Are retailers really prepared to go green?

Pick up a paper, turn on the television, visit the cinema or walk into a shop, and the chances are that you will be bombarded with information on the environment, ethical trading, sustainability and the whole carbon family comprising footprints, labelling, emissions and offsets.

Inevitably, some aspects of this barrage of information being thrown into the marketplace by the 'Green Lobby' are having an effect on the commercial practices of the retail industry and on the behaviour of shoppers.

The big question is how exactly do these effects manifest themselves? Regardless of what consumers hear or read about the environment there are no doubts that they like the idea of being green. Thus the recycling of home waste goes down well even if it provides them with nothing more than something to talk about down the pub.

Subscribe to MoneyWeek

Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Get 6 issues free

Sign up to Money Morning

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Sign up

But consider how many people would continue recycling at home if they had to pay for it to be collected? The reality is that there would be a massive fall-off in numbers. Deep down most consumers' green efforts would come to a swift end if there was a cost attached, or it became inconvenient.

Another issue with many consumers' 'green credentials' is that there is a divergence between what they claim to do, and their actual behaviour. This is leading to some seriously conflicting results in surveys.

Rowland Hill, sustainability manager at Marks & Spencer, recently spoke at the recent Responsible Retailing Summit in London. He revealed statistics from GlobeScan that showed as many as 70% of people believe individuals have to take more responsibility for climate change. He then said that only 35% of people considered themselves 'motivated' or 'potentially motivated' to be more environmentally-friendly.

This means the remaining 65% are unlikely to behave in a greener way unless they are actually forced to do so. This conflict is highlighted by their shopping patterns. The Henley Centre found that while 34% claim to be eco-friendly shoppers, a puny 6% actually deliver on this when out shopping. And while an impressive 53% of consumers claim they buy Fairtrade products, the reality is that only 30% actually do so.

Further research, from a confidential source, reveals that 13m shoppers bought a green product over the past 12 months but of these less than 700,000 buy across all forms of ethical products - such as organic, Fairtrade, Ecover and free range.

The bottom line for many people is that they recognise the likes of Fairtrade are great in principle, but they will not veto their favourite brand and switch to ethical products - regardless of the environmental impact.

But despite the reluctance of millions of consumers to switch, there is consumer pressure in some areas, with shoppers demanding tangible change from the retail industry. A key area of focus is the reduction of packaging. This provides a tangible benefit for shoppers, since they are being made increasingly aware of councils' proposals to charge households for collecting their rubbish.

Packaging is where retailers currently achieve the lowest levels of customer satisfaction because many people believe they are failing to cut back on unnecessary packaging. According to recent research from grocery experts IGD, as many as 35% of respondents regard packaging as their main area of dissatisfaction with retailers' products. This leads all other areas of dissatisfaction, including delivering value for money, which was only thought key by just 11% of people questioned.

Despite the consumers' continued discontent in this area, retailers are making some progress, with the major retail groups running various initiatives to reduce the amounts of cardboard, plastic and paper wrapped around their products. It represents a key part of the much-publicised 'Plan A' environmental initiative from M&S, and is a major component of all the supermarkets' green strategies.

One major problem retailers and manufacturers have with implementing green initiatives is that they will almost inevitably end up being regarded as providing a competitive advantage to be exploited as any other trade secret is. As such, this will put the mockers on any sharing of knowledge and expertise that might benefit the planet. A director at Tesco says: 'People say this is not a place where you can get competitive advantage, but then they go and do something else.'

This is why retailers are not sharing delivery trucks or suppliers who manufacture in an environmentally friendly way. To some more ethically-minded retailers this is hard to accept. Soap retailer Lush, for one, is incredulous that other retailers do not share information on environmentally sound suppliers.

The bottom line is that commerciality overrides the green issue for retailers. One of the many areas where the dichotomy over profits versus sustainability rears its ugly head is, of all places, packaging again.

The rise of Retail Ready Packaging (RRP), which is being increasingly used by all the food retailers, enables products to be delivered to stores and almost immediately placed on the shelves. Its use is on the rise because it increases retailers' efficiency, but the downside is that it increases the amounts of packaging used, since products still need to be protected during transportation.

'There is an obvious dilemma here. If retailers want to reduce packaging but they've also just got their suppliers to invest in plant that does RRP, that sticks a lot more cardboard and plastic around the products,' says the Tesco director.

It is undoubtedly because of these conflicts that consumers have serious questions about how committed retailers are to their green activities. This suspicion appears justified, if a recent survey from SEE Potential is to be believed. It found as many as 41% of UK managers believed that CSR (Corporate Social Responsibility) was just tokenism, instead of having a valuable role to play in business.

If this really is the case, then it is not surprising that an Ipsos MORI poll found a mere 5% of people believe retailers are doing as much as they can on social and environmental issues, and that a massive 79% reckon companies are pretending to be ethical just to sell more goods. Although this latter finding must put fear in the heart of the Green lobby, it is undoubtedly true. Retailers are more than willing to admit (behind closed doors, mainly) that they are in the business of making money, and that being green is a subsidiary part of this.

Getting the board to sign off on a green initiative that does not ultimately add to the top and bottom lines is unlikely to happen, according to Richard Ellis, group head of CSR at Alliance Boots. When speaking at the Responsible Retailing Summit he stated: 'If it drives profits and our brand values then [our private equity owners] KKR are interested as we can describe what is good economically and not just socially.' He highlighted a joint project with The Carbon Trust that cost £1.1m to implement, but which generates £1.35m of annual savings and reduces the company's carbon dioxide usage by 10,000 tonnes per annum.

Thankfully for retailers, at this relatively early stage in the 'greening' of the industry, there is plenty of just this type of 'low-hanging' fruit to be picked off before any of the more painful (unprofitable) decisions have to be made.

To edit and adapt their product range down to only those products that adhere to green principles will be a quantum leap for most retailers - especially if it involves passing any price increases on to the consumer. Retailers are likely to make a coldly calculated assessment of whether the planet was really worth the possible drop in sales before increasing their prices.

By Glynn Davis for The Fleet Street Letter