Ethical Retailing Memo: May 'The Force' Be With You: Tesco's Sir Terry Leahy to Describe His Chain as 'A Force for Good' in Speech

In a speech tonight, Tesco plc. CEO Sir Terry Leahy will tell a group in London that Tesco, the United Kingdom's largest retailer and the third biggest in the world, is a force for social and economic good, according to a report in today's Guardian newspaper.

Giving the distinguished Sir Roland Smith lecture in London this evening, Sir Terry will offer a laundry list of economic and social goods provided by Tesco, which he will say makes the giant retailer a "force for good" in society, according to a preview of the speech obtained by the Guardian. Among the social goods Sir Terry will describe in his speech titled, "A force for good in society: supermarkets and sustainable consumption," include:

>Lower food prices and job creation: Tesco has cut prices by 30% over the past decade and created over a quarter million jobs, Sir Terry says in tonight's speech. CEO Leahy says the 30% cut in retail prices has benefited the regular Tesco shopper by 5,000 British Pounds over the last decade. Sir Terry will also say Tesco has created about 260,000 new jobs in the last decade, which he claims amounts to a new job created by the retailer every 20 minutes.

>Healthy eating choices for society: Tesco has contributed to healthy eating by now offering over 1,000 varieties of fresh fruits and vegetables in its stores, Leahy will say. This is double the retailer's amount of fresh produce items over a decade ago. Ten percent of these fresh fruit and vegetable items are in the "value range," offering shoppers an extensive variety of fresh produce at reasonable prices, he will say, according to the Guardian. "Healthier eating is now a real choice for many on low incomes, not jonly the affluent few," Sir Terry says in his speech tonight." Surely a society in which more people can afford quality food and products is a society that is progressing," he will add.

>Tesco fights urban and rural blight: Leahy will say in his speech that Tesco helps redevelop and improve urban, suburban and rural areas by building and locating it's stores in rundown neighborhoods, which improves society overall and also creates needed jobs.

>Tesco's growth helps suppliers. Sir Terry will also point out he believes Tesco's growth is a force for economic and social good because it helps strengthen its suppliers and creates new businesses and jobs in the supplier sector. He says numerous new businesses have been created because of Tesco's growth.

>Taxes: Leahy will document that Tesco has paid $3.5 billion in taxes over the past decade, adding that the company is a supporter of the economy and social good through its tax contributions.

>Tesco and the environment: Sir Terry will also argue in tonight's speech that Tesco is a leader in energy conservation and greenhouse gas reduction through its various conservation and renewable energy initiatives company and store-wide. He will announce Tesco plans to cut carbon emissions from its stores by 50% by 2020, compared with 2006 levels, along with other company sustainability goals for the future.

Read the complete story from today's Guardian here for more details.

Tonight's speech by CEO Leahy is a full-frontal attack on Tesco's many critics in the UK. They argue the retailer has become more of a force for evil than for good by building too many stores, gaining too much market share, controlling too much of the food sector, using too much energy and emitting too much carbon; as well as generally trying to monopolize food retailing.

In fact, Sir Terry's speech sounds similar to us to a speech given in the U.S. just last week by Wal-Mart CEO Lee Scott. In his speech to over 7,000 Wal-Mart store managers, which we called Lee Scott's Social and Ethical Manifesto, he outlined similar goals and sited accomplishments in the areas of social and environmental policy for the mega-retailer from Arkansas. (Read our two pieces, January 25 and 28, about Lee Scott's social manifesto speech here.)

Both chains-- Wal-Mart and Tesco--face lots of global opposition to their respective rapid growth and all that comes with it socially and environmentally. It's clear Sir Terry, like Lee Scott, is trying to position Tesco as a force for social good by telling the chain's positive story as they see it and committing to doing much more in the social and ethical realm.

What we are seeing from both CEO's though--Scott, the head of the world's largest company and retail chain, and Leahy, chief of the world's third-largest retailer--is unprecedented. Both are moving far beyond the traditional role of a corporate CEO into the realms of social and environmental policy at large.

This fact demonstrates a changing social dynamic in which the leaders of mega-corporations can no longer focus primarily on company business. Rather, it seems they are increasingly needing to become one-part CEO and one-part social policy planner. This makes good sense to us because the impact their companies have on global society and the environment requires it. We're moving into a new era of corporate ethical and social responsibility and compnay CEO's are being held to higher social standards than ever before.

The response to tonight's speech by Sir Terry, which will likely be covered extensively by the print and broadcast media in the UK, should be interesting. And it has global implications.

Either way, Tesco, like Wal-Mart, is becoming an even more powerful force in global retailing. The valid question many will continue to ask is: Is it becoming more of a 'social force for good' or not? Tonight, CEO Leahy gets to describe why he thinks the answer is yes; and how he plans to do even more to prove he is right. After tonight's speech, the debate will continue full-force.

Ethical Retailing Memo: What Wal-Mart CEO Lee Scott Left Out of His Social and Ethical Manifesto

On Saturday we wrote about what we termed Wal-Mart CEO Lee Scott's corporate social and ethical policy manifesto speech, which he delivered last Wednesday to over 7,000 store managers at corporate headquarters in Bentonville, Arkansas.

Today, we would like to offer some constructive criticism (and positive encouragement) to CEO Scott regarding three key issues in the areas of social ethics and economics, health, and the environment we feel he left out of his social and ethical policy speech, and encourage him to address the issues we describe below.

Store-level employee wages

First, CEO Scott addressed a wide-range of social and ethical policy issues for Wal-Mart in his Wednesday speech. However, he left out one glaring and important one: The wages Wal-Mart pays its store-level associates.

Although it's the largest food retailer in the U.S., Wal-Mart pays it associates, particularly entry-level ones, less per-hour than all the other big chain supermarket retailers in the country. In the case of unionized retailers like Kroger Co., Safeway Stores, Inc. and a number of others, that hourly-wage disparity is huge.

We strongly suggest to CEO Scott that at a minimum, Wal-Mart immediately increase it hourly wage for entry-level associates by at least two dollars hour. Additionally, the retailer needs to bump-up its hourly pay-scale so that retail associates who've been with the company for one year also are making at a minimum two dollars hour more than they currently are paid.

As a comparative example, retail supermarket clerks in California who work for Kroger Co.'s Ralph's chain, Safeway Stores', SuperValu's Albertsons, Save Mart, Stater Bros., Raley's Superstores and others, make about $20.00 hour after one year of full-time experience. By contrast, a Wal-Mart Supercenter clerk with the same amount of experience makes about $13.00 -to- $14.00 hour in California.

Employee health insurance

Second, CEO Scott also failed to address Wal-Mart's employee health insurance plan in his Wednesday speech. This is not only an ethical issue, its a health and economic one as well. In a conference call with members of the media a couple days before the social manifesto speech in Bentonville, Wal-Mart announced that for the first time in the company's 45-year history, more than half of its employees had enrolled in the company health insurance plan. (Read our January 22 piece on the topic here.)

However, among the many statistics shared by Wal-Mart as part of the announcement, was the fact that over 7% of Wal-Mart workers have no health insurance at all. Further, over 25% of the company's employees are insured by a spouse or parent's health plan. Additionally, many others are on government programs like Medicaid.

We urge CEO Scott to improve Wal-Mart's health insurance plan significantly. When compared to the plans made available to store clerks who work for the California chains mentioned above for example, Wal-Mart's health plan is an embarrassment. These unionized clerks, who work for Safeway Stores, Kroger Co. and the like, have one of the best health plans in the United States. Co-pays are low, employee contributions are reasonable, and coverage is excellent. Further, where in the case of Wal-Mart, which has only half of its U.S. employees enrolled in its corporate health plan, Safeway Stores has nearly 100% of its store associates enrolled in its plan.

Increasing hourly wages for store-level associates and dramatically improving its corporate health plan are two social, ethical and health issues Wal-Mart must address. As a wise woman once told us, get your own house in order before you go out and try to save the world. We applaud Scott's larger social and ethical vision for Wal-Mart, but encourage him to get his house in order at the same time.

Superstores and the environment

The third issue CEO Scott left out of his social and ethical policy manifesto speech on Wednesday has to do with Wal-Mart's Superstores and the environment. Wal-Mart has made some great strides in the area of sustainability in the last few years, in our opinion. Further, the commitments Scott made in his speech Wednesday to store managers goes even further towards helping to make the company a "greener" and more sustainable one.

The one glaring issue Scott didn't address at all however are Wal-Mart's Supercenters in general from an environmental and sustainable perspective. Although the company has a few "green" prototype stores built (4-5) and is building a handful more, the vast majority of their Superstores are conventional ones. These stores leave much to be desired in terms of energy conservation elements and green design principles. We are talking about 98% of its Supercenters here.

By their very nature, Supercenters (or big box stores in general) which average about 200,000 square feet, are energy hogs. They're filled with electric lights, have hundreds of feet of perishable products' display cases that suck electricity, and require lots of energy to heat the huge stores in the winter and cool them in the summer. Big box stores also are by their very design located almost always away from the central city. This means customers have to drive some distance to get to them, requiring more energy use in the form of gasoline. The huge stores also have massive paved parking lots, which aren't friendly either in terms of reducing energy use.

Wal-Mart needs to do two things in our analysis: First, the retailer needs to make the "green" prototype stores the norm, rather than a cut-and-paste format that they use in a limited way. All new Supercenters should be "green" and sustainable Wal-Marts. Additionally, the company needs to embark on a major effort to remodel--say over a 5-year period--all of its U.S. Superstores so they meet at least the sliver (we would like to see the gold) standard for energy conservation set by the U.S. Green Building Design Council.

In his speech, CEO Scott revealed he has talked to automobile industry companies about having Wal-Mart sell electric and hybrid cars. He further said he envisions the retailer having wind turbines in its store parking lots where customers could recharge the electric and hybrid cars they buy from Wal-Mart.

We like this type of visionary thinking from Scott. However, we want to see some practicality combined with it. Its a long way off before electric and even "plug-in" hybrid cars are going to be on the market for Wal-Mart to sell, and for it to build wind turbines in its parking lots to recharge those renewable energy-powered vehicles.

However, it's not too far off at all for Wal-Mart to install those same wind turbines in its store parking lots--but use them to provide renewable energy to help power the store. Other retailers throughout the world are beginning to do this. It's time for Wal-Mart to let those wind turbines bloom in the parking lots CEO Scott. Then, when you do sell the electric and hybrid cars, they can be used not only to help power the stores, but to recharge those cars you will sell as well.

Wal-Mart recently completed the installation of solar panels on about 20 stores in California and Hawaii, along with putting solar panels on a new distribution center in the western region. We congratulate the company on that development, and suggest to CEO Scott that he dramatically excellerate the company's store-level solar power initiative.

It's feasible that a Wal-Mart Supercenter, with a full solar panel roof array and two or three modern wind turbines in its parking lot, could be able to obtain about 40% of the store's energy from those renewable sources. What a huge achievement that would be for the world's largest retailer.

Conclusion

By increasing the hourly wages of entry-level and one-year-plus store-level associates, enhancing the employee health insurance plan, and "greening" its Superstores in a more-rapid fashion, CEO Scott and Wal-Mart would demonstrate that on the socio-economic, ethical, health and environmental fronts, Wal-Mart is a company that not only does walk-the-walk, but believes in putting its own house in ethical order, along with embarking on a larger corporate social and ethical policy.