The Tip of the Iceberg: Climate Change, Lettuce Shortages, and Tesco’s Efforts to Adapt its Supply Chain

In the face of global warming and extreme weather, how will Tesco respond to keep Brits supplied with lettuce all year round?

The sKale of the issue – supply chain exposure to extreme weather

One of the more unusual news-stories in the UK this year was Tesco’s announcement that it was going to ration sales of lettuce and other veggies to British consumers [1] (Figure 1). This action by the world’s fifth-largest grocer and retailer prompted a plethora of puns in the media. But behind the headlines was a more serious story. The vegetable shortage was caused by poor growing conditions in Spain and Italy, which experienced record levels of rainfall – the type of extreme weather increasingly common due to climate change [2].

Tesco has cause for concern. With 6,809 stores located in 12 countries in Asia and Europe [3], it imports produce from across the world to satisfy customers that have come to expect year-round availability of groceries, regardless of seasonality. But as the ‘courgette crisis’ this year highlighted, Tesco’s core operations are exposed to the impact of global warming and extreme weather. As a huge global business that produced 3.89 million tonnes of CO2e last year [4], Tesco cannot ignore its contributions to the issue.

Figure 1: Social media hysteria at lettuce shortage [5]

‘Lettuce Romaine calm’ – responding to the challenge

Tesco’s response has focused on a long-term strategy to reduce its carbon footprint. The first move has been to drive accountability and transparency. Earlier this year, the retailer developed targets through the Science-Based Targets Initiative (SBTI) [6] to reduce scope 1 and 2 Green House Gas (GHG) emissions 60% by 2025 and scope 3 GHG emissions 17% by 2030 as compared to a 2015 baseline (see Figure 2 for current levels). These targets are designed to set emissions reductions on the course needed to limit global warming at or below a 1.5 degrees centigrade increase.

Tesco must now turn these commitments into results. It aims to run on 100% renewable energy by 2030 [7], which it plans to achieve by buying more renewable energy in the short term and by investing in on-site solar power generation and storage capacity in the medium term. It is also striving to half the carbon intensity of stores and distribution centres by 2020 compared to 2006 through initiatives such as energy efficient vans and more efficient logistics management [4]. Whilst Tesco has already invested a hefty £700m in energy and refrigeration efficiency measures since 2007, this isn’t without benefit – it has generated £200m of electricity savings per year as a result [7].

Working with its 15,000 suppliers is also critical. Tesco has announced plans to encourage suppliers to set their own science-based targets, helping them to share best practice through a knowledge hub and reducing the cost of investments in energy saving measures through collaborative purchasing schemes [8]. It appears to be on the right track – out of 300+ companies which have signed up to the SBTI, Tesco is one of only three major corporates currently on target [9].

Figure 2: Tesco’s carbon footprint for 2016/17 [4]

• Scope 1 emissions, or Direct GHG: ‘emissions from sources that are owned or controlled by the organization’
• Scope 2 emissions, or Energy Indirect GHG: ‘emissions from the consumption of purchased electricity, steam, or other sources of energy (e.g. chilled water) generated upstream from the organization’
• Scope 3 emissions, or Other Indirect GHG: ‘emissions that are a consequence of the operations of an organization, but are not directly owned or controlled by the organization’

 

 

Turning a new Leaf – opportunities for further progress

Tesco has gone further than most in its efforts to mitigate further global warming. But given climate change is already underway, management appears to have put less emphasis on how to improve the resilience of its supply chain to the inevitable future shocks from extreme weather. In the short term, management should consider how to diversify where produce is sourced from (the Murcia region in Spain, which was hit during the lettuce crisis, provides 80% of Europe’s fresh produce in winter months). In the longer-term, Tesco should support greater self-sufficiency of British food production by increasing the use and capacity of local suppliers: the UK has a £21 billion trade deficit in food and agricultural produce, and only 23% of fruit and vegetables come from home soil [10] (Figure 3). With supply chain risks only amplified by the uncertainties surrounding future trade deals in a post-Brexit world, competitors have been quicker off the mark to strengthen their local sourcing, and Tesco needs to catch up [11]. In addition, given Tesco’s scale of purchasing power, it could go further than ‘encouraging’ its suppliers to improve their environmental record. Tesco has proffered the carrot to suppliers by offering to support them make the necessary changes to reduce their carbon footprint. But there also needs to be a (celery) stick. One such approach could be to impose procurement criteria that requires supplier compliance with certain environmental standards.

Tesco faces several decisions about how to reduce the environmental impact of its supply chain. However, this case study sparks debate about much bigger questions. As environmentally-conscious consumers, do we expect too much from supermarkets to provide what we want, when we want it? Given their role in setting arguably unrealistic expectations with consumers around global year-round supply, should supermarkets try to shift consumers back to more local, seasonal consumption habits? Where does the balance of responsibility for our lettuce lie?

Figure 3: The case for more local produce [10]

(Word count: 799)

Sources

[1] Zlata Rodionova, “Tesco implements three lettuce limit as European vegetable stocks hit by extreme weather”, Independent, February 3, 2017, http://www.independent.co.uk/news/business/news/tesco-uk-supermarkets-three-iceberg-lettuce-limit-vegetables-broccoli-spinnach-courgettes-morrisons-a7560571.html

[2] Hansen, J., M. Sato and R. Ruedy (2012). ‘Perception of Climate Change.’ Proceedings of the National Academy of Sciences of the United States of America 109(37): E2415-E2423, http://www.pnas.org/content/109/37/E2415.full

[3] Tesco PLC, “Key Facts”, https://www.tescoplc.com/about-us/key-facts/, accessed November 2017

[4] Tesco PLC, “Our carbon footprint”, https://www.tescoplc.com/little-helps-plan/products-sourcing/reducing-our-impact-on-the-environment/our-carbon-footprint/, accessed November 2017

[5] Sara Neill (@lmSaraNeill), “Supermarket rails against lettuce shortage rages”, Twitter, February 2, 2017, 3.23pm, https://twitter.com/ImSaraNeill/status/827175677128503297/photo/1?ref_src=twsrc%5Etfw&ref_url=https%3A%2F%2Fwww.thesun.co.uk%2Fnews%2F2773682%2Fvegetable-rationing-lettuce-broccoli-courgettes-supermarkets-uk%2F

[6] Science Based Targets, “Companies Taking Action”, http://sciencebasedtargets.org/companies-taking-action/, accessed November 2017

[7] Pilita Clark and Mark Vandevelde, “Tesco turns to solar in Paris climate accord pledge”, Financial Times, May 14, 2017, https://www.ft.com/content/536fb55a-374e-11e7-bce4-9023f8c0fd2e

[8] Kené Umeasiegbu, “Tesco commits to use 100% renewable electricity by 2030”, Tesco PLC blog, May 15, 2017, https://www.tescoplc.com/news/blogs/topics/carbon-renewable-electricity-tesco/

[9] “Target commits to 100% renewables as part of science-based targets approach”, Edie.net, October 20, 2017, https://www.edie.net/news/10/Target-commits-to-100–renewable-as-part-of-science-based-targets-approach/, accessed November 2017

[10] Tim Benton, “British Food: What role should UK producers have in feeding the UK?”, Wm Morrisons Plc, February 17, 2017, http://eprints.whiterose.ac.uk/112876/1/BritishFoodReportFeb2017.pdf

[11] Zlata Rodionova, “Morrisons to hire 200 British suppliers after warning only half the food eaten in UK comes from the UK”, Independent, February 3, 2017, http://www.independent.co.uk/news/business/news/morrisons-hires-uk-suppliers-local-produce-warning-a7585216.html

Previous:

Cuba Libre: Airbnb’s Approach to Diplomacy in Cuba

Next:

“A-Tesla”, Can Elon Musk Revolutionize The Auto Industry?

4 thoughts on “The Tip of the Iceberg: Climate Change, Lettuce Shortages, and Tesco’s Efforts to Adapt its Supply Chain

  1. It is excellent to hear that a large corporation such as Tesco is taking such an active role in minimizing their carbon footprint and impact on global climate change. Hopefully other companies will follow their lead and also realize some of the potential savings this strategy can bring such as the 200 million pounds in energy savings you highlighted. To your question of do we expect too much of our supermarkets I think the answer is absolutely yes. As consumers many of us expect the supermarket to have all of our favorite fruits and vegetables year round. However, this can be a dangerous expectation as it puts pressure on supermarkets to source food from global suppliers as opposed to local ones which leads to significant increases in greenhouse gas emissions from transportation and storage. A study found that local produce in the UK contributed 95% less greenhouse gas emissions than those sourced from elsewhere. (1) I think to have a truly sustainable marketplace we are going to need to have changes in both customer expectations and how companies meet those expectations.

    (1) MariánMichalský, “Greenhouse gas emissions of imported and locally produced fruit and vegetable commodities: A quantitative assessment,” Science Direct, December 12, 2014 http://www.sciencedirect.com/science/article/pii/S1462901114002469

  2. Tesco should be applauded for its recent steps in combating climate change. The author’s question of whether a focus on seasonal purchasing (vs. year-round variety) could make sense is worth further consideration.

    The intuitive economic answer for grocery stores is to provide as much variety as possible to consumers, year-round, to the extent that there is demand for it. But it may be worth testing this theory with a focused marketing campaign around food seasonality and the environmental benefits of purchasing produce only when it is in-season. Testing such a campaign at small-scale in a few stores would likely be cheap, and may produce surprising results. Would environmentally conscious consumers value such a corporate decision enough that they could be swayed to shop at Tesco because of it? If so, adjusting to a seasonal produce strategy could actually yield new, more loyal customers who previously didn’t consider Tesco. It is worth running this experiment and doing a controlled cost-benefit analysis; while the industry has historically pandered to demand for breadth, it is possible that Tesco could actually discover an economic case for shifting to a different model in an era of environmentally-conscious consumers.

  3. While it’s easy to suggest that we should romaine calm in the face of the challenges being faced, in the food cultivation space, climate change poses a truly existential threat. Admittedly, as noted in the above article (great topic!), Tesco has taken large steps to confront and tone down its own environmental impact; however, I believe that markets overall can be too generous when giving credit to the company given that its changes have largely effected the environmental impact of the company specifically as opposed to that of its supply chain.

    In most cases I would pear-ish the thought that we could hold the company to a standard that suggests a broader societal responsibility, but in the case of such a ubiquitous, influential company as Tesco, I believe that they have a legitimate opportunity to shape the social discussion by making changes to the produce they offer such that it becomes less environmentally onerous.

    It would be simple to lettuce tell ourselves a story that justifies why continued consumption of outdoor grown, off-season produce is the norm and to continue to purchase as if it was. But, at risk of sounding a bit corny, if we want to change preference and behaviours, it’s time to turnip the scrutiny on consumer expectations. Doing so would be challenging, and there would certainly not be mushroom for error, but Tesco is uniquely positioned to do this in a way that could actually be sustainable given their massive footprint and scale with suppliers. As such, I believe it’s worth corn-sideration.

  4. I agree it’s great to see Tesco playing an active role in managing its carbon footprint. I agree that a key opportunity gap for Tesco lies in managing its sourcing rather than focusing purely on energy consumption in its facilities.

    My struggle with the expectation for year-round produce lies in the tension between acting as environmentally-conscious consumers and maintaining nutritional diets around the world. To source locally means that certain regions will suffer from a lack of nutritious fruits and vegetables due to the years of outsourced food production. If all regions actually grew a balanced supply of produce, then sure, local sourcing would be a great next step. I worry that in reality, production will be too slow to change even if firms like Tesco try to accelerate a change towards more local, seasonal consumption.

Leave a comment