Tesco chief: 'We must go green'

Acting now to cut emissions makes perfect business sense, argues Sir Terry Leahy
Sir Terry Leahy
The Guardian,
Wednesday September 3 2008

All too often, politicians and businessmen have said to me: "You're a businessman, so surely you're opposed to the green agenda?" They think: "You cannot make a profit and go green." They think: "A consumer society cannot be a green society." And they believe that developing economies cannot afford to go green.
From my perspective, this is all muddled thinking. I fundamentally disagree, and say that if we want long-term growth, we must go green.
Why? Because only by acting now on cutting emissions will we save money in the future. For every £1 we spend now on tackling climate change, we are saving our children anywhere between £5 and £20 at today's value. Failure to act means risking economic and social disruption on the scale of the great wars and economic depression of the last century.
The means to tackle climate change does not just lie in the hands of politicians or regulators, the UN or the G8. If climate change is to be tackled successfully, we need a new framework in which governments, business and consumers each play their part.
This is not simply about dividing up responsibility between these groups, as though government is responsible for this, or business for that. I am not advocating a diminished role for government. The role of government in tackling climate change is vital. But it must be fulfilled in ways that meet the needs of our time.
Politicians are good at emphasising climate change as the greatest threat of the 21st century, but too often they fail to adapt to this new challenge 20th-century the tools of tax and regulation designed for high-carbon economies. If we are to move to a low-carbon economy, policies - such as tax and planning - must reward low-carbon activities and investment. And too often governments fail to harness the 21st-century power of consumers, incentives and markets, and bring these to bear on tackling climate change too.
You may be thinking: "Consumers - aren't they part of the problem, not the solution?" I see things differently. Consumers account directly and indirectly for 60% of carbon emissions. Get the consumer on side and the task of tackling climate change becomes possible.
Lifetime customer loyalty
I trust and listen to consumers. I believe in the power of consumers. Tesco's core purpose is to create value for customers to earn their lifetime loyalty. Customers tell us that they want to go green and do their bit to protect the environment. The challenge for us retailers is to help them do that.
Tesco is a global company: each week, over 30 million people shop in our stores around the world. To serve them, we employ 400,000 people. Then there are the countless people who work in firms and businesses, supplying our stores. Imagine if all those people acted to cut carbon emissions in all they did. This would be true collective action. The supply chain, and gradually the economy as a whole, would begin to turn green.
Business also has a crucial leadership role to play in empowering consumers, by overcoming barriers of price, incentivising customers to buy greener products, providing better information and innovating through new products and services.
If consumers are able to purchase lower-carbon products and services, they will reward the businesses that produce these products. This will encourage competition between businesses to produce more environmental alternatives to current products and services. It will stimulate the research and development to bring forward even better products. And we will begin to create a mass movement in green consumption.
So our strategy at Tesco falls into three parts. First, greening Tesco itself. Second, helping turn the supply chain green. And third, helping our customers by making green choices easier and more affordable.
To turn Tesco green and reduce our carbon footprint, we need to know which actions emit greenhouse gases and which don't. So we have measured our carbon footprint, which was 4.47m tonnes of CO2 equivalent for the entire Tesco Group in 2007. To cut this, we have set the entire group some clear targets, with 2006 as our baseline.
For example, we aim to halve emissions from our group's stores and distribution centres by 2020. To halve the carbon emissions from all new stores we build between now and 2020. To halve, by 2012, the amount of CO2 used in our distribution network to deliver a case of goods.
To achieve these goals, we've changed every aspect of how Tesco operates. We are saving energy in our stores - [by] hanging curtains on freezer doors, for example, and using better insulation, low-energy lighting and new refrigeration systems. In South Korea and Thailand, we are using ice thermal storage, and creating biogas from recycled waste. In China, we are installing energy management systems on the refrigeration in all of our existing stores this year, which will reduce the power consumption of these systems by 15%. Next year, we will expand this to include the air-conditioning.
We are reducing the number of empty trips our vans make by ensuring our vans - and our suppliers' vans - are fully loaded, and, in the UK, using our own train and canals to transport goods.
We are saving water. Next year, our Chinese business will begin rainwater harvesting and using grey water [non-industrial waste water] for things such as car washing and toilets. We're using energy-saving technology when we build new projects. In California, our distribution centre has one of the largest solar panel roofs in the US. We've set up a £100m sustainable technology fund to support low-carbon technologies such as wind, solar and ground source heat.
In Thailand, we aim to plant 9m trees by 2012: this alone will help reduce CO2 in the atmosphere by 9m tonnes over 40 years. And in the UK, we have invested £25m in the new Sustainable Consumption Institute, to research how we make the transition to a low-carbon economy, and the role that sustainable consumption can play in this. This will aim to contribute to the development of an internationally recognised carbon footprint methodology, and help us understand how customers read labels and respond to them. All the SCI's research will be released on an open source basis - published as soon as it becomes available, and accessible to all as soon as it is published. It will be led by Mohan Munasinghe, a leading scientist and economist, and vice-chair of the Intergovernmental Panel on Climate Change.
By the end of this year, our UK energy use per square foot will be half what it was in 2000. Last year, our group carbon intensity per square foot of sales space fell by 4.7%.
We are achieving this while Tesco grows. That's the critical point: the choice is not "green or grow". That is a false choice. You can do both - and you must do both. Reducing emissions does not merely fight climate change, it also cuts costs.
But a green Tesco is only one-third of our ambition. Just as important is greening the supply chain everywhere. In some ways, this is easier to achieve in the developing world. Old practices do not have to be changed. Instead, we can simply apply what we have learned elsewhere.
Just as some countries could leapfrog the laying of telephone lines and go straight to the mobile, digital age, there is no reason why, when we set up in developing countries, we cannot create new, green supply lines from scratch.
Meanwhile, we're developing a label that will tell customers the size of a product's carbon footprint. Armed with that information, they can begin to choose products with smaller footprints. This information revolution is beginning to gather pace worldwide.
Bumpy patch
People's values do not change simply because the economy is going through a bumpy patch. What does change is their ability to live up to those values. If the budget for the weekly shop becomes tighter, we need to be sure that going green is not seen as an expensive optional extra.
Take energy-saving lightbulbs. They don't just cut carbon but also cut fuel bills. So in the UK we have permanently halved their price. We've sold over 10m in the UK in just over a year, up from 2m the year before.
Or carrier bags. In the UK, in just two years, we have saved almost 2bn bags. In Poland, by providing a greater range of reusable bags, we have saved 400m.
If retailers help customers, customers will go green. The green agenda is not something that consumers only care about in the US and Europe. It is absurd to think that people in Bangkok, Seoul or Tokyo don't want a healthy and clean environment just as much as people in Budapest, Warsaw or Los Angeles.
Billions of purchases send a signal to cut carbon right down the supply chain and right through the economy. Each time a product is swiped through a checkout, that sale can reduce CO2 emissions. Each consumer who buys a green product is joining the mass movement in green consumption.
That movement is what we are seeking to create. A mass movement in green consumption - a movement that shows it is possible to consume, to be green, and to grow.
· Sir Terry Leahy is chief executive of Tesco. This is an edited extract of a speech he gave to the Coca-Cola Retail Research Council Global Forum, in Beijing, on August 22.