Guest column: Moral good, financial gain

The law of unintended consequences, made popular by Robert Merton in the 1930s, has received renewed interest of late – perhaps now that life is less predictable and at the same time more documented.

The unforeseen outcome of an event can be good (aspirin also prevents heart attacks) or bad (1920s prohibition also produced organised crime). It is rarer that a moral good produces a commercial one. But in the case of Marks and Spencer’s Plan A, that is what has happened.

We set up Plan A in 2007 to pursue 100 commitments on social, environmental and ethical challenges in climate, waste and recycling, sustainable raw materials, fair partnerships and health. We have achieved 62 – and are also gaining financial returns from Plan A.

This month we publish our audited report on Plan A for 2009-10. It shows additional profits of £50m ($73m) – rather than a planned cost of £40m – from a range of eco-efficiencies: less waste, less fuel, less energy, less packaging; and from new income streams such as M&S Energy.

We know now that there is a significant commercial return for “going green”, not just a moral one. It is almost classic utilitarian “greatest good for the greatest number”.

Companies such as Walmart, O2, Unilever and Nike understand the green imperative commercially and have embarked on their own eco-ethical journeys.

Yvon Chouinard, chief executive at Patagonia, the clothing company, simply says: “Every time we do the right thing, we make money.”

What happens when we put Plan A at the heart of how we do business? First, Plan A has driven cultural change within M&S, where countless altered operating procedures have produced incremental savings; small aggregated changes in behaviour have amounted to large energy savings; and new eco-technologies in store design or refrigeration have had a marked commercial impact.

Second, Plan A has driven us to innovate and discover new markets. For instance, M&S Energy has nearly 300,000 customers; and we have launched a home insulation service. This “greening the home” market will be worth billions; we want a significant share of it.

Third, in operations, Plan A has helped us align interests and apply performance measurement. Board remuneration is in part based on Plan A; store managers have incentives to cut energy use. Getting the support and ownership of our finance team has been crucial in creating the right incentives for sustainable business behaviour.

And fourth, our supply chains benefit from what we have learned: “ethical and eco model” factories in Bangladesh, Sri Lanka and the UK are teaching thousands of other suppliers through our Supplier Exchange website.

Last year we shared our Bangladesh best practice with others (including Gap, Nike, Levi Strauss, Disney, New Look, Hennes, and Walmart). We encouraged them to join or replicate the programmes, benefiting workers irrespective of retailer or brand. We in turn have learned from Unilever and Walmart.

We are now accelerating Plan A, and to support this effort we have established an innovation fund to help build a sustainable business. We aim to be the world’s most sustainable leading retailer by 2015. Sustainability is crucial to our success.

The programme has to be thorough and well considered, as benefits in conjoined areas maintain a dynamic equilibrium. For example, how do we balance the environmental impact of air-freighting some food and flowers from Africa with the benefits that arise from creating secure jobs there?

In a McKinsey survey last year of 1,500 executives, about half picked the environment as one of three issues they thought would attract the greatest amount of public and political attention, and most affect shareholder value. Plan A is starting to do both, positively.

Sir Stuart Rose is chairman of Marks and Spencer.