Ethical and Green Retailing - UK - June 2007

Table of Contents

• Issues in the Market
• Main issues addressed:
• Key themes:
• Definition
• Retail Sales data
• Abbreviations
• Insights and Opportunities
• Market in Brief
• Overview
• Retailers have an important contribution to make to a more sustainable future
• Industry insights
• Pressure for change building and retailers have to respond
• Ethical labelling standards desirable but some way off
• Developing trust not competitive advantage
• Commercial considerations -- greater efficiency and less waste enhances profitability
• Retailers accept responsibility for reducing packaging waste
• Conclusion -- raising awareness and company response profile through measured communications
• Broader market environment
• Negative factors
• Positive factors
• Internal market environment
• Negative factors
• Positive factors
• Retailers' targets, disclosure and performance
• Disclosure
• Performance
  • Figure 1: Carbon dioxide emission of leading retail companies, 2005/06
  • Figure 2: Total waste produced by leading retail companies, 2005/06
• Targets
• The importance of ethical and environmental issues to consumers
• Majority of consumers attach some importance to these issues so retailers must act
• Retailers with strongest appeal to ethically aware shoppers
• A third of adults do not attach any importance to these issues and can be targeted through enlightened self-interest
• Retailers needing to lead customers to a greener future
• Conclusions -- it' s time to act
• Which retailers do consumers trust?
• Absolute levels of trust are low
• Food retailers trusted by more of their customers than non-food retailers
• Sainsbury' s and Marks & Spencer can leverage trust among ABs that Tesco doesn' t have
• Conclusion -- retailers likely to have to do more in future to earn and retain trust
• What do people think and how do they behave?
• Consumers not seeing beyond commercial motives
• Proof of ethical standards and labelling required
• Conclusion -- greater transparency and more communication required in future
• Focus on food -- what do people think and how do they behave?
• Can the strong sentiment in favour of UK and local produce be satisfied?
• Unsatisfied demand for Fairtrade
• Strong requirement for food miles information
• Conclusion -- positive sentiment for UK producers provides grounds for change
• What are people' s perceptions of packaging and are they proactive recyclers?
• Strong consumer support for recycling
• Onus on retailers to simplify packaging to aid recycling
• Onus on retailers to reduce packaging -- but also to explain why they use the packaging they do
• Conclusion -- retailers need to demonstrate they are taking action
• Industry Insights
• Key points, implications and conclusions
• Pressure for change building and retailers have to respond
• More affluent consumers are a leading force for change
• Adjusting to the low carbon economy -- frantic behind the scenes activity
• Ethical labelling standards desirable but some way off
• Developing trust not competitive advantage
• Commercial considerations -- greater efficiency and less waste enhances profitability
• Retailers accept responsibility for reducing waste
• Conclusion -- raising awareness and company response profile through measured communications
• Pressures for change
• Consumers receptive to green and ethical initiatives
• People' s views only driving some aspects of change
• Retailers are ahead of government in many aspects of change
• Government needs to set standards to drive change
• But, government does not always set the right agenda
• Who is changing and how quickly?
• Better off consumers are early adopters but everyone else is following
• Adjusting to the low carbon economy
• Setting base lines and measuring performance
• Change can be driven by cost savings
• Analysis of downstream factors becoming important
• The ethical dimension
• Ensuring high ethical standards
• The case for publicising standards to consumers
• Ethical labelling
• Trust and competitive advantage
• Ethical and environmental issues not primarily viewed as a source of competitive advantage
• Developing trust is of paramount importance
• Marks & Spencer -- under scrutiny to achieve its targets
• Commercial considerations
• Pursuing the profit principle and reducing environmental impact
• Some companies keeping too low a profile
• Packaging and waste reduction
• Raising recycling levels requires investment in infrastructure
• Consumer acceptance of less wasteful packaging expected to be high
• Transit packaging -- a major target for minimisation
• Store collection of waste not practical
• No potential for returnable or refillable containers
• Broader Market Environment
• Negative factors
• Positive factors
• Climate change -- what' s it all about?
• Evidence suggests dramatic changes ahead
• The Stern Review -- recommendations for action
• What it means for the retail industry
• What it means for consumers
• Consumers and climate change
• Energy intensive lifestyles are a key contributor to climate change
• Household energy consumption -- heating
• Household energy consumption -- appliances on standby
• Car travel
• Air travel
• Tackling the issues
• Draft Climate Change Bill published in March 2007
• What the Bill didn' t do
• Waste management policy -- published in May 2007
• Measuring impact -- KPIs and standardised reporting requirements
• Comparative performance
• Going carbon neutral -- what' s involved?
• Emissions trading -- how does it work?
• Pros
• Cons
• Carbon offsetting -- how does it work?
• Pros
• Cons
• Shortage of renewable energy generation capacity
• Switching to biofuels
• Getting rid of waste
• Waste management
• Packaging minimisation
• Post consumer waste
• Alternatives to landfill for non-recyclable waste
• Ethical issues -- relatively little government intervention
• Companies can decide
• Internal Market Environment
• Negative factors
• Positive factors
• Major retailers have high profile
• Retailers engaged in sourcing and supplying fmcg are at the top of the supply chain
• But in a competitive market consumer demand shapes what retailers do
• Campaign groups scrutinise retailers closely
• Tackling emissions
• Store-based retailing and product distribution consume energy and generate emissions
• Emissions from store operation and distribution
• Highest and lowest emissions
  • Figure 3: Carbon dioxide emission of leading retail companies, 2005/06
• Tackling waste
• Comparative data show wide variations in waste relative to sales
  • Figure 4: Total waste produced by leading retail companies, 2005/06
• Recycling rates
• Zero landfill targets
• Designing waste out of the business to business loop
• Reducing consumer waste
• The carrier bag issue
• Ethical stance under scrutiny
• Ethical standards cannot be ignored for lower prices
• Social welfare of workers in the supply chain has to be considered
• Context extends to UK workers
• Ethics of animal welfare in food production and product testing under scrutiny
• Greener and ethical products a growing market
• The market for greener and ethical products
• Organic food market growing strongly
• Fairtrade food nearly quadrupled in same period
• New retailing opportunities...
• ...but also pitfalls
• Carbon labelling
• Home shopping -- a greener alternative?
• Pros
• Cons
• Who' s Innovating
• Market in Context -- Ethical and Green Strategies in Food Retailing
• Tesco
• Assessment
• Key features of environmental and ethical impact
• CO2 emissions
• Figure 5: Tesco carbon dioxide emissions, 2003/04-2005/06
• Energy use
  • Figure 6: Tesco energy consumption, 2003/04-2005/06
• Waste management
• Recent initiatives
• Ethical sourcing
• Operations and performance
• J Sainsbury
• Assessment
• Key features of environmental and ethical impact
• CO2 emissions
  • Figure 7: J Sainsbury carbon dioxide emissions, 2003/04-2005/06
• Energy use
• Waste management
• Figure 8: J Sainsbury waste, 2003/04-2005/06
• Recent initiatives
• Ethical sourcing
• Operations and performance
• Asda
• Assessment
• Key features of its environmental and ethical impact
• CO2 emissions, energy consumption, and waste management
• Recent initiatives
• Ethical sourcing
• Operations and performance
• Morrisons
• Assessment
• Key features of its environmental and ethical impact
• CO2 emissions
• Energy consumption
• Waste management
• Recent initiatives
• Ethical sourcing
• Operations and performance
• Somerfield
• Assessment
• Key features of its environmental and ethical impact
• CO2 emissions, energy consumption and waste management
• Recent initiatives
• Ethical sourcing
• Operations and performance
• Marks & Spencer
• Assessment
• Key features of its environmental and ethical impact
• CO2 emissions (relates to group not just food)
  • Figure 9: Marks & Spencer carbon dioxide emissions, 2003/04-2005/06
• Energy consumption (relates to group not just food)
• Waste (relates to group not just food)
• Plan A -- the blueprint for the future
• Key initiatives and performance indicators cover five areas:
• Recent food category specific initiatives
• Ethical sourcing (food category specific)
• Operations and performance
• Waitrose
• Assessment
• Key features of its environmental and ethical impact
• CO2 emissions
  • Figure 10: Waitrose carbon dioxide emissions, 2003/04-2005/06
• Energy consumption
  • Figure 11: Waitrose energy consumption, 2003/04-2005/06
• Waste management
  • Figure 12: Waitrose waste, 2003/04-2005/06
• Recent initiatives
• Ethical sourcing
• Operations and performance
• Co-operative Group
• Assessment
• Key features of its environmental and ethical impact
• CO2 emissions
  • Figure 13: Co-operative Group carbon dioxide emissions, 2003/04-2005/06
• Energy consumption
  • Figure 14: Co-operative Group energy consumption, 2003/04-2005/06
• Waste management
• Recent initiatives
• Ethical sourcing
• Operations and performance
• Iceland
• Assessment
• Key features of its environmental and ethical impact
• CO2 emissions, energy consumption and waste management
• Recent initiatives
• Ethical sourcing
• Operations and performance
• Aldi
• Assessment
• Key features of its environmental and ethical impact
• CO2 emissions, energy consumption and waste management
• Recent initiatives
• Ethical sourcing
• Operations and performance
• Thresher
• Assessment
• Key features of its environmental and ethical impact
• CO2 emissions, energy consumption and waste management
• Recent initiatives
• Ethical sourcing
• Operations and performance
• Other initiative takers in the category
• Market in Context -- Ethical and Green Strategies in Non-food Retailing
• Clothing and department stores
• Marks & Spencer
• Assessment
• Key features of its environmental and ethical impact
• CO2 emissions (relates to group not just clothing)
  • Figure 15: Marks & Spencer carbon dioxide emissions, 2003/04-2005/06
• Energy consumption (relates to group not just clothing)
• Waste (relates to group not just clothing)
• Plan A -- the blueprint for the future
• Key initiatives and performance indicators cover five areas:
• Recent clothing-specific initiatives
• Ethical sourcing
• Operations and performance
• John Lewis
• Assessment
• Key features of its environmental and ethical impact
• CO2 emissions
  • Figure 16: John Lewis co2 emissions, 2003/04-2005/06
• Energy consumption
  • Figure 17: John Lewis energy consumption, 2003/04-2005/06
• Waste management
  • Figure 18: John Lewis waste, 2003/04-2005/06
• Recent initiatives
• Ethical sourcing
• Debenhams
• Assessment
• Key features of its environmental and ethical impact
• CO2 emissions, energy consumption and waste management
• Recent initiatives
• Ethical sourcing
• Operations and performance
• Next
• Assessment
• Key features of its environmental and ethical impact
• CO2 emissions
  • Figure 19: Next carbon dioxide emissions, 2003/04-2005/06
• Energy consumption
  • Figure 20: Next energy consumption, 2003/04-2005/06
• Waste management
• Recent initiatives
• Ethical sourcing
• Operations and performance
• Primark
• Assessment
• Key features of its environmental and ethical impact
• CO2 emissions, energy consumption and waste management
• Recent initiatives
• Ethical sourcing
• Operations and performance
• Matalan
• Assessment
• Key features of its environmental and ethical impact
• CO2 emissions, energy consumption and waste management
• Recent initiatives
• Ethical sourcing
• Operations and performance
• Arcadia Group
• Assessment
• Key features of its environmental and ethical impact
• CO2 emissions, energy consumption and waste management
• Recent initiatives
• Ethical sourcing
• Operations and performance
• Littlewoods Shop Direct Group
• Assessment
• Key features of its environmental and ethical impact
• CO2 emissions, energy consumption and waste management
• Recent initiatives
• Ethical sourcing
• Other initiative takers in the category
• Mixed goods and variety stores
• Home Retail Group -- Argos and Homebase
• Assessment
• Key features of its environmental and ethical impact
• CO2 emissions and energy consumption
• Waste management
  • Figure 21: Home Retail Group waste, 2003/04-2005/06
• Recent initiatives
• Ethical sourcing
• Operations and performance
• Woolworths
• Assessment
• Key features of its environmental and ethical impact
• CO2 emissions, energy consumption
• Waste management
• Recent initiatives
• Ethical sourcing
• Operations and performance
• Wilkinsons
• Assessment
• CO2 emissions, energy consumption and waste
• Recent initiatives
• Ethical sourcing
• Operations and performance
• Other initiative takers in the category
• Household goods retailers
• DSG International
• Assessment
• Key features of its environmental and ethical impact
• CO2 emissions and energy consumption
• Waste management
• Recent initiatives
• Ethical sourcing
• Operations and performance -- UK & Ireland Electricals Division
• Operations and performance -- PC World
• Operations and performance -- New business division
• Comet -- Kesa Electricals
• Assessment
• Key features of its environmental and ethical impact
• CO2 emissions, energy consumption and waste
• Recent initiatives
• Ethical sourcing
• Operations and performance
• B&Q -- Kingfisher
• Assessment
• Key features of its environmental and ethical impact
• CO2 emissions and energy consumption
• Waste management
• Recent initiatives
• Ethical sourcing
• Operations and performance
• IKEA
• Assessment
• Key features of its environmental and ethical impact
• CO2 emissions and energy consumption
• Waste management
• Recent initiatives
• Ethical sourcing
• Operations and performance
• Other initiative takers in the category
• Other non-food retailers
• Alliance Boots
• Assessment
• Key features of its environmental and ethical impact
• CO2 emissions
  • Figure 22: Boots carbon dioxide emissions, 2003/04-2005/06
• Energy consumption
  • Figure 23: Boots energy consumption, 2003/04-2005/06
• Waste management
  • Figure 24: Boots waste disposed of, 2003/04-2005/06
• Recent initiatives
• Ethical sourcing
• Operations and performance
• Superdrug/Savers and The Perfume Shop -- AS Watson
• Assessment
• Key features of its environmental and ethical impact
• CO2 emissions, energy consumption and waste
• Recent initiatives
• Ethical sourcing
• Operations and performance -- Superdrug
• Operations and performance -- Savers
• Operations and performance -- The Perfume Shop
• WH Smith
• Assessment
• Key features of its environmental and ethical impact
• CO2 emissions and energy consumption
• Figure 25: WH Smith energy consumption, 2004-06
• Waste management
• Recent initiatives
• Ethical sourcing
• Operations and performance
• Sports Direct
• Assessment
• Key features of its environmental and ethical impact
• CO2 emissions, energy consumption and waste management
• Recent initiatives
• Ethical sourcing
• Operations and performance
• Other initiative takers in the category
• The Importance of Ethical and Environmental Issues to Consumers
• Key findings
• Majority of consumers attach some importance to these issues so retailers must act
• A fifth of adults see these issues as being very important and will be very receptive to initiatives
• A third of adults do not attach any importance to these issues and can be targeted through enlightened self-interest
• Middle ground encompasses a broad range of people and requires a general approach
• Self-interest versus social conscience
• Conclusions -- it' s time to act
• Ethical and green issues important to a majority of respondents
• Figure 26: Importance attached to ethical and environmental issues when shopping, March 2007
• Bias towards women and older people among those giving a Very Important rating
• Some less affluent consumers rate these issues as Very Important
• Guardian most favoured reading by those in the Very Important group
• Tesco leading customers rather than being driven by them
• Waitrose and Marks & Spencer attract those in Very Important group
• Least interested need motivating
• "Do I look bovvered?"
• Less affluent have other priorities
• Popular tabloid readers need awakening
• Iceland and Morrisons shoppers need motivating
• The Importance of Ethical and Environmental Issues to Consumers -- Detailed Consumer Demographics
  • Figure 27: Those attaching importance to ethical and environmental issues when shopping, by socio-demographic group, March 2007
  • Figure 28: Those not attaching importance to ethical and environmental issues when shopping, by socio-demographic groups, March 2007
• Which Retailers Do Consumers Trust?
• Key findings:
• Absolute levels of trust are low
• Tesco lagging behind on trust
• Food retailers trusted by more of their customers than non-food retailers
• Sainsbury' s and Marks & Spencer can leverage trust among ABs that Tesco doesn' t have
• Tesco' s position based on appeal to less affluent, less concerned shoppers
• Asda and Morrisons also reliant on less affluent, less concerned shoppers
• Consumers may want to transfer responsibility to retailers
• Conclusion -- retailers likely to have to do more in future to earn and retain trust
• Who do consumers trust?
  • Figure 29: Consumer trust in retailers, March 2007
  • Figure 30: Consumer trust in retailers compared to usage, March 2007
• Tesco winning hearts and minds of younger consumers
• Marks & Spencer and Sainsbury' s doing best among ABs
• Asda and Morrisons achieve much lower levels of trust
• Is Boots doing enough to get its message across?
• John Lewis not reaching as many ABs as it should
• IKEA also struggling to be heard
• Sceptics strongly in evidence
• A fifth of adults have doubts about retailers
• Increased pressure to come clean
• Which Retailers Do Consumers Trust? -- Detailed Consumer Demographics
  • Figure 31: Most trusted retailers, by demographic sub-group, March 2007
  • Figure 32: Other trusted retailers, by demographic sub-group, March 2007
• What Do People Think and How Do They Behave?
• Key findings:
• Consumers not seeing beyond commercial motives
• Shifting responsibility from consumers to retailers
• Proof of ethical standards and labelling required
• Use of higher cost production broadly acceptable if it reduces emissions
• Consumers very receptive to media coverage
• Pace of change likely to gather momentum in future
• Low prices before principles
• Conclusion -- greater transparency and more communication required in future
• Consumers have high expectations of retailers on these issues
  • Figure 33: Consumer attitudes to ethical and environmental issues, March 2007
• Profits first, planet second
• Hopes and expectations
• Wear it with pride!
• Carbon labelling needed before judgements on local sourcing can be made
• Media a positive force for change
• Sleepers
• Low prices matter more
• Enlightened self-interest -- will make changes to save money
• What Do People Think and How Do They Behave? -- Detailed Consumer Demographics
  • Figure 34: Most widely held views about ethical and environmental issues, by demographic sub-group, March 2007
  • Figure 35: Other views about ethical and environmental issues, by demographic sub-group, March 2007
  • Figure 36: Consumer attitudes to ethical and environmental issues, by retailer shopped, March 2007
  • Figure 37: Consumer attitudes to ethical and environmental issues, by retailer shopped, March 2007
  • Figure 38: Consumer attitudes to ethical and environmental issues, by retailer shopped, March 2007
  • Figure 39: Consumer attitudes to ethical and environmental issues, by retailer shopped, March 2007
  • Figure 40: Consumer attitudes to ethical and environmental issues, by retailer shopped, March 2007
• Focus on Food -- What Do People Think and How Do They Behave?
• Key findings
• Can the strong sentiment in favour of UK and local produce be satisfied?
• Unsatisfied demand for Fairtrade
• Strong requirement for food miles information
• Modest levels of support for independent food stores
• Conclusion -- positive sentiment for UK producers provides grounds for change
• Local issues at the forefront of consumer thinking
  • Figure 41: Consumer attitudes to ethical and environmental issues when shopping for food, March 2007
• Widespread unfulfilled demand for local food
• Broad based consumer support for UK production
• Fairtrade products attract widespread support
• Food miles information widely sought after
• Independent local food stores
• A fifth of people actively avoid products that are perceived as having high food miles
• Convenience does not always count for everything
• Focus on Food -- What Do People Think and How Do They Behave? -- Detailed Consumer Demographics
  • Figure 42: Most widely held views about ethical and environmental issues when shopping for food, by demographic sub-group, March 2007
  • Figure 43: Other views about ethical and environmental issues, when shopping for food, by demographic sub-group, March 2007
  • Figure 44: Consumer attitudes to ethical and environmental issues when shopping for food, by rretailer shopped, March 2007
• What Are People' s Perceptions of Packaging and Are They Proactive Recyclers?
• Key findings
• Strong consumer support for recycling
• Onus on retailers to simplify packaging to aid recycling
• Onus on retailers to reduce packaging -- but also to explain why they use the packaging they do
• Limited amount of direct action likely
• Conclusion -- retailers need to demonstrate they are taking action
• Consumers expecting more help and action from retailers
  • Figure 45: Consumer attitudes to packaging and recycling, March 2007
• Onus on retailers to reduce packaging used
• Onus on retailers to think of recycling when specifying packaging materials
• Packaging sceptics influencing attitudes
• Biodegradability has widespread support
• Modest enthusiasm for returning packaging to stores
• Returnables and refillables unlikely to be viable
• What Are People' s Perceptions of Packaging and Are They Proactive Recyclers? -- Detailed Consumer Demographics
  • Figure 46: Most widely held views about packaging and recycling, by demographic sub-group, March 2007
  • Figure 47: Other views about packaging and recycling, by demographic sub-group, March 2007
  • Figure 48: Consumer attitudes to packaging and recycling, by store shopped, March 2007
  • Figure 49: Consumer attitudes to packaging and recycling, by store shopped, March 2007
  • Figure 50: Consumer attitudes to Packaging and recycling, by store shopped, March 2007
  • Figure 51: Consumer attitudes to Packaging and recycling, by store shopped, March 2007
  • Figure 52: Consumer attitudes to Packaging and recycling, by store shopped, March 2007
• Consumer Insight -- Typology Analysis Identifies the Most and Least Aware and Active Consumers
• Key findings
• A third of people are ethically aware
• Over four in ten people are apathetic to these issues
• Conclusion -- customer communication is key
• Consumer typologies
• Group 1: Ethically aware and motivated (idealistic) -- 35% of respondents
• What do they think?
• Who are they?
• Why are they important?
• Group 2: Unconcerned -- 41% of respondents
• What do they think?
• Who are they?
• Why are they important?
• Group 3: Ethically aware but realistic (practical) -- 24% of respondents
• What do they think?
• Who are they?
• Why are they important?
• Which retailers have the greenest and most ethical shoppers?
• Consumer Insight -- Typology Analysis Identifies the Most and Least Aware and Active Consumers -- Detailed Consumer Demographics
  • Figure 53: Consumer typologies, by attitudinal statements, March 2007
  • Figure 54: Consumer typologies, by demographic sub-group, March 2007
  • Figure 55: Consumer typologies, by stores used, March 2007