Valuing the future
This year we have made significant progress against our Plan A commitment to consider a range of financial models for assessing our social and environmental impact, and the suitability of these for M&S (Commitment no. 64).
Our commitment to Integrated Reporting (Commitment no. 61) supports this, and we are on track to have a report that fully meets the principles of the International Integrated Reporting Council (IIRC) by 2016, having been on a progressive journey since becoming a member of the IIRC Pilot Programme in 2011. We have since joined the IIRC Business Network, following the Pilot Programme coming to a close in 2014, demonstrating our ongoing commitment to Integrated Reporting.
The management and reporting of six capitals (financial, manufactured, intellectual, human, social and relationship), and their linkages to driving value creation for M&S shareholders and stakeholders is a fundamental concept of Integrated Reporting. Robust financial models that are capable of translating the value and impact of our wider business activities would support us in broadening our focus to incorporate these six capitals into decision making.
We’ve worked with Forum for the Future who brought to us a number of different models of natural and social capital accounting, and encouragingly there are some that we have already been using to manage our business. In addition to those that we already use none were determined to offer significant additional value to M&S at this time given the limited application and testing of these to date. This exercise has however supported us in developing our understanding of what we would need from a model and how we would best use these to support decision making. We will continue to assess the options as they evolve and the application and benefits become clearer.
We have performed our own review into the quantification of intangibles, with a focus on assessing the value of our brand and reputation, and of absenteeism. There are clear benefits to M&S on improving both of these, which clearly have an associated financial value. Being able to disaggregate the component parts, and attributing a strong cause and effect relationship however continues to provide a challenge for us, and therefore makes allocating an accurate value a challenge at this time.
This year we have also participated in the Accounting for Sustainability (A4S) CFO Network, where we have been engaged on natural capital accounting, whole life costing and how we communicate on these matters with our investors. Our contribution to this, along with a range of other leading UK companies, has supported A4S in establishing best practices on these issues. We will continue to participate in the A4S Network in the coming year.
Whilst natural capital accounting is a fast maturing area of focus, it is acknowledged within the sustainability community that further progress is required on the definitions and methodologies before it can be fully operationalised within Finance functions. This is consistent with our own stance towards the current methodologies available to us.
Given the need for further progress in this area M&S is now taking part in the development and testing of natural capital protocols alongside a consortium of other organisations, led by the Natural Capital Coalition, with the results due to be published in mid-2016.
Our commitment to being an active participator of this evolution is firmly on the table, and we will continue to assess the suitability of methodologies as new ones emerge and existing ones evolve.
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