Sourcing with integrity

Sourcing with

integrity

At Sainsbury’s, we recognise the need to source

with integrity, as we aim to provide our customers

with quality products at a fair price, in a way that’s

better for the farmers, growers, packers, processors,

manufacturers and the animals involved, while

minimising our impact on the environment.

Sainsbury’s has always supported British farming and has done so for over 143 years. We always aim to offer British products at their very best, when they are in season, and when the quality is as our customers expect. For farmers who supply us from other parts of the world, we work to help them improve their skills, and look to the long term sustainability of their land, crops and businesses. We have a Fair Development Fund for producers overseas and the Development Fund for UK farmers and producers.

As the world’s largest retailer of Fairtrade products, we know we make a positive difference, not simply by buying produce, but by paying Fairtrade premiums to farmers so they can decide how to use the income for the best benefit of their whole community.

A strategic approach to Sourcing with integrity

We take a strategic approach to how we source with integrity, as we source over 30,000 products for our stores. We have a strong heritage of developing long-term relationships with our suppliers. As well as with our direct suppliers, our relationship goes right back to the agricultural part of the supply chain. Our approach ranges from the Farmer and Grower Development Groups we work with, our global sourcing strategy across key raw materials, to the teams of agriculture, sustainability and nutrition experts specifically working on the sourcing and sustainability of the products we sell. We form partnerships with our suppliers that help them raise environmental and social standards, and move towards real sustainability across the whole of their business model. In practice, this means working with them to consider all the economic, environmental and social impacts of their activities.

Activities we undertake

– Sainsbury’s Farmer and Grower Development Groups

– Sustainability experts across functions

– International development groups

– Collaboration/partnerships with key organisations

– Regional buying team

– Over 150 colleagues work to bring over 12,500 different own-brand products to our business

– Global sourcing conferences held

– Our 20x20 Sustainability Plan embedded into business

– Technical Managers Academy

– Global sourcing strategy – across industry, geography and commodity

– Global sourcing tool

– Sustainability scorecard – New technology

Our 20x20 Sourcing with integrity commitments

In October 2011 we launched our 20x20 Sustainability Plan, featuring 20 ambitious commitments we intend to achieve by 2020. The targets which highlight our ongoing commitment to Sourcing with integrity are:

– By 2020, we’ll source all of our key raw materials and commodities sustainably to an independent standard

– By 2020, our own-brand products won’t contribute to global deforestation

– By 2020, all the fish we sell will be independently certified as sustainable and we’ll strengthen our position as the leading retailer for sustainable seafood

– By 2020, our sales of fairly-traded products will hit £1 billion

– By 2020, we’ll double the amount of British food we sell

– By 2020, all our meat, poultry, eggs, game and dairy products will be sourced from suppliers who adhere to

Sourcing with

integrity

– By 2020, our suppliers will also be leaders in meeting or exceeding our social and environmental standard British

We believe that developing strong, long-term partnerships with our British farmers and growers is key to achieving

sustainable and secure supply chains. We sell over 1,900 different British products in our own brand range and we will double the amount of British food we sell by 2020. We approach our commitment to doubling British food, through our ten farmer and grower Development Groups, our £1 million grant for research and development in British agriculture, as well as through bringing new British products to market. We achieve this through collaboration and a strong working relationship with our agriculture team, culminating in our annual Sainsbury’s Farming Conference, where 1,000 delegates hear about our strategic plans, with practical examples of how we are building partnerships, and of farmers sharing with farmers.

We focus on three key areas to achieve our commitment to British: promote British products where possible, convert more existing product lines to ones from Britain, and look to find new British products. Our achievements

– We were awarded RSPCA Good Business Awards 2012 – Retailer of the Year – the judges were impressed with our all round commitment to higher welfare food and good customer communication.

– We were also awarded RSPCA Good Business Awards 2012 – Engagement Award – we were honoured with the award for our potted meat product which was made with pork from pigs reared outdoors and inspected to the RSPCA’s higher welfare standards.

– Recognised by Compassion in World Farming awards for our leadership and innovation with our pig concept farm.

– The family that run our pig concept farm were winners of the Farmers Weekly Awards 2012 in the Pig Farmer of the Year Category.

– We’re the largest retailer of British apples and pears for the third season and we have doubled the size of our British asparagus market since 2007. The total for British-grown apples and pear varieties this season has risen to 64.

– All our Taste the Difference meat and poultry is British.

– In 2010, we became the first retailer to use only British flour in our own-brand sliced bread, matching what we do in our in-store bakeries. The wheat is grown by a group of 300 farmers in East Anglia, through the Camgrain co-operative, giving us a guaranteed traceable supply. Even through the bad weather this year, we have worked closely with our farmers.

– Many own-brand products are already entirely British all year round, including fresh chicken, eggs, milk, and sausages.

– All our milk in Scotland, Wales, Northern Ireland and the West Country comes from those regions.

– All Sainsbury’s British cheddar and territorial cheeses – Red Leicester, Double Gloucester, Lancashire, Cheshire – are produced in Great Britain, from British milk. Additionally, our Scottish stores stock Scottish cheddars produced in Scotland from Scottish milk, and all our Welsh stores stock Welsh cheddar produced in Wales from Welsh milk.

Retailer of the

Year –

RSPCA Good

Business Awards

2012

Farmer and Grower

Development Groups

By working with our

suppliers and farmers, both

in the UK and overseas,

including over 2,500 British

farmers and growers, our

Development Groups cover

beef, lamb, veal, pork, eggs,

chicken, milk, cheese, wheat

and produce.

Farmers involved in these groups chose four areas of focus: animal health and welfare, business improvement,

environment and energy, and collaborative working. They decide on the priority areas and identify major projects. To further support their work we announced a £1 million agricultural research and development grant to encourage them, along with associated organisations, to find projects to build towards our ambition to double the amount of British food we sell by 2020.

Dairy Development Group

Our industry-leading Dairy Development Group (SDDG) was set up in 2006 to help our dairy farmers reduce their costs by improving efficiency, and animal health and welfare, and by reducing their impact on the environment. We are committed to the long term sustainability of the dairy industry and work with farmers to build closer relationships with its supply chain and to overcome challenges.

Since 2006 our farmers have reduced inputs while increasing outputs to make

increased returns of £10.5 million. In 2011, they identified opportunities to increase returns by a further £10.4 million. We have invested over £30 million in developing these relationships since 2006, and in January 2010 we pledged a further £40 million over the subsequent three years, money that will go towards further improving herd health and welfare, raising management standards and reducing the impact on the environment.

For example, we have developed, with the Carbon Trust, a carbon footprint tool specially designed for dairy farming, which has the potential to reduce farmers’ energy costs and carbon footprint by 10 per cent a year. For herd health and husbandry we use an ‘outcome based’ system to ensure we focus on the cow’s health.

Dairy Cost of Production Model On 1 May 2012, we introduced a new, unique, Cost of Production (COP) model to reward our SDDG farmers for animal welfare and environmental standards. Following an overwhelming majority vote, our 343 SDDG farmers now benefit from the clearest and most rigorous model available. It was developed by independent consultants to suit all Sainsbury’s farm types and sizes, and ensure their sustainability and profitability in the long term. One of the unique elements of the COP is the quarterly review of the most volatile elements of costs: feed, fuel and fertiliser. It means the the price we pay to farmers changes to reflect these variable costs, ensuring a fair deal for all the farmers involved.

Farmer and Grower

Development Groups

In January 2010, we recruited 96 dairy farmers from Devon through Milk Link, to supply the milk we need for our own-brand block cheddar. We are the only retailer to have a set group of farmers to do this. All 96 farms have received support including fully funded milk recording, two funded local vet visits each year and an annual carbon assessment.

Egg Development Group

On 1 January 2012 we stopped selling own-brand products containing egg from caged hens (including those from enriched cages). This was at the same time as the EU Legislation banned the use of conventional cages and the industry moved to enriched colony cages. Through our Egg Development Group we ensured no disruption in supply of eggs in store for customers.

Beef & Lamb Development Group Our Beef and Lamb Development Groups are well-established and we are entering our third year of carbon assessments. We have hosted over 20 grassland workshops to promote the use of high sugar grasses to improve productivity and reduce carbon emissions. British Seed Houses have made grass seed mixes especially for us, which they offer to our Development Group farmers at a 10 per cent discount.

Crop Sustainability Group We launched our Crop Sustainability Groups at the end of 2009 as an extension to our well-established Crop Action Groups. While the Crop Action Groups focused solely on pesticides, the Crop Sustainability Groups look at a range of issues to identify the best environmental and economic practice in crop production. While our overall goal is to decrease and eliminate pesticide residues in the fresh produce we sell, we acknowledge pesticides are often an important part of producing crops sustainably and can also help to reduce waste.

Our Pesticide Policy encourages suppliers to minimise their use of pesticides and employ Integrated Crop Management (ICM) techniques. Our policy gives clear guidance as to the most appropriate choice of plant protection products for use on crops grown for Sainsbury’s.

New British producers Regional sourcing

Our buying teams, with offices in Scotland, Northern Ireland and England, continue to look for the best regional products from local suppliers.

In the last year, we have added hundreds of new lines to our ranges, and we now sell over 3,000 own-brand and branded regional products. This has helped

increase regional sales by over 15 per cent. We have plans to extend these ranges, especially in Wales and the south-west of England.

Norfolk Black chicken

Sainsbury's launched a world first with the Norfolk Black chicken in September 2012, a brand new breed for customers across the UK – free range and slow grown, to offer quality and flavour. Bred from two heritage breeds, the chicken has distinct black legs and feathers, with specks of bronze shading around the neck like a ruby necklace. Combining a corn-based diet and year around access to natural woodland, where the birds have extra perches and hay bales, produces a tender meat with a traditional full flavour. They come from the same farmers and suppliers that produce the festive favourite Taste the Difference Norfolk Black turkey. The farmers behind the development of Norfolk Black chicken won Poultry Farmer of the Year at 2012 Farmers Weekly awards.

Animal welfare

Global demand for meat has

grown dramatically in recent

years, and it is expected to

double again by 2050. We

share the concerns of many

people that some operations

have poor animal welfare

standards. Animal welfare is

important, principally for the

animal, but better

management and care for

livestock can improve

productivity and food

quality.

We have said that by 2020, all our meat, poultry, eggs, game and dairy produce will be sourced from suppliers who adhere to independent higher welfare standards. All our British farmers meet the Red Tractor Farm Assurance standard as part of supplying our own-brand meat, poultry, produce and dairy products.

Our achievements

– We were awarded RSPCA Good Business Awards 2012 – Retailer of the Year – the judges were impressed with our all round commitment to higher welfare food and good customer communication.

– We were also awarded RSPCA Good Business Awards 2012 – Engagement Award – we were honoured for our potted meat product which was made with pork from outdoor-reared pigs inspected to the RSPCA’s higher welfare standards.

– Recognised by Compassion in World Farming awards for our leadership and innovation with our ‘pig concept’ farm.

– In 2012 we became the first major retailer to move to eggs from cage-free hens in our ingredients. We are still the only major retailer to achieve this. This builds on our work in 2009, when more than two years ahead of Government legislation, we were the first major retailer to stop selling eggs from caged hens. We now sell 800 million eggs a year from cage-free hens.

– We were awarded (Best Volume Supermarket in 2010 and 2011 by Compassion in World Farming (CIWF)) based on our outstanding performance in all aspects of livestock production and our commitment to leadership,

innovation, transparency,

communications and performance.

– In March 2011, we made a commitment to the Humane Cosmetics Standard (HCS) which certifies that our cosmetics and toiletry products, and their ingredients, are free from animal testing.

– In 2011 we were awarded Best Calf Commendation in the Good Dairy category by CIWF for setting up an alternative supply chain for black and white bull calves, which go to Sainsbury’s beef supply chain.

Veal

Our veal is approved by Freedom Food and a full range is available in five of our London stores on counters and aisles. We also stock Taste the Difference veal burger in 50 stores.

We source the black and white bull calves directly from our Dairy Development Group farms and we’re currently working with our dairy farmers to increase the number of calves reared, so we can now serve 75 stores.

Our Dairy Development Group welfare standard prohibits the shooting of dairy bull calves and live export. The majority of bull calves are reared for beef on our Beef Farmer Development Group farms. Freedom Food

We are the UK’s largest retailer of

Freedom Food products in the UK, and sell over 60 per cent of all Freedom Food sold in the UK.

We sold over £380 million worth of Freedom Food products in the last year and sell 310 lines – the widest range of Freedom Food products.

Around 20 per cent of our fresh chicken sales are from Freedom Food birds, involving ten million birds reared to higher independent welfare standards.

Pig concept farm

Our pig concept farm is a partnership with a family-run, intensive

commercial business in East Yorkshire, which has bred and finished indoor pigs since 2009. It is unique, going beyond anything any other supermarket is doing. Funded by Sainsbury’s, the initiative is a long term project to test breeding, feeding and husbandry techniques and new and alternative ways of working, to continually improve the welfare of pigs.

We are currently testing alternative indoor farrowing systems to improve animal welfare, and to find a realistic solution to farrowing crates in commercial pig farming. The new farrowing system will allow breeding sows to give birth without

confinement so they can behave as they would when giving birth naturally. If this is successful, we will introduce it to other producers across the UK, improving the lives of millions of pigs.

This work has been recognised, as the family that runs the farm won the Farmers Weekly Awards 2012 in the Pig Farmer of the Year Category.

Sourcing sustainable

raw materials

Deforestation, overfishing, poor land management and increased energy use have all contributed to increasing stress on the global food system. Issues such as climate change, water scarcity and population growth have all had a significant impact on the long term security of supply. In a resource-stretched world, our challenge is to ensure we identify and address all social and environmental impacts along the supply chain, to ensure everything we sell is sustainable. By working with independent bodies, we can be held to account and use the highest standards that are available. We have said that by 2020, we’ll source all our key raw materials and commodities sustainably to an independent standard. We have now identified the top 30 raw materials in own brand products and are reviewing our sourcing plans.

Palm oil

The demand for palm oil is increasing, but palms cultivated in the wrong place can be a major contributor to deforestation and climate change.

We have said that all the palm oil we use in our own-brand products will be certified as sustainable by 2014.

– Over 50 own-brand products are made with physically-certified palm oil.

– Sainsbury’s is a member of the Round Table on Sustainable Palm Oil (RSPO)

– We adopted a leadership position on palm oil in 2002. After much effort to

introduce products made using sustainable palm oil, we launched the first food made with sustainable palm oil, in May 2008.

– We have developed our own label to inform customers where sustainable palm oil is used in products, rather than simply using only an umbrella term such as vegetable oil.

– We have established a tracker to identify the sources of palm oil in our products. This allows us to prioritise those

suppliers that are major users of palm oil, and to work with them to convert to using certified sustainable palm oil.

– In 2011/12, half of the total palm oil we used came from sustainable certified sources.

– We are a founding member of the Roundtable on Sustainable Palm Oil and continue to be involved in its working groups, to help shape the standard.

– We want full traceability of the palm oil we use in our products.

Soya

Soya is used to produce many everyday items, both directly in products such as soya milk and tofu, and indirectly through animal feed. In recent years, the rapid rise in demand for soya has meant that natural habitats in South America, such as rainforests and grasslands, are being cleared to make way for soya crops. We want to ensure the soya we use does not cause deforestation in places like the Amazon.

Sainsbury’s is committed to ensuring that the soya in our own-brand products is sourced sustainably and to an independent standard, well before 2020. We want full traceability of the soya we use in our products. We are a founding member of the Round Table on Responsible Soy (RTRS). The aim of the RTRS is to promote the responsible production of soya by working with all parts of the global supply chain, including growers, suppliers, manufacturers and retailers. Leather

Sainsbury’s is committed to ensuring that the leather in our own-brand products is sourced sustainably and to an independent standard by 2020. We want full traceability of the leather we use in our products. We have joined the British Leather Consortium and will be working with them to understand the traceability and sustainability issues relating to our leather sourcing.

Deforestation

contribution trees make to our planet and communities. Forests cover 30 per cent of the world’s total land area, but 13 million hectares of forest are lost every year through deforestation and degradation (according to United Nations Environment Programme, UNEP). Deforestation is responsible for around 20 per cent of global greenhouse gas emissions (UNEP). It causes irreversible damage to the natural habitat of many species vital for sustaining life on earth. Unsustainable logging practices and the destruction of forests for farming threaten to remove the earth’s natural breathing system. The challenge is not only to stop this damage, but also help to restore forest cover. We have said that by 2020, our own-brand products won’t contribute to global deforestation.

– We aim to be the leading ‘tree-friendly’ retailer, by planting new trees both at home and abroad, and by protecting and preserving existing forests.

– We will set up a research and development programme aiming to reduce our dependence on commodities sourced from regions at risk of

deforestation

– In 2011, Sainsbury’s was declared food and drug retailer sector leader by Forest Footprint Disclosure for the third consecutive year

– We have raised over £1.5 million to fund the planting of one million trees as part of the Jubilee Wood Project

– Through our link with Woodland Trust, we have funded the planting of 1.7 million trees from 2004 to November 2012. Timber and paper

Sainsbury’s is committed to ensuring that the timber in our own-brand products is sourced sustainably and to an independent standard by 2020, and to meeting EU Timber Regulation 995/2010, which outlines requirements for selling or importing timber products on the European market. We have a system to trace and verify the supply chains of all our products containing wood or paper.

– In 2011, 93 per cent of the wood used for Sainsbury’s products was made from Forest Stewardship Council (FSC) or recycled sources.

– Sainsbury’s is a member of WWF’s Forest and Trade Network and reports regularly and openly on progress.

Woodland Trust

In 2012, we became the main corporate sponsor for the Woodland Trust’s Jubilee Woods Project, which aims to plant six million native British trees to mark the Queen’s Diamond Jubilee.

We will be supporting the project, and raised £1.5 million for tree planting by:

– increasing the number of donations made from products in store by extending products to include cereals and everyday household items

– giving customers the opportunity to make a pledge in store to plant a tree to mark the Diamond Jubilee

– promoting it through our Active Kids scheme, to encourage schools to plant trees.

Sainsbury’s relationship with the Woodland Trust started in 2004, when we launched our own-brand Woodland Eggs, followed by chickens and turkeys. We sell 280 million Woodland eggs each year, 4.9 million Woodland chickens, and during Christmas alone, sold over 117,000 Woodland turkeys. The Woodland Trust is the UK’s leading charity championing native woods and trees, and has 300,000 members and supporters. It aims to create more native woods and places rich in trees, to protect native woods, and to inspire everyone to enjoy and value woods and trees. Established in 1972, it now has over 1,000 sites in its care, covering approximately 20,000 hectares (50,000 acres). Access to its sites is free.

Sainsbury’s woods

The Woodland Trust also plan to create a

Sainsbury’s Wood, within its flagship 460-acre Diamond Wood in Leicestershire. In total there will be 60 Diamond woods, each of at least 60 acres in size, created across the UK. Trees will be planted in Sainsbury’s Wood to mark the support of Sainsbury’s customers and colleagues, and it will be open for everyone to enjoy.

Toilet rolls

We announced a packaging change to our by Sainsbury's toilet rolls. We were the first company to make the move to reduce the diameter of the inner cardboard tube on every roll by 12mm, cutting the number of delivery lorries required by the equivalent of 140,000 kg of CO2. The

paper in Sainsbury’s toilet rolls has been 100 per cent FSC certified for many years, and the cardboard tube has also been certified since September 2011.

New on-pack information will help shoppers make more sustainable purchasing decisions, by reassuring them that there are the same number of sheets and the same quality in each roll, but it now uses less packaging, taking lorries off the road and saving space at home.

Fish

Increasing demand for fish,

and a lack of effective

management regimes, have

led to overfishing, leaving

many global fisheries in a

poor state, and fragile

ecosystems under threat of

collapse.

Certain fishing methods are seen as potentially damaging to the environment, either through physical contact with the seabed or by catching endangered or threatened species and juvenile fish as bycatch (the unwanted fish that are also caught). Healthy oceans are vital for the health of our planet and millions of livelihoods around the world. Sustainable fisheries are essential if the world is to retain its primary renewable source of protein. Protecting marine ecosystems is one of the major challenges facing our planet.

By 2020, all the fish we sell will be

independently certified as sustainable, and we’ll strengthen our position as the leading retailer for sustainable seafood.

– We launched Our future with fish report, produced by the Future Foundation, which was a major new study into fish consumption and attitudes in the UK. It shows a marked shift in consumer buying habits, as more and more people

purchase the lesser-known, alternative fish which are more abundant in our oceans.

– The new report predicts over half of all fish sold in the UK will be outside of the Big 5 species by 2030, and sales of lesser-known fish species such as pollack, sea bass, coley and tilapia are up by as much as 117 per cent year on year. We are the largest retailer of Marine Stewardship Council (MSC) certified sustainable fish in the UK for the third year running, with sales of £81 million.

– We sell over 120 products carrying the MSC logo, including on fish counters and in ready meals. We are also the biggest retailer of Freedom Food fish in the UK.

– All our own-brand canned tuna, including that in further processed foods (e.g. sandwiches, sushi and ready meals) is pole and line-caught.

– All our fresh cod and haddock is line-caught

Responsible sourcing

We have also recently received MSC certification for our Icelandic line-caught cod and haddock which means all our counters’ cod and haddock is MSC – a first for a major supermarket.

We were rated number one by Greenpeace for the responsible sourcing of canned tuna in 2012, 2011 and 2008.

We support the use of more selective fishing methods to minimise environmental impact and bycatch. New nets in the south-west of England have reduced unwanted bycatch by 50 per cent.

In 2008, we launched responsibly-sourced salmon, which is specially reared on RSPCA Freedom Food approved farms on the west coast and islands of Scotland. Our salmon feeds do not contain any artificial colourants, and only fish from well-managed sources are included in the diet. Supporting British inshore fisheries We are supporting a world first, Project Inshore, led by Seafish, the industry authority, which is mapping, for the first time, all inshore fisheries (predominantly under 10m vessels) and providing sustainability plans for each of them, helping secure seafood supplies from these traditional boats for this and future generations. Project Inshore is an effective way of providing English inshore fisheries with both long-term management plans and the opportunity to move toward MSC assessment.

Marine Conservation

Coupled with responsible fisheries management, we see marine protected areas as integral to the future wellbeing and diversity of global fish stocks and in maintaining areas of representative habitat. Sainsbury’s fully supports the identification and creation of an ecologically coherent network of marine protected areas in both UK and global waters when developed with full consultation of all stakeholders.

Switch the fish

We believe there is an urgent need to restore declining stocks of our most popular seafood, and to introduce long-term management plans for all fisheries. We launched an ambitious new campaign, Switch the Fish, as part of our work to encourage customers to rely not only on our most popular Big 5 species – cod, haddock, tuna, salmon and prawns, which account for 80 per cent of all fish purchases – but to widen their repertoire and choose alternative species.

The campaign began in June 2011 when, in a UK first, our customers wishing to buy one of the Big 5 were offered an alternative, lesser-known species free. Our fish counter staff served free portions of pouting, megrim, coley, mackerel and rainbow trout. We also took Switch the Fish on the road, with a six-stop regional tour. Throughout June and July last year, our mobile fish counter visited town centres and our stores up and down the country, to offer local residents cooked samples of alternative fish, to promote the sustainability issue. To give our customers the confidence to cook with these other species, we also gave out recipe tip cards. We sold an additional 46 tonnes of alternative fish species following the Switch the Fish campaign.

Fairly traded

We know first-hand how fair

trade initiatives can help

address many of the

challenges producers in the

developing world face:

ensuring they have fair

working conditions, a

sustainable price for their

produce and the tools and

skills to manage their farms

in harmony with nature. The

challenge is to ensure these

suppliers adapt to the impact

caused by climate change,

and build long-term

sustainable businesses that

can help create resilient

supply chains.

We have said that our sales

of fairly traded products will

hit £1 billion by 2020.

Sainsbury’s Fair Development Fund The Sainsbury’s Fair Development Fund (FDF), managed for Sainsbury’s by Comic Relief, invests in smallholder farmers and workers in the developing world. It aims to improve the livelihoods of farmers and workers by creating more efficient and transparent supply chains, building close relationships with suppliers and securing the sustainable supply of key raw

materials. Between 2007–2011, Sainsbury’s invested over £1 million to enable farmers across Africa, Asia and Central America to strengthen their businesses and build more secure futures for themselves, their families and their communities. To date, over 33,000 producers have benefited from the Fund. We are due to launch the next four years of funding in early 2013. In 2011, we commissioned an independent impact assessment with Comic Relief of the Sainsbury’s Fair Development Fund. There were three key benefits that Sainsbury’s involvement provided:

– A guaranteed route to market for

smallholder farmers who would otherwise struggle to supply a UK retailer

– Alongside the money, Sainsbury’s support gave them a greater

understanding of the supply chain and logistics

– Smallholder farmers gained the opportunity to develop agricultural and production knowledge and negotiation and lobbying skills

– Skills and capacity building Fairtrade

We always aim to provide great quality products. Where we offer only a Fairtrade option, we absorb the higher costs rather than increasing the price, so our

customers don’t pay extra.

– Sainsbury’s is the world’s largest Fairtrade retailer, with sales accounting for almost a quarter of the UK’s Fairtrade market.

– Since selling Fairtrade bananas only, we’ve given over £15 million to projects in the developing world

– We sold over £12 million of Fairtrade goods during Fairtrade Fortnight, up 11 per cent on last year.

– We had sales of over £288 million in the financial year 11/12, up 5 per cent on last year.

Supplier standards

We expect all our suppliers, no matter where in the world, to follow our Code of Conduct for Ethical Trade, which

incorporates the base code of the Ethical Trade Initiative (ETI). We set up our own code in 1998 (revised in 2011). Sainsbury’s code covers key principles including: providing a safe workplace, no use of forced or child labour, ensuring workers are not discriminated against or harassed and working towards paying workers a living wage. Our goal is to work with our suppliers, trade unions and other groups to improve working conditions in our supply chains and enable workers to realise their rights.

All our own-brand, branded and goods-not-for-resale suppliers are required to sign up to our Code of Conduct. Our ethical trade programme works with more than 700,000 workers in more than 60 countries at 2,900 food, general

merchandise and clothing sites to ensure we have visibility of working conditions and that we are managing any issues.

Product examples

Bananas – Since the end of July 2007, every banana sold in our stores has been Fairtrade. We were the first UK retailer to make this switch – a significant breakthrough for Fairtrade because of the volume of bananas our customers buy. We sell over 1,200 Fairtrade bananas a minute – 650 million a year – more than all the other major retailers combined.

Coffee, sugar and tea – All our own-brand roast and ground coffee, sugar and tea is Fairtrade. Sales of our own-brand tea in 2011 contributed £1.6 million in Fairtrade premiums to tea producers in developing countries.

Fairly traded

We recognise our responsibility to support the skills and development of our suppliers to ensure they can continue to operate efficiently and meet our requirements for quality, legality, safety and sustainability. We achieve this through continuous dialogue and knowledge sharing as well as newsletters, supplier conferences and working groups.

In addition, a formal training programme is provided to our suppliers through

Sainsbury’s Technical Management Academy® _{(TMA), established in 2006 in}

partnership with Campden BRI, a leader in food and drink research and training. Our technologists work with suppliers to identify where teams or individuals would benefit from training and the Academy provides a modular approach to tailor this to their needs.

The TMA’s vision is to ensure that Sainsbury’s has the best technical management teams at our Own Brand suppliers. The workshops offered as part of the TMA have evolved since 2006 to meet the ongoing training needs of the technical management team at our suppliers. The TMA now covers an

additional five workshops since the original three launched in 2006.

To recognise the importance of the integrity of our products with respect to allergen controls, we launched the industry leading allergen management TMA

workshop in 2011.

In 2012 we have added two new workshops, the Ethical Trade Workshop and the Product Safety Workshops. The Product Safety workshop has run across eight categories in 2012, with each one providing a focused session for suppliers within an individual category. The workshop covers the product safety risks applicable to their area and the methods of control and monitoring required, therefore managing the risk effectively to produce a Sainsbury’s product safely.

To ensure that Sainsbury’s products are the very best they can be, in 2012 we are running an ambitious programme of supplier training on quality management. These interactive training sessions reinforce the quality management and sensory appraisal systems required to identify and control the critical quality

points within a product and manufacturing process. This locks down the quality of a product so that it consistently achieves the standards expected by our customers every time it is manufactured. In 2012 we will have run 37 workshops training over 395 supplier representatives, from over 255 supplying sites.

For 2013 we will be continuing the focus on quality as well as reviewing the ongoing training needs of our suppliers to support our 20x20 targets and the technical challenges of the future.

Ethical Trade Training and Development We recognise our responsibility to support suppliers to achieve our 20x20 targets. We achieve this through training, continuous dialogue and knowledge sharing as well as newsletters, supplier conferences and working groups.

We train our colleagues to understand the importance of trading ethically and to be able to identify working conditions issues on visits. We have a number of “Ethical Champions” in the business and these individuals are also trained to be lead ethical auditors and to pass that training on to their colleagues. All our suppliers’ technical staff receive an initial short introduction to ethical trade through our Technical Management Academy (TMA), established in 2006 in partnership with Campden BRI, a leader in food and drink research and training. 72 supplier

technical managers were trained in ethical trade issues as part of our standard Ethical Trade TMA.

We also run a day-long Supplier Ethical Trade Technical Management Academy which our key suppliers attend in order to understand our ethical trade requirements and develop their own ethical trade strategy for their suppliers, growers and labour providers.

In 2011-12, we trained over 180 colleagues and 300 suppliers on ethical trade

delivering close to 1,500 hours of training. We also ran supplier workshops on ethical trade for suppliers in Kenya, South Africa, China, Hong Kong, Pakistan and

Bangladesh.

Supplier

monitoring and

tracking

We require all our direct own-brand production sites to be registered on the Supplier Ethical Data Exchange (SEDEX) or the Global Supply Chain Compliance system (GSCC). All these sites share with us basic information about working conditions and each site is risk assessed using independent information provided by companies such as Maplecroft and SEDEX.

Our high and medium risk sites have to share independent, third party ethical audits with us, including all our general merchandise and clothing factories in Asia.

The results of these ethical audits are monitored by our ethical trade and sustainability staff in our offices in the UK, Hong Kong, Dong Guan, Shanghai, Bangladesh, Kenya and South Africa. Our technical teams across the world work with suppliers to resolve issues identified by the audits. This programme is

supplemented by shadow audits, NGO audits and forensic audits in areas of greatest risk. In the last four years, more than 5,600 independent, third party ethical audits have been conducted on our direct suppliers and on their suppliers.

Fairly traded

Sainsbury’s own brand colleagues have undertaken the following trainings:

– 23 – Basic ET training

– 33 – Agency and Migrant Worker Training

– 36 – Advanced ET training

– Three issue-specific training sessions will be rolled out to the own brand team from September to December 2012, with follow-up sessions planned for early 2013.

Ethical Projects

We recognise that we cannot

improve working conditions

in our supply chains on our

own. A number of

organisations are key to

helping us understand the

issues we face and improve

conditions. This year we

have worked with Oxfam,

the Equality and Human

Rights Commission,

Department for International

Development (DfID) RAGS

and DfID FRICH Impactt,

Aspiration Exchange, Ergon,

Acona, Traidcraft and

Business Social

Responsibility, on projects

including:

DfID FRICH

Sainsbury’s has received match-funded grants from the Department for

International Development for two projects under the ‘Food Retail Industry Challenge Fund’, which aims to support African farmers through innovative business partnerships. Two supplier collaborated projects will have a massive impact on growers and workers in the DRC and Kenya, as well as helping us hit some 2020 targets!

Coffee in the Democratic Republic of Congo – partners Twin and Finlays Before Sainsbury’s (along with partners Twin and Finlays) started working with the SOPACDI coffee cooperative in the Democratic Republic of Congo, the high quality coffee produced in this area was poorly prepared and then either smuggled or sold by farmers to middle men who paid as little as 20% of market price of the coffee to the farmers. It was estimated that an average of 1,000 coffee farmers lost their lives every year trying to smuggle their coffee to Rwanda. However, the previous round of FRICH funding allowed us to undertake activities which strengthened the cooperative structure and provide access to market – with SOPACDI coffee being used in blends and even a single origin product. This follow-on 2012/13 project will see coffee quality improved through the building of a coffee

laboratory and micro processing stations – all of which mean the farmers can start to trade from a strengthened position. Flowers in Kenya – partners Superflora and various flower farms

The export of flowers and vegetables is now, alongside tourism, Kenya’s major foreign exchange earner, reportedly bringing in over USD 1 billion in 2008. Project activities will focus on improving water efficiencies during production, developing smallholder-specific flower production and capacity building workers on farms to improve productivity and worker satisfaction. A particularly innovative part of the project will see a new collaboration with an international initiative focused on improving women workers’ health education and provision. Sainsbury’s Fair Development Fund pilot projects

Two additional pilot projects before the launch of the revitalised Sainsbury’s Fair Development Fund are detailed below: Vegetables in Kenya – partners Wealmoor and KHE

The project aims to develop and enable the implementation of sustainable production practices amongst smallholder farmers who are not yet exporting to Europe through five key routes:

– Improved structure and governance

– Increased agronomic skills and

knowledge of sustainability/certification standards

– Financial stability

– Access to and improved local and international trading relationships Creation of three or four model farms

which will showcase best agricultural practice for other growers to benefit from – initially in the same product sector, but with the possibility of expanding to other products and countries.

Tea in Malawi – partners Keith Spicer, Harris Tea and Lujeri

The Lujeri tea estate is surrounded by a large number of outgrowers, who are disadvantaged by old tea bush stock and a lack of training. They therefore struggle to access international markets due to poor quality, low yields and ability to negotiate effectively – all of which impacts on their businesses and subsequently livelihoods. To address this, the project aims to set up a tea plant nursery which will – in the long term – be owned and managed by the

Ethical Projects

tea plants, coupled with training in areas such as effective husbandry and sustainable practices.

Overall, the project will be delivering the following key work streams:

– Quality crop development and management (nursery)

– Access to improved crop

– Training, skills and knowledge sharing

– Increased access to international markets and stronger, more transparent trading relationships

In total, £268,435 of Sainsbury’s cash has been committed from July 2012-Dec 2013 on DfID FRICH and pilot Sainsbury’s Fair Development Fund projects.

Moroccan strawberries

In October 2012, Sainsbury’s became involved in a cross-stakeholder project focused on improving the working conditions of primarily female workers on strawberry farms in Morocco, following a report highlighting a number of issues. Collaborating with other project partners Oxfam, suppliers, Moroccan Berry Associations and UK retailers, we have participated in workshops, developed a joint future activity plan and engaged with growers and workers on farms. Sainsbury’s is committed to playing its part in the project over the coming years, with the aim of securing long-term positive change in the working lives of Moroccan

strawberry workers. Other Food projects

We continue to work collaboratively with the ETI and other retailers on key supply chain issues in the UK and overseas. This year we have actively participated in the Equality and Human Rights Commission Meat and Poultry Processing Task Force in collaboration with other retailers, key suppliers, trade unions and industry bodies to improve working conditions in the meat and poultry processing sectors. We also continue to work closely with the Gangmasters Licensing Authority to ensure the welfare of agency workers in our supply chains.