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'Excellent' with potential for 'Outstanding'

By Elaine Cohen (BeyondBusiness) on July 22, 2009 at 11:52am.

Content

Tesco is the self-claimed 3rd largest grocery retailer in the world and the UK's largest. Tesco employs 470,000 people, and operates 4,331 stores in 14 countries. A veteran in managing and reporting on Corporate Social Responsibility, this is their 8th annual CR report. There has been evolution of Tesco's reporting alongside the expansion of their business which has more than doubled in this period to reach nearly £50 billion in annual sales, whilst employees have tripled and stores quadrupled. The grocery retailing sector has so many diverse impacts, risks and opportunities: impacts on local community fabric with the rise of the ‘big box’; managing an equitable and environmentally sound supply chain; responsible employment practices; impacts on consumer behavior and ethical consumerism; product labelling; packaging and organic waste; supply chain labor standards; food quality; eating habits; organics and fair trade; own label versus brands - to name but a few!  Surely a massive business like Tesco should place weight on indirect impacts? Here I find the Tesco report a little shy of tackling indirect issues. 

As a start, the CEO places strong emphasis on Tesco's role in developing sustainable communities and driving sustainable consumption. Terry Leahy talks about the 9.5 million customers in the UK that now re-use shopping bags, encouraged by the Tesco Green ClubCard program. In a time when customers "do not just spend less, they worry more", Leahy talks about Tesco's expending community programs, the 70 Tesco locations which have active Community Champions and £57 million in community donations last year.

A positive opening to the Tesco 09 report is the summary of achievements highlighting progress and challenges such as the fact that Tesco have not been able to calculate water usage ("This is disappointing"), difficulties in finding the best measure for packaging reduction, the community impact program ("We can do more to increase the local impact of our community activities"), and one of my favorites on gender balance ( ".. we still need to do more to ensure women are better represented at senior levels").

This is one of the few reports that criticizes its own performance, driving improvement openly. This format is positive and continues the style set by previous reports, though the challenges indicated are in my view rather soft. Not only is the format copy-paste, but also sections of content. For instance, the admission on sustainability of bio-fuels as a dilemma is copied almost word for word from the 08 report, and stakeholder dialogue elements include most of what was said in 08. I would welcome a distinction in this report about what has changed.
 
Tesco's CR is managed using what they have branded the Steering Wheel containing 5 strategic areas: people, finance, customers, operations and community (including environment). It  mainly steers direct impacts – the things that Tesco do within their own business – rather than indirect impacts –  broader higher level systemic change.  Again, Tesco could challenge themselves  further. The potential to drive massive consumer change though their business could be exploited and reported more fully.

Tesco emphasizes environmental impacts: "A new Tesco store in Rajec in northern Slovakia is the only one of its kind to be built from sheep’s wool, wood and pressed straw!” Tesco have a new prototype eco-store in the UK with a carbon footprint 70% lower than an equivalent store built in 2006, they have rainwater harvesting in a UK distribution centre and make extensive use of renewable energy. Tesco is the largest recycler of cardboard in the UK, and invested £25 million in a Sustainable Consumption research centre. Despite all this, Tesco's carbon footprint increased in absolute terms in 2009 over 2008, though Tesco maintains that this is still a 10.9% reduction in ‘carbon intensity’ as sales area grew by 16.4% whilst carbon emissions decreased by 3.7%. Data on the Tesco website shows that over 2 years, carbon emissions increased by 14.7% whilst sales area increased by 16.2% - virtually no ‘carbon intensity’ improvement here. Further, given that carbon intensity is what Tesco measure, I could not find anywhere in the Tesco 09 report a figure for carbon emissions per square meter of sales area. The 2002 report quoted around 55 tonnes per square meter, but this was not tracked in any subsequent report, giving way to reported energy use in stores (this is one driver but not the indicator of GHG emission levels). In 2007, Tesco first calculated its overall carbon footprint as 4.75 million tonnes (adjusted from  an original 4.13 million tonnes reported at that time) . In the 2009 report it was 4.9 million tones.  The calculation is not fully explained e.g. whether it includes all logistics operations and business travel. I would welcome more insight into Tesco's indirect carbon footprint – use of transport and logistics by suppliers and customers and the way Tesco impacts these.  More importantly, I wonder if it would not be too much to expect of a business like this to commit to expanding whilst maintaining or reducing absolute carbon emission levels?

Communication:

This report has a modern, young design which is pleasing to the eye, and text and color coded inserts give  highlights. It is a report for those with short attention spans. Rather than reading a section from start to finish, the design pulls your eye to the brightest color on the page so you read in short bytes, rather than flowing naturally with the text. The report is not indexed, which makes finding specific information tough. There is no materiality index so it's hard to know what issues are in focus or omitted without reading the whole report. Most data is shown only for the current year, or the prior year at most, thus robbing us of the perspective that comes over the longer term (although the website gives some additional information). In general, though, it’s a clearly written report which packs masses of information and insights into a short 59 pages.

Credibility: 

Tesco's Carbon Footprint calculation is verified and a brief statement by ERM is included, and ETI verify Tesco's supplier audits. A view from Forum for the Future on Tesco's performance and reporting is well balanced and raises material issues for Tesco to address going forward. The "Others Say" quotations in Tesco's report are mainly criticisms and suggestions for improvement on Tesco's reporting and performance, which contrasts well with many other reporters who quote only positive comments. Tesco's analysis of its own performance shows both positive and less positive issues. All this drives trust in Tesco reporting. However there is no assurance of this report which leaves us to take all this at face value.

I find it difficult to navigate Tesco's improving performance against KPIs (Key Performance Indicators).  KPIs are not directly aligned to the Steering Wheel, most data presented does not go beyond the prior year, new KPIs are added but there is no indication if KPIs have been removed, and most KPIs are relative not absolute e.g. % of store waste recycled rather than absolute levels of waste generated. The only KPI related to employees is training, and a KPI related to sustainable consumption talks about numbers of product promotions (direct impacts) and not the customer response to these promotions (indirect impacts). I would welcome a more consistent representation of KPIs.

Overall, this report is impressive and demonstrates strong positive direction by Tesco, but there is just a little something missing which makes me wonder if Tesco lacks that extra push to take them from excellent to outstanding.

Recommendations:

1.  Improve Carbon footprint reporting
2. Develop greater consistency in representation of data against KPIs
3. Make clear what has been previously reported, and if there is nothing new to add, say so!


Elaine Cohen is the Joint CEO of BeyondBusiness Ltd, www.b-yond.biz, a leading CSR reporting and consulting firm in Israel, specializing in a wide range of consulting services for the development of social and environmental responsibility of businesses. Elaine Cohen is an independent reviewer and has no relationship with the reporting company.