Marks & Spencer’s supplier engagement is driving resource efficiencies and product innovation

In June 2012, Marks & Spencer celebrated the fifth anniversary of Plan A. Launched in 2007, Plan A is still widely acknowledged as the most ambitious public sustainability declaration to come from a supermarket retailer.

The fifth anniversary comes at a difficult period for the retailer. At the same time that it was reporting annual progress against its Plan A commitments, M&S was also recording a 2.7% drop in like-for-like sales in the UK for the April-June 2012 period.

Ironically, while the UK stock market and financial media have focused on short-term sales figures, Plan A has been increasingly demonstrating its centrality to M&S’s long-term corporate and commercial future. Already 138 commitments have been achieved, with a further 30 on course. Of all M&S products, 31% adhere to a Plan A commitment and a total of £185m in net benefits has been delivered.

Of most interest, yet less analysed, has been the steady evolution of the way in which the company, under Plan A, has been adjusting its operational relationship with its suppliers in order to drive commercial benefit and secure a healthy supply chain for the future.

M&S has been shaping new models of supplier engagement to encourage and incentivise environmental responsibility in the supply chain. Applying a decade of learning from the company’s engagement with suppliers on social issues has been critical to this process.

Evolving approach

“We needed suppliers to understand the business case for making environmental improvements themselves,” says Carmel McQuaid, climate change manager at M&S. “If you go down the road of audits and compliance, that doesn’t lead to suppliers owning the agenda.”

From its ongoing supplier engagement process, M&S learnt the importance of involving suppliers closely. McQauid says this engagement “was telling us that it had to be something that the CEOs and senior factory managers understood and were driving themselves”.

M&S began by working closely with a small number of its most proactive suppliers. A handful of model factories were established to provide a baseline of information on exactly what environmental changes were possible in factories and to determine their cost and financial payback.

The broader objective of the model factory approach was to understand and demonstrate the business case for improved environmental management within supplier factories.

“We didn’t quite know what was possible, but we were looking for step-changes in environmental impact,” says McQuaid.

With the pilots complete, the next challenge was how to leverage the lessons across the supply chain.

For McQuaid, this was a case of analysing the model factory data and determining the investments that could form the basis of commercially sound and practically achievable recommendations for the wider supply chain.

New Plan A commitments came from this process at the same time that M&S was expanding its original 100 commitments to 180, in 2010. 

This included a commitment for the top 100 clothing factories to install more efficient lighting, improved insulation and temperature controls, and to reduce energy usage by an estimated 10% by 2015.

M&S also committed all of its food suppliers to completing a balanced performance scorecard, which covers social and environmental issues as well as lean manufacturing. The company wants a quarter of those suppliers to achieve a gold rating by 2015.

While some of the lessons from the model factories turned into supplier mandates through Plan A commitments, the larger focus was, and continues to be, demonstrating the business case for action.

Incentivisation and collaboration

“Showcasing the business case for action is so much more powerful in terms of galvanising change across the supply chain than any amount of documentation and codes of practice,” says McQuaid.

M&S’s approach has been to support its supplier-based commitments and mandates with lighter touch incentives and collaborative working models. For example, through its supplier exchange programme – a web platform available to all food and merchandise suppliers – the company is providing suppliers with advice, case studies and toolkits on how to make practical changes within factories and on farms as well as highlighting the business benefits of doing so.

This is supported by a variety of other incentive and collaborative programmes such as the annual supplier awards programme. The awards recognise and showcase suppliers that have made tangible and demonstrable improvements in areas such as process innovation or product sustainability.

Supplier networking sessions are also held every two to three months. The sessions focus on areas of the performance scorecard where difficulty is being experienced. Suppliers that have made progress on specific challenges are encouraged to share experiences and outcomes with their peers. M&S technical experts are also on hand to share operational knowledge and expertise. 

The networking sessions are highly valued by suppliers. For Fergus Morgan, group CSR manager of the 2 Sisters Food Group, their value is in providing an evidence-based information sharing platform where recommendations and advice are offered by suppliers that have tried-and-tested measures.

Here the practical and technical support of the retailers is more valuable than the need to make the case for adaptation. “A company of our size feels the same impacts that M&S does,” Morgan says. “We get the same [environmental] messages as the retailers. But we are food specialists, not environmental technicians. That is where we appreciate the support.”

For Dax Lovegrove, head of business and industry relations at WWF, the collaborative approach adopted by M&S is much more effective than simply setting and enforcing a series of supplier demands. The only logical way to reach a retailing sector where all products are sourced sustainably is for retailers to support their suppliers – rather than issue demands.

“M&S is sharing a lot of healthy thinking with its supplier base, but what we need is for all retailers to share ideas across each other. That’s the way to unlock sustainable business opportunities,” Lovegrove says.

Commercial benefits

Resource efficiency, increased productivity and improved product quality are among the major benefits being reported by suppliers. Putting a figure on those cost savings and commercial benefits is, however, more difficult.

“The quickest way to stop suppliers collaborating and sharing their knowledge with us is to start asking them about how much they’ve saved and how much that is due to our involvement,” says McQuaid.

This reflects the obvious concern on the part of suppliers that M&S’s buying departments would use the information to negotiate on price. It may also reflect the reality that drawing a direct correlation between the company’s supplier engagement and the decision of suppliers to make adjustments is not clear-cut.

Many of M&S’s big suppliers supply multiple retailers that, like M&S, have their own supplier engagement programmes in place. Many of the measures implemented by suppliers may have been implemented anyway, based on a reasonable assessment by senior management that reducing resource use and minimising exposure to future price rises makes good business sense.

And while M&S does make limited investment capital available to suppliers for projects of strategic interest on a joint venture basis, much of the company’s assistance is technical or practical, where the effects are harder to quantify.

One area where M&S has been able to quantify the benefits of its work with suppliers for the business has been in packaging. Through the introduction of vacuum packing for fresh meats, the company calculates it saved £16.3m in 2011-12.

Placing a financial figure on the full commercial benefits of M&S’s work with suppliers may be some years off. It will surely be important as a means to demonstrate the value of supplier collaboration to the business and external stakeholders alike.

It may also be missing the point. The real value of the company’s evolving supplier engagement lies in its collaborative and knowledge sharing approach. Unless suppliers feel part of, and willing to buy into, the company’s sustainability goals, M&S quite simply will not be able to deliver them.

Suppliers rewarded

Proof that M&S’s approach to environmental improvement in the supply chain is having a positive effect on suppliers’ businesses is evident in the winners of the company’s most recent supplier awards. 

Worldwide Fruit, an M&S food supplier, was named supplier of the year in 2012 for its achievements in reducing electricity consumption by 14% a year and water demand by 75%.

Brandix, a designated M&S eco-factory, was named clothing supplier of the year in 2012 for reducing carbon emissions by 80%, energy usage by 46%, and water consumption by 58%.

For M&S’s Carmel McQuaid, the real signs of success are when suppliers implement significant process innovation or start delivering more sustainable products.

AMC Grupo Alimentación Fresco y Zumo, a fruit supplier, introduced a closed-loop manufacturing methodology for fruit squeezing. This led to zero fruit waste, with 90% of fruit waste being used elsewhere in the business.

Courtauld’s, a clothing supplier, developed a new bra made from 100% recycled polyester, with improved durability and guaranteed non-yellowing.

M&S fast facts

Group revenue: £9.9bn

UK food: £4.7bn

UK clothing and home: £4.2bn

International: £1.1bn

Group profit before tax: £658m

Plan A

Plan A commitments: 180

Commitments met: 138

Net benefit in 2011/2012: £105m

Net benefit since inception: £185m

Plan A financial savings

Energy efficiency savings: £22m per year

Zero waste to landfill: £6.3m in 2011/2012

Packaging reductions: £16.3m in 2011/2012

Transport fuel efficiency: £2.1m in 2011/12

Printing cost reductions: £550,000 in 2011/12