The Industry Familiarisation Book provides an in-depth analysis of the industry setting for the case study. This book helps students develop a sound commercial awareness of the industry, which is an essential element to analysing options and providing recommendations.

1. T4 Part B Case
Study Examination
Sustainable trading in the
supermarket industry
Industry
Familiarisation
Sept / Nov 2011

2. © Kaplan Financial Limited, 2011
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3. Contents
Introduction
Chapter 1: Sustainability as a strategy
Chapter 2: Key players
Chapter 3: Sustainable trading
Chapter 4: Responsible trading
Chapter 5: Employees
Chapter 6: Nutrition & healthy eating
Chapter 7: Communities
Chapter 8: Internet retailing
Chapter 9: Combating climate change
Chapter 10: Other relevant developments
Chapter 11: 25 Quotable facts
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4. Introduction
Introduction
The aim of this booklet is to give you some background to the issues faced by
supermarkets, in particular in relation to the area of sustainable trading, so you are
able to better assess the pre-seen information for the Papy supermarket case.
Whilst there may only be 5 diversity marks available for “displaying knowledge of
relevant real life situations within the same or similar context as that in which the case
is set”, a sound understanding of how the industry operates is essential to passing the
Case Study Examination.
Without it you will be unable to demonstrate good commercial judgement on the day.
Without good judgement, you will be unable to offer sensible and realistic
recommendations. This booklet should not therefore be regarded as a quick way to
get 5 diversity marks. It is more a key to unlock nearly 50% of the marks on your Case
Study paper.
For each area, we provide some guidance on how this might be relevant in your exam.
In addition, the final chapter contains a list of 25 easy to remember, quotable facts,
grouped under topics that may come up in the exam.
It is worth noting that much of the research for this document has been performed by
looking at the large supermarket chains operating in the UK: Tesco, Asda, Sainsbury,
Morrison, Co-operative Group and Marks & Spencer. However, the issues facing these
supermarkets are no different to those facing any of the supermarket chains
throughout Europe.
If you are a Kaplan registered student, you can further develop your understanding of
the industry, by watching our “industry expert” podcasts, and by using the discussion
forum, both of which are available via Kaplan EN-gage.
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5. Sustainability as a strategy
Chapter 1 – Sustainability as a strategy
Why?
One of the most important reasons why companies fail is that they ‘miss colossal
external changes’1, and climate change can certainly be bracketed into this category.
According to the 2006 Stern Report, climate change poses a major risk to the global
economy, possibly shrinking its output by 20%.
Every organisation will be affected, with resources that we currently take for granted
such as water, food and carbon being in short supply. As a result, companies that are
well positioned and pro-active, that start tackling these issues now, could create
opportunities to increase their value by up to 80%2.
Sustainability is no longer just about ‘doing the right thing’. In addition to the long-
term needs of society, there are other real benefits of becoming a greener company:
• Reduced operating costs
Be it savings in energy costs or reducing waste, this is a very tangible benefit
from re-engineering to greener processes.
For example, Marks & Spencer launched their Plan A approach to business in
January 2007, with the aim of becoming the greenest retailer in the world. It
included 100 commitments designed to make the company carbon neutral,
send no waste to landfill, extend sustainable sourcing, and set new standards
in ethical trading. According to M&S, by year two the plan was cost neutral. By
year three the effort was rewarded with savings of £50 million - which, in
theory, should increase year-on-year.
• Increased sales and the development of new income streams
Research by the Carbon Trust 3has shown that over 65% of consumers think
it’s important to buy from environmentally responsible companies.
• Increased customer loyalty and motivation for employees.
The image of the company and its products are enhanced because
stakeholders believe the company acts according to the principles of integrity
and best practice.
1
Bregory P. Hackett and JohnEvans, Why Companies Fail: And the Information Imperatives to help Ensure
Survivability, Kalido White Paper, 2007.
2
Carbon Trust & McKinsey Company , Climate Change – a business revolution?, www.carbontrust.co.uk
3
Carbon Trust – Green your Business for Growth, March 2011
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6. Chapter 1
• Compliance with regulations
Being ahead of the game will ensure compliance with the increasing
regulations in this area.
It is clear therefore that in order to maximise long-term shareholder wealth, to
manage risk and to offer security for employees, strategies relating to sustainability
must be embedded as part of the core strategic goals.
How?
The key way to embed sustainability strategies is to ensure effective target setting and
monitoring. 60% of the FTSE 100 now declare targets to improve their environmental
performance. However, research4 by the Carbon Trust has revealed significant
differences in the rigour and quality of the targets that have been publicly set and
reported.
The Carbon Trust applied a simple framework to assess the quality of each target:
• Were they precise in what was being measured (including geographical and
organisational boundaries, and the timescale)?
• Was it possible to measure the data behind the target accurately?
• Were they stretching and aspirational?
• Were they appropriate and relevant to the business and its sector?
The research revealed that a number need to be revised and republished as they had
either outlived their target date, not stated dates for their target, or not stated a
baseline year.
The research also found that:
• Most companies that have set good quality targets declare between one and
five targets each.
• 55% of the time-bound targets identified were short-term, dealing with
timeframes from 2011 to 2013.
• 22% of targets had timeframes to 2018 or beyond.
• 53% of the targets relate to carbon, greenhouse gas emissions or energy
reductions.
• 26% of the FTSE 100 companies set targets to reduce the environmental
impact of waste and 22% to reduce water use.
The briefing document finished by providing key advice for setting high quality targets.
4
Raising The Bar – Building sustainable business value through environmental targets, Business briefing from
Carbon Trust Advsory Services, June 2011.
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7. Sustainability as a strategy
This includes:
• Set short-term as well as medium and long-term targets. The longer-term
goals act as a vision with the short-term targets as stepping-stones.
• Build the business case; demonstrate value to all stakeholders.
• Set stretching targets.
• Act quickly. Having sustainability on the agenda for a long time with limited
action increases apathy.
• Collect data: build a baseline and have robust reporting mechanisms in place.
Relevance in the exam
An appreciation of the business case for focusing on sustainable trading, together with
an awareness of key drivers of environmental targets will help you to comment of the
plans ahead for Papy.
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