The green team

No man is an island. It is a concept that retailers are beginning to understand as they tackle the huge issues around sustainability.

Particularly in terms of energy, waste and water reduction, retailers have first addressed their direct operations. But it is clear from looking at five of the biggest names in retail corporate social responsibility that they believe their mandates go much wider, both downstream in their supply chains, and upstream into their customers’ homes.

To meet the ambitious targets they have set themselves on issues such as energy and fuel reductions, waste to landfill and sustainable sourcing, retailers are having to make significant changes to the way they do business.

Land Securities environmental director Dave Farebrother explains that this means retailers are thinking green in all of their relationships. Like all of the retailers interviewed, he feels that legislation will eventually force the issue.

Time to work together

Land Securities has already come up against this with its One New Change development in the City, where planning conditions required it to provide some central services from renewable sources. Where this is mandatory then retailers have to be prepared to share these renewable energy sources rather than work alone.

“More and more local authorities will make it mandatory - and so opportunities for retailers to do everything themselves will be diminished.”

He adds: “We all know commercial property has historically been confrontational. That attitude is outdated and we all want to reach a common goal. Working together has to be the way forward.”

All the retailers featured stressed how they need to work with their supply chain partners and their customers for maximum impact. To that we could add that they need to think more fundamentally about how they can work together with each other, facilitated by third parties such as Land Securities, as no one business will be able to make all the changes that it needs to alone.

Marks & Spencer: The evolving plan

With its early work on sustainability focused very much on its own business, Marks & Spencer director of Plan A, corporate social responsibility and sustainable business Richard Gillies says that one of the retailer’s main priorities in the next few years is to extend Plan A to involve the customer much more in the journey.

Gillies’ second goal is to embed Plan A into how M&S does business. This means changes such as directors’ bonuses being partially dependent on hitting Plan A targets and the creation of the £50m Plan A innovation fund. “When you start moving some of their metrics you know that will drive behaviour. Also the innovation fund of £50m will drive behaviour that will lead to changes in the way we operate,” he explains.

The third goal is to broaden and accelerate M&S’s sustainability ambitions. Gillies says that trials of eco-friendly factories will be extended and it is also committed to signing up 10,000 farms to a sustainable farming programme. It has also stated its plan to reduce energy usage 35% per square foot by 2015, extending its previous target.

Looking ahead five years, Gillies says the most important issue his business will face “is understanding and staying ahead of changing customer buying patterns”. He adds that the world is going to have to undergo a sustainability revolution.

“One of the major commitments we have made is that every product will have some form of Plan A attribute by 2020,” he says, adding that while a small percentage of consumers will be prepared to pay a premium for sustainable products, mainstream consumers will come to expect it as standard.

He also thinks that rising prices of commodities will have a significant impact on the way retailers do business. “Changes in input costs will change everything that we do,” he says.

Finally he believes that M&S will have to respond to legislation in this area in the next few years, although he likes to think that the retailer will have done enough through Plan A to be ahead of the game.

Tesco: Zero hour

Tesco corporate responsibility and community director Ruth Girardet explains how far the supermarket is pushing itself

on sustainability: “At Tesco we do zero carbon, which means reducing energy usage and then getting the rest of the energy we use from renewable sources. The target is to become a genuinely carbon-zero company by 2050 - you can see the size of the challenge ahead of us.”

Tesco has already developed a supermarket that is zero carbon in its operation, but not its build, something Girardet - who last week spoke at a seminar into the brand perception created by carbon-zero initiatives - hopes can be worked on before 2050.

Last year Tesco extended its efforts to both its supply chain and its customers’ carbon footprint. Girardet gives figures to demonstrate the size of the prize for focusing on all three areas. Tesco’s UK operation produces 2.6 million tonnes in direct CO2 emissions. However, 26 million tonnes of CO2 is produced in its supply chain, and its UK customers’ carbon footprint is 228 million tonnes of CO2.

In addition to the 2050 commitment, Girardet says Tesco plans a 30% reduction in carbon in its supply chain by 2020, and to help its customers halve their carbon footprint by 2020. Within its business, Tesco also wants to make it easy for staff to understand how they can change the way they work to promote carbon reduction.

She explains that Tesco’s logistics team has phrased its strategy very simply as “less fuel, more fill”. Girardet says Tesco’s challenge is to develop such simple messages for other areas of its business, and build scale into its sustainability agenda.

To help customers reduce their carbon footprint is going to require them to consume differently, not just consume less. Another issue is customers’ price sensitivity. Girardet says: “The recession has made people more frugal - but in other ways they are inward focused and price sensitive.” Tesco wants to make sure that customers stay on the carbon reduction path with it coming out of the recession.

“Price makes a very real difference in a very simplistic way,” she says, using the example of how strongly demand for low-energy light bulbs has picked up at Tesco as the price of them has come down dramatically. She says in the past retailers have gone down the route of making green aspirational and this is a mistake.

The final point that Girardet makes is that different aspects of corporate social responsibility can actually conflict with each other. While Tesco is committed to its target on reducing CO2 emissions, it also must remain mindful of the other targets and commitments that it has made as part of its corporate social responsibility policy.

For instance, Girardet explains that it is possible that some plans to reduce energy consumption could conflict with other criteria such as labour standards or animal welfare standards.

Home Retail Group: No time to waste

Home Retail Group head of corporate responsibility Rosi Watson says that on the environmental side of her remit reducing Home Retail’s energy usage and operational waste is the top priority.

“We manage our own business as tightly as we can, the energy we use in our buildings and how we tackle waste.”

Homebase has reduced its energy usage 12% in the past year as a result of installing meters in stores to closely monitor energy usage, which changes the behaviour of staff. She adds: “We hope to replicate that performance in Argos this year.”

Targets on waste are even tougher. “Over the past five years we have reduced the waste to landfill 80%. We only sent 12 tonnes of waste to landfill in the past year, and we are really striving to get to zero.”

A second theme in Home Retail’s work is customer waste. As well as reducing product packaging, consumers are able to make use of recycling services. Argos offers a take-back service for large kitchen appliances and TVs when a new one is delivered to a customer’s home. It also offers a take-back service for the packaging products are delivered in - and 55% of customers are using this service.

Homebase is focused on providing energy-saving products and encouraging customers to grow their own produce, and will soon reveal further energy efficiency offer plans. In Argos it is about offering energy-saving options and making the least energy-efficient products unavailable. “In our July catalogue all TVs will be of above average efficiency,” she says.

When it comes to the issues that Home Retail will face in the next few years, Watson says that the question of how the energy it uses in its stores is produced is largely dependent on government. “Our approach is focused on consumption rather than carbon - let us try to tackle what we can control,” she says.

Sustainable sourcing is another hot topic, especially for timber. Watson expects European legislation in the next few years to make a timber audit trail a requirement.

“We have got 90% compliance with our timber policy this year - we know where it comes from and it is a legal source.”

The third trend likely to affect Home Retail will be looking at the impact of a product all through its life. Watson says Walmart is leading the field with its product sustainability index. Though Home Retail is yet to do a huge amount of work in this area, Watson recognises that it is something that will need to be addressed in the longer term.

Kingfisher: Front of mind

“What’s happened over the past few years is that corporate social responsibility has moved from back room to front of house,” says Kingfisher director of corporate responsibility and government affairs Ray Baker.

Kingfisher recognises that it must look beyond its own walls when it comes to sustainability. This means helping customers to reduce energy usage in their homes. Sales of eco-products topped £1bn in Kingfisher last year, but Baker says: “Our customers want more than just to shop - they want expert advice and service as well as products - and this changes the way we interact with our customers,” he says.

Baker says that financial worries have not dampened consumer desire in this area. “We’ve significantly increased the amount of eco-products on sale in the past year and our target will be to continue to do that; both products to save energy in the home and also those that have a lower environmental impact. We are expected to go to customers in their homes and offer them help and advice, because the vast majority want to make a change but don’t always know where to start,” he says.

B&Q has introduced eco advisers in its stores to help customers make the right decisions. This is a UK trial that Kingfisher could roll out to other countries if it proves successful.

At the same time the retailer must keep its own house in order. “We set ourselves stretching targets for reductions in key areas such as energy, waste and water usage. Also in store design, we have new stores, such as B&Q in New Malden, which is one of our first green stores. What we don’t want to say to customers is that you should do this in your home and then not do it ourselves.”

Baker sits on the Carbon Trust Standard Advisory Board, so says that Kingfisher is well prepared for initiatives such as the

CRC Energy Efficiency Scheme. However, he adds: “It requires different ways of thinking - we haven’t had to respond to requirements such as carbon trading before.”

As a very international business its sustainability remit stretches far beyond the UK. Baker says: “We also want to reduce mileage, training lorry drivers to be more fuel efficient, use double-decker lorries, etc. And this is relevant in all the countries that we operate, not just the UK.”

In addition, he adds: “It is very important for us to help our suppliers behave responsibly; not just on carbon reduction but other areas such as ethical standards, sourcing timber from certified sources, or reducing the solvents in our paints. These are all important to us, and we want to innovate with suppliers to do so - but also to help them reduce their own carbon footprint.”

Baker expects increasing requirements to comply with legislation on things such as product design and ensuring its stores are energy efficient. And further pressure will come from consumers themselves. “What will also change is how much our customers will view us. There will be far greater expectations from our customers for us to act responsibly,” he says.

Arcadia Group: fashion cares

Chaired by group chief executive Ian Grabiner, Arcadia’s Fashion Footprint Steering Group ensures that its commitment to being a socially responsible retailer goes right to the top of the organisation.

And in October last year, it added to this structure with a Fashion Footprint Advisory Panel - made up of 12 staff members from within Arcadia’s brands who are keen to contribute to its social responsibilities work.

Since 2007 it has produced an annual responsibility report to highlight the work that has been done throughout the business, on issues as diverse as labour standards in overseas suppliers, food recycling and the improved CO2 emissions of its supply chain partners.

Recycling is at the heart of Arcadia’s efforts to reduce its carbon footprint. Like other retailers, it is trying to maximise the amount of cardboard and polythene recycled from stores.

In addition it has worked hard at recycling clothes hangers - more than 11 million

a year. Three million hangers are now recycled locally within its stores, rather than being returned to its distribution partner’s centre for recycling. Also during 2009 it reassessed its plastic bags, reducing their weight by 12.8%.

Co-operation with landlords and local authorities is also on its radar. It is looking at how recycling could be further improved in 800 stores. The retail group explains: “Audits are under way in stores not directly managed by our property team, namely those in shopping centres and on retail parks where recycling is handled by landlords or local authorities.” The audits will recommend enhancements in recycling and it will report on the impact of this work during 2010.

Joint working is also taking place with partners in its supply chain, particularly on emissions reporting. In the future it wants to be able to be able to create a month-by-month comparative picture of its emissions performance against the previous year.

Looking ahead, Arcadia is also focused on how it could radically re-engineer its international supply chain, to further reduce its carbon footprint. It explains: “Shipping product directly to the US could well become a model for international warehouses, reducing both emissions and costs. It is conceivable that we could consolidate freight in shipping containers so that they could stop at multiple global destinations, where we would establish warehouses to pick and pack.”