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 eg 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 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 & 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
of 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
and 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 third 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
eg 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 per
cent 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 nine
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 five 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 to 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 eg 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.
February 2006
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