Marks & Spencer implements an ethical sourcing program for its global supply chain

JOURNAL OF ORGANIZATIONAL EXCELLENCE / Spring 2004

© 2003 Marks & Spencer. Published online in Wiley InterScience (www.interscience.wiley.com) DOI: 10.1002/npr.20001

MARKS & SPENCER IMPLEMENTS ANETHICAL SOURCING PROGRAM FOR ITSGLOBAL SUPPLY CHAIN

CORPORATE SOCIAL RESPONSIBILITY

As part of its commitment to socially responsible business practices, retailerMarks & Spencer has worked aggressively with its global supply chain, partic-ularly suppliers in developing countries, to implement more enlightened em-ployment standards and create better work environments. After significant in-vestments in processes, training, systems, and people, the company gauges itsprogress towards a sustainable solution—empowering suppliers at the locallevel to improve the lives of their workers. © 2003 Marks & Spencer

Muriel Johnson

Muriel Johnson is the social compliance manager for Marks & Spencer in London, England. She is responsible for implementing thecompany’s code of conduct in its global supply chain. This article is printed with the permission of Marks & Spencer. © 2003 Marks &Spencer. All rights reserved.

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Concern about substandard factory conditionshas been building over the last few decades

as many companies, including UK-based retailerMarks & Spencer (M&S), increasingly source theirgoods from overseas manufacturers who are morecompetitive on price and volume. Specifically, con-cern about issues such as child labor, prison labor,discrimination, and terms and conditions of workhave grown in recent years as a result of informa-tion availability and the growth of internationalspecial interest groups. Additionally there havebeen several high-profile cases of allegations thatcompanies have failed to provide humane and fairconditions of work for employees, either in theirown operations or those of their suppliers.

One such case affected our company directly.In 1996, the “World In Action” television pro-

gram ran a miniseries in the UK on Marks &Spencer in which it alleged that underage girlswere working in a Moroccan clothing factory thatproduced M&S goods and that we were aware ofthis situation. Although we won the resulting courtcase, a link between our own overseas sourcingpractices and low standards of human rights hadbeen made in the minds of many customers. Thisaccelerated our own journey towards best-prac-tice responsible sourcing.

Our customers are increasingly asking ourviews on social, economic, and environmental is-sues. Stakeholders who wish to promote ethicaltrade regularly survey us. This is becoming the re-ality for many other companies that procure ma-terial and product from sources (their own and oth-ers) in developing countries. Companies without


4 Muriel Johnson

a strategy for responsible sourcing may find thatthey lose business to others that do strive todemonstrate that they take the issue seriously andadhere to responsible sourcing policies.

Responsible sourcing is therefore a businessimperative for Marks & Spencer. We believe thatthis gives us an opportunity both to gain compet-itive advantage by initiating a proactive responsi-ble sourcing program and to enhance our profileas a worldwide employer of choice and providerof responsibly manufactured products and highquality services.

To achieve this, in 1999 we implemented ourstrategy for ethical global sourcing, structuredaround four key initiatives. In the first four years ofsustained effort, we have designed and implementedprocesses and criteria and have built capabilities

within Marks & Spencer, within our supplier or-ganizations, and among third parties. All of thishas enabled us to audit, monitor, and verify sup-plier compliance with minimum acceptable stan-dards for workplace conditions and labor practices,to assure that corrective actions are taken whereneeded, and to apply sanctions if necessary. We aremaking good progress in the development of localmanagement capabilities for implementing thosestandards, monitoring for compliance, and contin-uously improving conditions at the local level. Wehave also formed within several of our countriesof operation active networks of suppliers commit-ted to continuous improvement, joint problem solv-ing, and the spreading of best practices to achievethe highest workplace and labor standards. This ar-ticle reports on these efforts and some of the lessonslearned in what is bound to be a long journey, butone we make in concert with other concerned com-panies and international organizations to improvethe lives of workers worldwide.

OUR SUPPLY CHAIN AND THECHALLENGES IT POSES

Marks & Spencer PLC is a UK-based retailer ofhigh-quality clothing, footwear, gifts, home fur-

nishings, and foods, all of which are exclusive toMarks & Spencer and carry our own label. Withrevenues of £8.1 billion ($13.5 billion) and a world-wide workforce of approximately 70,000 employ-ees, Marks & Spencer operates 303 stores in theUK and provides products to franchise operatorsin more than 30 other countries. Its Financial Ser-vices subsidiary provides account cards, personalloans, unit trust management, life assurance, andpensions through its retail financial services com-panies and captive insurance company.

Marks & Spencer has a unique relationshipwith—and dependence on—its suppliers owingto its position as the largest solely “own brand” re-tailer in the UK. Every item is made to M&S spec-ifications; and since specifications must be com-municated and compliance verified, it is imperativethat the company at least know the source of sup-ply for all areas in the supply chain. As such, it hasalways taken great care in choosing the compa-nies that supply it directly with goods and ser-vices. Its objective—and a source of competitiveadvantage—has been to build long-term rela-tionships with its suppliers.

Prior to the 1990s, Marks & Spencer boughtmost of its materials and products within the UK.During the 1990s, relatively high UK labor costsput the company’s clothing at a cost disadvan-tage relative to competitors that had already de-veloped offshore production capabilities, and in1997 Marks & Spencer faced the necessity ofdeveloping more offshore suppliers of its own. Ithad enjoyed close relationships with its UK sup-pliers, some of which had extended over manydecades. Rather than abandon these relation-ships, we picked our best British suppliers andasked them to work with us in setting up lowercost, responsibly managed operations overseas.Some of these are owned and managed by ourUK suppliers; others are established throughshared equity agreements between UK manu-facturers and local suppliers, with significantinput from trained UK management to ensureresponsible working conditions as well as qual-ity of product.

About two thirds of our general merchandiseimports are currently provided by our 13 largestsuppliers from their own factories, their joint ven-tures, and third-party sources. The remaining onethird of imports is split between direct purchases

Marks & Spencer operates 303 stores in theUK and provides products to franchise

operators in more than 30 other countries.

Marks & Spencer Implements an Ethical Sourcing Program for Its Global Supply Chain


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positive change by virtue of their pivotal positionin their supply chains. It is our goal that all ourworkers are treated with respect and that our goodsare made in safe and hygienic conditions, by work-ers who receive a fair wage, and in factories,farms, and production units that minimize theirimpact on the environment.

To achieve this objective and assure that wecan sustain this commitment over time, Marks &Spencer adopted and implemented an ethical globalsourcing strategy with four parallel initiatives:

• Global Sourcing Principles (GSP): Thesystematic application of standards de-rived from best-practice internationalcodes, such as the Ethical Trading Initia-tive (ETI), and human rights conventions,such as those of the International LabourOffice (ILO) of the United Nations.

• Partnerships with Suppliers: The devel-opment of partnerships with suppliers whorespect the Marks & Spencer GlobalSourcing Principles and who are preparedto commit to developing the managementcapacity and systems within their organi-zations necessary to support the imple-mentation of those standards within theirown factories and those of their respec-tive suppliers.

• Social Audit and Verification: A processthat includes social audit, monitoring, andthird-party verification and is supportedby research, information analysis, train-ing, and expert independent consultants.

• Continual Improvement and Sanction: Thepromotion of continual improvementthrough the setting of supplier selectioncriteria, the identification of targets andaction plans following inspections, andthe application of strict sanctions whenstandards are not met.

We use two sources of standards as the ethi-cal framework for these four sourcing initiatives:

by Marks & Spencer from overseas businessesand from other UK-based suppliers and agents.

In turn, our direct suppliers use a number ofsubcontracted suppliers who are selected to be bestin class in the countries where we source. In the in-terest of developing long-term sources of high-qual-ity goods—and improving working conditions(more about this later)—we establish close rela-tionships with these subcontractors and provide sup-port, in conjunction with our direct suppliers, wherenecessary to help these local suppliers upgrade theirfacilities and improve their labor practices.

As a solely “own brand” retailer, we have com-plete control over recipes and specifications forour food products, and our supplier relationshipsare equally critical in this segment of the busi-ness. Twenty suppliers account for 70 percent ofall our food goods. Imported finished food prod-ucts, fresh produce, wines, groceries, and con-fectionery are purchased mainly through knownagents or the UK arm of our direct suppliers. Wealso purchase finished food products manufac-tured in the UK for which our direct supplierssource raw material from around the world. Manyof our suppliers have invested in overseas facto-ries dedicated to Marks & Spencer production.

Thus, the need to rapidly globalize our suppliernetwork has presented us, and by extension many ofour direct suppliers, with an unprecedented chal-lenge: Work with a geographically dispersed net-work of suppliers and subcontractors in developingcountries—where substandard facilities, uneducatedworkers, a lack of management capabilities and sys-tems, and insufficient government enforcement oflocal labor and environmental legislation are preva-lent—in order to develop a cadre of committed part-ners that produce high-quality goods and providesafe, gainful, and socially responsible employmentthat complies with international standards.

OUR STRATEGY FOR ETHICAL GLOBALSOURCING

Our supplier base now includes workers frommany cultures and ethnic groups with differentneeds and requirements that we must understandif we are to deliver on our vision of being a leaderin conducting socially responsible business. Webelieve that companies that work in such globaland diverse situations have the power to promote

Many of our suppliers have invested inoverseas factories dedicated to Marks &

Spencer production.


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the internally developed Marks & Spencer GlobalSourcing Principles and the international stan-dards developed by the Ethical Trading Initiative.

Marks & Spencer’s Global Sourcing Princi-ples (GSP). In 1999, we codified our conductwith our suppliers by publishing our GlobalSourcing Principles (see Exhibit 1). At the be-ginning of a relationship with a new supplier,and in the case of all existing suppliers, we re-quire each supplier to implement these GlobalSourcing Principles, which establish minimumacceptable supplier “entry” standards in the fol-lowing areas:

• Employment• Safety in the workplace• Protection of the environment• Correct labeling of our products

• Development of management systems tomonitor, maintain, and demonstrate com-pliance

Suppliers must not only apply these princi-ples at all times but must also be able to showthey are doing so. We will take action against sup-pliers who do not comply, which may involve can-celing our orders and ceasing to trade.

In November 2001, we published Marks &Spencer’s “Implementation of Global SourcingPrinciples” manual, which is distributed through-out the M&S organization, to its direct suppliers(and through them to subcontractors), and to itsservice providers in the audit field. The manualclearly lays out our social compliance programand the standards against which suppliers will besystematically measured. It also presents a single

Exhibit 1. Marks & Spencer’s Global Sourcing Principles

SUPPLIER’S RESPONSIBILITYTogether with each supplier we establish a set of standards, which includes specifications appropriate to the industries and countriesproducing the goods. It is the supplier’s responsibility to achieve and maintain these standards.

WORKFORCE RIGHTSThe people working for our suppliers are to be treated with respect, and their health, safety, and basic human rights are to be protectedand promoted. Each supplier must, as a minimum, fully comply with all relevant local and national laws and regulations, particularlywith regard to working hours and conditions, rates of pay, terms of employment, and minimum age of employment. Moreover, what-ever the local regulations, workers should normally be at least 15 years old; as a norm, they should be free to join lawful trade unionsor workers’ associations.

PRODUCTION SITES AND LABELINGSuppliers of goods must agree with us in advance which production site or sites will be used for each order, and no subcontracting ofour orders from these agreed locations is allowed. All goods must be labeled with their country of origin.

REGULAR ASSESSMENTAll production sites are to be regularly visited and assessed by our suppliers and by our own staff. Together we will strive for continualimprovement.

ENVIRONMENTAL RESPONSIBILITYAt the very least, suppliers must meet all relevant local and national regulations. In addition, we expect them to steadily improve theirenvironmental performance by aiming to comply with international standards.

DEDICATED PRODUCTION UNITSOnce we have established significant levels of business with a supplier, we expect that supplier to produce our goods in facilities andwith workers dedicated to Marks & Spencer orders.

COMMITMENT TO EXTENDING PRINCIPLES THROUGH THE SUPPLY CHAINWe expect our suppliers to adopt similar principles in dealing with those who, in turn, supply them.



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• Reasonable working hours• Prohibition of discrimination• Regular employment relationships• Prohibition of harsh or inhumane

treatment

ETI members commit to adopting either theBase Code or their own code accompanied by a setof guidelines and a time frame for implementingthe ETI Base Code. Our suppliers and we are com-mitted through our membership in the ETI tomeeting the ETI Base Code within a reasonabletime frame and to ensuring that performance inthis regard is measured, is transparent, and ulti-mately becomes a precondition of further busi-ness with Marks & Spencer.

OUR APPROACH

The scope of the task we face to implement our so-cial program is huge. For example, within ourfood products supply chain, one packing stationcan receive produce from 40 collecting stations,which in turn might be receiving produce from

400 cooperative farms. Implementing better work-place practices and improving them to the levelof international standards across this extensivesupply chain require a greatly increased organi-zational capacity on the part of both Marks &Spencer and its suppliers. Of necessity, during thefirst four years of implementing our ethical globalsourcing strategy, we have focused our efforts onthose areas where the greatest change could beachieved most quickly while building managerialand technical capabilities at the local level, whichcan in turn be leveraged for continuous sustainableimprovements throughout the supply chain. Themain areas of focus include the following:

• Documentation and communication of theMarks & Spencer Global Sourcing Prin-ciples throughout the M&S businesssphere and to all members of our supplychain

coherent framework and method forcollecting/capturing the data necessary to reportand monitor supplier performance. The document,which is confidential to Marks & Spencer and itssupply base, now serves as a consolidated sourceof information on the basics of our GSP and in-ternational standards.

The Ethical Trading Initiative. Over time, weexpect each supplier to steadily raise standards andimprove working conditions, the goal of those ef-forts being compliance with the international stan-dards adopted by the Ethical Trading Initiative(ETI), of which Marks & Spencer has become amember. The ETI is a government-led initiativemade up of companies, nongovernment organiza-tions (NGOs), and trade unions committed to work-ing together to identify and promote good practicein the implementation of codes of conduct in theworkplace. We believe that the collaborative ap-proach of working with other like-minded bodies,as well as the benefit of being able to appreciatethe different perspectives on labor standards andtheir implementation brought to ETI by NGOs andunions, is invaluable in reinforcing our efforts toimprove labor standards in our own supply chain.

The ETI is committed to incorporating inter-nationally agreed-upon standards into the codes oflabor practice of its individual members. Most in-ternational labor standards—the binding standardsand conventions developed by the InternationalLabour Organisation (ILO) of the United Nations—concern the obligation of governments, and com-panies are therefore not signatories to them; nonethe-less, the meaning and intent of these standards canserve equally well as relevant benchmarks for com-panies and inform their own business principles andways of operating in the global arena.

The ETI has developed a Base Code that re-flects the most relevant of these international stan-dards with respect to labor practices. In general,the ETI Base Code sets minimum standards in thefollowing areas, which are more detailed than the“Workforce Rights” section of the Marks &Spencer Global Sourcing Principles:

• Freely chosen employment• Freedom of association• Safe and hygienic working conditions• Prohibition of child labor• Payment of living wages

The ETI is committed to incorporatinginternationally agreed-upon standards intothe codes of labor practice of its individual

members.


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• A geographic focus on countries definedby the ILO as being in the “developingworld,” which are more likely to have sub-standard working conditions that GSP/ETIstandards can greatly improve, with a verypositive effect on the quality of work lifefor employees

• A supply chain focus on finished productsuppliers, specifically:— New finished product sites/facilities

before Marks & Spencer places its firstorder for goods

— Existing finished product sites/facili-ties, prioritized according to size orvolume of business done with Marks& Spencer

• Encouragement and support of our pri-mary suppliers to implement GSP/ETIprinciples and practices within their ownsupply chains

• Two stages of social compliance: — Stage One: GSP Compliance, in which

(1) new sites/facilities must strictlycomply with the minimum standardson major issues before Marks &Spencer will place an order for busi-ness, and (2) existing sites/facilitiesmust achieve compliance with mini-mum standards within a specified timeframe and demonstrate continuous im-provement, with strict sanctions ap-plied by Marks & Spencer if a supplierfails to make agreed necessary changes

— Stage Two: ETI Base Code Compli-ance, in which suppliers must attainand sustain international standards asspecified in the ETI Base Code

• Development and implementation of asystematic approach to the effective man-agement of ethical sourcing, one capableof being measured and consistently repli-cated and which includes four keyprocesses:— Supplier evaluation, monitoring, and

target setting — Due diligence and independent verifi-

cation— Training and capacity building— Networking, benchmarking, and dis-

seminating best practices

Each of the four processes listed above is dis-cussed in detail below. The scope of our effortsunder this approach encompassed about 1,100 fa-cilities/sites in as many as 35 countries; it hassince expanded to include 1,260 facilities/sites.

SUPPLIER EVALUATION, MONITORING,AND TARGET SETTING

The processes for evaluating and monitoring theworkplace conditions and labor practices of sup-pliers and targeting improvements where they arenecessary are an essential part of our ethical globalsourcing program. We employ two primary meth-ods for evaluating suppliers, depending upon thesituation, and report annually to the ETI on thenumber, type, and results—compliant or non-compliant—of all the evaluations performed dur-ing the prior year.

Risk Assessment. We conduct preliminary on-site evaluations, often part of the regularly sched-uled annual production visit to an existing sup-plier’s facility, during which trained M&Spersonnel meet with facility managers to conveythe Marks & Spencer Global Sourcing Principlesand identify any areas in which the facility maynot/does not comply with local laws. One of threeratings of the overall level of risk is assigned tothe facility—high, medium, or low; the rating de-termines the type of follow-up actions, includ-ing immediate actions necessary to address anyhigh-risk areas, and the time frame for the sup-plier’s first full social audit. These risk assess-ments, as part of a buying visit, are used exten-sively as both an opportunity to educate andinform on-site management as well as to iden-tify where the major noncompliances are likely tobe, which can then be confirmed through a full-scale social audit.

Our risk assessment approach also alerts usto problems that may be prevalent within the in-dustry. In such cases, we have investigated fur-ther along the supply chain to determine the ex-tent of the problem and devise solutions. We haveused the information gained to “flesh out” our

Our risk assessment approach also alerts us toproblems that may be prevalent within the

industry.



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steady progress towards attaining compliance withETI standards.

The social audit is conducted by trained indi-viduals with knowledge of local language and cul-ture. The audit entails a detailed and in-depth re-view of relevant documentation and records, atour of the supplier’s factory or facility, and pri-vate and confidential interviews with a number ofthe facility’s workers randomly chosen by the au-ditor. The auditor

• Identifies any areas of noncompliance withcountry laws/regulations—a significantnoncompliance is classified as a high-risksituation and a minor noncompliance isclassified as a low-risk situation

• Identifies any areas where the supplier isnot meeting the GSP

• Determines the degree of compliance withthe ETI Base Code

• Observes both good and poor practicesthat can then be used to develop best prac-tice for dissemination throughout the sup-ply chain

If the auditor identifies a high-risk issue(s),Marks & Spencer has the following options avail-able for dealing with it:

• Marks & Spencer can refuse to approve anew site/facility as a qualified supplier, inwhich case no orders for business areplaced; if it is a site/facility already es-tablished as a supplier, Marks & Spencercan choose to terminate any existing or-ders for product.

• Alternatively, Marks & Spencer can ob-tain agreement with the supplier on an ap-propriate course of corrective actionwithin a specified time frame. No orderswill be placed with a new supplier untilthe corrective actions are taken and ap-proved. Follow-up is then done throughsubsequent audits (full or partial) to as-

own policies and spread best practice for resolv-ing the problem.

Risk assessments are supported by desk re-search to provide evaluators with up-to-date in-formation about country laws and regulations andthe ETI Base Code, including recent changes.Desk research can also highlight areas that wemay need to investigate further based on new in-formation in the field.

Social Audits. A social audit is an in-depthevaluation by trained auditors of a supplier’s per-formance in meeting the legislative requirementsof the local country and Marks & Spencer’sGlobal Sourcing Principles, as well as the sup-plier’s current position relative to the ETI BaseCode, the international standards that serve asour ultimate goal. Full social audits in allGSP/ETI categories are conducted in the follow-ing cases:

• During the approval process for any fin-ished product factory with which Marks &Spencer has not done business in the past,and then one year after the date of approvalof the facility and on an annual frequencythereafter

• For existing finished product sites/facilitiesin the M&S supply chain on an annual basis

• As a follow-up audit to verify compliancein high-risk areas identified through pre-vious audits

These audits are important for assuring thatwe make business commitments only to suppli-ers that are able to provide and maintain a facil-ity that meets the minimum standards of our so-cial program and that are motivated to improveconditions over a reasonable period of time to at-tain the desired international standards. A facilitynew to Marks & Spencer must comply with ourminimum entry standard (the GSP) before it canobtain any orders; requiring at least this level ofcompliance as a precondition of trade ensures thatsuppliers understand we are serious from the out-set about our social responsibilities toward peoplemaking M&S goods. (Similarly, agents mustarrange a robust audit of new factories before wewill do business with them.) Existing facilitiesmust comply with our minimum entry standardwithin an agreed-upon time frame and then show

The social audit is conducted by trainedindividuals with knowledge of local language

and culture.


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sure the corrective action has been takenand compliance established.

If any low-risk issues are identified, the auditorobtains agreement with the supplier on an appro-priate course of corrective action within a specifiedtime frame, and follow-up is done during subsequentregularly scheduled site visits or a partial audit toassure the corrective action has been taken.

Full social audits are also conducted as part ofour due diligence process. Outside auditors ver-ify the findings of a sample of social audits thatwere conducted internally (those by Marks &Spencer and by its suppliers) and validate the sys-tems and procedures used to conduct these audits.

Initially, while we were building knowledgeand skill, we made extensive use of specializedexternal audit companies with local knowledge

and staff in each country. In the case of audits ofnew facilities, we have found from experience thatexternal auditors bring an objective approach thathas prevented us from engaging with supplierswho may never be able to meet our code.

Increasingly, the skill of our direct suppliershas increased so that they now do much of the au-diting of existing facilities themselves using ac-credited auditors in their own organization whoare trained through the M&S training programand certified to do audits. In order to ensure a con-sistent approach, Marks & Spencer has put a greatdeal of effort into developing a training processwhich ensures that managers within our supplybase are able to conduct a full social audit of thekey human rights areas addressed in the GSP, in-cluding the document review, facility inspection,and confidential worker interviews in local lan-guage. We have found that by allowing the“owner” of the audit to “own the actions” gener-ated, we have been able to effect significant changefor the better. It also permits realistic timelinesfor improvement that will prevent any long-termreputational or commercial damage to the factoryunit, neither of which is in the interests of the em-ployee’s livelihoods or their management.

Each supplier uses the same basic systems butmodifies them to suit respective supply routes.For example, a direct supplier with a large num-ber of “short term, one season” gift factories hastrained several accredited local internal auditorsrather than incur the expense of external auditorsfor a large number of factories with very smallorders. Another supplier who has operations inmany countries and many languages has com-missioned external audit companies to monitorhis facilities; he monitors the overall system, andhis local staff follows up on improvements duringtheir frequent travels to the sites.

Each of our direct suppliers has appointed anindividual to be its “social compliance manager.”That person is responsible for reporting on ratesof progress to M&S operational teams. Each di-rect supplier also maintains a central database offactory audit details, which is accessible to Marks& Spencer at all times.

Monitoring. Our system of monitoring is ac-tive at several levels: Everyone who visits or whointerfaces with a factory assumes some owner-ship for social compliance and takes responsi-bility for ensuring that factories are continuallyimproving. As such, M&S technologists probethe details of these audits on their regular site vis-its. All M&S personnel who visit factories aretrained to ask relevant questions about humanrights and labor standards and regulations in eachcountry. This quickly raises awareness and high-lights the key issues. Although M&S personnel donot often speak the local language, their detailedknowledge of local law (supplied by the M&Scentral Supplier Database) results in robust databeing generated. For example, the Food Divisionoperates an independent hygiene team, which hasbeen specifically trained to audit hygiene, in-cluding health and safety. All members are nowtrained social auditors and raise issues of non-compliance where they find them during theirregular visits throughout the entire food productsupply base.

Many M&S technologists and buyers, as wellas the company’s direct suppliers, have now beentrained as social auditors, and in 2001, more than800 of their visits specifically focused on ethicaltrade issues. This constitutes a large part of theM&S continuous monitoring process. All signif-icant ethical discussions during their regular site

We have found that by allowing the “owner”of the audit to “own the actions” generated,

we have been able to effect significant changefor the better.



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central database, which is accessible to all per-sonnel who visit the factories, includes such in-formation as country laws and regulations; thefindings from risk assessments and prior audits;facility improvement plans, follow-up actions, andtimelines; and the findings from regular site vis-its by M&S staff.

DUE DILIGENCE AND INDEPENDENTVERIFICATION

As evidence of due diligence in our ethical trad-ing practices, we have established a multiprongedprocess to independently verify the integrity androbustness of the systems and methodologies usedby Marks & Spencer and its suppliers.

Suppliers’ Systems and Procedures. We haveinsisted that our direct suppliers implement a man-agement system for auditing, approval, and con-tinual monitoring of their production sites. In ad-dition to ensuring that all sites are regularlymonitored, we require all our suppliers who con-duct their own internal audits to authorize annualindependent audits of five percent of their manu-facturing sites (or one site, whichever number isthe greater). Marks & Spencer also conducts 20due diligence audits per year using third party au-ditors to check on the systems of our direct sup-pliers, which should also confirm the results ofaudits previously done by our direct suppliers.

During 2001–2002, most of the findings ofthese due diligence audits confirmed the find-ings of our direct suppliers’ audits, which rein-forced the fact that our systems are robust. As aresult, the due diligence process is evolving to-wards creation of “problem-solving forums.” Wenow conduct countrywide meetings in whichsuppliers in that country come together to shareand discuss among themselves and with M&Spersonnel the ways in which they can achieveand surpass compliance. Together with our sup-pliers we have established a new due diligencemodel, in operation now for about a year, thatwe believe will take us and our suppliers to the

visits are documented and captured in the M&Scentral Supplier Database.

Ownership of the monitoring process is grad-ually moving to the local level, which is the mosteffective way of ensuring sustainable change.Direct suppliers take responsibility for continu-ous monitoring of their own suppliers—includ-ing the annual social audit and follow-up on ac-tion plans to correct deficiencies—by usingeither their own trained certified internal auditorsor contracted outside auditors. At a minimum,they log an annual report on each of their fac-tory sites doing business with Marks & Spencer.External third-party auditors are increasinglyemployed in countries where supplier staff doesnot possess appropriate language capacity, skill,or relevant local knowledge, or where the sup-plier has factories in many countries or a largenumber of factories in one country. Thus, exter-nal resources are becoming a larger part of ourjoint monitoring program with suppliers. In 2001,all of our finished food-product suppliers in de-veloping countries were audited by independentthird-party auditors. Certain direct suppliers welladvanced in compliance have trained local third-party teams to monitor their factories on a con-tinuous external basis, and in some countries,Marks & Spencer has been able to conduct work-shops to train these auditors.

External audits mainly yield robust data, butthe quality of auditing varies with the quality ofauditor training and individual auditor skills. Wegive constructive criticism to the audit compa-nies, which has prompted them to reinforce theirown internal training. Where necessary, we haverecruited audit firms and certified that they arequalified to do this work.

Multistakeholder Audits. We are currently ex-ploring the use of multistakeholder audits, in whichother stakeholders, such as trade unions and NGOs,participate in the design and conduct of social au-dits. Input by all stakeholders to the social auditprocess could prove invaluable in developing asustainable route forward. The present challenge isto build local capabilities and understanding of thesocial audit process among these stakeholders.

Knowledge Management System. As part ofthe auditing and monitoring process, we have ex-panded our central Supplier Database to captureall the data necessary to support this process. Our

Input by all stakeholders to the social auditprocess could prove invaluable in developing a

sustainable route forward.


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“next level” of assuring the effectiveness of ourefforts and will further build the capabilities ofthe supplier base for achieving compliance withinternational standards. The model provides forthe following:

• Country visits by the M&S due diligenceteam to facilitate learning by suppliers

• A minimum of three factories evaluatedby independent auditors on each visit

• Use of these audit findings to identify risksand inform all suppliers in a single learn-ing forum of likely risks in the existingsupply chain in that country

• Formation of a benchmarking group oflocal suppliers to achieve ownership of is-sues and promote local problem solving

Marks & Spencer’s Systems and Procedures.In the same way that we expect our suppliers to sub-ject themselves to regular independent audits, Marks& Spencer subjects its own systems and proceduresto external scrutiny. In 2001, Lloyds Register Qual-ity Assurance completed a systems assessment re-port on our ethical management system. This com-prised a desk audit only, based on the GSP manualand the processes supporting it. Lloyds’ findingswere instrumental in our subsequent developmentof the central recording system and database forethical sourcing information and activities. In 2002,we subjected our system to close scrutiny by an in-ternational audit company. Overall, the audit foundthe systems to be robust, and we have used its spe-cific findings to strengthen our process further.

As a useful additional external check on thequality of our procedures and scope, we regularlyseek comments on our Global Sourcing Princi-ples, our social audit program, and our GSP man-ual from external consultants on ethical trade andrelevant NGOs. Thanks to their input, we havelearned that in addition to compliance, there is aneed to develop even greater capabilities withinthe countries. Thus, we have put additional effortsinto building management skills and capacity atthe factory level.

We recently commissioned a number of aca-demic institutes who have expertise in this field toexamine our systems and procedures. We receivedencouraging feedback on the thoroughness of ourmethods as well as valuable benchmarking againstother companies in other industries.

TRAINING AND CAPACITY BUILDING

We realized early in our process that owing to thecomplex nature of responsible global sourcing,auditing and monitoring must be done throughconsistent procedures, and this is best achievedthrough consistent training. We worked with out-side specialists to develop a number of trainingschemes appropriate to the needs of the differentgroups involved in implementing and maintainingthe GSP. More recently, as we are maturing in ourefforts, we have begun to shift resources towardtraining the trainers and promoting distance andself-learning as a more effective approach at thisstage for building local capabilities.

Social Auditing Course. In 1999, we devel-oped a three-day training course to impart in-depthknowledge of social compliance auditing and theapplication of the GSP and ETI Base Code withinfactories. The course concentrates heavily on prac-tical skills. The participant is required to pass anexamination, as well as conduct two “accompa-nied” audits before becoming qualified as an au-ditor for Marks & Spencer. By the middle of 2003,250 personnel from Marks & Spencer and our di-rect supplier organizations had completed thistraining. We have begun to offer the program over-seas for internal auditors from the suppliers’ or-ganizations and for local external auditors con-tracted by suppliers; thus far, we have completedthe training in Hong Kong and plan to conduct itnext in Sri Lanka, Indonesia, Turkey, and Mexico.

Updates. We hold every member of our buy-ing teams accountable for ensuring GSP imple-mentation and reflect this in their individual per-formance objectives. We regularly conduct internalupdate sessions with our buying teams to ensurethat the approach towards our suppliers and thestandards we require are understood and followedby our buyers and technologists who work withM&S suppliers. These sessions include updateson new issues and best practices that emerge fromMarks & Spencer’s experience with its suppliers.

We recently commissioned a number ofacademic institutes who have expertise in thisfield to examine our systems and procedures.



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ing, and ownership of solutions among its sup-pliers. To involve the entire supply base of acountry in the process, we initiate and supportthe formation of supplier benchmarking groupsthat address local issues. These benchmarkgroups are now operating in eight countries:Egypt, India, Indonesia, Israel, Morocco, Por-tugal, Sri Lanka, and Turkey.

They are formally organized, meet regularly,and have a local chairperson who ensures min-utes are produced. As can be seen in Exhibit 2,which describes various activities and initiativesof some of the benchmark groups, we are expe-riencing significant success with this approach.However, if a group is to be successful in ef-fectively disseminating best practices, it musthave commitment, a shared vision, and a strongchairperson who has a personal interest in eth-ical trade.

Publication of Best Practices. Another waywe strive to draw on lessons learned from our in-ternal and external audits and the growing ex-pertise of our more experienced suppliers is tocompile best practices and publish them as partof our Global Sourcing Principles Implementa-tion Manual. These serve as potential solutionsfor improvement planning and target setting inaudits at individual facilities and for local issueproblem solving by benchmark groups. Exhibit3 shows examples of some of the best practicesthat we have identified and now include in themanual.

Supplier Conferences. We hold collabora-tive meetings every six weeks with our top 13suppliers in general merchandise, who now com-prise a confident group of social compliancepractitioners, responsible for GSP compliancewithin their own individual businesses and sup-pliers. All have made many presentations onGSP compliance, both within their businessesand at their factories, and they continue to learnfrom each other’s experiences and successes inthose areas where both Marks & Spencer and

Because we have learned that collaboration facil-itates continual learning and improvement, wealso make these updates available to our suppliersfor use in their own organizations and with theirown subcontractors/suppliers.

Training Manuals. We have found from expe-rience that although we can reach a large audiencethrough training, the reach of the written word iseven greater, particularly for communicating acrosscultures. This is the rationale behind the develop-ment of our Global Sourcing Principles Imple-mentation Manual in 1999. Subsequently, we havedeveloped manuals for every M&S global sourcingtraining course, in the local language where ap-propriate. The training manuals are proving a valu-able tool for expanding training at the local level by“training the trainers” in supplier organizations.

Social Compliance Workshops. We introducedin 2001 a series of one-day Social Complianceworkshops, which are funded by Marks &Spencer, conducted in countries where it has sup-pliers, and run by local specialists and M&S per-sonnel. They are presented in the language of thecountry, with a target audience of local middlemanagers. The workshop provides a detailed out-line of relevant country laws, Marks & Spencer’sGSP, and the ETI Base Code. It also serves as aplatform for sharing knowledge about commonareas of noncompliance and generating ideasabout how to achieve and enhance compliance.The sharing of ideas that occurs enables partici-pants to celebrate successes, own up to challenges,and take local ownership of these challenges asthey work together to find solutions.

NETWORKING, BENCHMARKING, ANDDISSEMINATING BEST PRACTICES

To sustain progress in ethical sourcing, it is im-perative that capabilities be developed and own-ership for ethical sourcing practices be taken atthe local level. To help achieve this, Marks &Spencer has encouraged suppliers to networkamong themselves, compare experiences, andshare best practices.

Supplier Benchmarking Groups. One of themost effective ways for Marks & Spencer tobuild local management capabilities and dis-seminate best practices throughout a country isto promote networking, learning, problem solv-

To involve the entire supply base of a countryin the process, we initiate and support the

formation of supplier benchmarking groupsthat address local issues.


14 Muriel Johnson

the suppliers agree there are no commercial rea-sons not to share best practice and work together.Following the success of this initiative, we nowhold quarterly meetings with our next 15 largestsuppliers. We have also held several conferencestargeted at specific supplier groups in our foodbusiness, including our top 80 suppliers, horti-cultural producers, and Far Eastern supplierswhere we have assessed the most risk exists withrespect to labor standards. These events clarifyour position on responsible global sourcing, em-phasize our commitment to the GSP and ourbrand values, and offer suppliers the opportu-nity to network and problem solve.

THE CHALLENGE AND THE KEYS TOPROGRESS IN ETHICAL SOURCING

Workplace and labor conditions vary hugelyacross the globe, and yet Marks & Spencer is com-mitted to achieving one worldwide standard—itsGlobal Sourcing Principles—in order to ensurethat its production sites meet the highest normsset by the international community. This poses asignificant challenge when working in other cul-tures where norms, standards, expectations, andavailable resources greatly differ. Progress cansometimes be slow, particularly progress that leadsto real sustainable change. Nonetheless, our ef-

Exhibit 2. Examples of Initiatives by M&S Supplier Benchmarking Groups



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ing countries are treated with respect and are pro-vided with decent working conditions and fairrates of pay. First, we have always possessed goodknowledge of our production sites, wherever theyare in the world, based on first-hand visits. As a re-sult, personnel at the production sites have alwayshad an appreciation of our core values as ex-pressed in our Global Sourcing Principles. This

forts in the first several years of our social pro-gram, which we have documented in confidentialannual reports to the Ethical Trading Initiative,point to steady progress and real improvementsin the lives of the people making our products.

We believe two primary factors have con-tributed to our progress thus far in ensuring thatthe people who produce our products in develop-

NO FOCAL POINT OF CONTROL WITHIN SUPPLIER ORGANIZATION FOR SOCIAL RESPONSI-BILITY AND ETHICS Appoint a senior manager to be responsible for the area of social compliance. This person should be in a corporate role with no vestedinterest in a particular business unit and therefore can be impartial.

THE AUDIT PROCESS CAUSES DIFFICULTY AND STRESS FOR LOCAL MANAGERS Implement a rigorous process of preparing the factories for annual compliance audits. (See Section 3. Pre-Audit.) The factories canmake reference to the workbook relevant to that country.

WHETHER TO USE INTERNAL M&S AUDITORS OR EXTERNAL AUDITORS Internal M&S auditors can use their conceptual knowledge of ethics coupled with their practical knowledge of the business to helpprepare the factories prior to the audit, and they also carry out a more thorough audit procedure because they are more aware of theneeds of the business. External auditors may be perceived to be more objective, to have no vested interest in either party, and be betterable to translate and interpret the local laws and language.

INADEQUATE HEALTH AND SAFETY TRAINING Show the training video at the time of an employee’s induction/orientation. As refresher training, periodically replay the videos in thecanteen. Fire safety and occupational training (e.g., lifting heavy objects) could also be done this way.Need visual documentation to substantiate findings during an audit Take digital photos during the health and safety tour of the factory. Process these onto a laptop and use these during the closing meet-ing. This saves time and reduces the need to “show me.”

EXCESSIVE OVERTIME The policy on overtime should be written and then signed by the Directors of the business, including both partners if it is a joint ven-ture, to ensure that they are fully aware of the importance of restricting overtime. Give responsibility to shop floor supervisors to en-sure that overtime does not exceed 12 hours per week and 48 hours per month. Request each factory to generate a monthly/weeklyovertime report to be sent to Head Office for monitoring. Managers must be aware that failure to manage overtime in line with thepolicy will subject them to disciplinary action.

INCREASE THE ACCOUNTABILITY OF THE THIRD-PARTY MANUFACTURER Marks & Spencer supplier should pay for the first GSP audit and work with the factory on the corrective action plans. If a further fol-low-up audit is required due to nonconformances, the factory should finance this/carry the cost.

SLOW PROGRESS ON IMPROVEMENT PROCESS AND LACK OF UNDERSTANDING WITHIN THECOUNTRY Train in-country employees in GSP and ETI Codes of Practice and allocate responsibility for compliance in-country to the most se-nior operational manager. The company can apply to join an organization such as ETI, BSR, or WRAPP to increase its knowledge ofsocial responsibility and provide an additional source of expertise on such matters. Benchmarking groups and in-country workshopscan also provide guidance and training for in-country personnel.

Exhibit 3. Examples of Issues and Recommended Best Practices in the Marks & Spencer “Implementationof Global Sourcing Principles” Manual


16 Muriel Johnson

has provided a good foundation for even closerworking relationships to identify and resolve prob-lems with workplace conditions and practices.

Secondly, our approach to sourcing—devel-oping long-term supplier relationships—and thesecurity of contract that this provides has ensuredthat improving working conditions is not a com-petitive issue amongst suppliers. Thus, factoriesare able and willing to assist each other in achiev-ing compliance with the standard, as best evi-denced by the success of our locally operated sup-plier benchmarking groups in promoting sharedlearning among their members. The security of con-tract also gives suppliers the confidence to investfor the long term not only in modern manufactur-ing machinery and methods but also in their ownstaff and their facilities, all of which support thecore purpose of our Global Sourcing Principles.

These primary factors are supported by ourpractice of selecting direct suppliers who areethical producers in their own right. Also im-portant have been our investments in training todevelop capable managers in our supplier or-ganizations and to build highly competent tech-nical teams—within the M&S sourcing organi-zation, our supplier organizations, and ourthird-party auditors.

The overall result, we believe, will be that theM&S supply chain will be in a strong position tocontribute positively to sustainable developmentgoals in the countries where we work. We also be-lieve that this can contribute to broader workwithin Marks & Spencer on corporate social re-sponsibility. While we know we still have far totravel, we have made good progress on the earlystages of this journey. �

Documents

Marks & Spencer implements an ethical sourcing program for its global supply chain