Memorandum submitted by
Marks & Spencer
1. Introduction
1.1 We welcome the opportunity to input
to this enquiry on Private Sector Development. As a major UK retailer
we have supply chains which are spread across many developing
countries and we see their growth and stability as crucial to
our future business strategy. Trust and responsibility have always
been core brand values for us and as our supply chains have moved
across the world we have continued to promote ethical and sustainable
business which benefits all members of the supply chain. This
presents significant challenges, some of which we shall share
in the submission below along with our thoughts on how they can
be overcome.
1.2
As well as ensuring our core supply
chain is run responsibly, we have also begun to recognise the
potential for retailers to make a positive impact by offering
customers products from new types of supply chains, set up to
directly benefit the poor. We are pleased to be able to share
some of our early successes and learning from setting up these
supply chains. We hope this may shape the way DFID interacts with
both business and funding bodies to encourage them to become positively
engaged in development which genuinely benefits the poor whilst
also delivering business benefits.
2. The impact of core business
on development
2.1 It is worth noting first that, as
a 100% own brand retailer we are able to trace each product to
the farm or factory it came from. This traceability means we are
able to influence the way our suppliers operate, without this
basic traceability there is little that a business in the West
can do to drive development.
2.2 We are working with suppliers of
finished products and raw materials in developing countries in
Africa, Asia and South America. Africa is of particular importance
to us as our third biggest source of food raw material supply
after UK and Europe. We have always worked to build long-term,
sustainable partnerships with suppliers and those in Africa are
no exception. This has enabled the development of good standards
in production, health and safety and labour rights in collaboration
with suppliers. For example our produce suppliers in Kenya have
pioneered the use of Integrated Pest Management (IPM) to reduce
the amount of pesticide used on their crops which is better for
the environment and for the workers as well as being important
in re-assuring our customers. Wider impacts of our business include
the empowerment of workers through their access to employment
opportunities which allow them to earn competitive wages and learn
new skills, as well as the development of infrastructure, amenities
and services in local communities. Examples include the provision
of hospitals, schools and water amenities by our suppliers. For
small, independent farmers, involvement in our supply chains allows
them access to advice and technical expertise; the sharing of
good agricultural practice enhances yield and quality both for
subsistence and cash crops, assisting farmers in gaining access
to new markets.
2.3 Marks & Spencer's
business model is one based on quality and value for money, rather
than lowest cost. As such, we are continually working with suppliers
to add value to their products - innovating and driving quality
improvements. We pioneered packing at source to give our customers
best quality and value with the important benefit of creating
wealth at the point of production. This type of innovation
is something which could be encouraged further.
2.4 However, to achieve truly sustainable
development, we realise that developing countries need more than
just our business. We believe that business can be conducted in
ways which promotes wider well-being and not just economic growth:
this is particularly important for poverty eradication in the
least developed countries. In all of our business relationships
we require minimum labour standards e.g. minimum age, wage and
health and safety in the supply chain and work with our suppliers
to find ways to improve their standards. This has an impact on
our suppliers and we hope it also raises awareness and 'the bar'
on labour standards within the source country.
2.5
We are aware of the importance of smallholders
in the agricultural supply chains, particularly for delivering
sustainable livelihood strategies, but working with smallholders
and small producers can present many challenges. We always strive
to deliver and high quality products for the consumer as well
as consistent standards for social and environmental management
in the supply chain. Smallholder systems often require significant
co-ordination and can be time consuming and costly to manage.
Small producers need better support, information and infrastructure
mechanisms to help them to supply the major retailers.
2.6 For this reason, we have been actively
involved with the Ethical Trading Initiative (ETI) to develop
a 'needs based approach' to supporting, managing and auditing
smallholders in our supply chains. Working with smallholders has
given us a better idea of their needs, and has encouraged better
communication and processes by which we can work together to develop
their capacity. The ETI offers considerable potential to develop
best practice on how business can address development issues as
part of their core commercial activities.
3. Government acting as an enabler.
3.1 Our approach to managing labour
standards in the supply chain and the development of the smallholder
guidelines mentioned above have been guided by our membership
of the Ethical trading Initiative (ETI). We would like to highlight
the ETI as an example of an effective Government-sponsored response
to a complex issue. In response to a series of reports about conditions
in clothing factories in the developing world, the Government's
financial support for the Ethical Trading Initiative has helped
develop a consensus between many retailers, trade unions and NGOs
on the management of labour standards in global supply chains.
This has proved an effective response, driving up standards in
factories around the world.
3.2 Marks and Spencer has been an active
member of the Ethical Trading Initiative since 1999 and a board
member since 2003. Through collaboration with other ETI member
organisations, including our suppliers and partner NGO's and Trade
Unions in sourcing countries we have been able to drive substantial
steps forward in many countries and product sectors including
labour conditions on Kenyan Flower farms and smallholders and
home workers through application of practical guidelines developed
by the ETI.
DFID's ongoing support for the
ETI is very important. We would encourage DFID to continue its
support as well as exploring how the ETI can play a more active
role in addressing development issues.
4.
Going further - products which directly
contribute to development
4.1
We believe that there is also an opportunity
to grow a sustainable business by offering a unique proposition
to our customers: products which directly contribute to social
development.
4.2 Firstly we would like to provide
details our partnership with the Shell Foundation as a good example
of a donor intervention which is targeted in a business friendly
and innovative way.
4.3 The Shell Foundation recognised
that many 'development' projects focussed on delivering better
market access to small producers fail to deliver benefits to a
substantial number of people because they do not have early agreement
on access to a sufficiently mainstream market to provide scale
up opportunities. Marks & Spencer supply chains impact directly
and indirectly on communities in over 100 countries. The Shell
Foundation partnership aims to target funding and skills at SMEs
in developing countries to facilitate their entry into the competitive
mainstream UK market, enabling them to reap the benefits of trade.
Our project aims to demonstrate that benefits can be delivered
at both the retail and the producer end of the supply chain by
a combination of targeted investment and development of sustainable
purchasing practices which build the capacity for enterprise,
innovation and growth at the raw material end of our supply chains.
4.4 Our first pilot project harvesting
wild flowers in the Fynbos region in South Africa has already
demonstrated successes. By visiting this small supplier and providing
supply chain advice and expertise we have already managed to more
than double sales of the product and in doing so provide more
job opportunities for harvesters and packers in an area of high
unemployment. Existing employees are also benefiting from more
stable, year round employment. Continued investment in particular
targeted at new personnel within the company management will ensure
that the business is able to continue to grow and develop its
products for sale within domestic and export markets.
4.5 Forming a partnership between a
developmental charity and the business gave the project a broad
understanding and skill base to draw from. We encourage DFID
to promote this partnership model with other businesses that need
advice and encouragement to unlock the potential of their supply
chains to deliver development. Our experiences in South Africa
illustrate that smaller suppliers who are not set up to supply
big retailers need more information, more flexibility. Very basic
supply chain consultancy can make a huge difference to product
quality/supply/consistency and ultimately profits for all involved.
This support may also give us more confidence to source in areas
where poverty is high and communities are particularly vulnerable
to inequitable trading relationships.
4.6 The mechanism of setting up and
securing the funding within the partnership was flexible and innovative
and the Shell Foundation was willing to look at a range of supply
chain models. Shell Foundation employ people with private sector
expertise, a valuable asset in setting up projects with the necessary
business focus. We encourage DFID to direct efforts towards
strengthen the capacity of funding bodies and NGOs to deliver
projects in a business focussed manner in order to encourage more
private sector engagement. This capacity building itself could
be an area in which the private sector is engaged.
4.7 This project is demonstrating that
business can be directly involved in poverty eradication measures
which also have a positive commercial impacts. We therefore
believe that DFID and DTI have an important role to play in disseminating
good practice and further encouraging such win-win partnerships.
We believe that there is currently a big knowledge gap for retailers
and other businesses in understanding how they can get involved
in development and what resources are available to them.
5. A fair deal for producers
5.1
Another way to promote growth for good
is through the selling of Fairtrade products - those which have
a specific social message attached to them, ensuring that producers
get a fair price for the products they sell. We are very supportive
of the Fairtrade model and believe that the Fairtrade Foundation
deserve and require continued support to strengthen their organisation
both in the UK and particularly in the producer countries as they
move into the more mainstream market. In this vein our coffee
shop chain Café Revive, the 3rd largest in the
UK, sells only 100% Fairtrade tea and coffee and we have recently
announced that we will be the first major high street retailer
to sell clothes made from Fairtrade cotton. The cotton is sourced
from a group of producers in India who have been supported by
the Shell Foundation for a number of years and demonstrates how
properly directed investment can help small producers link with
mainstream markets. This positive link between small producers
and the final consumer can be enhanced by Fairtrade which offers
a unique way for the consumer to get involved with sustaining
investment in producer livelihoods.
5.2 We believe the Government
can play a role here too in raising awareness. Information provided
by business should be complemented by Government talking about
the importance of Fairtrade, encouraging UK consumers to look
for products carrying the mark.
5.3 We thought it may
also be useful to provide an innovative example of how our long-term
relationships with suppliers has enabled us to work together to
develop a solution to a market issue within the UK. The
UK milk industry is under considerable pressure at the moment.
Although we are regularly benchmarked as paying the best price
to farmers they told us that what they really needed was a stable
price structure to make it easier for them to plan and manage
their budget and future investment. We worked together with our
suppliers to devise a new way of buying milk - the M&S Milk
Pledge - that guarantees farmers a fixed price for their milk,
based on cost of production, on a six month rolling basis. The
cost model is based on published indices which the working group
agreed track cost of production e.g. feed price. Greater security
lets farmers focus on delivering innovation and quality to mutual
benefit. We are considering applying this fair and stable pricing
model to other areas of farming.
6. M&S community
programmes - benefits of encouraging development
6.1 Finally, we wanted to mention our
direct community development work. The two main strands of this
are the extension of our UK work experience scheme (Marks &
Start) and our Tsunami reconstruction programme. The work is underpinned
by our close relationships with suppliers and partnerships with
experts on the ground.
6.2 Marks & Start International:
In the UK our flagship community programme, Marks & Start
provides work experience for disadvantaged groups who may find
it difficult to secure employment; the homeless, disabled, young
unemployed and lone parents in our stores. We have extended this
programme in partnership with our supply base in Sri Lanka and
Turkey. The Sri Lankan programme enables disabled women to gain
skills relevant to the garment industry, in particular machinist
jobs. The UK charity Motivation helped us find Rehab Lanka, a
Colombo based disability NGO who train the women to industry standard
before their placements commence with our suppliers.
6.3 This eight-week training programme
is audited by the Marks & Spencer buying office in Colombo.
Participants must achieve the required standard before they can
commence their six-month probation period within the factory.
30 women have successfully completed this programme and together
we have achieved 100% conversion into work.
6.4 The programme has also been in action
in Turkey for the last year and we plan to extend to more countries
where we have a presence in the near future. The scheme is driven
by our long-term relationships with suppliers and working in partnership
with charities that help deliver the project on the ground. It
has helped suppliers see the business benefits (recruitment, retention,
motivation) of working with marginalised groups.
6.5 We believe that business can
become more involved in development by linking community programmes
to supply chains. Business benefits can also be demonstrated such
as motivating suppliers, encouraging ethical trade and 'adding
value' to traditional philanthropic giving.
6.6 Tsunami reconstruction programme:
In response to the devastating Tsunami in 2004 Marks & Spencer
pledged £250k towards relief work. Traditionally, we would
probably have stopped there. However, we decided to form a partnership
with CARE International to spend this money by rebuilding homes
in three villages in the badly affected Galle and Kalutara districts.
We wanted to ensure that the money we donated was spent directly
in offering practical help to our Sri Lankan employees and suppliers
who were affected by the tsunami.
6.7 Working through two different local
partners in the districts of Kalutara and Galle, residents of
three villages are being assisted to rebuild their homes and livelihoods.
Marks & Spencer employee has been seconded from our Colombo
office to CARE Sri Lanka for the duration of the project. The
agreement is an active partnership with learning and skills transfer
opportunities for both parties.
6.8 CARE International has been working
in Sri Lanka for 50 years so were ideally positioned to respond
to the December 2004 tsunami. CARE Sri Lanka is working in 9 districts
of the country that were affected by the tsunami providing emergency
relief, transitional and permanent shelter and helping restore
survivor's livelihoods as part of a 5 year rehabilitation and
development plan
6.9 We believe that this partnership
approach provides a good example for how the private sector can
add value to the money they donate in disaster relief.
6.10 Finally we are members of Business
Action for Africa an initiative which came out of the commission
for Africa report. This is a very well run, actions orientated
group which is currently proving a valuable forum to share best
practice and knowledge regarding trade in Africa.
7. Summary
7.1 In summary, the key ways in which
we believe a retailer can engage with DFID in development both
directly and indirectly are:
DFID
can encourage retailers to apply good standards across their core
supply chains tom promote large scale sustainable development
in LDCs.
Retailers
can be used more to provide valuable guidance to DFID's producer
support programmes around appropriate production standards required
to acess mainstream UK markets.
We
encourage DFID to maintain its valuable support of the Ethical
Trading Initiative to continue raising the standards on labour
rights in supply chains across the world
DFID
could engage more directly with consumers to raise awareness of
the ways that they can contribute to development for instance
by buying Fairtrade products.
DFID
could engage more directly with retailers and funders to develop
market access projects with mainstream market channels.
DFID
could seek to engage the private sector more directly to add value
to disaster relief contributions
DFID
could help to educate companies on the benefits of linking community
programmes to supply chain development e.g. Marks & Start
International
7.2 We hope that this note contributes
to DFID's thinking on engagement with the private sector. We welcome
a focus on this issue and believe that it is in the interests
of ours and other businesses to become more engaged in this debate.
2
February 2006
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