Every little bit helps suppliers

12th March 2012


Tesco

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IEMA

Tesco reveals the innovative activities it uses to encourage its diverse supply chain to adopt more carbon-efficient operations

In 2009, Tesco set itself the ambitious target of reducing the carbon emissions of the products in its supply chain by 30% by 2020.

As one of the largest retailers in the world, selling more than 70,000 different products, the challenge is considerable – the carbon emitted in growing, manufacturing, processing, transporting, retailing and using its products adds up to about 10 times the supermarket chain’s direct carbon footprint.

Tesco has been cutting its carbon emissions for years as part of its climate change strategy to become a zero-carbon business, in terms of its own direct carbon footprint, by 2050. As a result, it has reduced its energy costs by more than £200 million annually.

The retailer already has several zero-carbon sites in its property portfolio, including UK zero-carbon stores in Ramsey, Bourne and Welshpool, a zero-carbon training academy in Korea and a new energy-efficient distribution centre in China. By relocating distribution centres to better service stores, reducing maximum fleet speed and introducing bigger lorries, Tesco now emits 20% less carbon per case of delivered goods than in 2007.

A collaborative approach

Unsurprisingly, Tesco’s supply chain is a huge and complex web – it has thousands of suppliers across the globe, some of which are huge multinationals themselves, others small local growers producing one specific product for the retailer.

Through top-level analysis, Tesco knows that approximately 55% of the carbon footprint of the products it sells in the UK arises from its supply chain, with about 10% of the remaining emissions attributable to Tesco’s distribution and retailing operations, and up to 35% from customer use and end-of-life disposal.

From the outset, although the retailer has taken a leadership position on reducing emissions in its supply chain, it has been determined to achieve its environmental aims through collaborative partnerships with suppliers.

As Andrew Yeo, head of supply chain carbon reduction, comments: “We don’t pretend to be the experts, and some of our suppliers may have better examples of good practice than us – it’s just as much about our suppliers educating us, and each other. We have not imposed any hard and fast standards for our suppliers to meet because it’s about us working together to reduce our collective carbon footprint.”

Yeo says that Tesco is still developing a real understanding of the detail of its supply chain carbon footprint – not surprising, given the extent of its supply chain activities. In 2010, the company asked all suppliers to its UK business to complete questionnaires on their carbon-reduction, water-saving, waste and packaging projects.

Since 2008, it has also measured the carbon footprint of about 1,100 of its products, the largest footprinting effort that any retailer has undertaken to date and a huge investment on the part of Tesco, says Yeo. Around half of these product footprints have now been certified by the Carbon Trust and a significant number are labelled with the Carbon Reduction Label.

Because of the scale of the challenge – and therefore opportunity for substantial carbon reduction, Yeo is quick to point out – Tesco has adopted a targeted approach to working with its suppliers.

This strategy applies to the areas of the supply chain Tesco focuses on first and the type of projects it initiates – it makes sense for the retailer to concentrate on “carbon hot spots” as these frequently represent the biggest opportunities to cut carbon.

As part of this work, Tesco is running several pilot projects to drive carbon reductions across its supply chain (see panels below). Although these initiatives are concentrated mainly on food production and transportation, and the larger-volume sales, Tesco is also looking to measure the carbon impact of all the clothing products it sells.

Having done so, it will target the hot spots in manufacturing and develop best practice that can be shared across the industry. One example is working with Tesco’s clothing and electrical suppliers in China, helping them to be more energy efficient and retrofitting their factories accordingly.

The knowledge hub

An illustration of Tesco’s collaborative approach to encouraging more carbon-efficient behaviour across its supply chain is the more than 350 suppliers in over 10 countries that have joined the retailer’s online “knowledge hub”.

The hub is a web-based forum for suppliers to share carbon-reduction experiences through a variety of seminars, discussions and educational visits.

The number of subscribers to the forum has increased steadily since its launch in 2010. Managed by 2degrees, a specialist online sustainability network, the hub hosts fortnightly webinars and other internet-based events, not even necessarily involving Tesco’s own input.

“The online forum is not about us talking to suppliers necessarily,” comments Yeo. “We invite guest speakers and often the dialogue and information exchange between suppliers is completely independent of our involvement – although 2degrees very actively manages the content on our behalf to ensure it is accessible, lively and engaging. But the focus is on our suppliers sharing best practice on a daily basis to help them gain the confidence they need to invest in carbon reduction.”

Tesco also promotes a number of face-to-face opportunities for suppliers to engage with its carbon-reduction goals, including a conference in March 2011 that brought together more than 200 suppliers to hear about Tesco’s vision and work in this area.

In September 2011, the retailer hosted its first supply chain awards ceremony. The event showcased suppliers that had successfully reduced their carbon emissions. Yeo says there were some impressive applications from Tesco’s suppliers, including GlaxoSmithKline, Arla Foods, Park Cakes, Coca-Cola, Italian tissue producer Sofidel and organic vegetable company Tio.

The award for best carbon-reduction innovation went to Branston, a supplier that completely rethought its processes and made some very ambitious investments in new technologies that have seen its energy use reduce by 40% and its water consumption by 60%.

Greenvale, one of the UK’s leading potato suppliers, carried off the award for best carbon-reduction strategy for introducing measures such as wind turbines, “cascade” water recycling plants, solar PV, LED lighting, a refrigeration replacement scheme, a motor replacement policy and staff awareness training.

Robert Wiseman Dairies won the best employee engagement award for developing an “environmental excellence roadmap”, a flexible tool allowing sites to develop their own local carbon-reduction campaigns.

In East Kilbride, the dairy came up with the idea of a site treasure hunt, encouraging individual employees to identify opportunities (also known as “treasure”) to reduce the site’s environmental impact. When treasure was identified they were provided with the tools and coaching to deliver the project themselves.

One simple idea was to put red, amber and green stickers on electrical equipment in the offices to identify when they can be turned off – green can be turned off if not in use, amber can be turned off at the weekend only and red can’t be turned off at all.

Other ideas included turning off chill compressors and compressed air supplies to certain areas after production and not having a boiler constantly on standby. In total, employees identified more than 300 tonnes of carbon savings a year through their treasure hunt.

Onwards and downwards

As was noted earlier, Yeo is well aware that the challenge facing Tesco, to reduce the carbon emissions of the products in its supply chain by 30% by 2020, is an ambitious one. And the path ahead is a long one. But it is a journey that Tesco is fully committed to completing.

As Yeo concludes: “Combating the impact of climate change is a huge undertaking, but as a responsible global company we want to do the right thing. Developing a more sustainable business will help us to build more robust and resource-efficient operations and supply chain – therefore our environmental aims are inextricably linked to our commercial priorities.”

By the glass

As a high-selling and potentially high-carbon product, given its typical production and transportation patterns, wine is an obvious choice for a carbon-reduction project. Tesco has particularly focused on reducing emissions in the packaging and transit of wine, looking at opportunities for bulk distribution and local bottling.

The retailer is working with some of its bigger suppliers to ship the wine in large containers and bottle it in the UK – this method saves dramatically on carbon emissions compared with the carbon footprint from shipping wine in bottles across the globe.

In 2007, the supermarket chain also launched its first “wine barge”, a supertug carrying huge wine tanks from abroad via Liverpool Port and destined for bottling plants close to Manchester. From the outset this new approach succeeded in taking 50 lorries off the road every week and reducing carbon emissions by 80%.

Working with suppliers to make the bottles more lightweight is the other main focus of Tesco’s wine initiative. So far this has involved reducing the weight of the glass in one bottle from 550 grammes to 350g, greatly cutting the overall weight of the bottles during transportation and aiding more carbon-efficient end-of-life disposal too.

But care has to be taken when developing these innovative, carbon-reduction solutions, says Andrew Yeo, head of supply chain carbon reduction at Tesco – if the glass was too thin, for example, it could shatter and the end result would be counter-productive. There are other considerations to take into account as well, such as customer perceptions and the compatibility of the product with the packaging. Tesco has also experimented with plastic bottling of wine, but it was not generally well received. It is also planning to trial recyclable cardboard-based wine bottles later in 2012.

The milk round

Tesco’s milk pilot builds on research by the Tesco Dairy Centre of Excellence at the University of Liverpool, where researchers have been monitoring whether giving cows different food will improve their digestion and reduce methane emissions. The retailer’s analysis shows nearly 75% of its milk’s CO₂ emissions are associated with the farm where it’s from, in part due to the link between cows and methane.

Individual carbon footprints of dairy farms are being measured to enable farmers to compare their environmental performance, identify areas for improvement and take practical steps to reduce emissions through better on-farm practices, such as manure management.

With more than 700 farms supplying milk exclusively to Tesco, the scale of this project is considerable, and has a correspondingly large opportunity for encouraging CO₂ cuts. To help achieve this goal, the retailer is working through the “Tesco sustainable dairy group” (TSDG). The TSDG has identified four key areas to improve efficiencies and reduce costs on farms, of which one is reducing environmental impacts.

The carbon footprints of more than 400 farms are in the process of being analysed and, once complete, the TSDG plans to share good practice among its dairy suppliers through a series of regional roadshows in the coming months. Andrew Yeo, head of supply chain carbon reduction, emphasises this initiative is not about Tesco dictating new working practices to its suppliers; rather, the focus is on farmers sharing experiences, challenges and information to improve efficiency.

A key emphasis is on the cost-saving opportunities dairy farmers can realise, as well as CO₂ reductions, through practical steps.

Canning carbon

The carbon footprint of the iconic baked bean was calculated in 2009 and Tesco has been working with its own-brand supplier since to make operational changes to production and packaging to improve efficiency. As a result, the supplier has reduced the footprint of a standard can of baked beans by 13%; the tin-making process having accounted for the biggest proportion of CO₂ savings. It is envisaged the measures will be passed on to other canned products in future.

“When you take into account the amount of own-brand baked beans we sell in our stores, you can appreciate the scale of the carbon saving,” says Yeo. “That is one of the advantages of being a large global retailer – little changes can realise huge benefits because of the scale of operations.”

Tesco is now considering other, low-CO₂ packaging options such as cardboard and plastic, although environmental benefits have to be weighed together with operational and commercial considerations. For example, switching baked beans from tin cans to cartons would reduce the carbon footprint of the packaging itself, but would have knock-on effects with slower production rates increasing electricity consumption as the filling machines would have to run for longer, and would change the product process as the beans are partially cooked in the can.


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