europe, impose unnecessary costs on consumers and block the creation of new jobs for many thousands of Europeans.
The digitalisation is a future but also a challenge. Should we apply the same rules in offline and online world?
Digital technology has driven a major change in the way people buy, but the way people buy has also transformed the way retail and wholesale do business. Digitalisation is transforming the competitive landscape of our sector in many ways. Retailers need to adapt to a new digital reality, and so does EU legislation. The distinction between online and offline, and between manufacturers, wholesalers and retailers is becoming blurred. Digitalisation has brought about massive changes in supply chains, increasing transparency but also competitive pressure. Platforms have created new business models. Data and the ability to use data gives a competitive edge and will increasingly do so. Online sales also can cause problems with some direct imports, from e.g. China, operating outside many of the EU’s rules on product safety or taxation. Regulation and tax should establish a level playing field among all operators and channels of distribution and be updated to reflect these changes. For example, in some countries like France or the UK, retailers pay taxes on their square meters of commercial space regardless of whether they make a profit. Regulation has to address the problems for cross-border trade in the EU arising from the many differences in e.g. consumer guarantees and VAT rates.
How can we better control the entrance of goods to the EU market bought online?
All products placed on the EU market need to be safe. EuroCommerce supports better coordination and collaboration between national market surveillance authorities, and especially with the customs authorities. Rogue traders bringing non-compliant products into the Single Market should be pursued. This should reduce the number of non-compliant products sold in the Single Market. In our view, enforcement, instead of introducing new rules that lead to additional costs for genuine traders, is the way to protect consumers best. Consumer product safety is paramount for our sector.
This year, we celebrate 25 years of the Single Market. What kind of barriers do the EU retailers and wholesalers face?
Indeed, and it’s also the 25th anniversary of EuroCommerce this year. In 1992 we were told that the Single Market would be completed. 25 years later we still see massive barriers to trading across the EU. A functioning Single Market is a unique potential strength of the EU. Making it work will ensure jobs, growth and wider choice and lower prices for consumers. Retailers and wholesalers are a crucial link between producers and suppliers and their customers. With around €1,000 trillion of goods traded cross-border yearly, the estimated untapped potential of the Single Market for Goods is between €183 billion and €269 billion. The Commission and Member States need to ensure better application of the principle of mutual recognition to improve the free movement of products which are not subject to harmonised EU legislation. Competent authorities should recognise foreign test reports, increase mutual trust and collaboration. Moreover, to improve the free movement of goods, Member States should refrain from going beyond the minimum requirement set out by EU law. The Commission should move from minimum harmonisation measures to Regulations, or Directives that provide maximum harmonisation for relevant aspects, particularly for products. As for labelling, the multiplicity of requirements causes an information overload for consumers and unnecessary costs for business, and make labels too complicated and consumers ignore labels or fail to understand them. Our sector faces multiple levels of regulation: the recent Commission Communication ‘A retail sector fit for the 21st century’ was an important step towards a better understanding of the significant drivers of retail competitiveness. It showed the cumulative impact of unnecessary national and local regulation and barriers. The Commission rightly pointed to the positive spill- over effect that the right policy decisions will have on other business sectors.
Dual quality is high on the Czech political agenda. Is it also a priority for your Members outside the CEE region?
Our sector holds consumer protection and consumer confidence as our highest values and misleading consumers is unacceptable. As a sector, we serve by giving consumers what they want, but big manufacturers often do not allow retailers to source cross-border and oblige them to sell the products manufacturers provide for a specific market with the price and quality attached. We support EU-wide and rigorous methodologies for testing which should lead to better understanding and a more uniform basis for evidence of the alleged problem, its real magnitude and significance.
The EU has a strong focus on consumer issues. Retailers are very close to their consumers what kind of challenges they are confronted with?
Retailers interact with consumers millions of times a day, offering them goods and services and giving support when needed. A simple, harmonised and balanced legal framework of consumer protection for both online and offline sales is therefore of paramount importance in building consumer trust and allowing everyone to benefit from the Single Market. At the same time, it will also boost the EU in competing with global e-commerce players. We need a full and balanced harmonisation of consumer protection rules at a proportionate level as the only way to help traders and consumers overcome legal fragmentation and obstacles to the free movement of goods.
The new EU plastic strategy is putting ambitious targets. What does it mean for retailers and wholesalers?
The European Commission published the EU Plastics Strategy in January, with targets for all plastic packaging to be reusable and recyclable in a cost-effective manner by 2030. At the end of May, the Commission tabled a legislative proposal targeting single-use plastic products. A group of single-use plastic products will be simply banned (e.g. cotton bud sticks, cutlery, plates, straws) and others will be subject to new Extended Producer Responsibility (EPR) schemes (e.g. food containers, cups for beverages, plastic bags). Member States will also need to achieve a separate collection rate for single use plastic bottles of 90% by 2025, using deposit schemes and additional EPR obligations to achieve this. These could result in higher costs for our sector and require retailers to provide packaging waste collection facilities for consumers. While we are giving general support to reducing waste and to improving recycling, retailers and wholesalers face real obstacles regarding plastic waste, redesign of plastic packaging and EPR/deposit schemes. The sector has already demonstrated its leadership in reducing packaging and single- use plastics and made collective and individual commitments on doing so, including an 80% reduction in overall waste. Long before the Commission’s proposal, retailers have been proactive in cutting their reliance on plastics. These include encouraging customers to collect and return their plastic waste, increasing their share of recycled products and carrier bags made of renewable plastics, and encouraging reduced-packaging refills of bodycare products. In addition to these measures, the sector is also engaged in supporting behavioural change through awareness and information campaigns. For instance, some of our members have given customers comprehensive information to facilitate waste sorting for nearly 14,000 food and non-food products. Retailers and wholesalers are already, and want to in the future, play their part in combating littering, but this needs to be across the supply chain, from producers to consumers. Extended producer responsibility must not mean supermarkets ending up as waste collectors.
How do your members respond to the challenges set by climate change?
The EU is working to achieve world leadership in green policies and climate change commitments, and create a properly-functioning circular economy. Consumers are increasingly looking for products that are produced sustainably and responsibly, and which help combat climate change. Retailers are committed to reducing their environmental footprint. The potential for retail to promote sustainable consumption led to the creation of the Retailers’ Environmental Action Plan (REAP). REAP is a voluntary initiative which aims at reducing environmental impacts in the retail sector and its supply chain, promoting more sustainable products, and providing better information to consumers. Collectively, the REAP members have also developed various voluntary agreements, such as the Retail Environmental Sustainability Code in 2010, the Waste Agreement in 2012, and the Commitment to the Circular Economy in 2016. Moreover, a number of retailers are implementing best practices through their pledges at the Consumer Goods Forum level with the aim to have a positive impact on the fight against climate change.
What kind of impact will have Brexit on EU retailers and wholesalers?
In a supply chain built on just-in-time deliveries, the movement of goods, and particularly fast- moving consumer and perishable goods and medicines, is extremely time-sensitive. Any delays or border queues will disrupt important production processes and damage perishable consignments. Disruption of current supply chains would lead to price volatility and market uncertainty for all involved. We have therefore asked negotiators to agree quickly on a suitable transitional period, ensuring legal predictability and allowing all parts of the supply chain to adjust to whatever new trading arrangements are finally agreed. The long-standing saga of Brexit took a new turn recently. The UK will shortly present to other EU Member States and EU negotiator Michel Barnier their new idea as the future relationship. This will propose the UK essentially staying in the customs union and Single Market for goods, but not services, creating a “UK-EU free trade area”. We will need to see on whether the UK proposals will be acceptable to the EU27, whose priority is to preserve the integrity of the Single Market.
By Alena Mastantuono