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Aligning Sustainability and Growth - Tony Keohane's IMI address
Date: Thursday, 3rd April 2008
Address by Mr. Tony Keohane, Chief Executive, Tesco Ireland to the Irish Management Institute Annual Conference, 3rd April 2008
Good afternoon.
I am going to talk about environmental sustainability and in particular our approach at Tesco to this challenge.
Padraig McManus earlier gave us a very insightful view of the climate change challenge.
I propose to add to his analysis by dealing with it from a business strategy perspective and the critical role of business in engaging consumers in the process.
This is because the issue of global warming is rapidly becoming a key driver of business strategy in general and retailing in particular.
Sustainability is a major issue for every Company and we in Tesco have actively embraced the concept as part of our management toolkit.
It drives our behavior and corporate culture, and especially our response and interaction with customers.
Our Response to Global Warming
The science of climate change is a given: it is no longer a matter of 'if' but 'when' global warming will impact on our lives and those of our children.
Ireland is, regrettably, a major emitter of greenhouse gases and we will all be challenged to do something serious about it over the coming decade.
For example:
- Our need to reduce our carbon footprint by 10 million tonnes between now and 2020 will change our lives and the way we behave.
- We will need to increase the level of renewable energy ten fold within 15 years, and
- We will need to invest €25 billion or more in retrofitting our housing and building stock to meet EU energy efficiency standards.
And as we become more aware of the impacts of climate change on practically everything we do, significant behavioural change is called for.
We are already witnessing some of this at Tesco.
Nothing stands still in retail.
We have become a successful retailer by being open to change.
The battle for customers in the 21st century will increasingly be won by convincing them that we behave responsibly, fairly and honestly in all our actions.
As a result, our business is placing a much stronger focus on what matters to the environment and the economy that we operate in.
Put simply, our customers have told us that they are worried about climate change but are unsure how best to play their part in helping to tackle it.
But first, we must end the debate about achieving either economic growth or environmental sustainability. We can and must have both.
I believe the key to success is to turn the express wish of our consumers to "Go Green" into a mass movement of Green Consumerism.
By harnessing the buying power and awareness levels of consumers about the impact of global warming, we can drive change through the economy.
Business has a responsibility to give a lead through its own behaviour. At Tesco we have transformed our business model so that the reduction of our carbon footprint becomes a central driver of our business.
What we have done is:
- Restated our growth objectives to include our community and environmental intentions
- Included community and environmental dimensions in our annual business planning
- Adopted environmental KPIs across the business, and
- We are measuring and tracking all KPIs towards annual and long term targets on climate change.
These are the essential steps to integrating the climate change agenda and making it a reality for our staff and for customers.
We are working hard to break down the barriers that our customers are telling us are stopping them from going green. These include:
- the cost;
- can they realistically make any difference; and
- a lack of information about the right action to take.
Three words are key to making this work - information, opportunity and incentive.
Customers want to do more in the fight against climate change, but they want us to help and make it easier for them.
We have already done it with organic food and with food labeling - initiatives that have changed consumer behaviour as well as driving innovation through the industry. For example, sales of products high in salt or fat content are declining steadily, while those with low salt or fat content are growing.
With a combination of the right information and the buying power of millions of customers, we have the capacity to unlock the potential for green consumerism.
As a result, we will help drive demand for low-carbon products and stimulate other businesses to change so that they also use less carbon.
So, what practical steps will Tesco be taking?
In addition to measuring our own carbon footprint, we plan to quantify the carbon footprint of products we sell. This, in turn, will require our suppliers to do likewise. It will change how we and our suppliers design, develop and manage these products.
This is the next stage of our journey towards a clear, universal system of carbon labeling for the weekly shop.
What we learn from this project will be invaluable and will bring us a step closer to providing the type of information customers need to make informed greener choices. They will start using it, sending powerful signals throughout the supply chain.
However, we need to accept that there will be some hard choices.
Transporting a product by air creates far higher carbon emissions than any other form of transport. So we could say, 'let's scrap all imports by air'.
BUT, some of the poorest people on earth, in developing countries, can only get their goods to market by plane. Their livelihoods and their economies depend on our business. So should we just cut them off at the knee? Clearly the answer is "no".
But there are things we can do ourselves here at home to make a difference.
We are a big supporter of Irish farming and want to see local Irish produce reclaim its pre-eminence with consumers. We have been actively working with farmers in North Dublin to start regrowing certain products, displace imports, and extend their growing seasons. For example, Irish tomatoes, peppers and onions are now more common than imported ones.
Not only is this good economics but it contributes significantly to reducing our carbon footprint.
But it is not always that straightforward.
655 million euro worth of Irish food and drink products is exported annually to the Tesco businesses internationally, making Tesco a more significant market destination than the entire of France or Germany. However, this adds substantially to our carbon footprint involving sea, air and land transport.
This poses a dilemma: should we scale back those exports to reduce our carbon footprint?
The answer to that is also "no". These exports make a very considerable contribution to the Irish economy, and are a foundation of our relationship with the wider community here.
It does, however, throw up an interesting challenge of priorities, and obliges us to reduce our carbon footprint elsewhere in our operations.
So, getting back to the shop floor:
Ultimately, we would foresee simple labeling that shows a product's carbon footprint at a glance, enabling consumers to make informed choices and judgments for themselves.
Carbon therefore becomes consumer currency!
By making possible millions of small individual actions, we will help make a big difference and create a new belief that 'together we can reduce our collective carbon footprint'.
We in business have a responsibility to give a lead through our own actions.
We are doing this by measuring, publishing and reducing our own greenhouse gas emissions, and by stimulating the development of low-carbon technology.
The carbon footprint of the Tesco businesses across the world is now available on our website.
We have been proactively investing and trialing new technologies in our stores. This includes an extensive energy management programme with energy managers appointed locally in all our stores here. In addition to generating savings, they are changing our consciousness at the operational level about the many things we can all do to reduce our carbon footprint.
We have developed our use of Combined Heat and Power, saving 25% in energy costs. Our distribution depots have rolled out a bio diesel mix to our distribution fleet, and we've introduced double decker trucks to save road miles.
This year we will build our first completely energy-efficient store, which will be at Tramore, Co. Waterford. This project includes ecologically sound construction materials, new technology for heating and hot water, solar panels to generate electricity, new air recycling systems, and other features.
Combined, these will save 420 tonnes of carbon per annum, about a 30% reduction and reduce energy use by 45%. It's going to cost a little more but we believe it will be a useful experiment, and provide significant learnings for the future.
These innovations are part of our group environmental strategy which also includes 'eco stores' across the world in the UK, Central Europe, Asia and the US. Similar to Tramore.
Tesco group has also set up a "150 million euro Sustainable Technology Fund" to research low-carbon technologies globally and help them become commercially viable.
We are also looking further down the road and have been a frontline promoter of the Sustainable Consumption Institute at Manchester University.
Their research programme is extensive and far-reaching, as you can see in this SLIDE.
For example:
- How to motivate customers towards greener lifestyles'
- Investing in new sustainable technologies, and
- Pioneering new approaches to waste, recycling and packaging, which will help customers minimize what they throw away.
These findings will inform our sustainability strategy for the future and we intend to share these learnings with governments as important inputs to public policy on climate change, and the evolution of green consumption.
Conclusion
My main point here is that tackling global warming is a shared need of government, business and consumers.
Business has an essential leadership role to play. We have to change our business practices. We have to embrace and promote low-carbon technology, and we have to facilitate behavioural change by consumers.
I see great opportunity for business. Climate change may pose some threats, but, on balance, I see greater opportunities. We must rise to the challenge.
We can reconcile economic growth with environmental sustainability.
By giving people information, opportunity and incentive - and by trusting them to make wise decisions - we really could see a green revolution that will help reduce our collective carbon footprint.
We must however, ensure that any initiatives are implemented on a lowest cost basis, that manufacturers and suppliers provide competitively priced environmental products to ensure that neither the consumer nor the wider economy is disadvantaged in the process.
Business must embrace the climate change challenge in a proactive and positive way.
The sustainability of our businesses and indeed our planet depend on it, and future generations of consumers and shareholders will judge us on what we do now.
Ends
For further information or images, please contact:
Tesco Corporate Affairs on (01) 215 2661