M&S bags the ‘green’ profit

UK supermarkets are very upfront about sustainability and so they should be. Their efforts to capture the environmental debate always risked being seen as a way of heading off criticism of the excessive packaging that has, literally, been part and parcel of the the remorseless march of  the country’s multiple food retailers in the last 20 years. One of retail’s loudest eco advocates was the erstwhile executive chairman of Marks & Spencer, Stuart Rose.

M&S has been clawing its way back after years of being squeezed on clothing sales by Next, Primark, and Top Shop and, latterly, on its previously gilt-edged food sales by the purring juggernaut of Waitrose.

Rose has never been slow with a soundbite and got Fleet Street’s finest running for their laptops when he announced three years ago that M&S would tackle the environmental scourge of the plastic bag. He would do this by charging 5p for the bags – which would reduce sales of the dreaded things – and then donating to charity “the profit” from each bag sold. Sounds great, but first things first.

The missing 64m bags

The beaming M&S chief told the media that a regional test had shown that charging for the bags would reduce demand for them by 70% or 280m bags per year. This meant there had been 400m bags a year distributed by M&S before they began charging for them in May 2008. But  fast-forward to 2011 and two weeks ago, M&S (now under shiny new Chief Executive Marc Bolland, fresh from turning round Morrisons)  announced it had slashed plastic bag distribution from 464m to 89m during those three years since 2008. But don’t worry about the odd 64m bags lost in the PR.

The best bit of the story back in 2008 belongs to Rose’s announcement that M&S would donate the plastic bag profit to charity. M&S has not explained how it calculates the profit on each of these flimsy plastic bags but it has widely claimed they cost 3.15p and, therefore, that the profit from each one (sold for 5p) is just 1.85p.

That does make it sound as if M&S are more generous with their plastic bag manufacturers than they and their supermarket peers allegedly are to farmers and food producers.

The neat part of this little trade in plastic bags, however, seems to be this: until 2008, M&S were providing, say, 400m plastic bags to their customers apparently at a cost of £1.26m (400m x 3.15p). Now, they are selling 89m of these bags at a price (net of the contribution to charity) of £2.8m (89m x 3.15p). So that’s either an additional £1.26m profit for M&S or something more depending on the actual marginal cost of the bags.

Not as cheap as they look

Now, I don’t know if there is anything special about these M&S plastic carrier bags. But Polybags, a London-based producer of biodegradable carrier bags, quotes 6.2p per bag for an order of just 12,500 bags. You’d expect to be able to do so much better with an order of 89 million year after year. So, perhaps, printing the M&S logo and the environmental claims for the great retailer’s campaign costs more than you might think.

I realise, of course, that this little conversion of plastic bags from a net cost to break-even (or profit?) is small beer for M&S.  Its 2010-2011 profit of £780m crowned Rose’s reign with a (whoopy-doop!) return to 2006 levels of profit. I also recognise that Marks & Spencer are doing as much as any European retailer (and much more than most) in pursuit of its drive to become “the world’s most sustainable retailer”. Further, the declared £4m “profit”  from the bags has helped the excellent Groundworks charity develop parks, playgrounds and green spaces in urban areas. And, lest it be forgotten, plastic bags are a very serious environmental hazard (ask the WWF).

But this little M&S saga does remind you to question whether all that grows is really green.