Should Whole Foods, like Google, get out of China?

March 26th, 2010

The Energy Collective
by Marc Gunther

Google is exiting China for a number of reasons, including the hacking of its data, but fundamentally, Google found that it couldn’t live up to its values of openness in a repressive society. Whole Foods Market has a different China problem: The company imports lots of organic food from China, but it’s hard to know whether the state run system of agriculture and organic inspections can be trusted.

The “natural and organic” supermarket chain has been generating unwanted attention for the foods that it sources from China for at least a couple of years. The most recent bit of news is a Florida lawsuit that adds an incendiary charge–that one of Whole Foods’ big suppliers relies on forced labor. This is only an allegation, and the evidence is skimpy, to say the least, but it’s another reason that branded companies like Whole Foods had better fully understand their supply chains, wherever they may lead.

In fact, all companies would do well to think about traceability–the idea that they should know the origins of the commodities they use. Without traceability, companies can’t be serious about sustainability. Patagonia, Tiffany & Co., Wal-Mart and many others are learning the value of transparent supply chains.

Sometimes companies learn the hard way. Last week, Nestle and its Kit Kat bars came under sustained attack from Greenpeace, which charged that the global food giant “uses palm oil from companies that are trashing Indonesian rainforests, threatening the livelihoods of local people and pushing orangutans towards extinction.” This set off a major brouhaha–Nestle asked YouTube to take down a video from Greenpeace (which, of course, brought more attention), then told critics on its Facebook page not to mess around with its logo, then printed a response on its website that raised as many questions as it answers. Like most controversies, this one is complex but it appears that Nestle was doing business and still may be with a palm oil producer called Sinar Mas which is accused of leveling Indonesian rainforests to make way for palm oil plantations.

Back to Whole Foods: The Florida lawsuit, which hasn’t gotten much press, was filed in a state court by a group called Southeast Consumer Alliance that lawyer Bruce Baldwin told me was formed, in part, to hold companies accountable through lawsuits. The suit, which is seeking class-action status, alleges that Whole Foods violated Florida’s deceptive and unfair trade practices act by labeling as “organic” foods from China that were “the product of a venture using forced labor” and “were not properly certified under the National Organic Program (NOP).” The source for the forced labor allegation is a website run by the Falun Gong, a dissident group that opposes the Chinese government.

The allegation that foods imported from China don’t meet organic standards deserves to be taken more seriously. It’s not new: In 2008, Roberta Baskin, a reporter with an ABC-TV station in Washington ran a story questioning China’s organic standards (available here) in which she pointed out, among other things, that 365 Brand frozen “California style” vegetables are imported from China. It includes this exchange between Baskin and Linda Greer, a scientist at the Natural Resources Defense Council:

Linda Greer: “I wouldn’t buy something organic from China with the idea that it’s truly organic.”
Baskin: “Why not?”
Greer: “The reason is we’ve had such a difficult time tracking things.”

The issue isn’t hypothetical. The TV station tested powdered ginger that was sold as organic at Whole Foods and found it contained a pesticide called Aldicarb. The company pulled the ginger off its shelves, as did others who imported the ginger.

Since then, a nonprofit that works with Whole Foods called the Organic Crop Improvement Association International has acknowledged problems with organic certification in China. The OCIA, which calls itself “one of the world’s oldest, largest and most trusted leaders in the organic certification industry,” recently published a column by its president, Jim Robbins, who wrote:

Our operations in China continue to be troubled. One of our accreditors believes that our strategic partner in China (OFDC) has irresolvable conflicts of interest, since both OFCD and many of the farms we certify in China are both owned by the Chinese state. After wrestling with this issue for several years, the board of OCIA has decided to withdraw from China as rapidly as we can, while inconveniencing our Chinese associates as little as we can.

Whole Foods has defended organics from China, including in this long 2008 blogpost. Interestingly, it cites as a source the OCIA–the group now pulling out of China.

Here, too, is a detailed response from Whole Foods to the WJLA story, in which, Joe Dickson, the company’s organics expert, says: “Organic products from China can absolutely be certified organic to the same standard as domestic products.”

And in an email to me, Jay W. Connolly, a lawyer with Seyfarth Shaw in San Francisco, who represents Whole Foods, says the company “denies the allegations in the lawsuit, both as to the organic certification and ‘forced labor’ claims.”

The bigger question is why Whole Food–which has a significant and laudable commitment to local growers, including a $10-million loan program–needs to import food from China at all? Particularly for its frozen vegetables–couldn’t it just as easily freeze local produce? Is this a sound, sustainable practice?

I don’t know the answers to those questions. It would take a sophisticated life-cycle analysis to understand the full impact of growing organics in China and sending them here.

In an effort to answer questions like that, Wal-Mart and its academic partners last year formed the Sustainability Consortium, which intends to use scientific tools to measure the social and environmental impact of consumer goods. Grocery industry members include Safeway, General Mills and Kellogg, but not Whole Foods. Not yet, anyway.

P.S. Bruce Baldwin, the lawyer who brought the suit, sent me correspondence from Whole Foods in which the company says it won’t release the names of Chinese suppliers unless he agrees to keep them confidential. (He won’t.) This lack of transparency won’t help Whole Foods’ cause in the court of public opinion.

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