Stewardship of Capitals by Marks and Spencer - Case Study Example

Marks and Spencer Table of Contents Table of Contents 2 Introduction 3 The Framework 3 Features of the Framework 4 Strategic focus and future orientation 4 Connectivity of Information 4 Stakeholder Relationships 5 Materiality 5 Reliability and Completeness 5 Consistency and Comparability 6 The framework’s Role in Improving Businesses’ Sustainability 6 Summary 7 Stewardship of Capitals by Marks and Spencer 8 Introduction 8 Human Capital 8 Social and Relationship Capital 9 Financial Capital 10 Manufactured Capital 11 Summary 12 Success of Marks and Spencer’s Approach 12 Conclusion 14 Recommendations 15 References 17 Introduction The International Integrated Reporting Council is a global organization comprised of a group of regulators. These regulators range from individual investors, corporate companies, and even organizations. This organization believes staunchly on the fact that communication on value creation forms the next stage of the evolution of corporate reporting (Porter, 2011). This strong belief is in fact, the main reason why this organization was formed. The organization’s long term goal is merging integrated thinking with mainstream business practice with the help of Integrated Reporting. Integrated reporting is majorly aimed at enhancing the quality of information availed to investors so that they can make informed decisions during the allocation of capital. Once this is achieved, a more cohesive approach to reporting will be attained thus toning the factors affecting an organization’s ability to create value. In general, the framework given by the International Integrated Reporting Council supports rational decision making in the corporate world thus simplifying the process of value creation. The International Framework gives companies guidance on the most appropriate channels to use during the preparation of integrated reports. The main expectation of the International Integrated Reporting Council is that Integrated Reporting becomes the norm of corporate reporting. This will minimize the current trends of production communications that are numerous, static and highly disconnected. The connectivity of reports and financial analyses will improve the operation of organizations and maximize the productivity of the different forms of capitals. The Framework The purpose of the International Integrated Reporting Council’s framework is to give corporate societies guiding principles on the elements that form the content of integrated reports. The framework pin points the vital information to be placed in integrated reports meant to assess an organization’s ability to create value (Busco et al., 2013). Although the framework is majorly written in the for- profit private sector’s context, it can be tailored to suit none-profits organizations of any size even in the public sector. Features of the Framework Strategic focus and future orientation Integrated reports have to give insight on the organization’s major strategy. It should also demonstrate how the organization’s strategy relates to its ability to create value. This is achieved through strategic focus on the major goals of the organization (Busco et al., 2013). Strategic focus is majorly based on all the activities an organization carries out in relation to the environment and their clients. Most organizations place their strategic focus points on financial flexibility, safety and environmental sustainability (Weybrecht, 2014). The International Integrated Reporting Council’s framework outlines an organization’s ability to create value. This is in short, medium and long term periods in relation to the organization’s use of capitals. Connectivity of Information Different organizations have different factors affecting their ability to create value (WBCDS, 2014). The International Integrated Reporting Council’s framework gives a guiding outline with which an organization can communicate a holistic picture of its operations (Busco et al., 2013). An integrated report indicates the connectivity and interdependence between the different factors affecting the ability of an organization to create value. This makes the information presented in financial reports comprehensive and terse in nature. It also greatly improves the relevance of information thus investors have increased confidence in their decision-making with regards to the use of the organization’s capitals. Consequently, organizations’ output is increased (Busco et al., 2013). Stakeholder Relationships The International Integrated Reporting Council’s framework gives suggestions on the best ways through which organizations communicate their relationship with stakeholders. Guided by the framework, an integrated report highlights the nature of their relationship with stakeholders (Starke, 2013). The integrated report also highlights the methods an organization uses to understand the needs, preferences and interests of their stakeholders. The extent to which an organization understands and responds to the interest of their stakeholders is also illustrated through an integrated report (Starke, 2013). Materiality Guided by the International Integrated Reporting Council’s framework, integrated reports expose the factors affecting an organization’s ability to create value. These factors include internal communication that involves training materials, policies and interpersonal relationships. Structure also affects an organization’s ability to create value (Starke, 2013). The organization of departments and teams within an organization greatly affects the value creation capacity of an organization. Other factors include external factors like market forces e.g. demand and supply trends. The International Integrated Reporting Council’s framework guides the organizations on the methods of disclosing the factors affecting the value creation potential hence improved communication on the best ways of handling weaknesses and improving on strengths. Reliability and Completeness Guided by the International Integrated Reporting Council’s framework, organizations can effectively communicate their material matters. This means that an organization can avail information on both positive and negative aspects of their operations. Such a move increases the number of people who can scrutinize the reports released by the organization. The result is positive since it increases the level of credibility and accountability (Starke, 2013). Consistency and Comparability The International Integrated Reporting Council’s framework suggests that an organization’s communication should be consistent with regards to time. Reports ought to be released after regular time intervals so that scrutiny can be arranged (Starke, 2013). This makes critics ready at a specific time hence the credibility of information is increased. Moreover, communication should be presented in a way that it can be compared to another organization’s reports. This will show the trends followed by organizations in their endeavor of creating value. The framework’s Role in Improving Businesses’ Sustainability The International Integrated Reporting Council’s framework has greatly contributed to the improvement of the conditions of the corporate world. Through this framework, organizations have increased the efficiency of their communication (Kass, 2012). This has culminated to the improvement of the sustainability of businesses in several ways. The International Integrated Reporting Council’s framework has for example led to the improvement of the quality of information being conveyed in organizations. The increased quality has resulted to better decisions with regards to allocation of capital. Therefore, financial capital is directed to the most relevant places thus increasing productivity. This productivity improves the sustainability of a business (Kass, 2012). As a result of the International Integrated Reporting Council’s framework, organizations avail more cohesive approaches to reporting. This is because the corporate reports integrate different strands of reporting. In addition, integrated reports give a holistic impression of the factors affecting the ability of an organization to create value. The International Integrated Reporting Council’s framework outlines the interdependence between the different forms of capital. This improves the level of accountability since the relationship between the different forms of capital is understood hence operations within an organization are more coherent (Kass, 2012). Since the International Integrated Reporting Council’s framework supports integrated thinking, the decisions made by the people in managerial positions are diverse hence affecting a wider array of the operations of an organization. This leads to what can be termed as integrated decision-making. With such, it has been observed that single decisions may have productive effects on more than one department. When single decisions result to ramified results, the decision-making process consumes less time (Kass, 2012). This time can be devoted to improvement of other aspects of an organization’s operations. The International Integrated Reporting Council’s framework thus makes communication efficient. This results to reduced conflicts and stronger work relationships. Effective communication makes the adoption of ideas easier since they are clearly presented. Summary The International Integrated Reporting Council’s framework is based on principles. Therefore, it creates a balance between prescription and flexibility since it provides suggestions yet it does not give specific parameters. Through the application of this framework, organizations increase their potential of maximizing on their financial capital hence being bound to increasing their productivity. The framework also improves the relations between an organization and its stakeholders satisfying the needs of both parties to a better extent. Consequently, through application of the International Integrated Reporting Council’s framework, organizations improve their capacity of creating value. Stewardship of Capitals by Marks and Spencer Introduction Every organization depends on several forms of capitals to achieve success. In the current framework, the capitals may be comprised of financial, human, natural capital, social and relationship and intellectual capital (Buchholtz & Carroll, 2014). Marks and Spencer, a leading British retailer and multinational corporation adopted Plan A in a bid to be more sustainable. The plan was launched in January 2007 and made 100 environmental and social commitments that were to be delivered in five years (M&S, 2014). The company named the strategy Plan A, as it did not consider having an alternative plan; ‘Plan B’. The plan was updated in 2010 with an addition of 80 more commitments (M&S, 2014). With the plan in place, the organization envisioned the journey towards building a sustainable business. The plan is aimed at fixing social and environmental issues that are relevant to Marks Spenser with a commitment to achieve an improvement in performance and operations across over 1000 stores, warehouses and offices (M&S, 2014). The plan is an ambitious program which requires far reaching and fundamental changes in the behavior of individuals across the globe. With the plan in place, Marks and Spencer has integrated the stewardship of capitals to ensure the success of the plan. Human Capital By using Plan A, the company controls various capitals in its line of business. Some of the capitals that the company is in control of include human capital, social and relationship capital, financial capital and manufactured capital. Stewardship of such capitals is responsible for the success of Plan A. Marks and Spencer, for instance creates new job opportunities through Marks and Start in line with the management of human capital. In the third year of the plan, the company helped over 500 disadvantaged individuals secure employment after completing work placements with the company. In 2012/2013, the company provided placements to 1100 individuals (M&S, 2014). In this number, a quarter of the positions were dedicated to individuals who were under 25 years of age (M&S, 2014). The company was able to achieve an estimated work rate of 50 percent in that time recording the best rate since the launch of Marks and Start in 2004 (M&S, 2014). The company has also introduced Marks and Start Logistics which works closely with Remploy. Together, they have managed to provide employment for disabled individuals. Furthermore, the company has also welcomed an estimated 2000 students to join the company for placements (M&S, 2014). Social and Relationship Capital Social and relationship capital is mainly about the relationships of individuals within the institution. It also encompasses the ability of individuals to share information and enhance individual well being within the organization. At Marks and Spencer, the organization has ensured the control of this fundamental capital by adopting various measures. The company is focused at maintaining good relationship between employees, management and customers (M&S, 2013). Some of the measures adopted by the organization include the training of all employees who are designated to deal with customers. The training enables the employees to handle the customers in a professional manner. Furthermore, during such employee training sessions, all employees undergo training on how to deal with colleagues in the work place. The employees then practice their trained skills over time to polish them. Marks and Spenser is also actively involved in corporate social responsibility activities. Through CSR, customers feel appreciated and can associate themselves with a company that is perceived to be generous to the community (Mallin, 2009). The company works hand in hand with a small team of ethical, social and environmental specialists in ensuring the smooth delivery of the CSR (Porter & Kramer, 2006). The team is involved in the development of solutions and policies that are aimed at building stakeholder relationships and bettering the existing ones. The team meets on a monthly basis to ensure the integration of social, ethical and environmental issues on daily business activities. Corporate social responsibility in relevant areas ensures that the company manages various social, ethical and environmental risks. Financial Capital Financial capital is comprised of the pool of resources and funds available to a company for use in the delivery of services and production of goods. Such financial capitals are obtained through several forms of financing which include loans, grants and generation through operations and investment. This type of capital is the most fundamental form of capital in an organization as funds are needed for in all operations of a company. After adoption of the plan, the company considered the control of the budgetary requirements by a member from the finance team (M&S, 2013). The finance group was engaged in helping the creation process of the rules and regulations that govern the delivery of the plan. The analysts in charge of the plan were responsible for capturing the benefits and costs alongside standard benefits and costs in their own areas. With the framework (Plan A) in place, the finance analysts provided the employees of the company with a much better understanding of financial management as compared to what a central team would have achieved on the same (M&S, 2013). The analysts were thus responsible for improving the overall knowledge of the business case and further, the opportunities responsible for driving the framework. Analysts further worked with relevant contacts of the framework in every relevant business unit to help in the capturing and calculation of the annual operating costs, expenditures and all other benefits or costs that are associated with plan (Bevan, 2007). This process is done for every business area to achieve the required 180 commitments of the company. This information is critical to the organization as it helps in the company avoiding of unnecessary costs. Manufactured Capital Manufactured capital is comprised of physical objects which are handled as being distinct from other physical objects which are available to a company and are used in the provision of services or production of goods. An example of such capitals includes buildings and equipment. Marks and Spencer manage a number of manufacturing capitals in its docket with the framework in place. The company, for example, manages eco factories that are used in manufacturing clothes. The rationale by the company’s management is that good management of the manufacturing process and techniques results to preserving the environment by reducing emissions in factories. The desired result is demonstration by the company that environmental targets can be achieved by doing things in a different manner by companies. With the framework, the company factories were responsible for the creation of different projects each with different paybacks which were to be used in exploring how the company can reduce the waste of energy, water, and other resources. Assessment of the projects resulted to conclusion that every factory can save at least 10 percent of the energy requirements at an acceptable payback level (M&S, 2014). Stewardship of this specific capital was helpful in giving the company confidence in line with eco production. Through the projects, the company planned to commit all its factories to saving the 10 percent energy requirements by 2015 (M&S, 2014). The main focus was agreed to be in the areas of lighting, heating and insulation controls. Through demonstration, the company engaged its supply base by proving that such endeavors were responsible for good financial sense. Summary Marks and Spenser adopted Plan A to be used in ensuring sustainability of the business in the long run. The framework was charged with the responsibility of ensuring all social, environmental and ethical issues are addressed accordingly by the company. With Plan A in place, Marks and Spencer worked to mange a number of capitals in line with its business model. In general, since the inception of the plan by the company, it can be concluded that Marks and Spencer has ensured good stewardship of various capitals in line with the company’s business model. Success of Marks and Spencer’s Approach The approach by Marks and Spencer of using Plan A to cater for social, environmental and ethical issues can be concluded as a successful move towards the attainment of sustainability in the company’s activities. The success of the approach is fueled by the basic desire of the company to approach issues in a different manner. Marks and Spencer works with suppliers in over 70 countries across the globe, 2 million workers who are located in over 20000 farms and 2000 factories. The management of the company perceives that the sustainability of the Plan’s vision is embedded on supply chain management and relationship handling of employees across the entire company and its affiliates. Thus, the company considers itself a fair and successful partner, a condition which is key to the strategy of the retailer. Consideration of transformative environmental and ethical standards by the company through Plan A further proves the importance of the plan to the future of the business. With Plan A, Marks and Spencer has gone beyond the expectations of customers, stakeholders and employees in the creation of a fair workplace and the achievement of step changes in matters regarding environmental performance. The initiatives by the company cover an array of sectors including the challenges in the global supply chain which the company reckons accounts for close to 80 percent of the company’s footprint. The company for example currently sources sustainable packaging from Sweden and works with fish suppliers on marine stewardship. With the plan, the company has also been seen to collaborate with food suppliers in Kenya and advising these individuals to engage in sustainable use of Water. The company has also set up eco friendly factories in Turkey, the United Kingdom, and China. Moreover, the company, through Plan A is responsible for the influencing and further establishing standards of fair pay in Cambodia, Indonesia, Sri Lanka and Bangladesh. Marks and Spencer believes that the path to doing the right things and doing things in a different manner is what shapes the plan and ensures the overall success of the plan (Beavis, 2014). Plan A has made demonstrable sense (business sense). In the 2010/2011 year, the company had improved the efficiency of energy use by 25 percent (Beavis, 2014). In the same period, the company was also able to cut waste by 34 percent through addressing the sustainability of raw materials used in manufacturing of goods (Beavis, 2014). The company’s goal is to ensure that all company products sold have at least a single sustainable characteristic. Such a plan is ambitious and demands concrete targets, transparent reporting and robust measurement. Since the adoption of Plan A by the company, supporters claim that Marks and Spencer is leading the way in monitoring and measurement. These individuals describe the scale of work by the company as phenomenal with praises for the retailer’s approach and significant means used in the evaluation of outcomes. The company has been dedicated to the attainment of this course by ensuring it has complete and sufficient knowledge through making significant investment in tracing products and collecting performance data. The company supports its plan by holding quarterly face-to-face meetings with suppliers. The annual conference is dedicated to providing guidance, incentives and opportunities for suppliers of the company to share their success stories (Beavis, 2014). Such stories are aimed at motivating other suppliers and individuals with an affiliation to the company. An example of such stories includes the achievements of various suppliers like the zero waste to landfill, fifty percent reduction in the use of water, savings of wastes by 290 tones, 30 percent reduction in the consumption of energy, 10 percent reduction in the turnover rate, reduced instances of accidents and salary increment of up to 50 percent for the employees (Beavis, 2014). To date, over 250 suppliers of food have adopted various measures of environmental and ethical standards in line with Plan A (Beavis, 2014). 1380 clothe factories are compliant with Marks and Spencer’s chemical and environmental policy and 25 percent of products manufactured have characteristics of sustainability (Beavis, 2014). The company sources its products in a sustainable manner. For instance, 76 percent of the wood used by the company in production and 90 percent of fish are obtained by sustainable means (Beavis, 2014). Finally, Plan A is responsible for leading to product innovation such as carbon neutral bras, cashmere coats made from jumpers returned by customers and fleeces manufactured from recycled polyester. Conclusion Due to the current trends in business, companies are adopting ways and means of ensuring sustainability in all business operations. Different companies use different approaches but the desired end result is the control of various capitals in the business to ensure the attainment of the goal. An example of such is the adoption of Plan A by Marks and Spencer. Various capitals have been controlled by the plan and a number of achievements have been made up to date. Marks and Spenser is determined to handle things in a different manner and spark change through its plan. Such motivation is fueled by the company’s achievement so far which can be alluded to the success of the company’s plan (Plan A). With the International Integrated Reporting Council’s business model framework, companies are able to work globally with a coalition of investors, companies and other professions. The coalition established thus shares the view that communication is an important step in the creation of value and corporate reporting. The IIRC framework is based on principles that every organization must adhere to. The framework is thus responsible for creating a balance between flexibility and prescription through the provision of suggestions that are not bound to any specific parameters. With the framework in place, the relations between organizations and stakeholders are improved resulting to the satisfaction of the needs of both parties to a much greater extent. Recommendations It is true that Marks and Spencer has achieved much of the anticipated results of integrating Plan A into its daily business activities. However, the company needs to focus of on weak areas of the plan to ensure the efficiency of the overall strategy. The company can for instance, assess the plan and revise weak areas to ensure productivity. Areas found unproductive can be improved with the aim of ensuring maximum sustainability of the plan. This move should be done in a timely manner as the timeline for the plan is nearing exhaustion. The company should encourage its customers to participate in the delivery of the plan. Many customers may care for the environment and social issues. Such considerate customers should be given an opportunity to participate in the plan. This participation should not only be witnessed in the form of donations and financial support, but should be founded on simple and costless concepts such as a nurtured spirit to reuse and recycle materials/wastes. The company should also adopt a digital dimension for the Plan. By using social media platforms such as Facebook and Twitter, the company can achieve great success of its course. This is because social media platforms have active users and there is fast flow of information across such sites. With the social media platforms, the company can ensure that customers get involved in the company’s activities under Plan A. References Bevan, J. (2007). The rise and fall of Marks & Spencer: and how it rose again. London, Profile Books Ltd. Beavis, L. (2014). M&S: doing the right thing leads to change – for the better. Retrieved from: http://www.theguardian.com/sustainable-business/best-practice-exchange/marks-and-spencer-change-better Buchholtz, A. & Carroll, A. (2014). Business and Society: Ethics, Sustainability, and Stakeholder Management. South-Western Cengage Learning Mason US Busco, C., Frigo, M. L., Riccaboni, A., & Quattrone, P. (2013). Integrated Reporting Concepts and Cases that Redefine Corporate Accountability: When Values Meet Value. 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