Business School Lectures: Dominic Fry of M&S Talks Plan A

Sustainability intern Linda takes over the blog once again and tells us what she thought of Dominic Fry’s lecture to the Business School on Marks & Spencer’s Plan A.

On March 7th, the Business School at University of Greenwich had invited Dominic Fry of Marks & Spencer to give a lecture on the company’s Plan A commitments and its 2015 plan of becoming the world’s most sustainable retailer. It was a great opportunity from students across disciplines to learn more about sustainability in retail, how to communicate such initiatives to consumers and get an idea of how corporate social responsibility (CSR) can be implemented in a large corporation. With a special interest in fashion supply chains, I was personally really excited to hear from such a significant and acknowledged UK clothing retailer.

Dominic Fry is the Director of Communications and Investor Relations at Marks & Spencer. Fry has 30 years of experience from PR and communications, and his impressive resume includes past director roles at J Sainsbury plc and ScottishPower plc. At Marks & Spencer, Fry is responsible for all internal and external communications and reports to shareholders and the chief executive.

Marks & Spencer is present in 42 countries and 1/3 of Britain’s population shops with Marks & Spencer once a week. Those are amazing figures, and it is evident that the supply chain of a retailer of such magnitude will have an impact on the environment as well as the people in the value chain. Fry emphasized how the global climate that we currently live in is the fastest it’s ever been: the phone calls made in all of 1998 is the same number of phone calls in 2012 made in a DAY! This fast-paced environment results in plenty of challenges for a big company, including food, health and safety, a growing population and naturally, climate issues such as global warming.

How does Marks & Spencer cope with the accelerating paces of today? Plan A was launched in 2006 to address issues such as climate change, fair trade and environmental issues. The plan comprised of 100 sustainability commitments, and 80 more were added in 2010. Some successes that have come about as a result of plan A include a 28% package reduction in food and clothing, 23% more energy-efficient stores and a 34% total waste reduction across sites and stores.

Sourcing decisions are especially interesting when talking about sustainability and CSR, as the sourcing strategy a company adopts has such a significant bearing on people and environment. We learned that Marks & Spencers suppliers are all accredited factories that have to abide by plan A principles and are audited independently on a regular basis. It even boils down to seemingly small situations like a needle dropping on the floor in a production line. In such an event, all operations need to be stopped to locate the needle so it can be removed! Moreover, having a growing number of ethical model factories in the supply base is also a huge focus for the company.

Plan A is about doing the right thing, but it is also about energy and cost savings. The extensive program was a 200 million pound investment, but has also saved the company 50 million pound resulting from more energy-efficient solutions. This goes on to prove that sustainability really can be hugely cost-efficient! Every Marks & Spencer shop has a “Plan A champion”, whose role includes being an advocate for Plan A, encouraging other staff members to follow correct procedures in for instance handling of waste and recycling and generally being an ethical and sustainable ambassador.

How does Marks & Spencer communicate all of these efforts to the consumer? Fry highlighted the important point of patience in such communications – it does take a really long time to get it across to customers. But as fair trading and sustainable sourcing should be long term commitments, it makes sense that it takes time to build up that trust with the customer as well. Going forward, one challenge is the online community and the potentials, and possible pitfalls, of social media. This is a resource that Marks & Spencers wants to utilize better in the future. Moreover, the company hopes to accentuate that part of its vision is their stand on social good. Just looking at last year’s riots, it is clear that there is a lot of anger in young people, dealing with challenges such as unemployment and rising tuition fees.

We found it to be a really inspiring lecture, and it’s nice to see that it is possible to make more conscious consumer choices on the high street. Next time you step into a Marks & Spencer’s, you might want to pick up a can of sustainably sourced tuna, a fair trade t-shirt or a 100% recycled polyester cushion?

Julia Raybould: What effect does Sustainability have on a Discount Rate?

Today Julia Raybould, who has been working tirelessly with the Sustainability Team to help us gain our ISO14001 accreditation for our sustainability management system takes over the blog and gives us an insight into how sustainability relates to economics. Here she focusses on the discount rate, an element from her masters dissertation she did for her MPhil in Environmental Policy at Cambridge.

Julia is leaving the Sustainability Team today and heading for Her Majesty’s Revenue and Customs but in the few months she has been working with us in the Sustainability Team she has been a driving force in getting our sustainability management system up to ISO14001 standards. We wish her the best of luck in her new role and HMRC can be rest assured they are getting an absolute gem!

Sustainable Economics

Sustainability is said to stand on three pillars – environment, society and economics. The Economics Pillar is often forgotten or is only discussed in the context of cost savings. But, as the economy and economic growth features more in the media and society is scrambling to find solutions to debt and growth on a finite planet, the economic pillar is coming into its own. Think tanks such as the New Economics Foundation and RESOLVE are considering alternative solutions to creating a sustainable economy.

One area where economics and sustainability overlap is in the appraisal of potential sustainability projects – whether this is the purchase of renewable energy technologies or investing in biodiversity initiatives.

The all important discount rate

A critical decision in most financial appraisals is the choice of the discount rate, because this little number has a huge impact on whether long term costs and benefits are considered important. Because of its importance, the ‘correct’ value for a discount rate has been a controversial issue for most of the 20th Century.

But what is a discount rate? It is a value multiplied to the costs and benefits at each period in time over the project’s duration. This enables future and present values to be compared. For example, one pound discounted at a rate of 3.5% in 30 years has a net present value of £0.36 today. Thus, very quickly future benefits can become negligible when high discount rates are used.

On the whole, a high discount rate favours projects with immediate or short returns on investment. Any project with a medium- or long-term payback is shown in an unfavourable light. As environmental investments often have high upfront costs with paybacks over long periods of time, when combined with a high discount rate, these projects will appear financially unsound. However, this is not necessarily the case. If a lower discount rate had been chosen, the same project may appear to be a great investment.

If the discount rate is so influential and yet so subjective, shouldn’t more people consider it when making investment decisions??

In the last ten years, the UK government has stepped up to the challenge. The HM Treasury guidance now requires much lower discount rates to be used for long-term project appraisals.

More dramatically, the Stern Review’s Economics of Climate Change argued that due to climate change’s unique characteristics – impacts that last hundreds of years and potentially causing large-scale damage for future generations – meant that an even lower discount rate, close to zero should be used.

Since the Stern Review, HM Treasury has released additional guidance stating that in the evaluation of projects that will involve “substantial and, for all practical purposes, irreversible wealth transfers between generations” and are very long term (in excess of 50 years) a much lower discount rate is advocated (HM Treasury 2008, p.4). This acknowledges that some projects will impact upon the very wellbeing of future generations and the discount rate should reflect this.

How does this affect you?

When considering future environmental projects at your organisation, it is worth questioning the discount rate used, specifically:

  • For any project with a lifetime greater than 30 years, the argument can be made to use a low discount rate.
  • For very long term projects, e.g. climate change mitigation and adaptation, biodiversity or ecosystem services, a discount rate close to zero matches the UK government’s approach.
  • Finally, it is fair to request a sensitivity analysis of the discount rate be completed for all sustainability investment appraisals. This means that the same analysis is undertaken using different discount rates (low and high). Vastly different results will demonstrate that further deliberation is needed regarding the most appropriate value for the discount rate.

For further information on the government guidance discussed, see HM Treasury’s website: http://www.hm-treasury.gov.uk/green_book_guidance_discounting.htm

Carrot Love

Julia insisted on this picture of carrot love being included in her blog post - so here it is!

World Development Movement Seminar on Food Speculation Review

Today’s blog post comes from Linda Marie Schoyen. Linda has been working with the Sustainability Team as an intern and has designed many of the posters you have probably seen around the campuses advertising Green Week and the Fairtrade Fortnight events. Linda is a specialist when it comes to sustainability fashion and has a strong interest in Fairtrade and ethical branding, she currently works for Fashion-conscience.com which is a leading eco and ethical retailer for fine fashionable clothing.

Linda Marie Schoyen - definitely the most fashionable member of the Sustainability Team

During Fairtrade Fortnight, the Sustainability team invited the World Development Movement to encourage debate on the role of the big banks and financial speculators in the trade of typical fairtrade commodities such as cocoa and sugar. The World Development Movement’s Simon Mayes gave a fascinating, and alarming, insight into the consequences of food price speculation at Greenwich campus on February 28th. On March 1st at Medway campus, food and finance campaigner Christine Haigh, also from the World Development Movement, carried the flame and asked: how can we ensure genuine fair trade?

Simon Mayes, February 28th, Greenwich Campus: Betting on Hunger: the Role of Banks in Causing Food Price Rises

The Sustainability Team was joined by a whole host of people from the University and local area including lecturers from the School of Education and Business School – including Benny Dembitzer, British economist, member of a team that won the Nobel Peace Prize in 1985 and the person who set up the first shop in the UK dealing with what we now know as Fairtrade. We toasted the evening with a few glasses Fairtrade wine and had some delicious Fairtrade cakes and chocolates to get us in the mood for the talk from the World Development Movement.

Tucking into the Fairtrade delights provided by ABM Catering

We learned that food prices are affected by a number of variables. Shifting dieatary habits, climate change affecting crops, the growth in world population and the value of the dollar all have an impact on food price trends. However, Mayes emphasised that many of these factors are more long term and do not logically account for sudden price changes such as the unprecedented price spikes of 2008. Banks and hedge funds speculating on future food prices are largely to blame for such swift food price spikes, resulting in severe consequences for the consumers in developing countries. From 2006 to 2011, US$126 billion was gambled on food price speculation. There is a wide consensus in the global political climate that betting on food prices in financial markets needs to be regulated to prevent massive price hikes from aggravating poverty and hunger.

When prices increase on other commodities such as electronics, fuel or oil, many people will budget around the increases and reduce their consumption. With food, however, consumers in developing countries simply cannot budget for price rises; one has to eat to survive. Consequently, results of food speculation can be devastating for the poorest consumers in the world.

What can we do to make a change? According to Mayes, we can demand tougher rules from the Treasury  to enforce on banks involved in food price speculation. Get in touch and pressure them! You can learn more about how to make a difference by joining WDM or signing up to their newsletter. Another resource for more information on how you can get involved and in-depth research on the issue can be found on WDM’s Food Speculation Resources site.

Christine Haigh, March 1st, Medway Campus: Taking on the 1%: Demanding Fairer Trade

At Medway Campus, the Sustainability Team was joined by enthusiastic staff as well as experts on environmental sustainability, food and farming. It was great to see so many people with such expert knowledge in environmental and farming issues engaging in the debate.

University of Kent Student's Union provided the wine supplies for the event

Haigh gave an introduction to the concept of Fairtrade and its origins. Fairtrade is a social movement and a market-based approach that was shaped in Europe in the 1960s, providing markets for producers. The Fairtrade movement has grown substantially over the past few decades, and even though it represents a small fraction of world trade in physical merchandise, some Fairtrade products account for 20-50% of all sales in their product categories in individual countries.

Despite the success of Fairtrade products, the movement cannot singlehandedly deliver an international fair trading system, this would require huge international market regulations that are way beyond the Fairtrade movement’s influence. Haigh continued on Mayes’ topic from Greenwich campus on the the alarming consequences that food speculation can have on some of the world’s poorest people. Contrary to common belief, high food prices are not necessarily good for farmers. High prices do not necessarily benefit the farmers when a Fairtrade scheme isn’t in place, but often the benefits go to the big companies who trade on a far grander scale on the international markets.

What do the WDM think a fair food system would look like?

  • Everyone would have right to food
  • Producers recognised
  • Localised production would be a priority
  • There would be greater control of resources, knowledge and skills
  • The food system would be environmentally sustainable

What can you do? Get involved! Pressure and call for more transparency in food prices, and push for limits to be posed on individual banks and bodies.