Tesco courts green lobby as profits soar

By Anita Awbi

- Last updated on GMT

Related tags Tesco Environmentalism

Britain's largest retailer has once again beaten analyst
expectations, hitting a new sales record of £41.8bn. But as it
unveils plans for greener technologies, environmental campaigners
fail to back the strategy.

Food giant Tesco today announced a 13 per cent rise in full-year group revenue to £38.3bn (€55.1bn), with international sales up 23 per cent in the year-ending 25 February 2006.

Profits hit £2.2bn, while UK food sales rose 10.7 per cent with Tesco.com bringing in nearly £1bn in sales - up 31.9 per cent on last year.

The company said it will release up to £5bn from property over the next five years, and much of this looks likely to go towards expansion and share buy-backs - making hay while profits rocket.

It plans to open 392 more international stores in 2006-07, adding 6.6m square feet of new retail space to overseas trading. The international division already makes up 56 per cent of all sales as investments in developing markets begin to pay off.

And 130 new Express stores will open in Britain in the next 12 months, as the firm focuses on organic domestic expansion.

These developments are expected to create more than 20,000 jobs worldwide in the coming year. And with a new £100m capital fund to invest in green technology, the firm is confident it can work to benefit local communities and the environment.

"Tesco works hard to bring real benefits to the communities we serve, the environment and the economy. This is recognised through our inclusion in the FTSE4Good and Dow Jones Sustainability indices,"​ it said in a statement.

But campaign groups are queuing up to point out the company's flaws in addressing environmental concerns and farmers rights.

Although the supermarket plans to install wind turbines at some new stores, and recycled 71 per cent of all store waste last year, Friends of the Earth (FoE) said this does not go far enough to address the firm's environmental impact.

"£100m is less than 0.5 per cent of Tesco's turnover - it's useful but not nearly enough,"​ FoE's food and farming head Vicki Hird told FoodandDrinkEurope.com.

"The chain's operations through supply, transport and packaging are hugely damaging to the environment - particularly its distribution network. Wind farms are not nearly enough to combat that."

Throughout the last year, Tesco opened 18 hypermarkets in Britain, with the Extra format now making up a total of 31 per cent of total UK sales area.

FoE claims this format seriously threatens the environment, and even with investment in solar energy and geothermal power these stores require greater supplier and consumer transportation and are inefficient buildings.

"With the knowledge that Tesco Extras are big leaky warehouses on the outskirts of town, it's hard to see how nominal investment in wind power will do anything,"​ Hird explained.

Tesco's plan to invest in greener technologies comes as organisations, including Tescopoly, farmers' groups and supply chain representatives, are worried about the firm's environmental, economic and social impact.

And the pressure is mounting following an Office of Fair Trading (OFT) inquiry into the alleged anti-competitive nature of the UK's biggest supermarkets Morrison's, Asda, Sainsbury's and Tesco.

On 6 April, Tesco submitted a response to the OFT on its proposal to refer the grocery sector to the Competition Commission (CC). But the OFT is yet to decide whether a full probe should go ahead.

But even without a full CC inquiry, Tesco may suffer from negative publicity surrounding the affair.

According to a recent YouGov brand-index survey measuring consumer attitudes to brands on a daily basis, Tesco's corporate image slipped following recent coverage of anti-Tesco campaigners calling for CC action.

And the company's latest dalliance with environmentalism, which comes off the back of a record-breaking financial statement, may go further to harm its public image rather than save it.

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