Free computers for farmers? Clothing made from 100% Fairtrade cotton? Quick supplier payments?

It's a far-cry from the accusations of bully-boy tactics levelled at supermarkets in the Competition Commission inquiry. In fact, it doesn't sound like the ultra-competitive British retail sector at all.

But that hasn't stopped the retailers from taking these bold steps towards more ethical sourcing and supplier relationships - an attempt to quell the notion that they are the root of many of the industry's problems.

Back in November Sainsbury's announced an electronic trading platform would become mandatory for all suppliers. Lost in the financial jargon was the early payment option, allowing suppliers to sell their credit to Morgan Stanley. It is not a free system, but because it is linked to the Sainsbury's credit rating, it is not cripplingly expensive either. For instance, if Sainsbury's is due to pay a supplier £1,000 on the normal 45-day payment terms, Morgan Stanley will pay £997 to the supplier after only five days to take on the credit.

"It's cheap credit and people will use it to get short-time finance," says Sainsbury's trading director Mike Coupe. "Half of large and small suppliers have said they may want to take advantage of it."

But it's more than just cheap credit. Coupe says it's as much about securing suppliers' goodwill as encouraging shoppers with a social conscience to spend money in his stores. "This represented an opportunity to offer our suppliers something they can't get anywhere else," he adds.

Other moves include the announcement by chief executive Justin King that 500 Sainsbury's beef farmers would receive free computers and training to use them. Sainsbury's isn't alone in attempting to improve its relationship with its key suppliers. "Asda is planning to launch longer contracts for many of its producers, adding stability to the market," says Chris Brown, head of ethical sourcing. "We're also celebrating our third year of dedication to a group of dairy farmers, who receive 1ppl premium for their milk."

Fairtrade has become another major focus of the retailers. Sainsbury's has switched to 100% Fairtrade bananas without raising retail prices, adding up to about £4m in extra payments to growers, and Marks & Spencer this week announced that it would be converting its key clothing ranges to 100% Fairtrade cotton, some 12 million garments. The introduction of Fairtrade bananas, jam and bagged sugar is also on its agenda.

"We're seeing an attempt to decommoditise the price by turning to the Fairtrade banner," says Tim Kershaw, chief executive of supply chain consultancy, Libra Europe. "Sainsbury's has decided to differentiate itself from Tesco by taking an ethical trading stance."

Sainsbury's actions have gone down well in the City - its share price has risen more than a third in 12 months - and among analysts. "Ethics and the environment have moved up the political and consumer agendas. Sainsbury's is keen to be seen as positive in this arena," says Alastair Lockhart at Verdict Research.

Jonathan Pritchard at Oriel Securities, adds: "Some may say ethics are the preserve of the rich - if so, Sainsbury's has the edge with a more upmarket client base than its big three competitors."

With Tesco hoping to roll out regional buying offices in the UK this year to help it source locally, and Marks & Spencer's ethical standpoint hitting the headlines, Sainsbury's edge could be short lived. The real winners could well be the suppliers. n