Tesco invests £500m to create 'green consumer revolution'

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Tesco will plough £500m over the next five years into turning the fringe green lobby into a mass consumer movement in the biggest attempt yet by any British business to combat climate change.

The retailer, which is frequently berated for the harm it causes the environment, intends to devise a "carbon calorie counter" that will allow shoppers to opt for a low-carbon lifestyle.

Sir Terry Leahy, the chief executive, refused to follow Marks & Spencer's lead and set a target for making his business carbon neutral, but he said Tesco would seek to reduce its carbon footprint. "I felt it inappropriate in an industry that is clearly carbon emitting to speak about carbon neutrality," he said.

Tesco's pledge to deliver "a revolution in green consumption" comes three days before the Competition Commission reports back on whether it thinks competition in the grocery market is distorted by having one dominant player. Tesco first publicly promised to "be a better neighbour" last May, days after the watchdog launched an inquiry into the supermarket sector.

Last night, Sir Terry told a roomful of environmentalists, civil servants, retailers and academics that Tesco would lead the charge to create a low-carbon economy. "We will bring down the cost of going green," he said, starting by halving the price of energy-efficient light bulbs.

Sir Terry believes Tesco is uniquely positioned to make "sustainability a significant, mainstream driver of consumption" because 17 million consumers visit its 1,900 stores every week.

Among the pledges outlined in a speech entitled "Green grocer? Tesco, carbon and the consumer", he said the group would donate £5m a year to help fund academic research into greener consumption. It will set up a body called the Sustainable Consumption Institute, in partnership with Oxford University, to develop an accepted measure of the carbon footprint of every product Tesco sells.

Sir Terry hopes that in the future all products will detail their "carbon calorie" values in much the same way as they break down their nutritional content. "There aren't many things that keep me awake at night but this is one," he admitted. He gave no timescale for when the new carbon counter would appear on the 70,000 items sold by Tesco around the world but said he was "confident we'll make good progress on it".

Other plans include limiting the amount of produce that is air-freighted to 1 per cent, down from as much as 3 per cent; rewarding shoppers who buy organic, Fairtrade and biodegradable items with extra "green" loyalty card points; selling more energy-efficient products through its Value range; and doubling the proportion of biofuels the group sells over the next 12 months.

It will also launch a "Kids Carbon Calculator" in conjunction with the Government to encourage good habits to start young. It said it would meet its existing target to halve the average energy use in its UK buildings between 2000 and 2010 by next year, two years early. It is spending £500m additional capital expenditure on cutting its energy use. This is on top of £100m already ring-fenced to support nascent low-carbon technologies.

Tesco's green overhaul does not stop at the UK. Plans to reduce emissions from its existing stores and distribution centres cover its 2,700 outlets in 11 countries around the world. All new stores opened between now and 2020 will emit at least 50 per cent less carbon than an equivalent store today.

Green lobby groups gave a cautious welcome to Tesco's plans. John Sauven, Greenpeace's UK director, called a universal system for measuring the carbon emissions associated with individual products "a major step forward".

Sandra Bell, supermarkets campaigner at Friends of the Earth, asked how Tesco could square its pledge to cut its carbon emissions with its global expansion plans, which will see it enter the US market later this year.

Tesco's climate change mission comes just days after M&S announced it would spend £200m on making its business carbon neutral by 2012.