FSN: Marks and Spencer’s environmental plan

Marks and Spencer's environmental plan – has it paid off?

25th February 2008
Companies at every level of environmental achievement can only be green with envy at the enormous and positive public profile Marks and Spencer have achieved since they launched Plan A in January 2007. Marks and Spencer's wide ranging corporate strategy for sustainability has put them at them within the top ten “green brands” in the UK recently, and top of a list of companies with the best reputation. But how much has Plan A contributed to the bottom line since its launch last year and does it saddle the company with expensive commitments that might be a drag on future profitability in the current tough retail trading environment? Niki Leahy, FSN senior writer reports on Plan ‘A' a year down the line.

Although hard to quantify, it's a brave pundit who ignores the value of the Marks and Spencer campaign in terms of goodwill, brand value and positive public perception when measuring M&S's current market capitalisation. PR firms and advertising agencies alike are all trying to find a similar “big idea” for their clients - regardless of environmental credentials. Despite the cynicism in many quarters, the value of “corporate responsibility” when managed this well seems undeniable. However, while M&S profits for the year ending 31 st March 2007 rose 26%, and first-half results for 2007 were 10 per cent ahead of the same period last year, sales in the UK fell 2.2% in the third quarter of 2007 as higher interest rates, increased personal debt and reduced consumer spending began to bite.

Plan A is undoubtedly, in part, a clever gamble. M&S are calculating that ethical and environmental considerations will continue to influence retail spend on food and clothes, and the company is determined to lead the market and the consumer by raising awareness of key issues such as climate change, problems with rising waste generation and fair trade.

A year on, and M&S can claim to have delivered some highly laudable, and quantified sustainability achievements, notably in reducing CO2 emissions in their value chain, in reducing packaging and in extending sourcing of fair trade and organic goods. However, many of the achievements recorded by the company a year since Plan A was launched are described as “good progress”, and remain descriptive of initiatives falling within the five pillars that comprise Plan A. Reductions in environmental impacts since January 2007 are reported on the company's website only in terms of absolute amounts, and are unrelated to financial cost savings. While they individually contribute towards a commendable set of achievements, it will be interesting to see how the company reports progress across its five priority areas in its next corporate social responsibility report. Whatever the precise level of achievement, Marks and Spencer's remain determined to “change beyond recognition the way (it) operates over the next five years”, and “responsibility” is to remain integral to the company's core business strategy. Marks and Spencer's, like other retailers large and small, are attempting to give customers better choices and more relevant information in order to meet their environmental and humane concerns. What this costs the company in terms of additional operational expenses remains unknown, as does Plan A's potential impact upon higher product costs and the extent to which the Marks and Spencer clothing customer is willing to pay any price premium.

To some extent the commitments in Plan A also reflect how accurately the company has anticipated rising operational costs and the changing regulatory environment. Store refurbishment, longer opening hours, the greater need for air conditioning, and a larger range of chilled products all increase energy consumption, and can contribute to greater waste generation and more complicated packaging requirements. Distribution and product air miles remain high on the regulatory agenda, and ethical issues increasingly affect consumer choices. The Climate Change Bill sets annual targets for the reduction of carbon dioxide emissions until 2050. It also places duties on the UK Prime Minister with regard to the reporting on and achievement of those target reductions. The Bill outlines the extension of the EU Emissions Trading Scheme to new sectors, including UK retailers. Changing EU rules on packaging mean that new penalties are being introduced for retailers and suppliers that over package goods under the EU Packaging Directive. Volume and weight of packaging must be limited to the minimum amount necessary to maintain “levels of safety, hygiene and acceptance”. Because M&S is aimed at the convenience market, with large amounts of pre-prepared and ready meals, food is sold in small amounts which increases absolute amounts of packaging. Heavily processed foods also use up large amounts of energy in their making, and many more carbon dioxide emissions than if individual ingredients had been assembled in the home kitchen.

What are the contributory factors that give Marks and Spencer's sustainability actions such a high profile and lend the company such credibility? A large amount of the goodwill the company has for its ethical and environmental performance is built on a long tradition of achievement in these areas. M&S's socially responsible business practices stretch back a long way, and the company has worked with suppliers on sustainability issues for many years. Marks and Spencer has had a strong commitment to auditing, monitoring and verifying its suppliers' compliance against exacting ethical and environmental considerations over many years. Marks and Spencer adopted and implemented an ethical global sourcing strategy before 2003. This included a set of global sourcing principles, the development of long term partnerships with suppliers, a process of social auditing and verification and a commitment to continuous improvement, with sanctions applied when standards were unmet. With regard to environmental issues, Plan A is comprehensive, with commitments across a broad range of environmental concerns. Carbon neutrality has the highest profile, and Marks' actions include extensive commitments towards increasing energy efficiency and reducing overall energy consumption, with the purchase of offsetting “as a last resort”.

Finally, responsibility for meeting the achievements set out in Plan A remains an integral part of the role of the company's Finance Director, Ian Dyson. By integrating corporate responsibility within the finance department's function, Marks and Spencer has ensured that sustainability issues will be considered as part of the company's growth strategy, potentially avoiding a source of tension between the corporate goals of profitability and sustainability. Many companies keep a firm distance between the sustainability and finance functions, with the result that environmental and ethical sustainability are subservient to overall business strategy. Plan A requires major efforts in UK retail operations, distribution and global supply chains. M&S are experimenting with a green store concept in Bournemouth, an eco-factory in Sri Lanka and the use of electric, zero emission distribution trucks in central London . The electric trucks are rechargeable at central depots and stores, so ideally suited to city based delivery schedules. London also introduced a new “low emission zone” In February 2008, which will restrict or penalize older diesel-engine lorries, buses, coaches, large vans, minibuses and other heavy vehicles entering the zone. Other low emission zones are either planned or in operation in other major cities throughout Europe, and where London leads, other UK cities are likely to follow.

So, in summary, what can be said for progress with Plan A to date? The company stress that Plan A is a partnership, and that the “social and environmental issues outlined in Plan A are too large to be tackled by consumers, businesses and even governments alone. Only partnerships will help us address these challenges and that is why partnership is at the heart of Plan A”. Cy nical observers may well feel this gives M&S some leeway in that we must all be willing to play a part if the company is to achieve the targets set out in the 100 commitments of Plan A. In addition, the company is assisted by the lack of quantification in its own goals, which commit the company to “extending sustainable sourcing, ….. helping improve the lives of people in our supply chain, …..helping customers and employees to live a healthier life-style”

In a new era of rapidly rising prices for food and other commodities, with the prospect of recessionary downturn in the UK in 2008, it will be interesting to see how Marks and Spencer's measures up against its commitments to the ambitions the company sets out in Plan A. This will be crucial to its credibility, because as the company says itself, “there is no Plan B”.

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