1. Policies and organisation

Group Environment Policy: J Sainsbury plc aims to reduce the impact of its operations through a programme of continuous improvement as set out in its Group Environment Programme. First issued in January 1990 and adopted initially by Sainsbury’s Supermarkets, it was subsequently adopted in March 2000 by Shaw’s Supermarkets and Sainsbury’s Bank.

Sainsbury’s Bank has also adopted the environment principles of the HBOS plc www.hbosplc.com, who own 45% of the equity.

Environment policy for J Sainsbury plc

We recognise that virtually all the activities of an organisation or an individual have some impact on the environment. Our aim is to reduce the impact of our own organisation through a programme of continuous improvement.

In this respect our policy is to:

• Quantify and monitor all environmental impacts of the business, including new projects, and set specific targets;
• Comply with current legislation and, where practical, seek to meet future legislative requirements ahead of relevant deadlines;
• Integrate environmental objectives into relevant business decisions in a cost-efficient manner;
• Require all colleagues to address environmental responsibilities within the framework of normal operating procedures;
• Minimise waste, seek to recover as much as is economically practical and ensure the remainder is disposed of responsibly;
• Develop appropriate emergency response plans for major incidents in order to minimise their environmental impact;
• Influence suppliers of services and own-brand goods to reduce their impact on the environment;
• Enhance awareness of relevant issues among customers, colleagues and others who have an interest in our business;
• Publish information on environmental performance.

2. Organisation and responsibilities

Sir Peter Davis, Group Chief Executive, J Sainsbury plc, has overall responsibility for environment and chairs the Group Board Environment Committee (GBEC). Membership of this committee consists of senior representatives from each operating company, who are in turn responsible for environmental issues and report to their own company boards.

The Group Board Environment Committee sets environmental priorities and goals, and each operating company develops appropriate targets and monitors progress through its own Board.

3. Priorities and goals

Three key priorities and six goals were developed in 1998. These are based on those environmental impacts that are considered the most significant for the business. No change to priorities or goals has been seen to be necessary as the business has not altered since the priorities and goals were formulated.

Priorities:

• Reduce the environmental impact of products.
• Reduce CO₂ emissions.
• Reduce waste.

Goals:

• Environmental Management System: Manage the significant environmental effects over which we have direct control and seek to influence those of our customers and suppliers who reduce the impact our organisation has on the environment.
• Own-Brand Products and Suppliers: Influence our suppliers to reduce their direct environmental impacts and improve the environmental quality of own-brand products through more sustainable sourcing.
• Transport: Increase the efficiency of transporting our products, and address employee and customer travel, with the aim of reducing CO₂ emissions while achieving customer satisfaction and business growth.
• Energy: In our own operations, reduce CO₂ emissions from energy for building services through responsible energy sourcing, minimising demand and efficient consumption.
• Waste: Reduce the waste we produce from our operations, recover as much as is practical, ensuring the remainder is disposed of responsibly. Encourage our customers to recycle where appropriate.
• Property and store operations: Develop, design and operate our stores and distribution centres to reduce their environmental impact whilst achieving customer satisfaction and business growth.

These goals guide the business in implementing its policy to reduce the impact of our own organisation through a programme of continuous improvement.

4. Financial considerations

Environmental targets are incorporated into the existing cost savings programme within the business. From the above goals, each operating company develops targets that not only take into account environmental issues but also any cost benefits which may arise in the short or long term from meeting those goals. Where appropriate cost benefit targets are attached to each environmental target and these contribute to the achievement of overall corporate financial targets. Progress on the targets is formally reviewed on a regular basis within the operating companies from both a financial and an environmental viewpoint. Cost savings may also be used to improve environmental controls within the business.

Some of the examples of projects that have shown cost savings and environmental benefits in the last year are:

• Energy savings projects have saved approximately £1¼ million in the last year and are projected to save £3.2 million in the current year.
• The reduction in distance travelled, thanks to the efficiency improvements in Sainsbury’s supply chain in the last year, has delivered a saving of approximately £7½ million as well as nearly 4,800 tonnes of CO₂ by Sainsbury’s HGV fleet.
• The increase in donation of food past its display-until date to charities has saved nearly £300,000 in waste disposal costs.

5. Benchmarking and performance

External benchmarking enables us to monitor the performance of our environmental programme in context. Examples include:

Business in the Community

Business in the Community is a unique movement of 700 member companies committed to continually improving their positive impact on society and to create a public benefit by working with companies to improve the positive impact of business in society. It helps to develop responsible business practice; provides a platform for dialogue on developing and sharing best practice; it has the ability to translate company policy into local action and is the largest UK national organisation of its kind.

• In a new survey that benchmarked corporate responsibility, J Sainsbury plc was named in the top group of companies by Business in the Community. It was also named as the leading food retailer for the fourth year running in the Index of Corporate Environmental Engagement published by Business in the Environment, part of Business in the Community.

SERM (Safety and Environmental Risk Management Rating Agency Ltd)

This is a financial rating agency, specialising in measuring and benchmarking companies’ ability to manage the potential safety, environmental and social risks arising from their operations, relative to their financial strength. Their mathematical model takes into consideration the total cost (both tangible and intangible) of any potential incident and the likely effectiveness of risk management in avoiding or mitigating any such incident. In the last year SERM has expanded the areas reviewed in the light of greater market volatility and increased reputational risks.

• The sector average in which J Sainsbury plc operates is rated as BBB+. J Sainsbury plc was awarded an AA rating well above sector average.

Dow Jones Sustainability Index

J Sainsbury plc remains one of three global retailers selected for inclusion in the DJSI World Index. It provides objective benchmarks for the financial products that are linked to economic, environmental and social criteria. It comprises the leading 10% of the largest 2,500 companies in terms of corporate sustainability from each industry and 20% of the total global market cap of each industry. Independent auditors verify the annual selection process.

According to DJSI World Research:

• Sainsbury’s performance is well above the industry average.
• Sainsbury’s commitment to responsible product sourcing contributes to a high score in the social as well as the environmental dimensions.
• Principles of socially responsible trading aim to ensure that health and safety as well as equal opportunities standards are met by suppliers.

 

FTSE4Good

FTSE4Good indices have been designed to measure the performance of companies that meet globally recognised corporate responsibility standards, and to facilitate investment in those companies.

J Sainsbury plc has maintained its listing on the FTSE4Good Index by satisfying criteria based on three principles:

• Working towards environmental sustainability.
• Developing positive relationships with stakeholders.
• Upholding and supporting universal human rights.

Assessment of Sainsbury’s inclusion is determined through the Companies response to a detailed questionnaire – a process managed by EIRIS (Ethical Investment Research Service).

Carbon Disclosure Project

In May 2002, 35 institutional investors representing assets in excess of $4.5 trillion wrote to the chairmen of the FT500 Global Index companies. They asked the companies for investment relevant information relating to greenhouse gas mitigation and later published a report presenting an analysis of the responses.

J Sainsbury plc was the only major UK supermarket chain to respond to the questionnaire. In the subsequent report J Sainsbury plc was shown to be the most actively engaged supermarket chain on greenhouse gas issues, among food retailers worldwide. It was highlighted several times in the section of the report dealing with an overview of best practice in food retailing. (http://www.cdproejct.net)

Membership of external organisations

By working with other companies and organisations J Sainsbury plc can incorporate best practice into its environmental programme. For example:

• J Sainsbury plc is a member of Business in the Environment and Business in the Community.
• Sainsbury’s Supermarkets memberships include Forum for the Future, Green Alliance, WWF 95+ Group, Marine Stewardship Council and The Soil Association.
• Sainsbury’s Supermarkets colleagues also have individual representation on the Advisory Committee on Consumer Products and the Environment and Energy Policy Committee for the CBI.
• Shaw’s is working with Clean Air - Cool Planet on energy initiatives.

Awards

Awards are a measure of external perception of J Sainsbury plc’s environmental programme and performance. For example:

• Sainsbury’s was awarded a silver and three bronze awards by the Considerate Constructors Scheme for works completed during 2002. The extension and refurbishment of Sainsbury’s Horsham supermarket was given a silver award, while the extension at Lincoln and the new supermarkets at Hazel Grove, Manchester and Bretton, Peterborough were given bronze awards.
• Shaw’s gained the top award in the Clean Air- Cool Planet Climate Champion Awards 2003 “demonstrating true leadership in greenhouse gas emissions reductions and in spreading a positive message of the need for climate action to their constituencies and their peers.” (Bill Burtis, Communications Manager, Clean Air – Cool Planet)

6. Environmental Management Systems

Each operating company in the Group has its own system to manage environmental issues.

Case study: Sainsbury’s Supermarkets’ Environmental Management System

Historically, Sainsbury’s Supermarkets Environmental Management System combines elements of both the international standard ISO 14001 and the European Eco-Management and Audit Scheme (EMAS) and includes public environmental performance reporting.

• An environmental sub-group, appointed by Sainsbury’s Supermarkets’ Board, sets targets, monitors progress and reports back to the Board. Membership comprises managers from operating divisions of the Company.
• Strategic targets, publicly reported are being implemented to deliver achievements on the three priorities of the environmental programme. These targets are linked to business benefits to ensure integration within the business.
• A network of co-ordinators and target holders situated throughout the business is responsible for tracking the implementation of the targets.
• Sainsbury’s Supermarkets’ Environmental Management Department co-ordinates the environmental management system, reviews activities, develops targets, directs activity, measures performance, liaises with external verifiers of data and information, and reports on progress.
• Sainsbury Supermarkets’ Supply Chain Division has two certified environmental management systems. The depot at Basingstoke, Hampshire is EMAS registered, and the depot at Charlton, SE London is certified to ISO 14001. These were routinely reassessed, successfully during 2002/03.
• A Risk Self Assessment is carried out annually by our internal auditors throughout the Company to identify risks and review controls. Environmental risks are included and are assessed for likelihood of occurrence, and severity of impact.
• Audits are conducted from time to time based on an annual review of need. This depends on developments in the environmental management system and issues that have arisen over the year.
• Data capture on key performance indicators has been refined over the last five years; within the last year data have been rechecked and documented to increase their robustness and to ensure continuity and ease of use within a rapidly changing business.
• The Company is committed to high standards of corporate governance in its business and complies with the provisions of the combined Code on Corporate Governance (see J Sainsbury plc Annual Report & Accounts 2003)

7. Compliance

Sainsbury’s Supermarkets received its first successful prosecution during the year, for a diesel spillage at the Rye Park, Hoddesdon distribution depot. The company was fined £1,500 plus costs. Improved procedures have now been introduced and implemented both for regular maintenance of fuel installations and for dealing with emergencies.

8. Stakeholder communication

(a) Internal

Sainsbury’s Supermarkets colleagues’ involvement in the environmental programme is sought wherever possible. Regular intranet notices and Business TV broadcasts are complemented by a monthly colleague magazine, The Journal, which features news and articles on environmental issues.

All new buyers and some existing buyers in Sainsbury’s Supermarkets are trained on environmental issues in courses that have been run since 1999 and, more recently, some product technologists with responsibility for a range of products, have been trained as well.

Colleagues in Shaw’s and Sainsbury’s stores who have responsibilities for contributing to the implementation of environmental targets receive training to improve waste handling and recycling. Those Sainsbury’s stores donating food to charity have a more intensive programme on how to sort food for donation while maintaining food safety and quality.

The Environment Co-ordinators meet regularly to review target progress and the environmental programme in Sainsbury’s Supermarkets’ Board Committee sub-group. They have received training on auditable data gathering and reporting.

(b) External

UK-based suppliers are involved in the environmental programme through product initiatives, the environmental guidelines entitled “Raising the Standard”, and have been providing comments on the Environment Report for several years.

Customers expect Sainsbury’s to be environmentally responsible, reduce operational impacts and provide customers with the opportunity to reduce theirs by, for example, selling lower-environmental impact products and offering recycling facilities. Customers also communicate with the Company by letter, telephone the freephone Careline (0800 636262) and by e-mail via the website (environ@sainsburys.co.uk). Regular customer focus groups continue to be held by stores and Customer Insight Department, some of which are specifically designed to look at environment issues.

Shareholders all have access to the Environment Report, which is referred to in J Sainsbury plc’s Annual Report and Accounts 2003.

The Company regularly responds to questions and surveys on the environment from the investment community and has spoken at a meeting of the UK Social Investment Forum.

The Company has regular dialogue with the UK Government and the European Commission which provides opportunities to contribute to policy development. For example, we are currently engaged in discussions on recycling of waste and electrical and electronic equipment. We are still discussing the disappointing lack of incentives to use recyclate in the packaging obligations in current regulations. While we are keen to use recyclate, inevitably where it is used, the weight of the packaging increases, thus raising our cost obligation under the Producer Responsibility Regulations. This makes packaging using recyclate more expensive and thus acts as a disincentive on the market.

Companies in the J Sainsbury Group engage in dialogue with Non Governmental Organisations (NGOs) working in partnership wherever possible, for example environmental NGOs provide the opportunity to review and enhance the environmental programme. Dialogue has taken place, for example with the World Wide Fund for Nature, on the Forest Stewardship Council and the Marine Stewardship Council.