By Kate Holton and James Davey
LONDON (Reuters) - Customers and investors want supermarkets to improve their environmental credentials but are not prepared to accept higher prices or lower returns as a trade-off, the head of Britain's biggest retailer Tesco (OTC:TSCDY) told the Reuters Impact conference.
Addressing the challenge of how the industry can navigate the shift to net zero emissions, Ken Murphy said it had to strike a balance, for example cutting the use of plastic packaging without increasing the food waste that might follow.
Asked if customers were willing to pay higher prices for more sustainable goods, Murphy replied: "I think there is always a small proportion of very committed customers who are willing to pay a premium, but actually the vast majority are not is the honest truth.
"What our customers expect us to do is find ways to innovate, to make sustainable products for them."
Investors, he said, also insist that supermarkets increasingly focus on environmental goals but did not want to see a lower return on their investment as a consequence.
"So we're constantly juggling these priorities, and hopefully doing a decent job," he said.
NET ZERO TARGET
Tesco, the 102-year-old supermarket that dominates British retail, has set out plans for its operations to hit a net zero carbon target by 2035 through using renewable energy, cutting plastic and encouraging more sustainable diets.
Many environmental campaigners are sceptical about the willingness of major companies to cut emissions, seeing it as more of a public relations exercise. But large companies that have recently set out targets, such as fast-fashion chain Primark, say they can make a difference due to their sheer size.
For Tesco, a company with global supply chains and 360,000 staff, it requires change across many elements of the business.
It has turned to vertical strawberry farming to cut water usage, introduced unwashed potatoes that have a longer shelf life and launched reusable packaging. It has also increased recycling of soft plastic packaging that often ends up in landfill and is electrifying its home delivery vehicle fleet.
Murphy said in Britain the move to use less plastic had suffered a setback during the pandemic, when consumers sought out plastic packaging in the hope it would increase safety.
Like the shift to eating more plant-based products and less red meat, Murphy said Tesco could not dictate what its customers should do, but he said the group, the wider industry and government could help to educate people about the benefits.
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