Tesco has come a long way from Jack Cohen’s legendary retail philosophy ‘pile them high and sell them cheap’. Now the UK market leader, the company is expanding into goods for the home and garden, motoring and leisure, fashion and cosmetics. It runs the largest internet grocery operation in the world, has a personal finance business with nearly 1.5 million customers, and earns ten percent of sales from continental Europe and Asia.
Tesco is growing fast, today employing over 200,000 people including part-timers (up 60% over the last five years). It operates 659 stores in the UK and 110 stores in Ireland, central & east Europe, Thailand, South Korea and Taiwan. By 2002, almost half the sales area is expected to be outside the UK.
The company’s stated social responsibility goal is synonymous with its business goal to be “number one locally”: putting local people first in the way it runs its business, supports its communities and protects the environment – and so earning customers’ lifetime loyalty. This strategy of ‘following the customer’ is evident in everything from the causes it values to how the stores are laid out. It is clearly apparent in the thinking behind Tesco’s flagship project, Computers for Schools
Computers for Schools
Probably Britain’s best know cause-related marketing scheme, Computers for Schools started in 1992 and so far has donated £54.5 million worth of computer equipment to more than 20,000 schools across the UK. This year the scheme enlisted support from other brands – Pepsi, Tango, 7UP, Heinz, Dairylea and Kenco Rappor – allowing Tesco Clubcard holders to collect additional vouchers when buying those products.
But Computers for Schools is more than just cause-related marketing; it also provides employee involvement opportunities. For example, a check-out operator might agree to help raise the scheme’s profile by adopting a local primary school and encouraging support from local parents and media. Undertaken in company time, this feeds into the company’s human resources goals too, such as encouraging teamwork, and can be included in staff appraisal and assessments for career development.
From this core programme has developed a range of related educational activities. Tesco offers local teachers places on internal training courses, for example, and some 40 teachers have undertaken short-term secondments within the company. Store managers become schools governors. Tesco SchoolNet provides free curriculum resources and on-line support to teachers to encourage the use of IT in the classroom. This year, Tesco sponsored the Learning Zone at the Millennium Dome in Greenwich.
Indeed young people and education are two major themes in the community involvement policy, alongside people with disabilities, the elderly and regeneration. Tesco’s community contribution now totals £11.5 million a year. This covers some £6 million for Computers for Schools equipment (valued at cost, not market price), grants by the Tesco Charity Trust of over £500,000 in 1999 to local and national charities, matching donations to staff fundraising and contributions through local stores of both cash and community vouchers. Also included are the management costs of running the community programmes.
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Staff fundraising is particularly successful. Tesco chooses a national charity to support each year – Macmillan Cancer Relief is the charity for 2000, NCH Action for Children was chosen for 1999. The company adds a 20% top-up to all money raised; this year’s target is to raise £2 million. Local stores also support diverse activities – local fun days, children’s sports teams, theatre in education, road safety campaigns – and raise bigger sums by supporting appeals and selling charity badges in store. Staff and customers have raised over £5.8 million for the Variety Club of Great Britain Gold Heart Appeal over the past nine years, and over half a million for Great Ormond Street Hospitals Jeans for Genes Appeal.
Programme management
Overall responsibility for central programmes and co-ordination of local activities rests with Fiona Archer, who heads the recently renamed corporate social responsibility department, based at the head office at Cheshunt. The change has added the environment programme and sourcing issues to her portfolio, although not regeneration which remains with the team responsible for business development and new store opening. Her team comprises eight people – Fiona herself, three members of staff focusing on charities, Computers for Schools and sponsorship, and a new post of ethics, agriculture and the environment, plus four support staff. Fiona reports to the corporate affairs director, who in turn reports to the chief executive, Terry Leahy. The team works closely with the marketing department to deliver programmes such as Computers for Schools, and Tim Mason, the marketing director, chairs the Tesco Charity Trust and plays a leading role in promoting cause-related marketing within the UK as the chair of BITC’s leadership team.
Fiona’s role is to set the strategy and communicate it among all UK stores, and share best practices from across the company with Tesco’s overseas businesses, where there is a strong emphasis on adaptation to local issues and interests.
Business responsibility
Corporate citizenship, one should remember, means taking steps to address the potential negative impacts of a supermarket chain on its host community, as well as maximising the positive ones, like providing jobs and affordable fresh produce. And it is interesting to see how far the company has developed its response to these potential negatives, as well as making proactive community investments.
One issue, for example, is the danger of large supermarket chains using their sheer size and market dominance to force prices up – the UK government’s Competition Commission has been investigating the retail sector for the past 16 months, and reported to the DTI at the end of July. Although the commission found some evidence of monopolies in the food retail market, it apparently did not find evidence of excess profits and noted high levels of consumer satisfaction – so an endorsement of Tesco’s ‘follow the customer’ strategy.
Another potential impact involves the supply chain, particularly concerns about health, safety and related issues in the developing world. Tesco was a founder member of the Ethical Trading Initiative and has adopted its code of good practice about labour and other standards. It also recently joined with other major retailers to develop a new code of practice on local sourcing and transparency in pricing, presented to the Competition Commission in July.
Another long running issue of public concern is the impact on town centres and local shops of out-of-town hypermarkets on greenfield sites. Tesco now aims to build 85% of new stores on brownfield sites. Running in parallel is work to boost inner city regeneration, managed by the property area of the business which builds on Tesco’s policy of recruiting and training people from local communities, often with few formal qualifications.
One example is the Seacroft Partnership, centred on a run-down area in Leeds -Europe’s biggest housing estate, the Seacroft Centre. Tesco is building a major new flagship store as part of an estate demolition programme, in a partnership with the local council, a construction company, an educational organisation and others to achieve maximum scope for regenerating the area. The aim is not _just job-creation, but co-ordinated efforts to overcome factors that might hinder local people from taking up new opportunities. Around 500 job offers have been guaranteed up front for local unemployed people; the East Leeds Family Learning Centre is providing training, including interview techniques and presentation skills; included are better transport around the site for locals, childcare services _ continued on page 32_continued from page 30_ and an information office, open daily. The project was launched in July 1999 and the store is due to open in October.
Alongside regeneration, green issues are of growing public concern, and the company’s environmental programme includes:
• improving energy efficiency in store – up by almost 10% per square metre;
• recycling 180,000 tonnes of cardboard and 10,000 tonnes of plastic annually;
• saving 70,000 tonnes of packaging by using reusable trays;
• providing customer recycling facilities at 350 stores;
• cutting lorry miles by three million, to cut carbon dioxide emissions by 40%.
Measuring performance
One reason why Tesco has been successful in integrating CSR issues into the business is its approach to setting targets and monitoring progress. A balanced scorecard method is applied, including relevant key performance indicators embedded into the ‘operations’ measures. These include:
• fuel efficiency and electricity consumption in stores;
• reducing trade refuse to landfill;
• take up of Computers for Schools;
• building new stores on brownfield sites;
• developing policy on ethical trading;
• perceptions of community involvement and social responsibility;
• developing regeneration through partnerships.
Among the detailed measures, quarterly ‘image and attitude’ surveys include questions about social responsibility.
Looking ahead
Bringing the major social responsibility issues under one department and setting clear targets for the business should help make Fiona’s task easier. But looking forward as Tesco develops, the challenges for the CSR team are still formidable:
• continuing to develop Computers for Schools as it enters its tenth year – and finding the next ‘big idea’;
• addressing diversity issues, such as disability access and training staff;
• spreading the international practice of Tesco’s CSR, reflecting its profile as a global business, sharing experience from around the group;
• communicating Tesco’s strategy more widely, perhaps through some form of social report.
Fiona is particularly proud of how the Computers for Schools programmes (which she helped launch) has developed – the way it builds the company’s brand and its relations with customers, community and employees. In her view, though, there is no substitute for supportive leadership within a company – given the difficulty of measuring some of the benefits of CSR to the company as precisely as one would like, there are still times when you have to rely on a conviction from the top that this is the right way to go. That seems set to continue, as both profits and pressures from society continue to mount.
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