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How Marks & Spencer Engages Suppliers in Sustainability

M&S engaging suppliers article sept 2012

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How Marks & Spencer Engages Suppliers in Sustainability

  1. 1. ECM September_Layout 1 03/09/2012 13:33 Page 36 Sustainability commercialised – Marks & Spencer Helping suppliers get with the plan By Rob Bailes Marks & Spencer’s supplier engagement is driving resource efficiencies and product innovation n June 2012, Marks & Spencer celebrated the fifth media have focused on short-term sales figures, Plan I anniversary of Plan A. Launched in 2007, Plan A is still widely acknowledged as the most ambitious A has been increasingly demonstrating its centrality to M&S’s long-term corporate and commercial future. public sustainability declaration to come from a Already 138 commitments have been achieved, with a supermarket retailer. further 30 on course. Of all M&S products, 31% adhere The fifth anniversary comes at a difficult period to a Plan A commitment and a total of £185m in net for the retailer. At the same time that it was reporting benefits has been delivered. annual progress against its Plan A commitments, Of most interest, yet less analysed, has been the M&S was also recording a 2.7% drop in like-for-like steady evolution of the way in which the company, sales in the UK for the April-June 2012 period. under Plan A, has been adjusting its operational rela- Ironically, while the UK stock market and financial tionship with its suppliers in order to drive
  2. 2. ECM September_Layout 1 03/09/2012 13:33 Page 37 Ethical Corporation • September 2012 Strategy and management 37 commercial benefit and secure a healthy supply across the supply chain than any amount of docu- chain for the future. mentation and codes of practice,” says McQuaid. M&S fast facts M&S has been shaping new models of supplier M&S’s approach has been to support its supplier- Group revenue: £9.9bn engagement to encourage and incentivise environ- based commitments and mandates with lighter touch UK food: £4.7bn mental responsibility in the supply chain. Applying a incentives and collaborative working models. For UK clothing and home: decade of learning from the company’s engagement example, through its supplier exchange programme £4.2bn with suppliers on social issues has been critical to this – a web platform available to all food and merchan- International: £1.1bn process. dise suppliers – the company is providing suppliers Group profit before tax: “We needed suppliers to understand the business with advice, case studies and toolkits on how to make £658m case for making environmental improvements them- practical changes within factories and on farms as selves,” says Carmel McQuaid, climate change well as highlighting the business benefits of doing so. Plan A manager at M&S. “If you go down the road of audits This is supported by a variety of other incentive Plan A commitments: 180 and compliance, that doesn’t lead to suppliers own- and collaborative programmes such as the annual Commitments met: 138 ing the agenda.” supplier awards programme. The awards recognise Net benefit in 2011/2012: and showcase suppliers that have made tangible and £105m Model approach demonstrable improvements in areas such as process Net benefit since inception: From its ongoing supplier engagement process, M&S innovation or product sustainability. £185m learnt the importance of involving suppliers closely. Supplier networking sessions are also held every McQuaid says this engagement “was telling us that two to three months. The sessions focus on areas of Plan A financial it had to be something that the CEOs and senior fac- the performance scorecard where difficulty is being savings tory managers understood and were driving experienced. Suppliers that have made progress on Energy efficiency savings: themselves”. specific challenges are encouraged to share experi- £22m per year M&S began by working closely with a small num- ences and outcomes with their peers. M&S technical Zero waste to landfill: £6.3m ber of its most proactive suppliers. A handful of experts are also on hand to share operational knowl- in 2011/2012 model factories were established to provide a base- edge and expertise. Packaging reductions: line of information on exactly what environmental The networking sessions are highly valued by £16.3m in 2011/2012 changes were possible in factories and to determine suppliers. For Fergus Morgan, group CSR manager Transport fuel efficiency: their cost and financial payback. of the 2 Sisters Food Group, their value is in provid- £2.1m in 2011/12 The broader objective of the model factory ing an evidence-based information sharing platform Printing cost reductions: approach was to understand and demonstrate the where recommendations and advice are offered by £550,000 in 2011/12 business case for improved environmental manage- suppliers that have tried-and-tested measures. ment within supplier factories. Here the practical and technical support of the “We didn’t quite know what was possible, but we retailers is more valuable than the need to make the were looking for step-changes in environmental case for adaptation. “A company of our size feels the impact,” says McQuaid. same impacts that M&S does,” Morgan says. “We get With the pilots complete, the next challenge was the same [environmental] messages as the retailers. how to leverage the lessons across the supply chain. But we are food specialists, not environmental tech- For McQuaid, this was a case of analysing the nicians. That is where we appreciate the support.” model factory data and determining the investments “We needed that could form the basis of commercially sound and Savings and benefits practically achievable recommendations for the For Dax Lovegrove, head of business and industry suppliers to wider supply chain. relations at WWF, the collaborative approach understand the New Plan A commitments came from this process adopted by M&S is much more effective than simply at the same time that M&S was expanding its origi- setting and enforcing a series of supplier demands. business case nal 100 commitments to 180, in 2010. The only logical way to reach a retailing sector where for making This included a commitment for the top 100 cloth- all products are sourced sustainably is for retailers to environmental ing factories to install more efficient lighting, support their suppliers – rather than issue demands. improved insulation and temperature controls, and “M&S is sharing a lot of healthy thinking with its improvements to reduce energy usage by an estimated 10% by 2015. supplier base, but what we need is for all retailers to themselves” M&S also committed all of its food suppliers to share ideas across each other. That’s the way to completing a balanced performance scorecard, which unlock sustainable business opportunities,” Love- Carmel McQuaid, covers social and environmental issues as well as lean grove says. Marks & Spencer manufacturing. The company wants a quarter of Resource efficiency, increased productivity and those suppliers to achieve a gold rating by 2015. improved product quality are among the major ben- While some of the lessons from the model facto- efits being reported by suppliers. Putting a figure on ries turned into supplier mandates through Plan A those cost savings and commercial benefits is, how- commitments, the larger focus was, and continues to ever, more difficult. be, demonstrating the business case for action. “The quickest way to stop suppliers collaborating “Showcasing the business case for action is so and sharing their knowledge with us is to start ask- much more powerful in terms of galvanising change ing them about how much they’ve saved and how
  3. 3. ECM September_Layout 1 03/09/2012 13:33 Page 38 38 Strategy and management Ethical Corporation • September 2012 MARKS & SPENCER The real value of M&S’s supplier engagement lies in its collaborative and knowledge sharing approach Put ethics in the shop window much that is due to our involvement,” says McQuaid. Many of M&S’s big suppliers supply multiple This reflects the obvious concern on the part of sup- retailers that, like M&S, have their own supplier pliers that M&S’s buying departments would use the engagement programmes in place. Many of the information to negotiate on price. It may also reflect measures implemented by suppliers may have been the reality that drawing a direct correlation between implemented anyway, based on a reasonable assess- the company’s supplier engagement and the decision ment by senior management that reducing resource of suppliers to make adjustments is not clear-cut. use and minimising exposure to future price rises makes good business sense. Suppliers rewarded Technical assistance Proof that M&S’s approach to environmental improvement And while M&S does make limited investment capi- in the supply chain is having a positive effect on suppliers’ tal available to suppliers for projects of strategic businesses is evident in the winners of the company’s most interest on a joint venture basis, much of the com- recent supplier awards. pany’s assistance is technical or practical, where the Worldwide Fruit, an M&S food supplier, was named supplier effects are harder to quantify. of the year in 2012 for its achievements in reducing electricity One area where M&S has been able to quantify consumption by 14% a year and water demand by 75%. the benefits of its work with suppliers for the business Brandix, a designated M&S eco-factory, was named clothing has been in packaging. Through the introduction of supplier of the year in 2012 for reducing carbon emissions by vacuum packing for fresh meats, the company calcu- 80%, energy usage by 46%, and water consumption by 58%. lates it saved £16.3m in 2011-12. For M&S’s Carmel McQuaid, the real signs of success are when Placing a financial figure on the full commercial suppliers implement significant process innovation or start benefits of M&S’s work with suppliers may be some delivering more sustainable products. years off. It will surely be important as a means to AMC Grupo Alimentación Fresco y Zumo, a fruit supplier, demonstrate the value of supplier collaboration to introduced a closed-loop manufacturing methodology for fruit the business and external stakeholders alike. squeezing. This led to zero fruit waste, with 90% of fruit waste It may also be missing the point. The real value of being used elsewhere in the business. the company’s evolving supplier engagement lies in Courtauld’s, a clothing supplier, developed a new bra made its collaborative and knowledge sharing approach. from 100% recycled polyester, with improved durability and Unless suppliers feel part of, and willing to buy into, guaranteed non-yellowing. the company’s sustainability goals, M&S quite sim- ply will not be able to deliver them. I