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Big business goes green

Updated Wednesday, 27th June 2007

As part of 'How Green Is Your High Street', The Money Programme team filmed interviews with several high-profile business leaders. Here we provide extended versions of two of those interviews, along with expert insight from Open University lecturer Anja Schaefer.

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In principle there’s nothing new in the idea of a ‘green revolution’ in marketing. For the last 20 or 30 years there’s been lots of talk on (and many books written about) the way in which green consumer demand would make manufacturers and retailers become greener in turn.

Sir Terry Leahy, Chief Executive, talks about Tesco's plans to help the environment:




There’s a moral imperative to do something about it, but also it makes commercial sense as well because previously people would have said well the choice is be green or grow. I think now it’s clear that you can be green and grow. I think if you look into the future you may have to be green in order to grow, so I think that businesses are now looking at major changes in their whole business model to ensure that they operate in a sustainable way.

The whole world has to reduce its carbon emissions very considerably. The developing countries like China and India, they’re not going to stop developing so the developed countries have to make very big cuts in their emissions to set an example for China and India so that they develop their economies more on a low carbon basis than we did. So Tesco is a big part of the economy so we’re going to have to do our bit, do more than our bit and provide a lead.

We have made commitment to use electricity from renewable sources and indeed... but we put the first target in which says we’re going to reduce absolutely the amount of electricity we consume, and also we’re going to create some of our own energy, and only then will we use the electricity that we have to use from renewable sources. So they’re all part of the target... it’s happening right now, we have committed and do consume our electricity, a large part of it, from renewable sources.

It’s extremely difficult to put the carbon content on every product, and we’ve said we would begin the search, it would be a worldwide search for the academic knowledge in order to be able to do that. But we are making very good progress. We’ve got collaboration from all around the world, from all parts of industry, and there are lots of supporters of the movement, and actually there’s very good knowledge in terms of how you would approach it. So I’m encouraged now, now six months on, that we will make very solid progress. But it will be a huge undertaking but a very necessary one. And in the same way as industry had to structure itself over many years to be able to cost products in detail so people knew the price of a product, and in the same way as they’ve had to do all of the analysis of the product so people know the nutritional content and that can be labelled, we’re going to have to get the same skills in place in order to be able to do the carbon contents so that people can make choices around their consumption, informed by the carbon content of the products they’re consuming.

A 25% reduction in packaging is an enormous amount because remember you can’t just do away with packaging. It plays a very important role in keeping food safe and fresh, and actually, by the way, carrying a lot of the information about nutritional contents and price and sourcing that people want to see on their products. So that’s a big increase, but of course it’s not the only target. We’re putting in improved recycling centres at the front of our stores so that it’s much easier for customers to bring back their package and recycle it and that will result in something like a 200 or 300 percent increase in customer recycling which is more than 100,000 tons extra.

We’re going to have reduced by a billion bags – that’s a lot of bags – in a single year. That’s tremendous progress. Now the way we’ve done that, is actually we’ve incentivised people. So we give them a green club card point every time they avoid taking a new bag, and so we’re not using the stick of charging, we’re using the carrot of rewarding people. Now five million people have earned those club card points. The important point there for me is that every time they make that decision, they make that decision consciously, willingly about the environment, and that’s very important.

Organics might be approaching 5% of our sales but it grew 40% in the last year. So it is important and it does again reflect the trend amongst consumers to know more about the provenance of foods and to buy more natural, less processed foods.

We have set out huge daunting targets for Tesco in terms of changing the amount of energy that we consume and how we operate as a business these commitments we’ve made in order to be able to label all of our products with the carbon content. These are huge, huge changes.

The most important contribution though we can make is in relation to our customers, and if we can engage with them and encourage them by providing information, opportunity, and incentive to change the way they consume, that’s the big contribution that Tesco can make.

Terry Leahy makes the strategic argument for corporate 'greening' when he says that "in the future you may have to be green to grow". But green demand has been overestimated in the past and a real green retail revolution will have to reach the breadth of the market, not just an ethical consumer segment that is willing to pay high premiums for organic or green products.

Stuart Rose is Chief Executive of Marks & Spencer. Here he talks about Marks & Spencer's five-year environmental plan :




It wasn't in a Damascene moment, but it was close to it. That I did actually--I was going to say read Al Gore's book. It's not so much a read as a picture book. But I did it last summer. And I went away and I thought to myself, 'Blimey, this is quite interesting.' And I then looked at the film, which is quite a lengthy film. I don't know if you've seen it. And I showed it to the top hundred staff in this business. The top hundred staff in this business drove this process.They actually all e-mailed me or came into my office the following day and said, "Stuart, that's really frightened me."

Now the real issue is you have to be a serious flat-earthist in 2007 to believe that something is not going on. And even if something isn't going on, by the time we find out that it is, I'll be dead. But our children will have to, you know, reap the whirlwind. So I can't--I don't believe we can't do anything. I mean you have to be seriously stupid not to see that we have added enough pollution into the atmosphere to have some effect on climate.

We had another plan last year, which was 'Look Behind the Label' where we tried to show customers a little bit about what happened, uh, in terms of how their products are manufactured, where they come from. Are they ethically produced, etc.? And we launched a little campaign called 'Look Behind the Label'. The feedback from that was fantastic, and most of it said, 'That's great. Please tell us more.'

So that was the genesis of January's launch of Plan A, where we said, “Look, we believe it's the right thing to do. We're not going to have a Mickey Mouse plan which is going to deliver one, two, three things. We're going to have a plan over five years doing a hundred things. And by the time we finish that five years, A, we will have done it. And secondly, we will have transformed in which M&S works”.

About 80 percent of all the food that we sell is from Europe. And interestingly enough, only about four percent of the food that we're selling in the food division comes in by air.

So it's a very, very small quantity. But I accept that it is an issue. We have to deal with it.

At the moment, for instance, we've said it in a slightly different context that we have labelled up now on packaging every product that has been flown in. It's quite clearly labelled. So you as a customer have got the right to go in and say, 'Do I in my conscience clearly buy these beans that have been flown in from Kenya?' or do I say, 'No, I'm going to eat something locally grown'? That's your choice, but we'll give you the choice.

If everybody believes that they should reduce emissions, and we all do our little bit, then it will make a difference I believe.

Now interestingly enough since we started the process, we have actually converted all our Scottish stores; we've converted our head offices; and we've converted all our Simply Food stores in a period of three months to green energy.

The real proof in the pudding is that we have got a hundred point plan. It does exist. It will be audited. I will have to report to you twice a year on our progress against that plan. And that's quite a big challenge. No one else in the UK has set out such a ground breaking plan, and I think if you go and speak to any of the NGOs, they will tell you that this is ground breaking.

There's an element of risk in what I do, but I think that it's the right thing to do. And therefore we have said that we're prepared to in invest maybe up to 200 million pounds over a five year period. And if I don't generate as a result of that better customer goodwill, and therefore more business, effectively I'll be 200 million pounds shorter off than I was today.

That's a risk as a businessman I'm prepared to take. I think it's the right thing. The interesting thing is that when we articulated those sorts of plans to the investor base, there wasn't even a murmur of dissent, where if you'd gone back five years ago and said that you were going to do that, there would have been uproar. So I think it is absolute sea change in what investors expect you to do to invest and run your business over a long time scale.

We are now benchmarking ourselves against what we said we will do. And we're auditing it and saying, "Well, we said we'd do this, how are we getting on?" But I believe one other thing that if you say you're going to do something, even if you set a flag which is so far apart that you might fail on one or two things, you're more likely to get there than if you don't set a flag, because you'll go nowhere.

So we've set very tough targets for ourselves, but I think we can do it. But let's take some examples. You know we said that we would get into fair trade cotton. We will be using a third of the world's production of fair trade cotton by the end of this year. That was from nothing last year.

We said that we will reduce the amount of packaging we're using in foods. And we use a lot, as do other, ah, retailers for good purpose. And we have already made huge headway in reducing it. We've said that we will send nothing to - to landfill. That will mean reducing 38,000 tons of landfill in five years. Now bit by bit, we're doing things.

Real greening of the high street would need to go right across the entire operation of a retailer. Concrete and extensive targets set across an entire operation, such as those promised by Stuart Rose for M&S therefore seem a good thing. It’ll be interesting to see whether M&S achieve these targets and how they report on them.

Global climate change is the most talked about environmental issue at the moment and carbon neutrality is surely one of the big targets for companies to aim for. The big questions are whether there is actually enough renewable energy, to go round if every business is aiming to meet its electricity needs this way, and whether offsetting is a viable long term alternative.

Perhaps really sustainable marketing and consumption would mean that we have to consume less overall, including energy. Problems of over-consumption may not be solvable by yet more consumption, albeit of a slightly greener variety.





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