Ethical Performance
inside intelligence for responsible business


meeting the challenge of winning a lifetime’s loyalty from customers

June 2006

Reading Tesco’s latest corporate responsibility review, it is hard to imagine how anyone could have a bad word to say about the company. The UK’s biggest retailer is the best performer in its sector in Business in the Community’s Corporate Responsibility Index. It is putting £100million ($185m) into a green technology fund – twice what the UK chancellor of the exchequer promised in his recent budget. A full 90 per cent of new stores will be built on brownfield sites, and the company is even giving its competitors a helping hand by supporting Sedex, the online system for sharing data on labour standards at far-flung production sites.

Even so, attacks on the company are now cropping up with greater frequency: planning disputes, grumblings from suppliers, the prospect of another competition review. Overall the underlying theme is the company’s overweening power. But Tesco is not Wal-Mart. The US retailer did not acquire its present poor reputation overnight, instead spending years with its head stuck in the sand before belatedly taking remedial action. By contrast, Tesco is remarkably quick-footed in its response to sensitive issues, has a sound track record and is good at listening to its critics.

The challenge for the UK retailer now is to pursue sustainability policies for the long term without losing commercial advantage. Introducing a community element to its management system is a good start (see page seven), as is the ten-point plan unveiled by chief executive Sir Terry Leahy. Halving average energy use over ten years in all its buildings will help the bottom line, as may selling more local produce, while making it easier for customers to recycle certainly sends the right message.

Tesco may have won the latest heat in the supermarket recycling beauty parade. But more than any other retailer, it is sitting at the point where climate change, healthy living and urban regeneration intersect. That is not a comfortable place to be. Sir Terry is right when he says the battle to win customers in the 21st century will increasingly be fought not just on value, choice and convenience, but on being good neighbours and active in communities and on the environment. For Tesco to prevail, he needs to show more vision. Winning customers’ loyalty for a lifetime – the company’s declared aim – will require a much more co-ordinated strategy in these areas. Admirable though they are, recycling, giving money to charity and energy efficiency are the easy bits. But the dots need joining up. Sustainability is starting to emerge as a market differentiator and much tougher business challenges, such as food miles to the sustainable procurement of products, lie ahead.

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