Environmental Trends and their Impact on the Supermarket Sector - Term Paper Example

Environmental Trends and their Impact on the Supermarket Sector ID ID Introduction The environmental issues are continuously increasing and their impact on the various business sectors is also considerably higher. The supermarket sector is one of the sectors which are immensely affected by the environmental trends. This paper discusses the key impact of environmental trends and issues on the supermarket sector. Some of the environmental trends affect the business in a positive manner and the others negatively. The businesses need to bring in changes into their way of doing business if they wish to benefit from the environmental trends, otherwise, the environmental trends can affect the businesses negatively. There are costs associated for the supermarket sector with the environmental trends. For the right way of producing food in a sustainable manner and to consume the food as well in sustainable ways, environmental impacts should be factored into the cost of products on supermarket shelves (Russell 2007) because the supermarket sector has to incur high costs as compared to any other sector when it comes to environmental trends. This is because it is one of the largest sectors in UK. This paper will firstly discuss the environmental trends and how important they are to the businesses and then move on to their impact on the supermarket sector. The positive and negative impacts are considered and finally a conclusion is presented. Environmental Trends The environmental trends are becoming an integral part of the economy and are thus affecting almost all the businesses. The environmental issues have now become a part of the business decision making due to their significant impact on the businesses. The importance of the environmental trends is so immense that it has been said by the former South African minister that (Black 2008) the "companies should have directors with environmental experience". Valli Moosa, the president of International Union for the Conservation of Nature says that like in all the other businesses we have marketing executives, accountancy executives and accountancy executives, there should also be environmental executives as well (Black 2008) who have a working knowledge of the environmental issues and can link the business and the environmental trends and can capitalize on their resources through mitigating the negative impacts from the business and in turn contributing to the environment as well. Environmental issues are basically defined as those problems which are created by environment. There are different environmental issues which are affecting the supermarket sector as a whole (Ellen, 2008). The environmental trends include a host of issues from reducing waste, recycling, reducing flood risk to efficiently utilizing energy sources, reducing carbon footprint and global warming. The climatic changes have impacted the biodiversity to a great extent, global warming is a huge issue due to the climatic changes and also as a result the depletion of ozone layer. The solutions to these as predicted so far include reforestation i.e. planting more trees and to use carbon sinks to absorb carbon dioxide. These all environmental trends have been impacting the businesses to a great extent as the businesses have to take into effect the negative impacts associated with these environmental trends. The business sector which is the most impacted by the environmental trends is the supermarket sector. The environmental trends specific to the supermarket sector are the carbon dioxide emissions, genetically modified (G.M.) food and the impact of climatic changes which has lead the supermarket sector to go greener and take measures which assist in mitigating the negative impact these environmental changes have been causing. The next section discusses the impact of the environmental trends on the supermarket sector in detail. Effects of the Environmental Trends on the Supermarket Sector The supermarket sector is affected by the environmental trends to a great extent as they have to change the way of doing business and take into account all the environmental considerations. Although this increases their costs but since the customers are also becoming more aware of these environmental issues, the supermarkets have to take steps so that the negative effects of the environmental trends can be mitigated. Along with 94% of the food supply industry regarding the environmental issues as either very much important (54%) or quite important (44%) to their businesses, the industry therefore has tried a lot to implement a number of other measures in order to improve all the environmental based responsibilities. These responsibilities basically include, recycling (93%), strategy of reducing packaging (83%); sourcing all the suppliers by taking into consideration all the environmental based criteria's of the suppliers (79%) and sourcing all the goods from all the renewable sources (61%) (Platt 2008). Some issues effects supermarkets in positive or negative way. For example; to be friendly to the environment they might get more customers and their sales will increase, or by forcing government or new legislations they might need to spend much more money on it. As much as they do good things their image will be good in consumers' eyes and this will help their businesses to prosper as well as they will achieve increase their sales. The supermarkets are pressurized by the environmental trends that the food suppliers that supply food to the supermarkets are causing such problems as water pollution as it costs more than 200 million per year in order to clean the water supplies because the food suppliers generate a lot of pollution from farming (Reilly 2007). Thus, the big supermarkets like Tesco, Sainsbury and Asda have a greater responsibility to select suppliers of food which are not causing damage to the environment. The supermarket sector also has the responsibility due to the growing environmental trends to do more sourcing more of food locally and reduce the pressures on the land and the environment. This has impacted the supermarket sector as their costs have increased. Supermarkets are criticized for hoarding, and by this means encouraging the making and selling of, genetically modified (G.M.) products. The supermarket business was being negatively affected by this environmental trend as the customers would not buy G.M. products when they got aware of its negative impacts. The supermarket sector had to respond to this so that this trend doesn't impact the business negatively. A number of supermarkets have taken steps in this regard and are restraining to sell G.M. products. For example, M&S is selling organic meat products; ASDA is now selling organic food at affordable prices, whereas Waitrose has the widest range of organic food offerings. Sainsbury is now not selling Skate and Husk as they were endangered fish and is now aiming to move more towards selling organic beef and other organic products (Sustainable Stuff, 2008). By taking into consideration the issue, the supermarkets responded to this environmental trend by selling more organic products which is now resulting in an increase in their sales and profits. Going Green Initiatives and their Impact on the Supermarket Business Transport, production and packaging of food make a huge impact on all over the environment. The purchased food accounts for about one third of the total environmental impact. Most of this food comes from different supermarkets, not basically thought of as eco-friendly organizations. But as nowadays the climate change is becoming one of bigger news every day, the major supermarket chains have therefore seen an opportunity in order to improve their reputations by doing some high-profile green initiatives like using reusable bags, limiting carbon emissions by becoming energy efficient etc (What price 2008). By using reusable bags, the supermarket sector can change its perception in people's mind as consumers will prefer buying from them and as a result their sales can increase and also a new image is attached to them as they incorporate the impact of climate changes. For example, Marks & Spencer started to charge 5p on its carrier bags called 'bags for life'; this initiative by M&S has built an image in customers' mind of an environment friendly organization and more than 80% of the customers supported this change (Stratton, 2008). These 5p per bag are given to environmental charity to Groundwork and this way the customers are also contributing to the environment when they are shopping at M&S. Tesco, Sainsbury and Asda also plan to follow the plan. Tesco introduced the concept of giving 'Green points' to its clubcard customers for reusing bags and it reduced 1.8 billion bags in last one year. Sainsbury also followed Tesco and gave points to its consumers for reusing bags and reminding them through SMS to bring bags with them when they come to the store for shopping (Osborne 2009). Sainsbury has also launched a full fledge plan of becoming the "Excellent" in responding to the environmental friendly changes. It has launched a program of "Green Stores" in which the supermarket stores will be aimed to conserve use of energy, water, waste, timber and land by the use of biomass boiler, contributing to cutting electricity, using lesser lights. And using recycled material in the construction of the stores (Drake 2008). This is a step which has impacted Sainsbury positively and their sales have increased as they are perceived to be the 'Excellent" supermarket contributing to the environment. The environmental trends although impact negatively to the supermarket sector but the businesses have to respond to the trends in order to get positive results from the environmental trends. Along with this Wal-Mart has also made a name for itself over the past year by taking up various environmental initiatives, which is also considered as an easy way in order to improve its image. By reducing packaging on all the food products and selling more energy light bulbs are the most important steps that Wal-Mart should be appreciated for, they must do much more in order to make amends for an environmentally unfriendly past. In the past, Wal-Mart has been guilty of storm water violation, air pollution and improper storage of the hazardous materials. Wal-Mart and all the other super stores have faced a lot of problems which were caused because of the different activities. These activities were known as environmental activities which caused many problems for other people (Ruben 2006). The impact of these initiatives on the supermarkets have been that the customers are supporting them in this initiative and when customers think of the supermarkets as being more environmental friendly, it is a positive effect on the supermarket sector as the customers will buy more from them to contribute to the environment and as a result the sales and profits of M&S, Tesco, Sainsbury and Asda will go up. The top 5 supermarkets; M&S, Waitrose, Tesco, Sainsbury & Asda were ranked as the top brands by the consumers in a survey by the environmentally friendly brands (Allen 2008). This is an achievement for these supermarkets and their brand image has improved due to the initiatives take to avoid using plastic bags, less emphasis on packaging and caring for the environment. Although the supermarkets are criticized on issues related to the food miles but the consumers appreciate their initiatives of avoiding the plastic bags and contributing to the environment. As Gandy says (Allen 2008): "People look for practical, substantive examples of action that they can relate to" This is the reason why the go green initiatives by the supermarkets have impacted in positive ways and lead to creating a brand image of these retail giants. M&S actually planned to reduce 25% of the environmental impact of plastic bag waste which is generated and it is found that it exceeded its target and reduced the bag waste by 40% (Osborne 2009). The supermarket sector has benefited from environmental trend of reducing plastic waste. Other measures taken by the supermarket sector as an impact of the environmental trend include Asda promising to reducing waste by stopping to send any waste to its stores by 2010 and by reducing the packaging that is there on all of the products of Asda by 10% at least, Tesco has initiated to include go green measures like powering the stores with wind turbines. Carbon Dioxide Emission and its Impact on Supermarket Sector The environmental trend of carbon footprints and carbon dioxide emission has also impacted the supermarkets to a great extent. The carbon emission by various regions is shown by the graph below: Source: STERN REVIEW: The Economics of Climate Change Fifty years ago most of the people used to buy their food from the markets or from the specialist food shops, such as greengrocers, fishmongers, butchers. Today, around 78bn is spent on groceries, and around more than 82 per cent also goes to the supermarkets. Now the time is arrived when people prefer to go to those big supermarkets where they can find everything easily without having any problem. Campaign group Friends of the Earth (FoE) argue that since the supermarkets generate 60% more carbon dioxide as compared to the local grocery shops and therefore condemns making purchases from the supermarkets (BBC News 2006). This has impacted the supermarkets negatively as it creates a bad image of the supermarket sector in the consumer's mind and diverts them to buy from the local shops. The supermarket sector would have suffered from huge losses due to this news. The British Retail Association had to respond to this argument by the FoE group due to the fact that the carbon dioxide generated by the supermarket sector is much more because of their per square meter of floor space is much more than the local shops. The supermarket sector stores fruits and vegetables and due to this carbon dioxide is generated. The Friends of Earth group criticizes this (Hickman 2006). But looking at it logically, this impacts the supermarket sector negatively as they are given an image of the sector which generates carbon dioxide. Due to this trend, they have to lower their food storage which has costs associated with it. The food miles have created a problem for the supermarket sectors as they now need to lower their storages and lowering the levels of transporting food. This has a large cost associated with it. According to the UK's Waste and Resources Action Program, in 2008, around 8 million metric tons of carbon dioxide emissions were generated by the supermarket sector only (Treacy 2008). This is mainly due to the waste food by the supermarkets. Sainsbury as a reaction to this environmental trend decided to become waste free by the end of 2008 by sending its all waste food to the biomass plant. The best part about the step is that the waste food will be used in generating electricity which will serve a number of households. This initiative has definitely positively affected the growth in sales of Sainsbury as it has positioned itself being a "Waste-free" company and the customers are willing to do more business with Sainsbury due to their step towards reducing land spills and becoming waste free. This has a positive impact and the sales of the company grew and their profits inclined. This is because the business responded to the environmental trend to achieve positive results from the environmental trend. There has been a continuous surge in the economy to reduce carbon dioxide emissions and the first target for this is the supermarket sector. Whenever there is a topic of reducing carbon dioxide emissions, supermarket sector tops the list and this has a negative impact on the sector. Since, Tesco alone accounts for 1 in every 7 spent on the UK high street; there is therefore thought that the supermarkets have a tremendous potential to facilitate more sustainable methods of food production and consumption (Russell 2007). This sector is always looked upon first when it comes to reducing carbon dioxide. In order to respond to this environmental trend, the supermarket sector has to bear high costs of taking into account all these factors and take measures accordingly. The Future The future impact of these environmental trends is also forecasted to be huge on the supermarket sector as this is one of the largest sectors and is therefore impacted greatly due to the environmental trends. The supermarket sector will need to respond to the environmental trends which has huge costs associated with it but they need to capitalize on their resources and take measures which not only mitigate the negative impact of the environmental trends on the business but also result in making profits and increasing sales by creating a brand image. If the supermarket sector contributes highly to the environment in turn, the benefits that it will achieve can outweigh the costs that are associated with responding to the environmental trends. The customers will have a positive perception of these supermarkets and their contribution to the environment will be attached to their brand name which will as a result increase their sales and generate more profits for the supermarkets. The supermarket sector can have a very positive impact in the future through the environmental trends as it can shape the entire economy into a low-carbon economy by their environmentally friendly campaigns. This sector is one of the most powerful sectors in the economy with respect to creating consumer perceptions and reshaping the buyers' behaviors. The supermarket sector can capitalize on their strengths and respond to the environmental trends in a very positive manner this way. Conclusion There are various environmental trends that impact the supermarket sector negatively and also have positive impacts on the business. The supermarket sector has to incur extra costs in some cases due to these environmental trends. The environmental trends although impact negatively to the supermarket sector but the businesses have to respond to the trends in order to get positive results from the environmental trends. The supermarket giants like Tesco, Sainsbury, Marks & Spencer, Waitrose, Asda and Wal-Mart have taken a number of steps from introducing avoiding plastic bags, reducing carbon dioxide emissions and saving costs on electricity to using recyclable materials in store construction and giving points to the customers on bringing their own bags for shopping. These all steps are being taken in order to respond to the threats that the environmental trends offer to the supermarket sector. If we look at an overall picture, the supermarket sector now is impacting positively through these environmental trends as this is the only sector which has taken a number of steps to going green and becoming environmentally friendly. The sales and profits of the supermarket sector have recorded a continuous increase as they have responded to the negative impacts that could affect them and these have now turned out to contributing to their profits. References Platt, Geoff 2008, "Supermarket Suppliers Call for New Standards", 21 May, FOODBev.com, viewed 07 May 2009, Allen, Katie 2008, "Packaging helps supermarkets bag top spots in green poll", 02 June, The Guardian, viewed 07 May 2009, BBC News 2006, "Shop Local, Campaign Group Urges", BBC News, 28 April, viewed 07 May 2009, Treacy, Megan 2008, "UK Supermarket Plans to Be Waste-Free by End of Year", 26 January, EcoGeek - Clean Technology, viewed 07 May 2009. 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