Major UK Retailers Going Green, ` Eco-Plan` At What Cost?

Introduction

Significance of the Study

In as much as goods and service are important, environmental issues become an increasing concern as the environment is deteriorating with detrimental effects to man and other living things. At present, human induced climate change is said to be the greatest threat this century in terms of the environment, the economy, and the society. (Carbon Neutral Company 2007) This is caused primarily by the rapid exploitation of fossil fuels and the effect of which is called the greenhouse effect which can be explained as follows:

Earth’s atmosphere temperature is dependent upon the radiation from the sun such that it cools or warms until this radiation is in balance with the lost energy through cooling. Greenhouse Gases (GHGs) which are present in the atmosphere traps the heat in the atmosphere, causing a balance in the global temperature. However, if these gases overly abundant, temperature would increase, causing very detrimental effects.

While firms, on the one hand, appreciate the importance of these facts and the need for good environmental practices. In fact, the European retailing market has already responded to this by having a “convergent swing towards structural change.” (Tordjman 1994, 3) However, they lack awareness of its implementation. Furthermore, there is a wider marketing factors to consider such as the economic, political, cultural and demographic trends which companies respond differently. (Dibb 1996, 16-29) To correct this problem, it is suggested that firms should consider social responsibility a criterion which supplier looks in judging its quality attributes. Environment factors must also be taken into account in purchasing on the part of the firm while the government must provide policies to encourage proactive environmental approach. (Greenan et. al. 1997: 208-214)

One particular firm which sought to be environmentally responsible is Marks & Spencer, headed by its CEO, Stuart Rose. In January 2007, it launched its $400 million five-year plan called Plan A (i.e., called by that name to imply there is no plan B). Under this plan, the company would cut on its energy consumption, encourage recycling in the use of its products, and reduce air freight by buying foods closer to home. It would also test the possibility of using unsold expired food as source of renewable energy to power its over 500 stores in the United Kingdom.

John Porritt, former Director of Friends of the Earth, helped in drafting this plan. He hopes that through this, the bar for every business in every sector would be raised. Blake Lee-Harwood, campaign director at Greenpeace UK, was also pleased with the launching of this plan. According to him, “We’re glad a company like M&S has proposals that begin to match the scale of the challenge of climate change…” (CBC News 2007).

Statement of the Problem

Most of retailers in the United Kingdom are now “going green” in the sense that they integrate plans and programs to take care of the environment in their business. In particular, Marks & Spencer has been among these businesses which made significant advances in this area with the launching of its 100-point Plan A. (See Section 2.1.) This research aims to determine qualitatively the cost which such plans entail in terms of sustainability of such plan. In view of the current environmental problems, particularly in greenhouse gases emissions, the dynamics of the Carbon Market will also be factored in the discussion.

Scope and Limitations

This study aims to assess Plan A of Marks & Spencer in terms of sustainability and marketability. This research would focus primarily on the company’s goal of making it Carbon Neutral, although this doesn’t mean it would exclude other facets of the plan as discussed in Section 2.1.  Moreover, this research would only zoom in the company Marks & Spencer, being present in virtually any other product class, would be a good target of study. (Burt 2000, 875-890)

Normally, evaluation of plans such as Plan A would have three aspects: the planning process, the organization of local land-use plans and the state planning mandates as done by Conroy and Berke. (2003) For the purpose of this research, however, the emphasis would be on the planning process. This will be evaluated in terms of assessment guidelines used by the Ministry of the Environment of Finland since it has provision for evaluating broad plans such as Plan A of Marks & Spencer. However, more elaborate details of the plan such as management and provision of financial services, though also very important (Alexander & Colgate 1998, 225-236) is already beyond the scope of this research as it is beyond Plan A in the first place.

Also, in order to better assess the plan, both qualitative and quantitative approach would be implemented on the methodology. However, bearing would also be given to the social responsibility aspect of the plan. Moreover, in as much as the researcher seeks to make this paper as comprehensive as possible, other social issues such as the gendered nature of management, as promoted by Rippin in her paper “Marks and Spencer-waiting for the warrior” (2005, 578-593) nor the implication of the company’s policy against genetically modified organism (GMO) will not be discussed. (Those, however, who are interested in GMO may refer to Pearce and Hanson’s paper, “Retailing and Risk Society.” (2000, 450-458).

The customers referred to this paper would be treated as one entity, with no distinction between ages as Burt et. al. suggests that age is immaterial when it comes to actual shop choice and motives.(Burt et. al. 1995)

Literature Review

 Marks & Spencer’s Plan A

A “Green” initiative for UK retailers was launched last January 2007 by CEO Stuart Rose of Marks & Spencer. This project, called Plan A (because there is no plan B) would amount to about 200 million pounds is actually a 100-point plan which would impact the company’s operation in the next five years. It is the goal of this project that by the year 2012, Marks & Spencer would become Carbon-neutral, have no waste sent to landfill, extended sustainable sourcing, set new standards in ethical trading and promote the health of its customers and employees. Generally, the company made commitments in the following five key areas: (Harvard Business Review Online 2007, 1-3)

Climate Change

It is the goal of the company to make operations in the UK and Ireland carbon neutral. It is hoped that the use of energy would be minimized while maximizing the use of renewables. Translated, this would mean making the company 25% more energy efficient and using “green” renewable energy in powering their stores. In addition, this also means decreasing import by buying as much food from UK and Ireland to save on air freight. Consequently, this would demand that researches and development projects be done to develop production techniques in these parts of the world. Also part of the efforts made in this area is limiting carbon offsetting to the point that this will be used only as a last resort. Other goals Marks & Spencer also aim are opening a model “green” factory, using 50% biodiesel in all their lories, sharing best practices with suppliers to reduce carbon emissions, and developing low carbon products and services to help customers reduce energy use at home.

Wastes

It is also the aim of the company to halt sending of wastes from stores, offices, and warehouses to landfills and use it instead to generate energy through anaerobic digestion. This also involves recycling of all waste from all their stores; reduce use of packaging by 25% and restricting the materials used for packing to only those which are sustainable or recyclable sources. Recycle symbols would also have to be printed in all customer packaging and the used of carrier bags would have to be reduced to 33%. With regards to clothing, Marks & Spencer aim that none would end up in landfill by finding alternatives such as reusing, composting and recycling.

Raw Materials

Protection of the environment and the world’s natural resources is a key thrust of Marks & Spencer. That is why the company commits to use recycled wood or wood from a Forest Stewardship Coucil (FSC) – certified sustainable source or equivalent,  convert all fresh turkey, goose, duck, and pork to free range, using only free range shell and shell eggs, sell only Marine Stewardship Council (MSC) – certified fish or equivalent, triple the sales of organic found, launching organic cotton, linen, and wool, ensure independent standards such as LEAF or FWAG are met, and water use is reduced by 20% in stores, offices, and distribution centers.

Fair Partner

The company’s goal is to improve the lives of the people in its local communities and supply chain. To do this, it is Marks & Spencer’s plan to help disadvantaged groups such as the homeless and disabled to land into jobs through work placement, convert key clothing ranges to 100% Fairtrade cotton, offering Fairtrade bananas, jam, and bagged sugar, extend Milk Pledge pricing scheme into new farming sector, and exchange best practices, stimulating innovation, and securing investment fund trough the M&S Supplier Exchange.

Healthy Eating

Another thrust of Plan A is to promote a healthier lifestyle to its customers and employees. To ensure this, artificial color, flavors, and all unnecessary preservatives, as well as HVOs will be removed from fresh prepared food. Food Standards Agency Guideline Daily Allowance (GDA) will also be provided in their product labeling. GMOs would also be avoided.

Sustainable Development and Sustainability

One of the major concerns of Mark & Spencer’s Plan A is sustainability which it tightly linked to sustainable development. Sustainable development has been a key topic in the development discourse since 1990s and the United Nations Conference on Environment and Development in Rio in 1992 was the force behind this. This conference was attended by representatives coming from 170 nations to create a proclamation supporting environmentally sensitive economic development. In line with this, credit must be given to Northern environmentalists for being the prime movers of this initiative. (Adams 2001, 2-3)

Sustainable development could be defined in a number of ways. It could mean “an economic progress that is ecologically sustainable and satisfies the needs of the underclass” or “a development that meets the needs of the present without compromising the ability of future generations to meet their own need.” In any case, it has to have an element of concern “about inter- and intragenerational equity in human access to nature and natural resources.” (Adams 2001, 3)

In pursuing concrete and long lasting development, sustainability has now become world’s number one issue. “It is a process, which tells of a development, which commands all aspects of human life affecting sustenance. Sustainability means resolving the conflict between the two competing goals: the sustenance of human life and the integrity of nature. Sustainability involves the simultaneous pursuit of economic prosperity, environmental quality and social equity famously known as three bottom lines.” (AllFreeEssays, n.d.) Such sustainability can be achieved by shifting into centralization as done by most UK retailers (Fernie 1992, 35) or into other activities to pursue goals mentioned earlier.

“In essence, sustainability is the ability of sustaining sustainable development, which is a process of change in which the exploitation of resources, the direction of investments, the orientation of technological development and institutional change are all in harmony and enhance both current and future potential to meet human needs and aspirations. The concept of sustainability is discussed at a time when environmental problems caused by the various human activities are requiring serious attention. Remedy lies with sustainable development, approaching the management of natural resources and the adverse effects of globalization in order to address a range of problems” (AllFreeEssays, n.d.) especially now that expansion into global markets is a dominant issue that is faced by most retailers for strategic growth. (Simpson and Thorpe 1995, 16).

“In 1992, the international community as adopted at the Earth Summit in Rio de Janeiro discussed Agenda 21, the world’s plan of action for sustainable development. It was a landmark achievement, incorporating environmental, economic and social concerns into a single framework. It contains over 2,500 wide-ranging and achievable recommendations for action on issues such as, reducing wasteful use of natural resources, fighting poverty, protecting the atmosphere, oceans, animal and plant life. So sustainability is achieved when it “meets the needs of the present without compromising the ability of the future generations to meet their own needs.” (AllFreeEssays, n.d.)

Carbon Neutrality

Climate Change

According to the report of Carbon Neutral Company, Greenhouse Gases (GHGs) are mainly composed of carbon dioxide. In fact, about 67% of human induced warming was brought about by this gas as it is released in the atmosphere as humans extract fossil fuels in order to produce energy for industrial purposes. The remaining 33% comes form methane, nitrous oxide, and other gases released by other agricultural and industrial processes. (2007)

It is predicted that in the next century, the concentration of carbon dioxide in the atmosphere would be doubled as it has rises 33% since the industrial revolution. Consequently, temperatures varying by one Celsius degree since the start of civilization would rise from 2-4 Celsius degrees over the next century. Since this change is very sudden compared to what was experienced in the past thousands of years, experts believe that major and severe harm  would be felt by the environmental, economic, and social systems, endangering even the survival of mankind.

A global reinsurance company called SwissRe reported that the impact of this about $150 billion in 10 years and there would be doubling of losses from natural disasters every 10 years. England and Wales, being 1.5 Celsius degrees warmer than average, is estimated to have lost economically of about £1.5billion. In 2005, it was found out at the Conference of Scientific Experts in Exeter, United Kingdom, that melting of the Greenland ice cap may be triggered by just a two Celsius degree temperature increase above pre-industrial levels. Translated, this should mean Carbon Dioxide concentration should also stay below 400ppm – a threshold that could be exceeded in just 10 – 15 years if current rate of increase in global emissions persists.

The effect of this would be global in magnitude. Greatest effects would be felt by developing countries. For instance, a great reduction in access to drinking water would be very detrimental to the poor as it would adversely affect health and food security in many countries. Melting of the Greenland ice would cause such a dramatic rise is sea level that even changes is the shorelines would be so radical that changes have to be reflected on the map of the world.

According to Stern Review Report on the economics of climate change, HM Treasury, UK Government, 2006, “The impacts of climate change are not evenly distributed – the poorest countries and people will suffer earliest and most.  And if and when the damages appear it will be too late to reverse the process.  Thus we are forced to look a long way ahead.”

World Response

There is an agreement in the scientific community that 60% or more reduction in global carbon emission is needed within the next three to four decades, just so as to prevent the threat of global warming affecting economic, social and environmental systems.

Dramatically reducing dependence on fossil fuels is one way by which this problem can be effectively resolved. However, pursuing this line of solution would present another problem as a vast majority of power stations, businesses, cars, homes and aircrafts are dependent of these fossil fuels. A radical shift in the production and consumption patterns would now be necessary within the next few decades.

Two responses to this challenge are now being observed. From the government’s end, environmental regulations have been mandated. From the society’s end, however, initiatives have been taken go beyond or pre-empt government mandates.

In December 2006, the Kyoto Protocol of the United Nations Framework Convention on Climate Change was ratified by 163 countries. (The details of this can is presented in Section 2.3.3) To this date, this is the foundation of most regulatory initiatives to control climate change. In this legally binding treaty, a reduction of 5.4% of collective greenhouse emissions from industrialized countries is required by the year 2012. Also included in this protocol is a provision on three flexible mechanisms in achieving the goals of the participant nations:

The first mechanism is emission trading. This is done by purchasing carbon savings of one country from another such as being done within the European Union. In this part of the world, they have developed a trading scheme called Union’s Emission Trading Scheme to facilitate EU carbon allowances trading among its member countries.

The second mechanism is called Joint Implementation. Following this mechanism, developed countries can purchase carbon credits from GHG reduction projects implement from countries which are either developed or with economies in transition (such as former communist nations in Easter Europe.)

The third mechanism is called Clean Development Mechanism. By financing carbon reduction projects, industrialized countries are given access to carbon reductions. Carbon savings from these projects can be traded as Certified Emission Reductions.

Governments of Australia and United states, however, did not ratify this protocol. However, in the state level, each country has its own regulatory processes. An example of this is the Regional Greenhouse Gas initiatives of the eights states on the east coast of the United States. Included in this initiative is a regional strategy to reduce carbon emissions using emissions trading.

When the full cost of goods and services are known and factored into carbon trading, free market systems work efficiently. If prices of goods and services are not correctly priced, market system fails as in the past where the present economic system was unable to price value of stable climate. This is due to the fact that in the past, it was difficult to place an economic value on a unit of CHG emitted to the atmosphere. By translating the units of pollution, such as tonnes of carbon dioxide emitted to the atmosphere, into units of property, such as emission reduction units or carbon credits, like being done today, dynamics of free-market economy can work better.

Nevertheless, a long term stable climate requires new low and now-carbon technologies. In order to achieve this, investments must be made in commercial development research. Moreover, a strong market demand has to be created in order to encourage these new technologies which, at times, can be very expensive. To enforce this, emitting greenhouse gases should be more expensive, allowing carbon trading to come into play. Incorporating the price of GHG emissions in the market system, therefore, gives way to better in formed decisions regarding investment of new technologies. The goal, then, would be avoidance of the cost of carbon.

With the creation of carbon markets, trading carbon credits among nations from different parts of the world becomes possible. This system is very viable since in considering climate change, concentration of GHGs in global atmosphere is independent of the physical location of emissions. Emitters, therefore, have an option under this market to either reduce emissions internally or buy carbon credits from another nation whenever it is cheaper to do so.

Currently, less than just 1/3 of global greenhouse gas emissions are being managed despite the urgency of global emissions reductions. Even if the target mandated by the Kyoto Protocol is achieved, less than 3% reduction of global emission from 1990 to 2012 can be expected. Moreover, outside regulated systems, there is a substantial increase of emissions from other nations. In addition, the Kyoto Protocol is only in effect until 2012 and there has been no agreement yet on what to do after 2012. Thus, this wide discrepancy between what regulations can deliver (i.e., 3%) and the requirement determined by the scientific community (i.e., 60%) necessitates increased voluntary action.

Voluntary action is achieved when individuals, public agencies, and businesses such as Marks & Spencer’s voluntarily lay out measures to reduce or offset greenhouse gas emissions beyond regulation.

Kyoto Protocol

The Kyoto Protocol is important for the reasons discussed in Section 2.3.2. Thus, an additional subsection has been placed in the literature review for this. Moreover, this should also add gravity on case of focusing on the Carbon Neutral provision of Plan A instead of the other four areas. The following is an executive summary of the protocol as provided by the Energy Information Administration:

“Over the past several decades, rising concentrations of greenhouse gases have been detected in the Earth’s atmosphere. It has been hypothesized that the continued accumulation of greenhouse gases could lead to an increase in the average temperature of the Earth’s surface and cause a variety of changes in the global climate, sea level, agricultural patterns, and ecosystems that could be, on net, detrimental.

The Intergovernmental Panel on Climate Change (IPCC) was established by the World Meteorological Organization and the United Nations Environment Programme in 1988 to assess the available scientific, technical, and socioeconomic information in the field of climate change. The most recent report of the IPCC concluded that: “Our ability to quantify the human influence on global climate is currently limited because the expected signal is still emerging from the noise of natural variability, and because there are uncertainties in key factors. These include the magnitudes and patterns of long-term variability and the time-evolving pattern of forcing by, and response to, changes in concentrations of greenhouse gases and aerosols, and land surface changes. Nevertheless, the balance of evidence suggests that there is a discernable human influence on global climate.”1

The text of the Framework Convention on Climate Change was adopted at the United Nations on May 9, 1992, and opened for signature at Rio de Janeiro on June 4. The objective of the Framework Convention was to “. . . achieve . . . stabilization of the greenhouse gas concentrations in the atmosphere at a level that would prevent dangerous anthropogenic interference with the climate system.” The signatories agreed to formulate programs to mitigate climate change, and the developed country signatories agreed to adopt national policies to return anthropogenic emissions of greenhouse gases to their 1990 levels.

The first and second Conference of the Parties in 1995 and 1996 agreed to address the issue of greenhouse gas emissions for the period beyond 2000, and to negotiate quantified emission limitations and reductions for the third Conference of the Parties. On December 1 through 11, 1997, representatives from more than 160 countries met in Kyoto, Japan, to negotiate binding limits on greenhouse gas emissions for developed nations. The resulting Kyoto Protocol established emissions targets for each of the participating developed countries—the Annex I countries2—relative to their 1990 emissions levels. The targets range from an 8-percent reduction for the European Union (or its individual member states) to a 10-percent increase allowed for Iceland. The target for the United States is 7 percent below 1990 levels.

Although atmospheric concentrations of greenhouse gases are thought to have the potential to affect the global climate, the Protocol establishes targets in terms of annual emissions. Non-Annex I countries have no targets under the Protocol, but the Protocol reaffirms the commitments of the Framework Convention by all parties to formulate and implement climate change mitigation and adaptation programs.

Should the Protocol enter into force, the emissions targets for the developed countries would have to be achieved on average over the commitment period 2008 to 2012. The greenhouse gases covered by the Protocol are carbon dioxide, methane, nitrous oxide, hydrofluorocarbons, perfluorocarbons, and sulfur hexafluoride. The aggregate target is based on the carbon dioxide equivalent of each of the greenhouse gases. For the three synthetic greenhouse gases, countries have the option of using 1995 as the base year.

Several provisions of the Protocol allow for some flexibility in meeting the emissions targets. Net changes in emissions by direct anthropogenic land-use changes and forestry activities may be used to meet the commitment, but they are limited to afforestation, reforestation, and deforestation since 1990. Emissions trading among the Annex I countries is also allowed. No rules for trading were established, however, and the Conference of the Parties is required to establish principles, rules, and guidelines for trading at a future date. According to estimates presented by the Energy Information Administration (EIA) in its International Energy Outlook 1998,3 there may be 165 million metric tons of carbon permits available from the Annex I countries of the former Soviet Union in 2010. Greenhouse gas emissions for those countries as a group are expected to be 165 million metric tons below 1990 levels in 2010 as a result of the economic decline that has occurred in the region during the 1990s. Additional carbon permits may also be available, depending on the “carbon price” that is established in international trading.

Joint implementation projects are permitted among the Annex I countries, allowing a nation to take emissions credits for projects that reduce emissions or enhance emissions-absorbing sinks, such as forests and other vegetation, in other Annex I countries. The Protocol also establishes a Clean Development Mechanism (CDM), under which Annex I countries can take credits for projects that reduce emissions in non-Annex I countries. In addition, any group of Annex I countries may create a bubble or umbrella to meet the total commitment of all the member nations. In a bubble, countries would agree to meet their total commitment jointly by allocating a share to each member. In an umbrella arrangement, the total reduction of all member nations would be met collectively through the trading of emissions rights. There is potential interest in the United States in entering into an umbrella trading arrangement with Annex I countries outside the European Union.

In 1990, total greenhouse gas emissions in the United States were 1,618 million metric tons carbon equivalent. Of this total, 1,346 million metric tons, or 83 percent, consisted of carbon emissions from the combustion of energy fuels. By 1996, total U.S. greenhouse gas emissions had risen to 1,753 million metric tons carbon equivalent, including 1,463 million metric tons of carbon emissions from energy combustion. EIA’s Annual Energy Outlook 1998 (AEO98)5 projects that energy-related carbon emissions will reach 1,803 million metric tons in 2010, 34 percent above the 1990 level. Because energy-related carbon emissions constitute such a large percentage of the Nation’s total greenhouse gas emissions, any action or policy to reduce emissions will have significant implications for U.S. energy markets.

At the request of the U.S. House of Representatives Committee on Science, EIA performed an analysis of the Kyoto Protocol, focusing on the potential impacts of the Protocol on U.S. energy prices, energy use, and the economy in the 2008 to 2012 time frame. The request specified that the analysis use the same methodologies and assumptions employed in the AEO98, with no changes in assumptions about policy, regulatory actions, or funding for energy and environmental programs.” (2005)

Corporate Social Responsibility

Concept

Social responsibility nowadays can be seen in a much broader light and Carby-Hall used three aspects in order to analyze and evaluate this concept. The first deals with the contract of employment relating to the social responsibility of the firm to have respect towards its employee – a new and common law. The second examines the generic link of this common law to respect towards the employee. The third would discuss social responsibility in a macro-scale. (2005, 205-234.)

According to Mallenbaker, there is no agreed definition of corporate social responsibility although he would define it as how companies manage the business processes to produce an overall positive impact on society.”  Nevertheless, he also outlined other definitions as follows:

According to him, “The World Business Council for Sustainable Development in its publication “Making Good Business Sense” by Lord Holme and Richard Watts says ‘Corporate Social Responsibility is the continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as of the local community and society at large’

The same report gave some evidence of the different perceptions of what this should mean from a number of different societies across the world. Definitions as different as ‘CSR is about capacity building for sustainable livelihoods. It respects cultural differences and finds the business opportunities in building the skills of employees, the community and the government’ from Ghana, through to ‘CSR is about business giving back to society” from the Phillipines.’

Traditionally in the United States, CSR has been defined much more in terms of a philanphropic model. Companies make profits, unhindered except by fulfilling their duty to pay taxes. Then they donate a certain share of the profits to charitable causes. It is seen as tainting the act for the company to receive any benefit from the giving.

The European model is much more focused on operating the core business in a socially responsible way, complemented by investment in communities for solid business case reasons.” (2007)  In fact, the Commission on European Communities asserts that there is an internal and external dimension to the way companies approach CSR. Internal Dimension is primarily concerned practices that are socially responsible with the company. External CSR, on the other hand, is concerned with the local community and the rest of the world. Management of human resources, health and safety at work, adaptation to change and the management of environmental impacts and natural resources are the concerns of the internal dimension. External dimension, on the other hand, is concerned with the investors, local communities, business partners, suppliers and consumers, human rights and social concern.(2005, 883.)

Moreover, it is suggested that the CSR issues are commonly confined to four general headings, namely: marketplace, workplace, environment, and the community. Companies must, however, be careful with the first area since it is the main source of damage in the company’s reputation. After all, according to Dr. Rutledge, “good reputation counts more than a smart strategy or clever tactics.” (1997, 73)

According to Hopskin and Crowe, tension had always been present between business and social goals. This can be explained by the concept called CRS reporting which has three phases. The first phase happened beginning early 1970s where there were advertisements and annual reports focusing on environmental issues but was not linked to the corporate performance. During the late 1980s, however, social audit was introduced to examine the performance of companies in social responsibility with respect to the communities, employees, customers, suppliers and investors. The Body Shop and Shell Canada were but early examples of companies using a similar approach. Finally, the third phase which started late 1990s caused social auditing to be strengthened with the introduction of externally set of standards.

In order to build the current momentum behind CSR, there are five key drivers suggested by Ernst & Young in 1992 which influenced the increasing business focus on CSR. They are the following:

• Greater stakeholders awareness of corporate ethical, social and environmental standards
• Direct stakeholders pressures
• Investor Pressure
• Peer Pressure
• Higher sense of social responsibility.

Now, CSR is being gradually recognized amongst companies as an important part in the new form of governance. The reason for this is because it helps companies respond to a new set of basic changes in the global business environment which include globalization. This is can be thought of as social conscience which prick companies who source products and services in developing countries.

Public Perception

Currently, food retailers in UK use Corporate Social Responsibility (CSR) both as a way of marketing to and communicating with customers. This is carried out while customers are in their stores. It can be seen that in the past years, there had been a steady increase of market share of large food retailers, placing them at the cutting edge of retail development. With increasing awareness of activities of these companies which are often controversial in term of their economic, social, and environmental impacts, major food retailers now emphasize and report their commitment to CSR. In a study made by Peter Jones and others, it was observed that retailers use CSR themes to market their goods. (2005, 47-56).

In a recent study done by MacMillan and others, it was found out that “the general public also has views about the reputation of companies and, to the extent that they act on the basis of those views, can significantly affect the fortunes of the businesses concerned.” In this study, the nominations for the Euro-RQ (Reputation Quotient) was considered and it was found out that Marks & Spencer were among the Top 20 in the United Kingdom. This, of course would have good market implication as the company worked on it’s reputation, not mimicking other which made theirs “a wasted asset” as described by Fearnley. (1993, 4).

Companies Perception

Large retailers in from the United Kingdom have recognized that their businesses have impacts on the society, economy, and environment. In general, a broad range of environmental programs are being pursued such as energy efficiency, water consumption, carbon dioxide emission, vehicle emissions, volume and constituents reduction of packaging, waste management, and retailing. Likewise, addressing social issues are also being pursued such as social including social inclusion, ethical trading, healthy living, training, health and safety, and community support activities. The difference lies, however, in the diversity and strength of the commitment of these large companies in pursuing these issues. In fact, in the area of economic sustainability alone, the retail companies’ response is very varied in the sense that some do not explicitly address social responsibility while others perceive it only in terms of ensuring lasting and profitable growth. Still others perceive it as embracing broader concerns such as economic regeneration and support for local economies.

Track Record of Marks & Spencer

Marks & Spencer is among the top scale store brands today. In fact, the company has been used as a standard in Fernie and Pierrel’s study. (1996, 48-52) According to Marks & Spencer CSR report in 2004, “The ways in which Marks & Spencer products and services connect with people, the environment and animal welfare, will always be one of our most demanding CSR challenges.” The approach of the company in practicing social responsibility – which other companies also pursue (Jones et. al. 2005, 34-44) – implies that, rather that having controls from both its supplier and customers, it has a direct control over its stores and distribution centers. This may also be the It can be said, therefore, that the company can control design and operations. This means that acting as a good neighbor while at the same time complying with Health and Safety protocols is highly feasible. This can be done by ensuring quality management systems to influence their supplier while providing labels that are informative yet understandable to products for their customers.

The 2004 CSR Report of Marks & Spencer reported five key issues, namely, sustainable raw materials, responsible use of technology, animal welfare, ethical trading, and community programs – all of which also appear in the most recent Plan A of the company. According to this report, progress was made by the company in these areas although challenges were encountered along the way in terms of adhering to standards, working effectively with suppliers, government agencies and environmental and community groups. Moreover, it was also challenged in the area of communicating its progress on sustainability agendas to its customer and the general public.

For instance, in November 2003, a new over-arching set of standards which focuses on traceability, minimizing the use of pesticides, ethical trading, support for non-genetically modified foods, and food safety for the management of its supply chain for fruits, vegetables and salads was released by the company. Moreover, a Code of Practice was released for fish farm suppliers in order that approved standards are being followed in the farming of salmons. Furthermore, this code is enforced by regular company audits against this code.

Also, towards the end of 2002, 99% of polyvinyl chloride packaging on food products have been replaced since it was found out those harmful emissions was produced in the manufacture and disposal of this kind of packaging. Furthermore, the company determined that 10% of its electricity should come from renewable sources. There also now exists a centralized collection of garbage from its UK stores so that legal compliance, cost efficiency and environmental improvements are being followed. Noise and pollution was likewise due to delivery vehicles reduced by the company by enforcing such standards. (Jones et. Al 2005, 34)

Values-Driven Approach to Marketing

Concept

In a study done by Levy and Gannon, it was found out that success in the market place is dependent, in an increasing measure, on the company’s ability to win the hearts and minds of consumers, employees, and the general public. Using a values-driven approach help improve market responsiveness, builds customer loyalty and brand equity, and create wealth for major stakeholders. The effects of this, however, go beyond calculation of economic risks and rewards. (1998, 43.)

Reputation of Marks & Spencer

According to Rutlege, “A good reputation counts for more than a smart strategy or clever tricks.” By levering on this, a company can have an advantage in the market place that cannot be easily paralleled, as demonstrated by Marks & Spencer.

This company is able to tweak it corporate culture in such a way that its employees, customers, and suppliers have an identity of interests. Moreover, the whole value system of the company is based on forging good long-term relationships among its main stake holders. According to Levy and Gannon, “It is a philosophy which set out from the beginning to build the business on three ‘great assets – the goodwill and confidence of the public, the loyalty and devotion of management and staff throughout the system, and the confidence and cooperation of our suppliers.”

By venturing in these three great assets, Marks & Spencer was able to provide high quality, well-designed products, fulfilling its economic goal. In effect, because of the company’s consistency in treating its own staff and suppliers, customers are convinced that the company is also interested in their long-term relationship. From the perception of customers, the interests of management and shareholders do not have undue precedence over the interests of staff and suppliers as from the beginning; staff and suppliers are seen to be full partners in the creation of wealth. The message, then, becomes crystal: If Marks & Spencer never exploits its suppliers and staff; neither would it exploit its customers.

Corporate History

No study on Marks & Spencer would be complete without first studying its history. This subsection, therefore, closes the literature review section with a discussion of the company’s background, growth, and progress over the years.

Michael Marks and Tom Spencer founded the company in 1854. Now, it has already grown to 515 stores across the United Kingdom and 200 stores worldwide, operating in 30 countries (See Table 2-1 and Figure 2-1.), and is engaged in retailing which has now become an important feature of global distribution systems. (Quinn & Alexander 2002, 264-276.)  History has it that a certain established local businessman by the name of Isaac Dewhirst lent Michael Marks five pounds to buy and sell goods in 1800s. Later, Michael partnered with Tom who was then the chief steward of Isaac’s store. Together, they build a chain of market stalls known then as penny bazaars. (Seth and Randall 2001, 118) Growth of the company, however, can be attributed to Mark’s son, Simon, who developed the store brand, created an innovative corporate culture, and laid down trading principles that are still upheld today. In 1998, Simon registered St. Michaels – a famous brand of Marks & Spencer – and all other merchandise sold in Marks & Spencer’s stores became under that brand name in 1956.

This research has two aspects – quantitative and qualitative. The quantitative aspect is founded on the assumption that a statement can be made about the outcomes of broadly comparable experiences is evidences are collected. In Philosophy, this is called a positivist approach to the social world in the sense that facts and knowledge are assumed to be objective. Moreover, it assumes that complex problems, if broken down into simpler components can be best understood. In other words, this type of methodology seeks to search some universal truth which explains the reality being observed.

For an inexperienced researcher, it is tempting to confine research methodology only to its quantitative aspect for the simple reason that analysis is clear cut and only move within the boundaries of the data collection phase. The researcher, however, did not pursue this approach since it requires that the research instrument must be scientifically respectable. Of course, different institutions would have their own definition of what “scientifically respectable mean.” In as early as the data collection phase, experts disagree as to what the number of samples must be surveyed. However, they all agree that it must be quite a number if reliable results are to be produced. For the purpose of this dissertation, however, a reasonable number of respondents were involved into the two surveys employed: 69 for retailers’ survey and 1,960 for consumers’ survey.

Rather, the researcher put a qualitative aspect to the research methodology as well. The philosophy behind this is so that the dissertation would not be confined with just obtaining facts. Instead, insights into perspective would also be gained. The philosophy of this approach is that problems cannot be fully observed in isolation and that knowledge and facts are subjective. That is why this aspect of the methodology hopes to view problem as a part of a complex pattern of links and relationships.

The main advantage of this is that the methodology would then be intensive yet flexible. Even small samples or a single case would be sufficient provided that there is an in depth investigation over an extended amount of time.

Comparison of alternatives would follow. Here, the broad outcome of each alternative and its likelihood in influencing future development would be considered. Later on in the evaluation, these alternatives would be narrowed down, possibly to one best alternative. This, of course, would be thoroughly justified.

Finally, impact will be evaluated. Since the plan is very broad in its scope and its precise impact is not easy to gauge, a general qualitative description of all possible cause-effect scenarios would be undertaken. Since it is not possible to seek every possible repercussion that the plan may have, based on the following criteria:

• the cumulative impacts of separate measures such as investments,
• the indirect impact of changes in the structure of industry, consumption patterns and production methods; and
• the impact on the environment and on human living conditions caused by :
• increasing pressure from human intervention within a particular area or region;
• community restructuring;
• an increase in the volume of traffic;
• rising energy consumption

Findings, Analysis and Synthesis

This section is the discussion of the results of the methodology presented in the previous section. The qualitative aspect can be seen in Sections 4.1 to 4.4 while the quantitative aspect is presented in Section 4.5.

Formulation of Alternatives

Solutions to environmental issues can be categorized into Internal, Supplier, and Customer. Internal activities refers to activities that the company has direct control. This includes making operations carbon neutral, increase Energy Efficiency by 25%, Carbon Offsetting, and reducing Carbon Emissions whenever possible. The second category is focused on the supplier which includes decreasing food import (which, when done would also require research for more effective production techniques. Also on this category is sharing best practices with supplier which includes periodic audits. Finally, the third category is development of products and services for the customer. Decision has to be made on which of these, or combination of these three activities would best combination in order to ensure sustainability. Sustainability, of course, in this case would mean the project can be carried from the company’s perspective.  Before venturing into any decisions, several considerations per category have to be dealt with.

Internal Activities

The first deals with financial matters. Venturing in Internal activities alone would require much capital. Although it is true that researchers have already carefully studied this and so, were able to come up with the figure of 20 million pounds as an expected budget for this project, it is highly possible that this can even go higher due to the added cost research and development might unexpectedly incur. Increasing energy efficiency by 25% alone could post many problems in this area. First of all, before this could be implemented, it has to be tried first to different stores. The act of just changing high-efficiency bulbs, for instance, would require down time which would cost the company more than the money allocated just for the purchase of bulb because losses would be incurred at this time. Consider further that it is also highly probable that some of these high efficiency bulbs get busted through transport or all the proposed bulbs have become suddenly obsolete, then the planned amount would definitely not be met since such projections only work with certain assumptions and in Science,  all these assumptions are hardly ever met.

This option, however, also has its up side, too. With the rise of Carbon economy, both improving energy efficiency and making the company Carbon neutral would not only uphold the reputation of the company in public (which, by the way, is a very important factor as discussed in Section 2.5), but would also gain enable the company to gain carbon credits which now have monetary value. Conceptually, this would be like hitting two birds with one stone – on in this case, three: the public, the company, and the government. Of course, winning the public would mean increase trust of the public which eventually translate to higher sale. As for the point of view of the company, the higher the Carbon credits would mean less money being lost and therefore, can also be seen as a positive phenomenon. And finally, the perceived concern for the environment would even cause a commendation from the government. Still, as an added bonus, the company would have done its share in bridging the required carbon emission determined by the Scientific community and the projected reduction emission brought about by the Kyoto Protocol.

Supplier

The second category is focused on the supplier.  As mentioned in Section 2.5.2, the suppliers are among the greatest asset of the company as other than being potential customers, they also help establish a trust factor to the general public, causing them to prefer the company over competitors. Decreasing food imports would most probably cause a strain in the relationship of Marks & Spencer with the supplier overseas. Some of them may not buy the idea that the company is severing such ties which have been in existent for a number of years now just to pursue some environmental program. For those who companies which have a low appreciation of this, the move by Marks & Spencer would entail at least two objections from these companies.

First, Marks & Spencer is neither a power-generating nor environmental agency. That is why it becomes so hard for managers who are less knowledgeable with what’s going on in the environment to understand this idea. Moreover, even if the Kyoto protocol is followed, carbon emission would not be low enough, anyway. If this is the case, they why is there a need for the company to pursue this so-called Plan A? Second, the suppliers may also doubt Mark & Spencer’s commitment to their suppliers. Since they are also potential customers, they might now prefer the competitor over Marks and Spencer, especially if there is a possibility competitor would establish a relationship with the one Marks & Spencer is severing ties with.

In can be noted that in 1999, when Marks & Spencer announced the end of long-term supply arrangements from several main clothing suppliers in UK, several suppliers felt they were betrayed as most of them had been wholly dependent on Marks and Spencer. Moreover, these arrangements had been going on for at least 100 years without written agreements and so, several suppliers sued the company for this. History might repeat itself if the company would not be careful in severing ties.

Still on its down side of venturing in this category is for the company to fund research and development projects which would increase the productivity in its region of operation, particularly UK and Ireland. Aside from the high possibility of spreading the company’s manpower and resources too thinly, the results of the study would take time for it to be useable. That is because a newly developed technique would take time to be established because government permits have to be sought first, experiments have to be made, and a waiting period would have to be endured for the results. Of course, if results fail, then the process would have to be iterated. This, of course, would lengthen the waiting time some more.

The brighter side of this undertaking, however, would be the forging of a stronger relationship with the company and the UK growers. This would be furthermore strengthened by opening a model “green” factory with a supplier. Should these two projects succeed, then there would be a favorable long term implication of this project.

Customer

Generally, helping customers reduce energy use in their homes by developing low-carbon products and services would be welcomed. The least that the company could expect is no response. It is doubtful that there would be significant opposition to it since the project would directly benefit the customers. Running a Carbon Challenge with the Women’s Institute and a similar campaign by the Climate group would even improve Marks & Spencer’s reputation, not only its customers, but for the rest of the world. For as Thompson and Richardson suggested, “Organizations, be they profit-seeking or not-for-profit, must add value for their customers if they are to be successful.” (1996, 5-19). Certainly, this is an added value which could help the company become more successful.

Formed Alternatives

The following alternatives may be considered:

• Option 1: Focus on the internal only.
• Option 2: Focus on the supplier only.
• Option 3: Focus on the customer only.
• Option 4: Focus on the internal and the supplier.
• Option 5: Focus on the internal and the customer.
• Option 6: Focus on the supplier and the customer.
• Option 7: Focus on the internal, the supplier, and the customer.

In terms of sustainability, Option 7 may be the most unsustainable because it has the highest risk and the most work to be done. Yet, it could also have the most benefit as well, not only for the company, but for its suppliers and customers. Those with focus on customers may also not be necessary if the goal of which is to improve public perception of the company. Taking Option 4, for instance would already win the hearts of the customers since its overarching mission is to save the environment. Just by the mere fact that Option 1 seeks to lower down the company’s GHGs emission is already noteworthy. Although the success or failure of experiments relating to this is another matter, taking Option 1 would make the company more focused on this work, thereby increasing the likelihood of success.

Comparison of Alternatives

Alternatives would be compared in two areas: the broad outcome of each alternative and its likelihood of influencing future development. The researcher has devised a four point rating scheme for each of this two criteria.

Outcome

The following rating scheme was used to judge the broad outcome of each alternative:

4 = Very Desirable Outcome:

Success is almost assured since the company has done something similar and succeeded in the past. The effect would have a global and lasting (i.e. at least, a lifetime) implications.

3 = Desirable Outcomes (A):

There is a good likelihood of success since other companies have embarked on a similar strategy and succeeded. The effect would be global but only temporary. Even so, the outcome could be enjoyed for a significantly long time (i.e. a decade or more.)

3 = Desirable Outcomes (B):

There is a good likelihood of success since other companies have embarked on a similar strategy and succeeded. The effect would be local but lasting (i.e. at least a lifetime.)

3 = Desirable Outcomes (C):

There is some likelihood of success since other companies have embarked on a similar strategy and succeeded. The effect, however, would be both global but lasting.

2 = Less Desirable Outcomes (A):

There is a good likelihood of success since other companies have embarked on a similar strategy and succeeded. The effect would be local but only temporary.

2 = Less Desirable Outcomes (B):

There is some likelihood of success. The effect would be global but only temporary.

2 = Less Desirable Outcomes (C)

There is some likelihood of success. The effect would be local but lasting.

1 = Undesirable Outcome:

There is little likelihood of success. The effect is irrelevant.

Influencing Future Development

The following rating scheme was used to judge the influence of each alternative to future development.

4 = Very Desirable Influence:

The outcome is most likely to be a basis of future advances in this alternative. Moreover, there is a high likelihood that no undesirable permanent impact is expected as a result of taking this option.

3 = Desirable Influence:

The outcome is moderately likely to be a basis of future advances in this alternative. However, there is a high likelihood that no undesirable permanent impact is expected as a result of taking this option.

2 = Less Desirable Influence:

The outcome is most likely to be a basis of future advances in this alternative. However, there is some likelihood of undesirable permanent impact is expected as a result of taking this option.

1 = Undesirable Influence:

There is a high likelihood of undesirable permanent impact is expected as a result of taking this option. The outcome, whether it is likely to be a basis of future advances or not, is immaterial.

Rating the Alternatives

Among the alternatives, option 3 has been given the highest outcome rating since it was proven in the past the customers of Marks & Spencer respond well to the goodwill of the company by giving the company its trust (Section 2.1.2). Conversely, Options 2 and 7 have the lowest ratings due to the supplier component. Research has yet to establish that when a model green company is opened with a supplier, it will have a positive impact on the company. Working with suppliers to share best practices, however, has been proven in the past. Thus, the likelihood of the outcome is not as high as say, option 3, thereby lowering Options 2 and 7’s outcome ratings to 2.

Now, regarding influencing future developments, Options 1, 4, 5 and 7 had the highest scores. That is because each of these options explores the internal categories which deal the problem of GHG emissions and have therefore much potential in influencing future developments. Basically, the situation of the environment due to Greenhouse emission is quite alarming as can be noted in Section 2.3. The fact that the losses amount to $150 billion in 10 years have significant impact all human activities which certainly includes all businesses such as that of Marks & Spencer. Taking into account the current world population of 6,602,224,175 persons that is translated to $2.2 billion per person per year. Because of such potential, it is but logical to say that concentrated efforts on this field would definitely be a basis of future advances.

• Thus, by comparing the alternatives presented in Section 4.1.4 (See Figure 4-1) using the measures discussed in Section 4.2, the alternatives are now just narrowed down to the following three options which are the highest in the ratings:
  OPTION 1: Focus on the internal only.
• OPTION 3: Focus on the customer only.
• OPTION 5: Focus on the customer and the internal.

With all things equal, OPTION 5 is the best choice since it is more comprehensive in scope and addresses more issues.

 Interest Groups

Interest groups for this particular plan would be the following:

Company

If there’s a group that would be most interested in all the details of Plan A, that would be the company since they would implement the plan. In general, the motivation of every company is really to increase profit. Unless Marks & Spencer is indeed interested more on charity than on profit (which is also possible, though less likely), the research, in general should produce more profit for the company. This is possible since taking on controversial matters such as concern and care for the environment is becoming a concern these days. As shown in Section 2.5, a value-driven approach to marketing is also beneficial to the company.

Looking from the opposite view, however, that the company needs to survive, especially now that foreign retailers have been entering the United Kingdom in unprecedented numbers. (Retail Reports 2002, 151-160). So, if the company is to maintain its competitive edge, this should also be an area of interest.

Customer

The next stakeholders which would be interested in the options presented are the customers who would be affected by the plan, especially since Marks and Spencer has the best corporate reputation according to the Corporate Reputation Review (Macmillan et. al. 2002, 377.) Table 4-2 on the previous page shows the Top 10 UK nominations as published in the review.

According this review, Marks and Spencer, by far, had the majority of nominations. Apparently, it has maintained its good reputation as discussed in section 2.5.2 despite the fact that it has received consistent media criticism as reported McMillan et. al. (2002. 376). Moreover, the article reports that for many years, it was also regarded as a good employer. This is a good thing since for Marks & Spencer since other companies who go global received criticisms and a bad press. (Segal-Horn 2002, 8-19)

Environmentalists

Due to the current situation of the world as described in Section 2.3, the environmentalists would also be interested since they are experts in this field. If the plan of this company would work, they may also lobby for others to follow the example of Marks & Spencer in order to save the world from calamities brought about by climate change if the issue of GHGs would not be addressed as soon as possible.

Impact Assessment

As mentioned in section 3, the broadness of the plan in its scope and the difficulty in gauging precise impact necessitates a qualitative description of all possible causes and effects. Since by this time, only one of the choices is left, the selection criteria in section 3 need not be enforced. Rather, it shall be used to measure the extent of the impact.

Cumulative Impact

Compared to options 1 and 3, option 5 has the widest cumulative effect since it is a combination of options 1 and 3.

As discussed earlier, venturing in internal activities would require much investment and a high deviation from this value due to the uncertainty in research. Suppose that the working figure is 20 million pound for this project. Suppose further that due to some unavoidable and unexpected circumstances, the actual figure rose up by 50% to say, 30 million pounds. Roughly, that would be around $ 60 million.

Now, it has been said that due to greenhouse effects, the losses from natural disasters every year is about $150 billion and this is expected to double every ten years if we fail to resolve the issue. Dividing the $150 billion expenses to ten, it turns out that the total losses is $15 billion a year. Now, the population of the earth is just roughly 6.5 billion people so that if the loses per year is divided by the population, each person is losing about $ 2.3 dollars per year. Comparing this now to the total adjusted expense of $60, this investment now, though very great, would seem insignificant in light of the whole earth.

Of course, Marks & Spencer could be held liable if after all their best efforts, the Greenland ice still melted and changed the face of the earth forever. Yet, before that happens at all, efforts by Marks & Spencer could have started a trend which other companies should also venture into – especially those in the energy sector who are using fossil fuels.

Following the logic that this step of Marks and Spencer would also inspire others to do the same, the Carbon economy would be more extensively studied and used, forcing others companies to join in or be left out. Of course, as more and more companies join in, emission of GHGs may indeed be significantly reduced as hoped for in the Kyoto Protocol.

Indirect Impact

An indirect impact of this would be to reinforce the company’s good reputation. It can be remembered that in 1999, the company faced cases when suppliers sued it from breaking century-old gentleman’s agreements with certain suppliers in the UK. Now, less than a decade after, it can be forgotten as the bad memory is replied with good memories of how Marks and Spencer tried to save the world with Plan A. Consumption patters also would be affected as old customers would now be more loyal than ever. In fact, they may even persuade the new ones to stick to Marks & Spencer as well.

Of course, production methods would also be drastically changed. For one, it is planned to reduce packaging by 25%. Carrier bags would also be reduced to 33%. Even the range of materials which will be used are restricted to cornstarch-derived PLA, PP, PET, and PE. Another change would be an additional task in the production line which is printing recycle and compost symbols on all plastic bags.

Survey Results and the Company’s Financial Performance

A survey was done on national newspaper on 69 key retailers. For each retailer, a score from -30 to +30 were given depending on the perception of the critic. The more positive view, the more positive the score is.

On the top of this survey was Marks & Spencer with a total score of 174.17. One possible reason for this big lead is the band’s drive to promote itself as an ethical retailer. Indeed, this has been a major factor in its chain survival. John Lewis, on the other hand, scored 80.83, placing it on a far second place as shown in Figure 4-2. Among the positive view of John Lewis highlighted in the survey were the opening of a food hall on Oxford Street where its flagship store is located. However, it was severely criticized for revision of its classic slogan which have been in existence in the last 80 years, “Never knowingly undersold. In the third place is Topshop with a score of 77.5 brought about by the favorable coverage of the Kate Moss collection.

Now, as for those who are along the end of the list, Tesco finished last with the score of -140. Alleged price-fixing of dairy products calls all major supermarkets to suffer as a result of the investigation called for by the Office of Fair Trading. Gap, a fashion chain store, also scored a very low -26.7 as there had been reports of their child labor involvement through a subcontractor for making clothes. This placed them also near the bottom at rank 60.

From the consumer’s point of view this time, it was observed more than half on the consumers are willing to pay premium to the company with the best reputation despite the fact that a cheaper alternative of the same product or service is available elsewhere. Of all the retailers in the survey, it was found out that Marks & Spencer tops the list, followed by John Lewis Partnership and the Virgin Group. On the next seven spots are the following: Tesco (4th), Sony (5th), ASDA (6th), Amazon (7th), Apple (8th), Boots (9th) and BBC (10th). (See Table 4-1.)

According to the survey, there are several ways on how to build good reputation. Forty eight percent of the respondents believe excellent customer service is very important. A little over a third (36%), on the other hand, believes that if products and services are lived up to the expectations, a good customer service is built. Other answers include being a good employer (7%) and brand appeal (4%).

This uncontested reputation had been held by Marks and Spencer for decade although, like most companies, it also went through a season of declining market share, net profit, and price share for a season. However, since 2000, the company was able to rise up as shown in Table 5-2 and Figure 5-3.

It can be observed from Table 5-2 that the company registered an increased of 4.1% in retail sales, 35.1% increase in pre-tax profits, and 63.5% increase in earnings per share. Its food and clothing department continue to be the large contributors of M&S sales accounting for 46.6% and 42.2% of total revenues. Food recorded a strong growth in 2006, while clothing sales remains flat. Home products and international sales account for 4.5% and 6.7% for total revenues with home products seeing a 0.8% increase.

Also, an improvement of the overall performance can also be observed progressively as the operating margin increased more than 10% in 2006. Continued tight control of costs, tight management of stock commitments and better procurement process were the main factors in seeking to improve margins. Moreover,  the was increased by nearly 350,000 a week to over 15 million in 2006 as compared to 14.7 million in 2005 for customer visits. Increasing consumer purchases with a total of 10 million consumers purchasing every week was also pushed by the Christmas season. It is expected by the management of Marks & Spencer that this positive trend would continue as M&S continue to offer better products, stores, and customer service to the consumers as well as total quality management as Porter and Smith asserts this to be a means of driving quality improvement. (1993, 13).

Primary Data: Survey Results

To further underscore the importance of ecologically sound business practices, a survey has been conducted to Marks and Spencer patrons. The main aim of the quick survey among 60 patrons of the company was to determine the importance which they place on this facet of the business. The respondents were chosen through simple random sampling, and the tool has been pilot tested and administered through telephone interviews.

Correlating each of the reasons for patronage to overall strength of patronage (last item), the foregoing table shows that the strongest reasons for patronizing the brand are as follows: personalised service (r=.83, p<.01); being a trusted global brand (r=.65, p<.01); store ambience (r=.47, p<.01); willingness to pay a premium for environmentally sound products (r=.45, p<.01); having a wide variety of options (r=.44, p<.01); and knowledge that the products being offered are environmentally friendly (r=.42, p<.01).

Conclusions and Implications

Environmental issues, in particular – those brought about by human induced climate change, is becoming a major concert today as it is by far, the greatest threat this century in term of of the environment, the economy, and the society. Usually, firms are able to appreciate the importance of good environmental practices. The only problem with this is that often, they lack the awareness of how it should be implemented. However, there are companies such as Marks & Spencer which could act as a trend setter in this field.

Last January 2007, Marks & Spencer released its Plan A to address the growing environmental issues. The plan is a 100-point document on five major areas of concern: Climate Change, Waste, Raw Materials, Fair Partner and Healthy Eating. The focus on this paper, however, is on the first area.

Using the environmental assessment of plans provided by the Ministry of the Environment in Helsinki Finland, categories of actions to be taken in climate change were combined to determine the different combinations this project might be carried out and which is the most desirable of all. Using the methodology outlined in section 3 and evaluating its outcome and influence, it was found out that the best practice is to focus on both customer and internal aspects of Plan A. This would, of course, increase its cumulative and indirect impact and may even be perceived as practice of Corporate Social Responsibility (CSR).

A strategy to do this would be to package this as a form of customer service in the overall global chain strategy of the company (Christopher & Towill 2007, 1-14) since results in Figure 5-2 confirms that this is the number one builder of a good reputation. In fact, this idea can be further explored so as to develop Marks & Spencer to a lifestyle retail brand which would positively affect the company. (Helman & De Chernatony 1999, 49-68). To strengthen the impact even more, the company may even employ systematic feedback from the customers on the company’s activities. (Voss et. al. 2004, 212-230)  This can be effectively done by exploring natural channels to enhance strategic competitiveness (Griffith & Ryans 1995, 52-69) and can now be part of a set of standard to cover all branches. (Shaw & Cresswell 2002, 7-23)

Moreover, this action on the part of the company can also be perceived as ethical, causing the company to maintain its lead as before over John Lewis as was presented in Figure 5-1. In fact, this, integrated with information and communications technology, could be a great dimension to add to on line shopping. (Barlow et. al. 2004, 157-163) In addition to this, the company may also incorporate environmental analysis since it is a key element in strategy development. (Neil 2000, 249-250.) Doing this distinctively well would make Marks & Spencer very distinguishable from other companies so as not to lose their discriminating power, a phenomenon common with the expansion of retail chains. (Piron 2001, 45-60)

Should other follow, there is a good chance that carbon neutrality would be achieved. Cumulative impact are those which affect even the future generations such as what can happen if all these researches of GHGs should succeed and be used for the good. Indirect impact, on the other hand, involves maintaining good relationship with the customers, thus preserving its public trust and competitive advantage. Moreover, this is also a good venue to practice CSR which also has an impact on the market. Below are some of these impacts, covered in the Kyoto Protocol, when all sectors in the society do their share – as presented by the Energy Information Agency:

It is projected that in 2010, the carbon prices necessary to achieve the carbon emissions reduction targets range from $67 per metric ton (1996 dollars) in the 1990+24% case to $348 per metric ton in the 1990-7% case. “In the 1990+24% case, carbon prices generally increase from 2005 through 2020. In the 1990+14% and 1990+9% cases, the carbon prices increase through 2013 and then essentially flatten.

In the three other carbon reduction cases, the carbon price escalates more rapidly in order to achieve the more stringent carbon reductions in the commitment period. The carbon price then declines as cumulative investments in more energy-efficient and lower-carbon equipment, particularly in the electricity generation sector, reduce the marginal cost of compliance in the later years of the forecast. These investments reduce the demand for carbon permits over an extended period of time, offsetting growth in energy demand and moderating the carbon prices.

As a result of the carbon prices and higher delivered energy prices, the overall intensity of energy use declines in the carbon reduction cases. Energy intensity, measured in energy consumed per dollar of gross domestic product (GDP), declines (i.e., improves) at an average annual rate of 1 percent between 2005 and 2010 in the reference case due to the availability and adoption of more efficient equipment. In the carbon reduction cases, higher rates of improvement are projected—from 1.6 percent a year in the 1990+24% case to triple the reference case rate at 3.0 percent a year in the 1990-7% case.

In 2010, reductions in carbon emissions from electricity generation account for between 68 and 75 percent of the total carbon reductions across the cases. Electricity consumption is projected to be lower than in the reference case, with more efficient, less carbon-intensive technologies used for electricity generation. In all the carbon reduction cases except the 1990+24% case, carbon emissions from electricity generation in 2010 are lower than the actual 1990 level of 477 million metric tons of carbon emissions from the electricity supply sector. Electricity generators are expected to respond more strongly than end-use consumers to higher prices because this industry has traditionally been cost-minimizing, factoring future energy price increases into investment decisions. In contrast, the end-use consumers are assumed to consider only current prices in making their investment decisions and to consider additional factors, not only price, in their decisions. In addition, there are a number of more efficient and lower-carbon technologies for electricity generation that become economically available as the cost of generating electricity from fossil fuels increases.

Total electricity generation is lower in the carbon reduction cases because electricity sales range from 4 to 17 percent below the reference case in 2010. Reduction in electricity demand in response to higher electricity prices is somewhat mitigated by the change in relative prices. In 2010, electricity prices are between 20 and 86 percent above the reference case across the carbon reduction cases; however, delivered natural gas prices are higher by between 25 and 147 percent. With a smaller percentage price increase, electricity becomes more attractive in those end uses where it competes with natural gas, such as home heating.

Although reduced demand for electricity and efficiency improvements in the generation of electricity contribute to the total reductions in carbon emissions from electricity generation, fuel switching accounts for most of the reductions. The delivered price of coal to generators in 2010 is higher by between 153 and nearly 800 percent in the carbon reduction cases relative to the reference case. As a result, coal-fired generation, which accounts for about half of all generation in 2010 in the reference case, has a share between 42 percent and 12 percent in 2010 in the carbon reduction cases. To replace coal plants, generators build more natural gas plants, extend the life of existing nuclear plants, and dramatically increase the use of renewables in the more stringent reduction cases, particularly biomass and wind energy systems, which become more economical with higher carbon prices.

Assuming that carbon emissions from the generation of electricity are shared to each of the end-use demand sectors, based upon their consumption of electricity, the industrial and residential end-use demand sectors account for most of the carbon reductions, and the transportation sector accounts for the least. In response to higher energy prices, consumers have an incentive to reduce demand for energy services, switch to lower-carbon energy sources, and invest in more energy-efficient technologies.

Because coal is the most carbon-intensive of the fossil fuels, delivered coal prices are most affected by the carbon prices. Higher electricity prices reflect the increased costs of fossil fuels for generation and the incremental cost of additional investments, although the increase is mitigated by generation from renewables and nuclear power, because their fuel prices are not affected by carbon prices. Although the average carbon content of petroleum products is higher than that of natural gas, the percentage increase in the price of natural gas is higher than that of petroleum. Higher prices for petroleum are partially offset by lower world oil prices, and Federal and State taxes on gasoline also serve to mitigate the percentage increase.

Total carbon emissions from the industrial sector are lower by between 7 and 28 percent in 2010 in the carbon reduction cases, relative to the reference case. Total industrial output is lower because of the impact of higher energy prices on the economy. As energy prices increase, industrial consumers accelerate the replacement of productive capacity, invest in more efficient technology, and switch to less carbon-intensive fuels. In 2010, industrial energy intensity is reduced from 7.6 thousand British thermal units (Btu) per dollar of output in the reference case to between 7.4 and 7.1 thousand Btu in the carbon reduction cases.

In both the residential and commercial sectors, higher energy prices encourage investments in more efficient equipment and building shells and reduce the demand for energy services. Total carbon emissions in the residential sector are reduced by 11 percent in the 1990+24% case and by 45 percent in the 1990-7% case, relative to the reference case. Because of reduced demand for energy and improved end-use efficiencies, total energy use in 2010 ranges from 145 to 173 million Btu per household in the carbon reduction cases, compared with 184 million Btu per household in the reference case. Space heating and cooling account for the largest share of the change in energy demand; however, energy demand for a variety of miscellaneous appliances, such as computers, televisions, and VCRs, is also reduced.

In the commercial sector, total carbon emissions are lower by between 12 and 51 percent in the carbon reduction cases, compared to the reference case. Total energy use per square foot of commercial floorspace, which is 206 thousand Btu in 2010 in the reference case, is reduced to between 148 and 192 thousand Btu across the cases. Similar to the residential sector, most of the reduction occurs for space conditioning—heating, cooling, and ventilation; however, more efficient lighting and office equipment and reduced miscellaneous electricity use—for example, for vending machines and telecommunications equipment—also contribute to lower energy consumption.

The average price of gasoline in 2010 across the carbon reduction cases is between 11 and 53 percent higher than the projected reference case price. Carbon reductions in the transportation sector in 2010 range from 2 to 16 percent, primarily as the result of reduced travel and the purchase of more efficient vehicles. The relatively low carbon reductions for transportation result from the continued dominance of petroleum, although some increase in market share is projected for alternative-fuel vehicles. Improvements in average fuel efficiency are slowed by vehicle turnover rates. Although new car efficiency in 2010 improves from 30.6 miles per gallon in the reference case to between 32.0 and 36.4 miles per gallon in the carbon reduction cases, total light-duty fleet efficiency rises only from 20.5 miles per gallon to between 20.7 and 21.7 miles per gallon. The impact of carbon prices on the economy lowers light-duty vehicle and airline travel and freight requirements while inducing some efficiency improvements. “ (2005)

References

Climate Change

The following materials was fact sheet released by the European Environment Information and Observation Network or EIONET on 9/7/1998. This section has been provided in order to provide an advanced technical reference on the scientific basis of European retailers “going Green” to supplement the material presented in Section 2.1.1.

Indicator Title:  2.6 Atmospheric Concentration of CO2

Main Input Sources: Level of economic activity in each of five economic sectors (industry, transport, residential, services, and other); structural changes in the economic sectors affecting overall energy intensity; technological change leading to improvements in energy intensity; and fuel prices. The IMAGE model has been calibrated on 1970-1990 data.

Background Socio-economic Scenario: The baseline economic scenario used by IMAGE 2 is an intermediate one applying medium growth for population, the economy, and economic activity. Population and GDP figures are derived from IPCC’s medium estimates. Population growth is assumed to be 3% in 2010 compared to 3.8% in 1990, resulting in a world population of  7.1 billion by 2010 and 10.1 billion by 2050. Global average GDP/capita increases by 41% between 1990 and 2010 and 139% between 1990 and 2050.

Model: IMAGE 2 is an integrated model designed to simulate the dynamics of the global society-biosphere-climate system. It consists of three fully linked sub-models: energy-industry that computes emissions of GHG as a function of energy consumption and industrial production; terrestrial environment that simulates changes in global land cover and the flux from biospheric GHG into the atmosphere; and atmosphere-ocean that computes average global and regional temperature and precipitation patterns.

Links with Other Models: Not applicable.

Exogenous Variables and Assumptions: Assumptions about population and economic activity levels are key exogenous driving forces of the baseline scenario. Medium assumptions on population and economic growth are applied in the IMAGE model. Based on these assumptions, the model computes future changes in the consumption of energy, food, and timber. This consumption combined with technological efficiencies and resource use (for example, mix of energy sources) leads to emissions from energy producers, industry, transport, households, and agriculture; shifts in land use and land cover; and changes in the fluxes of gases from the terrestrial environment. The carbon-model in the IMAGE model at the same time accounts for all natural sources and sinks of CO2 to calculate atmospheric CO2 concentrations.

Documentation: Pertinent references include: Alcamo, J. (ed) (1994) IMAGE 2.0: Integrated Modelling of Global Climate Change, Kluwer Academic Publishers, Dordrecht; Alcamo J. et al (1996) Baseline Scenarios of Global Environmental Change, Global Environmental Change, Vol. 6, No. 4, pp 261-303; RIVM Linking Near-term Action to Long-term Climate Protection: The Safe Landing Analysis; Alcamo, J.  et al (1997) Climate Protocols and Climate Protection: An Evaluation of Proposals Leading up to Kyoto, Prepared as a Background Report for the German and Dutch Delegations to the Third Session of the Conference of the Parties to the UN Framework Convention on Climate Change, Kyoto, Japan, 1-10 December, 1997, Center for Environmental Systems Research, University of Kassel and RIVM; and IPCC (1996), Second Assessment Climate Change 1995: A Report of the Intergovernmental Panel on Climate Change, WHO, UNEP.

ASSESSMENT

Description of Main Trends:  On a global level, CO2 atmospheric concentrations will rise from 354 ppmv in 1990, to 396 ppmv in 2010, and to 512 ppmv in 2050. This represents a 45% increase for this 60 year period.

New Scientific Insights: Since the second assessment report of IPCC, there has been scientific progress, but no fundamental new insights into the causes, mechanism, extent and impacts of global climate change.

Contribution of Societal Developments to these Trends: Globally, the primary source of CO2 emissions leading to higher atmospheric concentrations will be the growing demand for energy for heat, transport, and industry. Other important sources include deforestation (17% of CO2 emissions) and the industrial processes such as the cement industry (3% of CO2 emissions). Low energy prices and slow improvements in energy efficiency also contribute to high CO2 emission levels.

In Europe, the main sources are fossil fuel combustion (98%), and industrial processes such as cement production (2%). Land use change in Europe acts as a sink, absorbing about 13% of European CO2 emissions.

Contribution of Environmental Policies to these Trends: The principal international and European policy instruments that apply to CO2 emissions include:

• UN Framework Convention on Climate Change—stabilization of GHG emissions at 1990 levels by 2000
• Energy Standards for Traded Products Directive
• Energy Labelling Directive
• SAVE Energy Efficiency Programme—20% energy efficiency improvement 1990 to 1995
• SAVE II Energy Efficiency Programme—20% energy efficiency improvement 1995 to 2000
• ALTENER Renewable Energy Directive—5% reduction in CO2 emissions 1990 to 1995 through an increase to 12% of primary energy provided by renewable sources
• JOULE Renewable Energy Programme

Distance to Policy Targets and Sustainable Reference Values:  The ultimate objective of the UN FCCC is to stabilize GHG concentrations in the atmosphere at a level  that would prevent dangerous anthropogenic interference with the climate system.  This level is currently thought to be between 450 and 550 ppmv. For the Kyoto negotiations, the EU proposed to stabilize CO2 concentrations below 550 ppmv. The trends do not contribute to this achievement of stable concentrations in the atmosphere, necessary to attain sustainable temperature and sea level increases. As concentrations will continue to rise after 2050, this SRV will not be achieved under the baseline scenario.

Main Causes for Not Achieving the Targets: The reduction of CO2 emissions needed to reach this SRV are much higher than countries have committed to under the UN FCCC and the Kyoto Protocol.

Strengths: All elements of the IMAGE 2 model have been extensively tested either with data from 1970 to 1990, or with long term averages. The model’s strength lies in its capability for integrated analysis across the complete causal chain at the global level. The analysis, although simplified, is scientifically sound. The model takes account of sources of CO2 emission other than from the energy system. The climate sensitivity of the IMAGE model (2.37) is well within the IPCC range of 1.5 – 4.5 degrees, although at the lower end.

IMAGE has been used to support climate change assessments within IPCC and policy fora such as FCCC (negotiations on the Kyoto protocol) and the EU.

Weaknesses:  CO2 atmospheric concentrations represents a useful global reference indicator, but cannot be applied to regional or national levels.”

• Details of the surveys described in Sections 4 and 5 can be found on the following pages on the internet:
• http://www.personneltoday.com/articles/2007/11/19/43334/marks-and-spencer-tops-cbi-poll-of-companies-with-best.html
• http://www.brandrepublic.com/News/770144/Marks—Spencer-tops-media-coverage-survey/

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