Terry Leahy, CEO of Tesco – Interview

Terry Leahy, the CEO of Tesco speaks about incentivizing the consumer to live a low carbon way of life at Policy Network’s ‘Politics of Climate Change’ conference on 5th June 2009 at the LSE. Leahy argues a green way of life begins and ends with the consumer and they must be motivated not just through tax and regulation to change their lifestyle. He believes governments cannot see consumers as a problem by restricting and rationing our lives, rather create frameworks and markets that encourages both businesses and consumers towards a better way of life.

Terry Leahy’s speech on the politics of climate change:

“As we prepare for Copenhagen later this year, we need to confront a brutal truth: our approach to tackling climate change is not working. On current trends, we’re going to miss all the targets we have set ourselves. We’re in this situation because the climate change debate is based on a number of wrong assumptions. One is that climate change can only be solved by big governments and big technology.

I am not implying that government has no role at all – of course it does. Transport, planning, energy: these are just some areas where government has a key role to play in taking a lead and creating a framework for action. Nor am I downplaying the importance of technology, which will make a huge contribution. But we cannot be sure that technology alone will rescue us from climate change. Those technologies that can help us and are developed – such as nuclear power – rely not only on science and economics, but on the public’s attitude.

 

Which brings me to people. When this debate focuses on people, too often they are seen as part of the problem. We blame people for consuming and wasting too much, and flying and driving too often. Policy thinking on choice editing, taxation or personal carbon allowances is designed more to stop people doing things, rather than encouraging them to start doing things. If we want to turn people off the green agenda, the best way is to say we’re going to tax and regulate them to reduce their consumption.

Taxes, targets, regulations – this is the classical approach of central planners. We don’t seem to remember the lessons that planned economies taught us. Economies where the state decrees production and consumption – how much we can have, how much we can do, what is allowed and what isn’t – lead to stagnation, disillusion, chaos and collapse.

One lesson we learnt from planned economies is that going against the grain of people’s instincts and desires is inefficient and in the end unsustainable. This applies to cutting carbon too. In Ireland a carrier bag tax of 15 Euro cents per bag was introduced in 2002. It reduced carrier bag usage significantly, but by 2006 single-use carrier bag usage was increasing again. So the tax was increased to 22 Euro cents. In Tesco in the UK, we have achieved a 50 per cent and rising reduction in carrier bag usage not through a tax but by a simple incentive – one Clubcard point – worth about a penny – awarded for re-using a bag. Reward behaviour and you will find the economic cost is a fraction of the cost of penalising behaviour – and in the end will be better sustained because it goes with the grain of people’s lives.

A second lesson that planned economies taught us is that regulation and prohibition cannot begin to match the power of human initiative. The scale of emissions reductions we need to achieve – not just in advanced economies but across the world – is many times what can be achieved by this top-down approach.

I believe that climate change will only be tackled successfully by getting the best out of people, not by controlling or limiting what they can do. Every major challenge in the modern world – technological, medical or social – has been achieved by growing, successful market economies: by encouraging and helping people to do new things rather than by stopping people from doing things. My principle here is that you can be green and grow. Choosing between green and growth is absurd – especially at the moment, where the choice would be between low growth and no growth. Even if we for a moment think we can make that choice, do we really believe that China or India will embrace any policies that inhibit their growth?

Green growth requires a leap in technology to propel us from a high-carbon economy to a low-carbon economy. But that won’t be enough to cut carbon on the scale required. We need consumers, through their purchasing and their behaviour, to embrace these technologies, and the products and services that flow from them.

This is not a pipe dream. All our research shows that consumers want to go green – but they need help in making the change. If going green is just about taking things away from consumers, it is not going to work. But if you say to someone ‘here is a better life, a low carbon life’, you will get green consumption and green growth. As Arnold Schwarzenegger has said, you have got to make it cool to be green.

So we must inform, empower and encourage consumers to move to a low-carbon lifestyle. By building demand for low-carbon consumption, consumers will stimulate competition between businesses to produce greener alternatives than current products and services. They will also encourage businesses to lower their own carbon footprints, as consumers reward businesses that are green.

Think about it. When you are at the checkout, each “bleep” of the barcode sends a signal down the supply chain. Produce more of that product, or in the case of a product you have not chosen: “change what you produce”. Give consumers more information about products’ carbon footprints, and they will buy greener products. And when then happens, the supply chain will turn green.

So empowered and motivated consumers can be the key to a revolution in green consumption and the technological revolution that must underpin it. Get this right and consumers can have an influence way beyond the 60 per cent or so accounted for by their direct and indirect emissions.

At Tesco we’re putting this thinking into practice. First, we’re helping consumers make green choices – by giving them more information about products’ carbon footprints, for example. We’ve learnt a great deal about how we can reduce emissions and costs and about how we can influence customer behaviour. We have put carbon labels on over 100 products and today we are announcing that we’re now going to label our plastic bags, milk, bread, paper and home insulation service.

Secondly, we’re cutting emissions ourselves. Our targets for green growth are as tough as any set by the UK government. One is to ensure that on average all new stores we build emit half the carbon that an equivalent store emitted in 2006. Today I can announce that this year we will build in Ramsey, Cambridgeshire, a zero-carbon store – working with the Manchester Sustainable Consumption Institute to create a store that will not have a carbon impact in the way it is run.

Thirdly, in tackling climate change, collaboration is vital. Business, government and consumers are inter-dependent. Electric cars are an example: Manufacturers must improve the technology and governments must incentivise it if consumers are to embrace it. We too can play our part. So we’re going to begin by making a commitment to trial electric car charging points in some of our London stores.

This strategy is locked into the core of our business. Our aim is not simply to “green” Tesco, but to spark the creation of something much bigger – a mass movement in green consumption.

Which brings me back to my core point: consumers are agents of change. Trust them and we can begin to make real progress in the fight against climate change. To do that, we need a fresh approach, based on a simple belief: consumers are a force for good. Thank you for listening”.

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2 responses to “Terry Leahy, CEO of Tesco – Interview

  1. Terry’s idea on incentivizing the consumer to live a low carbon way of life using rewards is really great. He values consumer and he understands the importance of awareness and guidance. This can drive consumers to low carbon by choice and rewards. Products will have to show respective carbon units offsets. My proposal is to use a credit/debit program as a competition and reward towards those who will assist in lowering the statistics. The zero reference point will be the standard deviation over a given time. The results can be measured with metrics. Metrics will be published monthly and high score award winners can testify on their way of life and their choices. The change in behaviour through awareness & competition will be shown with the movement of the standard deviation.

    Dr. Marios Gerogiokas
    UPF-UK environmental Chapter

  2. I really want to buy into the enthusiasm and belief that Sir Terry espouses in the consumer – its uplifting. Unfortunately the science is against us on all accounts. The question I have for Sir Terry is does he believe in ‘one planet living’ and if he does, would that be possible if every town in the world had a Tesco in it, selling their standard offering, with all those amazing deals, BOGOF’s etc? The elephant in the room here is not so much sustainable consumption, but how do we consume less, a lot less than we currently do and maintain our standards of living? How can Tesco help people consume less, but have more? If that effected revenue growth, would that be acceptable to the company? 9 billion people, thats lots of buy one, get one free deals to get through the supply chain?

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