Tesco and Marks & Spencer are driving the sustainability agenda, setting unprecedented responsible business standards with budgets of £500m and £200m. But what are the economics of such sustainability drives?
If we had written two years ago that Tesco would be labelling its products with carbon footprints, or that Marks & Spencer would aim to be carbon neutral by 2012, we would probably have been dismissed as fantasists. But here we are, and it’s difficult not to get carried away with these astonishing developments.
This ‘mainstreaming’ of responsible business practice is to be applauded. Both Tesco and M&S are setting higher standards than any government would dare impose on them: M&S has promised to become carbon neutral, to cease sending waste to landfill and to stop stocking any fish, wood or paper that is not from sustainable sources. (And notably both companies are setting higher standards than government is setting for itself).
But care is needed when looking at some of the claims. What does it mean that Tesco is spending £500m on cutting its overall energy use? In fact, improvements in eco-efficiency we’ve seen over the last decade were largely paid for by lower energy, water and waste disposal bills, for example. Is Tesco really saying it is transferring a whopping £500m from shareholders in the form of lower profits, because it is the right thing to do? Or are these notional investment figures, which will pay back and more over time. Or maybe suppliers will be expected to pay – as Wal-Mart suppliers have been finding – or expected to achieve sustainability goals and take back secondary packaging waste, with no let up on relentless downward pressure on prices consumers expect. (As Briefing goes to press the UK Competition Commission has announced it will be investigating further the supermarket-supplier relationship here after publishing the preliminary findings of its inquiry into the industry). As often the devil is not just in the detail, it’s in the economics too.
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Tesco’s green initiative
Tesco said it will spend £500m in the next five years to cut its overall energy use. In a plan unveiled by Sir Terry Leahy, chief executive, on January 18, the UK’s largest retailer pledged to:
Label products with their carbon footprint, similar to nutrition labels
Donate £5m annually to fund academic research into environmentally friendly consumption – developing a Sustainable Consumption Institute in partnership with the Environmental Change Institute at Oxford University
Work with suppliers to reduce its “indirect carbon footprint”
Halve the price of energy efficient light bulbs
Offer more energy-efficient products throughout its range
Work with the Energy Savings Trust to develop stronger energy efficiency labelling for all electrical products
Reward customers who buy organic, Fairtrade and energy-efficient products with a Green Clubcard
Launch a Kids Carbon Calculator with Defra and the Royal Society of Arts, which will show children how making “simple everyday choices” can “make a big difference”
Double the amount of biofuels sold in the next twelve months
Restrict air-freighting to 1% of their products. All air-freighted products will also be labelled with an aeroplane symbol
The company added that it would further set an example by halving the energy used between 2000 and 2010 by 2008 – two years early – and that plans to reduce emissions will be deployed globally, not just in the UK. It will publish its carbon footprint on its website and all new stores built up to 2020 will emit 50% less carbon than currently existing stores. However, the emissions of existing stores will also be reduced by 50% by 2020. Distribution vehicles will run on a 50% biodiesel blend and the company is also training environmental engineers, maintenance technicians and energy champions. The business already has a £100m Sustainable Technology Fund, which invests in the development of low-carbon technologies such as wind turbines, gasification, and straw-fired biomass combustion. Contact Tesco 01992 632 222 www.tescocorporate.com
Marks & Spencer ‘Eco Plan’
Marks & Spencer announced the implementation of an “Eco Plan” on January 15. The business model – called Plan A – will impact on every area of the retailer’s business over the next 5 years and will cost £200m.
The 100-point plan focuses on five areas – climate change, waste, raw materials, ethical trading and healthy eating. It means that by 2012 M&S will:
Be carbon neutral
Send no waste to landfill, which will mean reducing packaging and carrier bag use as well as finding innovative ways in which to recycle and reuse the materials
Ensure that raw materials come from the most sustainable source possible
Set up ethical trading partnerships with suppliers and local communities
Help customers and employees live healthy lifestyles by removing artificial colours and flavours as well as unnecessary preservatives from all freshly prepared food and by introducing the traffic light as well as guideline daily amount (GDA) product labeling schemes
Stuart Rose, chief executive of M&S, said that the company plans to engage suppliers, partners and government to make this happen. The directors of Forum for the Future, Greenpeace UK, Friends of the Earth and WWF-UK hope that the move made by Marks & Spencer will encourage other retailers and businesses to take similar action. Contact Marks & Spencer 020 7935 4422 www.marksandspencer.com
Food companies’ sustainability commitments
Food companies such as McDonalds, Britvic, Dairy Crest,Soil Association and Duchy Originals have taken significant steps forward in putting sustainability at the heart of their operations, Forum for the Future said in December. At an event held in November – A sustainable food industry: Why, how and what next – hosted by the UK-based sustainable development charity and the Campden and Chorleywood Food Research Association, over 70 delegates from across the industry learnt about what sustainable development means for the food industry and their organisations.
The event focused on identifying practical actions required to help create a more successful and sustainable food industry. These actions were developed at three different levels, organisation, industry and government. Some of the potentially more influential ideas included:
looking for innovative on-site provision and re-use solutions for water, waste and energy
examining how ethical qualities add value to products from a consumer perspective
increasing industry collaboration on specific sustainability issues and through resource efficiency networks, and
government providing incentives for capital investment for initiatives beyond those with 1-2 year paybacks.
A report capturing all of the actions developed and the key learning points and questions raised can be downloaded from the Forum’s website. Contact Tom Berry 020 7324 3639 www.forumforthefuture.org.uk
Global 100 most sustainable companies
A list of the top 100 most sustainable companies was published on January 19 by Innovest and Corporate Knights. The Global 100 analyses the non-financial factors driving shareholder value and risk – such as environmental, social and governance issues. Launched in 2005 and unveiled annually at the World Economic Forum in Davos, it analyses 1,800 companies on governance, human capital and environment criteria. Companies included in the alphabetical list of the top 100 are Unilever, Shell, Danone, Lafarge, Centrica, BA, Marks & Spencer, Sainsbury, HSBC and Diageo.
Innovest notes that “social, environmental and governance factors are increasingly relevant to financial performance, and that companies which show superior management of these issues are fast gaining an edge over their competitors”. Global 100 companies are “sustainable in the sense that they have displayed a better ability than most of their industry peers to identify and effectively manage material environmental, social and governance factors impacting the opportunity and risk sides of their business”.
The list is alphabetical as the authors “do not believe that it is particularly insightful, or even methodologically possible, to give companies absolute sustainability ratings, as different industries face vastly different sets of social and environmental dynamics”. They explain that comparing an oil and gas company to a food retailer is like “comparing apples and oranges”. “Companies on the Global 100 list are thus category leaders in terms of ESG risk and opportunity management for each of Innovest’s 71 categories”. Contact Susan Aagenes Global 100 Most Sustainable Corporations in the World 020 7073 0477 www.global100.org
Getting down to business
Unilever’s ice cream subsidiary Ben & Jerry’s has come top in the fourth GolinHarris Corporate Citizenship Index. The survey – Corporate Citizenship Gets Down to Business: Doing Well by Doing Good 2006 – rated 152 brands and interviewed 5,000 Americans. Ben & Jerry’s was followed by clothing companies Target and Patagonia and medical equipment maker SC Johnson in second and third places respectively.
While respondents believe companies are embracing corporate citizenship as a business asset, business needs to invest more money, time and attention, as 68% of those interviewed believe that corporate citizenship should be considered an “essential, high priority”. The survey also showed that communicating corporate citizenship is essential and that the work done should be authentic. Corporate citizenship should also not be “checkbook philanthropy” but must be aligned with the business goals and mainstream activities. Contact GolinHarris 00 1 312 729 4000 www.golinharris.com
Small is beautiful
In the areas of community/environmental performance and supplier management, small companies significantly outscore their larger rivals, according to a new report from GoodCorporation. The difference is also marked in terms of customer performance and employee performance.
“The relative strength of small companies we believe derives from their commitment and ability to respond quickly to stakeholder needs. They are also small enough to be flexible and give personalised attention to employee or customer problems,” GoodCorporation said.
The report was released as GoodCorporation reaches its fifth birthday and its two-hundreth assessment. To study is a result of a detailed analysis of its on-site assessment data.
Since its launch on July 3, 2001, GoodCorporation has conducted 200 assessments of 90 organisations against the GoodCorporation Standard, which consists of 62 specific responsible business practices covering five stakeholder areas: employees, customers, suppliers, shareholders, and communities including environmental impact management. Contact Lisa Buchan GoodCorporation 020 7924 3994 www.goodcorporation.com
UN and business
“The United Nations and business need each other.” That was Secretary General Ban Ki-moon’s message when he made his first speech outside the UN as secretary general. Speaking at an event hosted by the UNA-USA Business Council for the United Nations and the Association for a Better New York, the secretary general stated that the UN must engage with companies more in order to bring “peace and prosperity” to the world. He deemed the Global Compact as central to the UN’s engagement with the private sector and that the UN and business share common goals of “building and supporting strong economies and communities, providing opportunities for people to pursue a livelihood”. The UN Global Compact is an international initiative that brings together companies, UN agencies and civil society to support environmental and social principles. Contact Global Compact www.unglobalcompact.org
Sustainable aviation
Virgin Atlantic has become the first airline to be a corporate partner of Forum for the Future. The organisations will work together to further integrate sustainability into Virgin Atlantic’s business strategy and activities. The partnership follows the company’s announcement that it will pressure the aviation industry to cut carbon emissions through projects to develop more efficient methods of descent before landing and more co-ordination between air-traffic control authorities. The partners hope that the collaboration will pave the way for a sustainable future for aviation. Contact Forum for the Future 020 7324 3639 www.forumforthefurture.org.uk
Fortune magazine ranking
Vodafone has topped Fortune Magazine’s league of most accountable companies, followed by UK oil companies BP and Royal Dutch Shell, and French utilities EDF and Suez. Volkswagen was the most improved company, jumping to 19th place from 59.
The survey is based on corporate governance practices and ranks the world’s largest companies according to how well they conform to socially responsible business practices. It also suggests that European companies perform better than companies in the US and Asia. Eleven of the top companies have their headquarters in Europe. Contact Fortune Magazinewww.fortune.com; World Business Council for Sustainable Development 00 41 22 839 3100 www.wbcsd.org
Covalence ethical ranking 2006
Covalence published its Ethical Ranking 2006 on January 2, with Unilever performing top across all sectors, closely followed by Coca-Cola. HSBC was named the best bank and was ranked 6th across all sectors. The ranking analyses 20 multinational companies in ten of the major industries such as oil and gas, automobiles and entertainment and leisure. It looks at the Best Ethical Quote Score (positive minus negative news cumulated from 2002 to 2006), Best Ethical Progress (positive minus negative news cumulated from January to December 2006) and Best Reported Performance (positive news only, cumulated from 2002 to 2006). Contact Covalence 0041 22 800 0855 www.covalence.ch
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