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Green Supply Chain Management at Tesco

We have seen how Walmart deals with the concept of green supply chain management. This
section will take a completely different perspective of how another UK retail gaint deals with
green supply chain management practices.

îistory

Tesco was founded in 1919 by Jack Cohen (Cohen), who invested his serviceman's gratuity of
£30 in a grocery stall. The first private label product introduced by Cohen was Tesco Tea. The
name Tesco was a combination of the initials of the tea supplier - TE Stockwell and the first two
letters of Cohen's name.

Tesco opened its first store in 1929. Cohen was influenced by the supermarket culture in
America and tried to introduce the concept in the UK. The company's driving force was the idea:
'Pile it high and sell it cheap.' In 1947, Tesco went public and a year later, Tesco self-service
stores were started. In 1956, the first Tesco self-service supermarket was opened.

To overcome this obstacle to price reduction, Tesco introduced trading stamps which were given
to customers when they purchased products; they could be traded for cash or other gifts. RPM
was abolished in 1964, and from then on, Tesco was able to offer competitively priced products
to its customers. The first Tesco superstore, with an area of 90,000 square feet, was opened in
1967.

By the 1970s, Tesco's 'Pile it high, sell it cheap' philosophy no longer appealed to shoppers. As
people got richer, they started demanding expensive and luxury items. The poor performance of
Tesco even led to the saying 'doing a Tesco,' which meant snatching defeat from victory. Tesco's
image took a further beating when Imperial Tobacco Company which had considered acquiring
Tesco as a part of its diversification strategy, did not go ahead with the deal as it felt that Tesco
might damage its corporate image. To arrest the downslide in its fortunes, Tesco's management
went in for an overhaul of its stores during the decade. Several stores were closed down to
concentrate on the superstores.
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Œntroduction to Tesco¶s SCM

Tesco's SCM relied heavily on the concept of 'Process Improvement' and was guided by its core
purpose of creating value for customers so as to earn their lifetime loyalty. The key period for
Tesco's supply chain initiatives was between 1983 and 1996; during this time, the company
introduced several systems including point of sale scanning, centralized ordering, centralized
distribution, automated warehouse control and electronic data interchange (EDI). Graham Booth
(Booth) was Director, Supply Chain, Tesco between 1985 and 2002. He felt that it was necessary
to have replenishment triggered by customers, for which, using the same set of suppliers along
with cross dock distribution centers (DC) and vehicles supplying to all store formats would be
ideal.

Managing the Supply Chain

Tesco had 2,365 stores across the world, 1,780 of which were in the UK operating on 24.2
million square feet of retail area. In the UK, Tesco operated primarily through four types of
stores. The company's international operations were spread in 12 countries across the world. The
sheer size of Tesco's operations called for high efficiency in supply chain. Even if the service
level was at 99.9%, it still meant six million service failures.

Looking Ahead

In the East European Markets, Tesco's logistics and supply chain were not well developed and
relied heavily on deliveries from suppliers. This was a viable proportion for the large stores but
not for the smaller ones.

As Tesco planned to expand smaller stores in Eastern Europe, developments in the supply chain
became necessary. In Thailand and Korea automated DCs have been operational. For Tesco to
gain an edge over other multinational retailers entering these markets, it was necessary to build
viable supply chain solutions.

In the process of understanding how companies have adopted green supply chain management,
we have understood the Walmart perspective in the previous section. Now, let us look at how
Tesco approached Green supply chain management, its claims regarding the same and what it
actually was.
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The big supermarkets seem to be competing with each other to be seen as green and socially
responsible companies. Market leader Tesco is leading this PR battle. Tesco in the Community,
launched in May this year, was supposed to signal a greener approach to business by the
supermarket giant. But analysis of the commitments made by Tesco reveals that the supermarket
is more interested in greenwash than genuinely reducing its impact on communities and the
environment.

 c Tesco¶s Commitment: Energy and carbon emissions

Tesco says it will:

mc Invest £100 million in sustainable environmental technology and that it wants to halve by
2010 the average energy use in all its buildings against a baseline of 2000.

mc Build the most environmentally-friendly store in the UK.

Why this is greenwash:

Tesco is not cutting total energy use by half but just µwanting¶ to cut per store energy use.
Analysis shows that even if Tesco achieves this target for existing stores, expansion plans will
counteract this, with the result that there will be no absolute reduction in energy use. In fact, total
energy use will be higher than it is now with the result that greenhouse gas emissions (GHG) will
also be higher.

The calculations do not even include the significant energy costs of actually constructing the new
stores or the construction work in expanding existing stores. So in reality Tesco will not be
making any cuts in its overall emissions, let alone a reduction of 50 per cent.

Tesco's 10-year target applies only to energy use in its buildings. Its other activities also have a
carbon impact. Tesco¶s commitment is not to cut total carbon emissions from its extensive
freight operations but to cut emissions per case of goods sold by 30 per cent. As its store floor
area is predicted to grow by 26 per cent, a 30 per cent reduction in CO2 emissions per case of
product will be largely cancelled out.
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Investment in environmental technology is useful best practice. But overall the environmental
gains delivered per store will be negated by the supermarket¶s expansion plans which involve
building, and inevitably greater freight needs.

Tesco claims to be building the most environmentally-friendly store in the UK, but this looks
weak when compared with the environmental impact of farm shops and certified farmers markets
which use local produce, minimal food miles, and which have almost no construction impacts.
High street grocers, small supermarkets and wholefood shops also tend to use far less energy and
use more local produce, with less or no packaging. Most would probably score more highly than
Tesco on most indicators of µenvironmentally friendly¶ practices.

What Tesco should be doing:

mc Stop its expansion plans and concentrate on refitting existing stores to reduce absolute
GHG emissions (including from refrigeration and freight) by half.
mc Ensure any new building and refitting, both here and overseas, are to the highest
environmental standard available.

0 c Tesco¶s Commitment: Recycling/packaging/plastic bags

Tesco says it will:

mc Make all Tesco carrier bags degradable

mc Double the amount that customers bring back to stores for recycling

Why this is greenwash:

Tesco¶s degradable bags will still be made out of plastic and will offer virtually no
environmental advantage over conventional plastic bags. Degradable plastic bags need exposure
to sunlight in order to break down ± but the majority will end up in landfill sites where they will
not be in the right conditions to break down rapidly. Tesco says its bags will break down creating
CO2 ± hardly an environmental benefit given the urgent need to cut CO2 emissions. But in the
absence of sunlight the bags are more likely to break down into methane ± another potent
greenhouse gas.
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Tesco should not be promoting any degradable material as this is easily confused with
biodegradable (compostable) material - for example, people may think that they can put
degradable bags into their compost bins. Packaging should instead be made from materials which
are easily-recyclable and clearly labelled as to whether they are recyclable or compostable. Bags
should be re-usable.

Degradable plastic bags will still end up as litter, creating eyesores and possibly more serious
problems. Marine mammal deaths have been linked to the ingestion of plastic bags.

Tesco would make a much greater environmental contribution if it significantly reduced the
amount of packaging it used. The company¶s packaging policies, like other big supermarkets, are
responsible for generating vast quantities of food and packaging waste. Although Tesco has
signed up to the ³Courtauld Commitment´ on waste, this is a voluntary agreement with no firm
targets for the amount of waste to be cut.

What Tesco should be doing:

mc Set ambitious targets for reducing the amount of waste it generates, including getting rid
of unnecessary packaging and cutting down on food wastage along the supply chain.
mc Scrap plastic bags and only offer µbags for life¶ or encourage customers to bring their
own bags.
mc Contribute to local authorities¶ doorstep recycling schemes to give consumers the easiest
way to recycle.

Ô c Tesco¶s Commitment: îealth and nutrition

Tesco says it will:

mc Put new nutritional labelling on all its own brand products by Spring 2007.
mc åaunch a project to help inform parents, childcare professionals and children in some of
the UK¶s most deprived communities to make healthier choices.

Why this is greenwash:

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åabelling

Clear information on labels is important to help customers make healthier choices. But Tesco¶s
new labelling scheme, which uses Guideline Daily Amounts for salt, fat and sugar has been
controversial because it has shunned the Food Standards Agency¶s (FSA) traffic light labelling
system.

Tesco has been criticised for other aspects of its labelling. In 2005 the National Consumer
Council found that a third of products still did not translate sodium as salt on labels, making it
harder for consumers to understand the labelling . A survey in 2005 by Which? revealed that
some Tesco products including its kids hot dog pizza, contained misleading or inaccurate
information about nutrients on their labels, including many outside the allowed error margin.
Tesco admitted to Which? that it knew that the labelling on these products was wrong and would
correct it.

Tesco claims to be working to tackle food poverty with the Pre-School åearning Alliance. But
research by food poverty experts suggests that Tesco is as likely to be part of the problem as the
solution for helping low income families to access healthy food. For example, physical access to
healthy food can often be a big problem for low income households because local shops have
closed down ± due in large part to out of town supermarkets such as Tesco putting town centre
shops out of business, and the out of town stores are not easy for shoppers without a car.

What Tesco should be doing:

mc Stop promoting unhealthy foods

mc Pay the cost of promotions on fruit and vegetables and not pass these costs onto its
suppliers.

£ c Tesco¶s Commitment: Being a Good Neighbour

Tesco says it will:

mc Design new store fronts for its Tesco Express stores

mc Reduce the frequency of deliveries to Express stores and make deliveries quieter
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mc Improve the way it consults local communities before opening a store

Why this is greenwash:

More and more communities around the country are saying that they don¶t want Tesco as a
neighbour at all. There have been at least 75 active site battles in the last year involving local
communities and/or local councils opposing plans by Tesco to build or expand stores. And
communities are finding that when Tesco does move in they are not good neighbours.

Good neighbours don¶t steal trade from existing businesses. But when Tesco comes to town,
local shops are likely to suffer. In Hove, Brighton, Tesco opened a large superstore in 2003. The
company claims that this attracted 30,000 new customers. Yet local traders complain they are
worse off. They have seen a fall in takings and the new store was built on land previously used
for car parking. The store¶s own parking is only for two hours, giving customers little time to
shop anywhere other than Tesco.

Good neighbours don¶t close down vital services± but that¶s exactly what Tesco has done,
closing down post offices in the convenience stores it has taken over. This hits older people
particularly hard.

What Tesco should be doing:

mc Tesco should withdraw planning applications in towns where the community is saying it
doesn¶t want a Tesco. Tesco should start by withdrawing its plans for a store in
Sheringham, Norfolk, where local people have been fighting to save their local shops for
10 years.
mc Tesco should stop using bully tactics to get planning permission including securing secret
deals with the local authority before the community even gets to hear about the
application and intimidating councillors.
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The government should

Ensure local authorities can stand up to the bullying tactics of developers and investigate
situations where there appear to be conflicts of interest.

SUMMARY

1.c What should be in Tesco¶s community action plan:

2.c Stop its expansion plans and concentrate on refitting existing stores to reduce absolute
GHG emissions (including from refrigeration and freight) by half.
3.c Ensure any new building and refitting both here and overseas are to the highest
environmental standard available.
4.c Set ambitious targets for reducing the amount of waste it generates, including getting rid
of unnecessary packaging and cutting down on food wastage along the supply chain.
5.c Scrap plastic bags and only offer µbags for life¶ or encourage customers to bring their
own bags.
6.c Agreed to contribute to local authorities doorstep recycling schemes to give consumers
the easiest way to recycle.
7.c Tesco should withdraw planning applications in towns where the community is saying it
doesn¶t want a Tesco. Tesco should start by withdrawing its plans for a store in
Sheringham, Norfolk, where local people have been fighting to save their local shops for
10 years.
8.c Tesco should stop using bully tactics to get planning permission, including signing secret
deals with the local authority before the community even gets to hear about the
application and intimidating councillors.
9.c Set targets for sourcing produce locally and buying produce at prices which reflect the
cost of production and investment by farmers and growers.

Conclusion

We have seen the claims of Tesco in going green but it turns out to be a mere eyewash. In effect
Tesco is contributing to the increasing pollution and global warming. Even though Tesco¶s
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promotion and initiatives convey concern for the environment but the processes are
contradictory.

ay ahead

Taking the various examples into account, also the critical success factors derived earlier, the
next step would be to design an effective green supply chain from the perspctive of an Indian
company. We shall also look into how various Indian companies have been adopting for green
practices and what has been driving them to do so.