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Last Updated: Monday, 15 January 2007, 10:29 GMT
Rose goes green in pursuit of profit
Robert Peston
By Robert Peston
BBC business editor

Stuart Rose
M&S chief Stuart Rose is confident a greener image will help sales

Marks & Spencer has today announced a 100-point five-year plan to re-engineer itself to become a carbon neutral, zero-waste-to-landfill, ethical-trading, sustainable-sourcing, health-promoting business.

In typical Stuart Rose style, it's called "Plan A", because there is no "Plan B" for either M&S or the planet(geddit!).

I have read all 100 points. They seem practical - and most important of all - capable of being monitored.

What's more Porritt, Greenpeace and the WWF seem to think so too, since they've given fairly generous endorsements of the proposals (Porritt: "this plan sets a new benchmark...")

Rose says that the initiatives will cost 200m over five years.

That's the price of having to pay a bit more for sustainably-produced cotton, wood, fish, poultry and other raw materials, the incremental cost of green energy and so on.

It doesn't include the expense of a major marketing campaign it'll launch around these issues in March.

Responsible behaviour

There is a substantial risk for M&S here. It's a highly competitive retail market and the company probably can't afford to be seen to be charging significantly more than its rivals.

However, Rose says that M&S will absorb the costs in lower margins in the short term, though he is confident the greener image will generate additional sales and that the business will end up ahead.

He's probably right not to risk putting up prices. According to research by Opinion Leader Research (OLR), consumers say in opinion polls they'd be prepared to pay more to save the planet, but focus groups show they don't really mean it.

One eye-catching promise is that all polyester will be made from recycled plastic bottles instead of oil

OLR says there's a close analogy with voters telling pollsters in the run-up to the 1992 election that they were happy for taxes to rise - although their behaviour in the ballot box said something totally different.

On the other hand, M&S claims that 97% of its 15 million customers are telling it that it must behave responsibly.

And it may well work, so long as prices for customers aren't perceived to have risen.

So can all those costs be absorbed? Well it doesn't look all that challenging to me.

If the 200m rise were all included in the cost of sales - which they won't be, since some will be capital cost - and if they're spread evenly over the five years at 40m a year, they would be the equivalent of less than 0.5% of turnover per annum.

That's not a trivial sum. But it's not crazy to expect that the initiative could generate incremental turnover of 0.5% a year.

Bio-diesel fleet

What's Rose actually committing M&S to do? Well, all stores, warehouses and offices are to be powered with "green energy", including "anaerobic digestion" or converting M&S's own waste into fuel from compost.

What I particular like is that it is pledging to avoid the normal cop-out of purchasing carbon off-sets (planting a few acorns as a supposed remedy for spewing CO2).

It says buying carbon offset will only happen "where it is required by government or where the technology for green air or road transport will not be available for the foreseeable future".

M&S store in Edinburgh
Less air-freighted food will appear in M&S stores

M&S is being more ambitious than Tesco in the use of bio-diesel in its lorries (going for 100% of fleet to run on half bio-diesel, versus 75% at Tesco).

It is pledging that no waste will go to landfill at all, and that all of its products and packaging can be recycled.

One eye-catching promise is that all polyester will be made from recycled plastic bottles instead of oil.

Among the other commitments are that "new builds" will have 20% on-site generation from renewables, and that there'll be more local and regional sourcing of food.

Also, there'll be more rail-freighting of produce. As for all those air-freighted goodies, they will be labelled as such so that shoppers can boycott them if they so desire.

However, air-freighted food is the one area where offsets will be used, with the costs of offsetting allocated to the buying teams, as a financial incentive to find alternative produce.

Raw materials

Of course, for businesses like M&S, there is a separate issue of how it uses its economic clout to change the behaviour of suppliers.

And in the case of M&S, it has enormous clout over 2000 factories and 10,000 farms, because it is 100% own-brand.

In this area, M&S talks about only sourcing raw materials like wood and foodstuffs from sustainable sources, of putting a greater emphasis on animal welfare at farms, of phasing out loads of pesticides, and of making a big further shift to fair-trade suppliers (thus more than 20 million garments will be made from fair-trade cotton, including all the 5 t-shirts).

Come March, there'll be a massive marketing campaign to promote M&S's eco-friendly image

Finally, there's a raft of commitments on encouraging healthy eating by customers, such as spraying Omega 3 all over the place and removing any residual taste (sorry, I meant "salt").

So what should we make of it all? Well, I am uneasy about the way M&S has shoved green and fair-trade issues into one big scheme labelled "good company".

The arguments for being carbon neutral are different from the fair-trade ones. And, to be frank, there are questions to be asked about quite how "fair" fair-trading really is.

If it stimulates production of commodities that are already in over-supply - which there is some evidence that it does - then just possibly it is sending harmful price signals to farmers in developing countries.

It may encourage them to continue to produce low-margin produce rather than diversifying into foodstuffs from which they could make a proper living.

'Tsunami' of cash

However, as a concerned middle class citizen with children who lives in what Rose and others patronisingly call Muesli Hill (and only a few doors from M&S's marketing director), I think most of what Rose has announced is a good thing.

Except that - "omigod" - I've suddenly realised it's all spin, it's marketing, M&S is trying to make me spend more money in its stores.

And come March, there'll be a massive marketing campaign to promote M&S's eco-friendly image.

But funnily enough it's the fact that Rose clearly believes there's big money to be made out of going green that should give more confidence that he means what he says.

HAVE YOUR SAY
I'm uplifted to hear news that a major brand has made unequivocal commitment to a sustainability policy
Neville, Reigate

He'll be aware that there is a tsunami of investors' cash pouring towards environmentally beneficial business and even looking to short shares in companies that are perceived to damage the planet.

After his fantastic 2006, Rose will have quite a challenge keeping the sales momentum up this year.

He's a serious businessman - not a bleeding heart liberal. And that's why I think this initiative may say something quite significant about the future orientation of British business.




SEE ALSO
M&S unveils carbon-neutral target
15 Jan 07 |  Business
M&S chief hails sales 'recovery'
09 Jan 07 |  Business
M&S caught in copycat design row
19 Dec 06 |  Business
Have M&S cracked Christmas?
30 Nov 06 |  Business

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