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Corporate Social ResponsibilityReview 2001/02

The Tesco Corporate Social ResponsibilityReview 2001/02

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Introduction

By Terry LeahyTesco Chief Executive.

Profile and Scope

The principal activity of Tesco is theoperation of food stores andassociated activities in the UK.

Executive Summary

Outline of our key achievementsand our approach to CSR.

Vision and Strategy

Our Corporate Social Responsibilitypolicy objective is to earn the trustof our customers by actingresponsibly in the communities weserve.

Policies

We aim to set robust CSR policiesbacked by a comprehensiveprogramme. We have divided ourpolicies into three sections -Economic, Social and Environment.

Management System

The ‘Steering Wheel’ lies at theheart of the company’s businessplanning strategy.

Performance

Each year, the Corporate SocialResponsibility steering group setsKey Performance Indicators (KPIs)for the key areas where Tesco hasan impact.

Case Studies

Examples of the many successfulCSR initiatives Tesco ran in2001/02.

ContentsWelcome to ‘Every Little Helps’ the review of our business’sachievements in the UK in the area of Corporate SocialResponsibility (CSR).

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Introductionby Chief Executive Terry LeahySection 1

Welcome to the review of our business’sachievements in the UK in the area ofCorporate Social Responsibility (CSR). TheReview sets out our approach to CSR andhow we implement it in practical ways,drawing on the strengths of our business.

Our Core Purpose and Values define the way we do business. This creates the cultureand environment in which all four parts of our strategy continue to deliver strongresults, and define our responsibilities to our customers and employees, and to thecommunities where we operate. The four parts of our strategy, strong UK corebusiness, non-food, retailing services and international, are delivered through the TescoSteering Wheel, our business planning tool which sets our objectives each year.

Corporate social responsibility reflects our Values - ‘treating people how we like tobe treated’.

As such, we recognise our responsibility to communities and to the environmentwherever we operate. Our philosophy of ‘Every Little Helps’ underpins these wide-ranging responsibilities – we recognise that we cannot change the world, but we can doour bit and so play our part.

We strive to attract and retain the best people to work for us by offering support anddevelopment, reflecting another one of our Values, ‘look after our people so theycan look after our customers’. This lies at the heart of our business strategy.


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The principles of sustainable development are in keeping with our policy, serving thepresent needs of our customers, employees and communities without compromising theneeds of future generations. We endeavour to achieve the highest standards in order toensure long-term access to quality produce and to maintain our position as the UK’sNo.1 supermarket.

Corporate Social Responsibility makes sound business sense. The key to our approachis our integrated business system, where environmental and social performance ismanaged alongside financial performance. This means we have a year on yearprogramme of focused action to drive improvement.

The information in this, our first CSR Review, is an important part of our commitmentto Corporate Social Responsibility. It illustrates the steps Tesco takes to contribute tothe communities we serve, whilst outlining some of the achievements we have madethrough our CSR programme during 2001/02. I hope you will find it informative and wewould welcome your feedback on the Review.

Terry LeahyChief Executive, Tesco PLC

Feedback

We welcome your feedback on the Review. Feedback is used to improve howwe communicate and what we do each year. We are particularly interested tohear your views on how easy it is to use, clarity, content, and on ourprogramme.

If you would like to make any comments please send them by email to:[email protected], or write to the Corporate Social Responsibility Department,Tesco, Tesco House, PO Box 44, Delamare Road, Cheshunt, Herts, EN8 9SL.


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A review of the business is contained in theAnnual Review and Summary Financial Statement2002, published separately. Tesco has 729 storesin the UK. The group operates in 10 countrieswith a total of over 979 stores internationally. Weemploy 260,000 people, serving a population of60 million in the UK and a total population of 280million internationally.

During the last five years, we have expandedfrom our traditional UK supermarket base intonew countries and into new products and services,including Tesco Personal Finance and Tesco.com -the world’s leading online grocer.

Business Strategy

Tesco has a rolling 5 year businessplan. Our long-term growth strategyhas four elements:

• Strong UK core business

Our UK business is based on our obsession ofgetting it right for customers. We continue to offergreat value, bring new innovations and growmarket share.

• Non-food

We are extending our brand into non-food. Wenow have over 4% market share and aredeveloping a good one stop shop for customers.

• Retailing services

Retailing services are a great opportunity for us tobring new services to the customer. We havedeveloped the best grocery home shoppingsystem for the customer and Tesco PersonalFinance offers great products at good prices.

• International

Our strategy of building an international businessof scale continues to gain momentum. We have

made good progress in all markets and nowoperate 102 overseas hypermarkets. We are ontrack to have the same overseas as in the UK in2003.

Tesco Annual results for the UKbusiness for the 52 weeksending 23 February 2002UK Figures

• UK sales up 9.1% to £21.7 billion.• UK operating profit up 10.3% to £1.23 billion,

pre-tax.• Tesco is the largest private sector employer in

the UK, employing 195,000 people in the UK.

We estimate that we probably pay somewhere inthe region of 50% of our profit in various directand indirect taxes, such as corporation tax, rates,National Insurance contributions and climatechange levy. Our business activities, includingbeing the largest private employer in the UK,mean we are a major contributor to the UKeconomy at a national and local level.

ScopeThe Tesco CSR Review for 2001/02covers the UK business - thisrepresents over 85%* of ourbusiness to date. Our internationalbusiness operations will be featuredin future Reviews, as we develop.

Our CSR policies outlined here apply to the UKbusiness and supply chain unless otherwisestated. * The UK business represents 85% of the Group’s turnover

and employs 75% of our staff.

Profile and ScopeSection 2Principal Activity and Business ReviewThe principal activity of Tesco is the operation of food stores and associatedactivities in the UK, Republic of Ireland, France, Hungary, Poland, CzechRepublic, Slovak Republic, Thailand, South Korea and Taiwan.


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Executive SummarySection 3The Corporate Social Responsibility Review 2001/02, outlines the keyachievements of the UK business in the financial year ending 23 February2002. It has been produced to give further detail than that already containedin the Annual Report 2001/02.

For the full set of financial results please see ourAnnual Report 2001/02. This contains detailedinformation on the company’s performance.

The review was written with reference to theGlobal Reporting Initiative (GRI), DEFRA (UKDepartment of Environment, Food and RuralAffairs) Environmental Reporting Guidelines, andwith consideration to the Association of BritishInsurers (ABI) Guidelines on Disclosure of SocialResponsibility.

Our CSR strategy is to earn the trust of ourcustomers by acting responsibly in thecommunities where we operate, by maximisingthe benefits we bring and working to minimiseany negative impacts. We deliver this through aprogramme of practical community based andcustomer focused activity, which we monitor andevaluate annually. CSR is a win-win for ourbusiness and the communities where we operate– we aim to have a positive impact on society. Bybuilding good will and trust with our customers wecan earn their lifetime loyalty – our core purpose.

The CSR Group, a cross functional team fromacross the business, sets annual Key PerformanceIndicators to drive improvement to help usachieve our goals. We listen to all ourstakeholders and try to take into account thecomments they have about our activities. Wetrack public attitudes to Tesco and benchmark ourperformance against that of our competitors. Weactively seek dialogue with our customers andstaff through a daily schedule of customerquestion times and staff panels at local storelevel. Their feedback helps us focus on and deliverwhat customers want and understand better theirexpectations of us.

Our CSR strategy is backed up by a clearprogramme of practical activity.

See pgs 18-20 for the Summary Table of our performance

in 2001/02

Highlights

Our key environmental achievements in2001/02 were:

• Further improvement in energy efficiency - saving over £8 million and offsetting the cost ofthe climate change levy, introduced last year.

• UK Emissions Trading Scheme – Tesco was one of only 43 blue chip companies to actively participate in the scheme. We have voluntarily committed ourselves to save over 74,000 tonnes of greenhouse gases over 5 years. The money saved - £3.9 million, will be reinvested in further energy saving initiatives.

• Reducing water use in store by 10%, trial on collecting and reusing rainwater in Pontypridd and Bridgend stores to conserve water and reduce costs.

• Continued improvement in recycling of secondary packaging waste – saving the equivalent of 1.2 million trees and significant landfill charges and packaging waste costs.

• Continued roll out of improved merchandising systems in store – 4% increase in the use of reusable green trays for sending products into stores, replacing the equivalent of 46,000 tonnes of cardboard.

• Launch of customer focused recycling programme – mobile phones, Christmas cards and carrier bags were added to the existing store recycling facilities of paper and glass.


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• Launch of biodegradable packaging trial on organic fruit to reduce waste and respond to customer concerns over packaging on organic produce.

• Biggest organic foods retailer in the UK with the launch of a range of over 1000 products. Announced £1 billion sales target for organic products by 2006.

Our key achievements in the communitywere:

• Most successful year for Computers for Schools in its 10th year, having donated over £70 million worth of ICT equipment over 10 years. Record number of participating schools in 2001 - 66% of UK schools now participate in the scheme.

• Through staff fund raising and Tesco Charity Trust we raised over £2 million for Alzheimer’s Society and Alzheimer Scotland Action on Dementia, who together were our Charity of the Year 2001.

• Maintained our membership of the BITC PerCent Club, donating more than 1% of our pre-tax profits - over £12 million to good causes.

• Opened a further two regeneration stores – in Dragonville, Co Durham and St Rollox, Glasgowfollowing Leeds Seacroft last year. The two schemes created a total of 1,050 new jobs of which 371 new deal or long term unemployed local people were given training.

• Launched the Tesco Teaching Masterclass programme at Harper Adams for undergraduates, farmers and producers.

• Over 7000 regional food products stocked in local stores.

Our key achievements as an employer were:

• Talent Spotting - 800 members of staff promoted into managerial positions.

• Diversity - attracting people from different backgrounds; school leavers, graduates, postgraduates, returners and mature people, eg. one in four of our employees are over 50.

• Recruitment - launched Tesco Careers website in 2001 - the UK’s biggest retailing careers website - to attract the best people to work for our business.

• 59,000 people transferred to a defined benefits pension scheme this year.

Recognition of our achievements 2001/02:

• Business in the Community (BITC) Impact Endorsement Award for Computers for Schools.

• Financial Times BITC ‘Programme Impact Award’ for Innovation for Leeds Seacroft Regeneration Partnership.

• 5 awards for the St Rollox, Glasgow Regeneration Scheme.

• 3 awards at Recruitment Advertising Awards, including the overall winner.

• At the New York Film Festival, Tesco won a Gold Award for our Pensions Video under the Worldwide Corporate Film category.

• Constituent of the FTSE4Good Index.• Featured in the 2001 Business in the

Environment 6th Annual Survey, ranked 2nd in sector, 22nd in the FTSE100 and 36th overall.


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Vision and StrategySection 4Our Corporate Social Responsibility policy objective is to earn the trust of ourcustomers by acting responsibly in the communities we serve. This meansrecognising our impact on society at all levels and working to maximise thebenefits we bring, whilst minimising the impacts.

Our Core Purpose and ValuesOur Core Purpose and Values definethe way we do business, how wetreat our customers, our people, eachother and our suppliers. They help todefine our responsibility to thecommunities where our businessoperates.

All aspects of the Tesco strategy reflect ourCore Purpose:

“To create value for customers to earn their lifetime loyalty”

The way we do things at Tesco is defined byour Values:

No one tries harder for customers:

• Understand customers better than anyone• Be energetic, be innovative, and be first for

customers• Use our strengths to deliver unbeatable value to

our customers• Look after our people so they can look after our

customers

Treat people how we like to be treated:

• All retailers, there's one team...The Tesco Team• Trust and respect each other• Strive to do our very best• Give support to each other and praise more

than criticise• Ask more than tell and share knowledge so that

it can be used• Enjoy work, celebrate success and learn from

experience

Sustainable DevelopmentThe principles of SustainableDevelopment fit with our policy,serving the present needs of ourcustomers, employees andcommunities, without compromisingthe needs of future generations.

We strive to achieve the highest standards inorder to ensure long-term access to qualityproduce and to maintain our position as the UK'snumber one supermarket.

Corporate Social Responsibility makes soundbusiness sense. The key to our approach is ourintegrated business system where environmentaland social performance is managed alongsidefinancial performance - sustainability in action. Anexample of this is our commitment to the MarineStewardship Council (MSC), set up by the WorldWildlife Fund (WWF) to investigate ways toconserve fish stocks throughout the oceans of theworld.

Tesco is a member of the WWF95+ Group who arecommitted to finding ways of conserving theworld's forests by sourcing from well managedsustainable forests.

The Tesco approach to Sustainable Developmentin developing new stores focuses on ourconstruction techniques, materials and processes.Examples of this include significant reductions inthe quantity of steelwork and concrete in theconstruction of our latest concept stores and thereplacement of traditional brickwork andblockwork with composite sandwich panels. Bothof these have dramatically reduced the amount ofembodied energy used in the construction of ourstores and also represent our overall approach tostore design, minimising the capital costs at thesame time as ensuring the business developsusing sustainable methods of construction.


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PoliciesSection 5The CSR strategy corresponds with the Tesco Core Purpose and Values. Weaim to set robust policies backed by a comprehensive programme and tocommunicate these effectively.

We have a key accountabilities matrix which setsout the respective responsibilities of thedepartments and Directors for each area.

We have divided our policies into three sections,Economic, Social and Environment in accordancewith GRI Guidelines. Although we have dividedour CSR policies into these categories, many ofthem, such as regeneration, straddle all threeareas.

Economic PoliciesSection 5.1Corporate Governance and RiskManagement Tesco is committed to high standardsof corporate governance. To read thefull statement of 'Application ofPrinciples of the Combined Code'please go to pages 7-9 of the TescoAnnual Report and FinancialStatements 2002.

In the UK, Tesco has established a cross-functional Corporate Social Responsibility Groupunder the Chairmanship of the Group CorporateAffairs Director to discuss key and emergingissues, monitor and track progress against targetsand implement plans. The objective is to protectand promote the brand and consideration of riskis an integral part of the CSR Group’s function.The Chairman reports annually to the ExecutiveBoard on strategy, and quarterly with the rest ofthe business on progress towards achieving theCSR key performance indicators (KPIs).Environmental, social and ethical issues areincorporated into risk analysis at each level.

Business EthicsTesco is committed to conductingbusiness in an ethical and sociallyresponsible manner.

This relates to all aspects of our business, treatingemployees, customers, suppliers and shareholdersin a fair and honest manner and ensuring thatthere are constant and open channels ofcommunication. This is in keeping with our Valuesof ‘treating people like we like to be treated’and ‘trust and respect each other’.

Tesco has a Code of Ethics for its staff whichincludes a policy on the receipt of gifts. Tesco hasa confidential telephone helpline. It is for anyonewho wishes to raise concerns relating to allegedcriminal offences, failure to comply with legalobligations, miscarriages of justice, health andsafety issues, damage to the environment andconcealment of any of these issues.

Political and CharitableDonationsContributions to community projectsand to charity, including gifts in kind,amounted to £8,983,000.

Tesco does not make political contributions.During the year 2001, the Group madecontributions of £3,200 spread equally in the formof sponsorship for events at political conferences.


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DTI Code of ConductThe Department of Trade andIndustry introduced a Code ofConduct regulating tradingrelationships between the fourlargest UK supermarkets and theirsuppliers in 2001.

Tesco already abides by the key principles of theCode and has always made it clear that it fullysupports it. Our Buying Teams have been trainedin accordance with the Code of Conduct, and thiswill be reviewed annually in line with DTIrequirements.

See pg 23 for an explanation of how our Supply ChainWorks.

RegenerationOur regeneration schemes aim tobring together public services,employers and community groups toyield social, economic andenvironmental change in deprivedurban areas.

They are based around the development of a newstore to serve the local community. By investingin these areas we hope to attract other companiesto invest there too, thus bringing improvements ineconomic prosperity. In the last two and a halfyears, Tesco has forged 13 regenerationpartnerships to deliver practical support creatingbetter places to live and work and real prospectsfor a secure economic future.

See pg 24 for Regeneration case study.

AgricultureAs the biggest customer indirectly ofUK agriculture, Tesco has a longstanding commitment to source asmuch UK produce as possible whereavailability and quality permit.

We actively promote it to customers through clearand honest labelling, including using the British,Welsh and Scottish flags and by stocking over7,000 regional lines in local stores.

Our announcement to grow the organic market to£1 billion of sales by 2006 included a challengefor UK farmers to help us meet the target byproducing more organic produce. We are workingwith the NFU to see how this can be donepractically.

We have a commitment to open and transparentcommunication with producers and suppliers andactively seek opportunities to share knowledgeand improve transparency within the SupplyChain. We encourage the two way flow ofinformation within the Supply Chain, for examplethrough our suppliers’ producer club meetings. Weare committed to dialogue with representativefarming groups.

As part of our commitment to UK agriculture, wehave a policy of investing in agricultural researchthat supports the future of the UK food andfarming industry and creates value for ourcustomers.

See pg 23 for Communication in the Supply Chain casestudy, pg 22 for Tesco Centre for Organic Agriculture casestudy and for the FAI, our Animal Welfare initiative casestudy.


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Social PoliciesSection 5.2PeopleWe depend on the skills andcommitment of our people. Staff atevery level are encouraged to maketheir fullest possible contribution toTesco success.

A key business priority is to serve customersbetter. Ongoing training programmes seek toensure that employees understand the Group’scustomer service objectives and strive to achievethem.

The Group’s selection, training, development andpromotion policies ensure equal opportunities forall employees regardless of gender, sexualorientation, marital status, race, age, colour,ethnic origin or disability. All decisions are basedon merit. Employees are encouraged to becomeinvolved in the financial performance of the Groupthrough a variety of market leading schemes,principally the Tesco employee profit-sharingscheme, the savings related option scheme, SaveAs You Earn, SAYE, and the partnership shareplan, Buy As You Earn, BAYE.

To attract and retain the best staff and supportthe Group objectives Tesco is committed to payingamongst the best rates of pay for store staff. Allstaff are entitled to the same benefits, includingpensions, staff discounts, profit sharing, flexibleretirement, career breaks and parental leave.

Above all, our commitment to live the Values -treating people how we like to be treated, working

together as one team, and looking after ourpeople - are what make the difference.

Go to pg 25 for Living the Tesco Values case study.

Training and DevelopmentWe recognise that our staff are ourbest asset. We provide opportunitiesfor all members of staff to developtheir talents to the full, aiming tomake Tesco an enjoyable andsatisfactory place to work.

Tesco is committed to the education anddevelopment of its staff. We aim to create aculture of lifelong learning, driven by a trainingand development programme to help our peopleachieve their potential. ‘Talent spotting’ has beenintroduced to ensure that all our people are giventhe opportunity to develop within their existingrole and are given realistic prospects forpromotion on merit.

Go to pg 24 for the Life-long learning case study.

DiversityTesco aims to manage people openly,honestly and fairly.

We aim to employ people who reflect the diversenature of society and we value people and theircontribution irrespective of age, sex, disability,sexual orientation, race, colour, religion or ethnicorigin.

Tesco has a policy of recruiting and retaining thebest people to help the business grow for thefuture. We are a broad church recruiting peoplefrom different backgrounds and countries as theybring new ideas and innovation to the company.

We have four recruitment campaigns – the young,aiming to recruit school leavers and students.Graduates - we are the biggest graduate recruiterin the country, and we have recently expanded


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into post-graduate recruitment, being the firstcompany to have introduced an MBA graduateprogramme. The mature market – we aim torecruit mature workers, for example 1 in 4 of ourstaff are over 50.

Four out of five applicants for jobs at Tesco areour customers. This helps us in our aim for ourstaff to be representative of the diverse mix ofthe local communities where we operate.

We aim to understand what potential employeeswant from work.

Go to pg 25 for the Recruitment case study.

Pensions PolicyWe seek to give our employees thecertainty and security for theirretirement that they deserve, whilsttrying to protect the group and itsshareholders from open-endedliabilities.

To this end, and in stark contrast to many otheremployers, in the last year we have moved59,000 employees who were on a definedcontribution scheme onto a defined benefitsscheme. This scheme is based on career averageearnings, rather than final salary, so that eachyear, our people know exactly when their pensionwill be, and the company knows what liability ithas to fund. In this way, we believe we offer anindustry leading benefit to our employees, whilstallowing us to mange the groups exposure.

Performance RelatedRemunerationSenior managers are rewardedthrough a performance related bonusscheme.

Managers only receive bonuses where thecompany has met its targets for the year. Bonusesare based on a sliding scale according to the levelof achievement on the corporate steering wheel.At the end of each year, every KPI in the SteeringWheel is reviewed to determine whether thebusiness has met its objectives, and this shapesthe level of remuneration for senior management.

The CSR KPIs form part of the operationssegment of the Steering Wheel.

Workplace health, safety andwelfareA safe place of work goes beyondlegal requirements: it is aboutproviding a safe workingenvironment for our people and ourcustomers. Good health and safety isgood business.

The commitment to health and safety comes fromthe Board through our Health and Safety Policy,and they review the performance of the businesson a regular basis.

Achieving our goals depends upon all our peopleworking together. Managing health and safetysuccessfully demands investment in our peoplethrough training, support and setting standards.

We strive to ensure that health and safety is fullyintegrated into the way we work. With over195,000 staff and 12 million customers visitingour stores every week we take safety veryseriously. To achieve our goals we constantlyreview how we are performing and seekimprovements in the way we work to ensure theshopping and working environment is right for ourpeople and our customers.

Supply Chain Labour StandardsThe welfare and safety of theemployees of our suppliers isimportant. We expect all Tescosuppliers to extend fair and honestdealings to their employees and to allwhom they do business with.

It is our aim to act responsibly in our commercialand trading activities. We cannot claim to have allthe answers to complex ethical or social issues.We aim to be good citizens, acting responsiblywhere ever we operate, and we will endeavour tomeet our customers' expectations.


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Ethical Trading Initiative (ETI)

Tesco has been a member of the ETI since it wasfounded in 1998. We are committed to ensuringthat the principles of the ETI Base Code on workerwelfare are followed throughout our UK supplychain for our own Tesco brand products. Managingstandards across our large and complex ownbrand supplier base is a challenge, but Tesco iscommitted to working with our suppliers tomaintain, develop and improve standards.

Go to pg 23 for the Supply Chain Standards case study.

CommunityIn recognition of the importance of our role in thecommunities where we operate, we are committedto sponsoring community based projects thatbring practical benefit to local communities.

We support projects and initiatives which benefitchildren, education, people with disabilities andthe elderly in areas local to Tesco stores. We aimto be a member of the BITC PerCent Club, giving1% of pre-tax profits to good causes.

CharityTesco Charity Trust

The Tesco Charity Trust was set up in 1987. TheTrust aims to help local and national charities, aswell as voluntary organisations to providepractical support for children, the elderly andpeople with disabilities. Donations from the TescoCharity Trust are given to registered charities ororganisations recognised by the Inland Revenueas having charitable status.

Tesco Charity of the Year

Each year, Tesco adopts a national charity with astrong community network to be the main focusfor staff fundraising activities.

Go to pg 24 for the Charity of the Year case study.

EducationAs one of the UK’s leadingcompanies, Tesco believes it has aresponsibility to contribute to thecapabilities of tomorrow’s workforce.

By working in partnership with education, Tescoaims to build its local community reputation whilemaking a real contribution to young people’slearning and development. This is bestdemonstrated through our award winningComputers For Schools scheme, now in its 11thyear.

Go to pg 21 for the Computers for Schools case study.

Healthy Living The Tesco Healthy Living projectsupports a growing desire amongstour customers to lead a healthierlifestyle.

We aim to create the best Healthy Living productrange so that we are the retailer customers trustto meet all their Healthy Living needs. We willpromote ‘Healthy Living for all’, ensuring that ahealthy lifestyle is accessible, affordable andappeals to all our customers. We will talk to ourcustomers and staff about healthy living - throughinformation, education and promotion in-store,and via events such as Race for Life.

Go to pg 26 for the Healthy Living case study.


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Tesco Environment PolicyTesco aims to apply the principle ofsustainable development, meetingthe needs of the present withoutcompromising future generations:

• Tesco, its directors, officers and employees will at all times comply with all applicable laws and regulations relating to the environment.

• We will develop, maintain and implement policies, procedures and management systems to assess and monitor, on a continuous basis, the environmental impact of our operations. Wewill set targets annually in order to achieve continuous improvement.All senior management shall be responsible for ensuring compliance with the Tesco policy including the establishment of programmes and reporting requirements throughout their organisation.

• We will incorporate in our environmental practices the best available technology that is economically achievable.We will minimise the use of all materials and energy and not use any materials derived from endangered species.We aim to apply the principles of reduction, reuse and recycling to the management of our products and their packaging.

• This policy applies to our UK business and we are working to adopt these principles throughout our international business operations as we grow.

• We will communicate regularly with our stakeholders, including shareholders, staff, and customers, on matters of environmental policy and practices.

• Tesco is committed to reporting on its environmental performance through our web site.

Climate ChangeTesco fully supports the UKGovernment’s commitments to theKyoto protocol on climate change.

Tesco is committed to reducing its energyconsumption and emissions of greenhouse gasesresponsible for climate change. We welcome theGovernment’s initiatives to develop the renewableenergy industry, and are actively looking at thepossibility of using energy from these sources.

We recognise that climate change will have aneffect on the availability of water resources in thefuture. We are committed to reducing our waterconsumption in stores and finding economicallysound ways of achieving this.

Waste and RecyclingTesco is committed to minimising theamount of waste produced and torecycle it wherever possible.

We have a comprehensive recycling programmefor our own operations and for our customers.Secondary product packaging is kept to aminimum and recycled where possible. Paper,polythene and other consumable items used byTesco, as well as some non-food products andconsumer packaging, contain a proportion ofrecycled materials wherever possible. Tesco hasits own recycling units, recovering paper,cardboard and plastic that would otherwise beconsigned to landfills or incinerated.We are always looking for new and innovative

Environment PoliciesSection 5.3Tesco is committed to protecting the environment, using its commercialstrength to put principles into practice. Our standards apply to every aspect ofour business and Tesco also asks its suppliers to adhere to many of theseenvironmental practices.


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ways to minimise packaging, such asbiodegradable packaging for organic fruit and ourreusable green trays scheme to deliver productsto store.

Our pioneering use of green trays won theQueen’s Award for the Environment for 2000.Since then green trays systems have begun to beused throughout the food and retail supply chain,not just in Tesco. By sharing best practice in thisway we have helped make other businesses moreefficient and save thousands of tonnes of waste.

Go to pg 31 for Green Tray Use graph.

We recognise that we have a responsibility toencourage our customers to act responsibly aswell and so have introduced a range of customerrecycling initiatives and campaigns.

Go to pg 21 for Mobile Phone Recycling scheme case studyand for Christmas Card Recycling scheme case study.

BiodiversityAll produce must be attractive to lookat and good to eat. Tesco isdetermined that this is achievedthrough production practices whichprotect, and where possible enhance,the well-being and biodiversity of theenvironment.

Nature’s Choice Code of Practice

Tesco developed Nature’s Choice to help achievethis. All food production causes some disruption tothe natural environment, but Nature’s Choice isabout identifying and adopting farming systemsand practices which will lessen this effect.

The Code sets demanding but achievablestandards of production with an IntegratedManagement Plan, incorporating the need forenvironmental protection and enhancement andthe development and sustaining of biodiversity. Akey element is developing a wildlife and landscapeconservation and enhancement policy and actionplan.

The Code covers the rational use of pesticides,fertilisers and manures, pollution prevention,protection of human health, efficient use ofenergy, water and other natural resources,recycling and re-use of materials, wildlife andlandscape conservation and enhancement.

The Code was produced by Tesco Technical staffwith ADAS Consulting Ltd.


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Genetic Modification - GM and GMOsTesco has removed GM ingredientsfrom all own brand products and hasincreased non-GM options for ourcustomers by launching the largestorganic range.

To address customer concerns about GM food,Tesco is committed to providing properinformation and clear labelling so customers canmake an informed choice when shopping. Asurvey of our customers confirmed that many ofthem are concerned about GM.

Tesco is seeking reliable sources of non-GMingredients for our products, and of non-GManimal feed for our meat products.

Animal Welfare PolicyTesco aims to be associated bycustomers with high standards ofanimal welfare and best industrypractice in its supply base. We will dothis by using up to date knowledge ofanimal welfare, ethics, scientificknowledge and legislation.

We are committed to devising and implementingCodes of Practice which ensure that therequirements of the Tesco Animal Welfare Policyare met in all animal husbandry systems. Tescohas a programme of independent animal welfareauditing to ensure the effective application ofthose Codes.

Tesco is committed to achieving an integratedsupply base to allow, wherever possible, whole-lifetraceability. The range of Tesco animal welfarestandards may extend to include the husbandry ofanimals that may not directly be used to supplyfood for customers, for example breeder stock.

Tesco Animal Welfare Policy endorses the ‘FiveFreedoms’ concept proposed by the Farm AnimalWelfare Council (FAWC).

We will continue to communicate honestly andclearly to our customers about the animal welfarestandards under which our food is produced.


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We define the key deliverables to achieve ourgoals in each segment. This is a balancedapproach to assessing business performance. Inother words, by being customer-focused, strivingto be more efficient in our operations, andkeeping our people at the heart of all we do weget the right emphasis and so the finance willdeliver itself.

The Steering Wheel is a diagnostic managementtool helping us decide when adjustments need tobe made to stay responsive to our customers andour people. The Steering Wheel is linked to everyperson's objectives, linking strategy to their dayto day work and so making it meaningful.

Each segment sets the business priorities for theyear ahead and is driven and monitored by KeyPerformance Indicators (KPIs), which setchallenging but achievable targets for thebusiness. Each KPI is backed by a sound businesscase, quantifying the benefits.

Go to pg 27 for the Tesco Steering Wheel.

CSR performance is incorporated into theOperations quadrant of the Steering Wheel, underthe ‘Support for the Business’ segment.

KPIs are measured using a traffic light system.This system is simple, visual and transparent.Every department and store has a Steering Wheelon display showing whether they are on track ornot. Where KPIs are not on track, action plans areput in place.

The KPIs are measured and reported quarterly to the Board to ensure the business is on track tomeet its objectives. A summary report is sent tothe top 2,000 managers in the company tocascade on to staff.

To ensure our Corporate Social Responsibility(CSR) policy is delivered, the CSR Group sets theCSR KPIs each year. The CSR Group is cross-functional involving all the stakeholders in thebusiness brought together under the chairmanshipof the Group Corporate Affairs Director.Responsibility for delivering specific KPIs isdevolved to relevant business areas. Each storehas its own individual Steering Wheel with specificdeliverables.

At the end of each year, every KPI in the SteeringWheel is reviewed to determine whether thebusiness has met its objectives, and this shapesthe level of remuneration for senior management.

In this way CSR performance is integrated intothe Tesco business planning system alongsideother priorities. We believe that integratingenvironmental and social factors into everydaymanagement is a good way of managing the triplebottom line effectively.

VerificationThe CSR KPIs are set annually andprogress is reported quarterly to theBoard.

They form one part of the corporate SteeringWheel, the business planning tool used toimplement change, set targets and monitorprogress. The Group Steering Wheel is audited ata strategic level by the Group’s auditors, PriceWaterhouse Coopers (PWC).

Internal verification is carried out by thedepartments responsible for the individual KPIsusing independent sources where possible,including market share data, independentsurveys, utilities and services bills, andcompliance schemes for packaging waste. Wherethese are not available, internal budget controlsare used.

Management SystemSection 6The Tesco Steering WheelThe ‘Steering Wheel’ lies at the heart of the company’s business planningstrategy. The Steering Wheel has four quadrants: People, Finance, Operationsand Customer with each quadrant subdivided into segments.


18

PerformanceSection 7KPIsEach year, the Corporate Social Responsibility steering group sets KeyPerformance Indicators (KPIs) for the key areas where Tesco has or can havean impact. A full explanation of how the management and KPI systems workin practice is contained in Section 6 of this report.

The programmes aim to be challenging but achievable. The table below summarises our CSRperformance in key areas during the 2001/02 financial year. They are divided into environmental andsocial key performance indicators. Some programmes are a year long, but some are longer term withanything up to an 8 year time scale. Consequently, for some the long term objectives have yet to beachieved and so are described as ‘On Track’ where achievements have been made in this current year,2001/02. Programmes that have met their aims are ‘Completed’ and so described as such, where thesehave out performed they are described as ‘Exceeded Expectations’, and where programmes have notprogressed, they are ‘Under Development’.

Environment

ExceededExpectationsCompletedAchievementKPI’s

OnTrack

UnderDevelopment

Fuel Efficiency Programme:Improve distribution fleet fuelefficiency by 3%, as part of anon-going programme to driveefficiency in our supply chain.

Achieved: 7.8% reduction in energyconsumption in stores in 2001/02.On track to meet 2006 objective.Achieved through staff training andawareness campaign, byintroducing energy saving initiativesin stores, replacing inefficientequipment, fitting energy savingdevices, regulating the powersupply.

Achieved: improvement indistribution fleet fuel efficiency of2% using a new fuel managementsystem called Isotrack. This saved64,500 gallons of fuel last year, asaving of 750 tonnes of CO2. Since1999 our fuel efficiency programmehas saved 150,580 gallons of fueland 1.8 million tonnes of CO2.

Energy Efficiency: 8 yearprogramme to reduce electricity andgas consumption in stores persquare foot by 35% by 2006.

Water conservation: reduce waterconsumption in store by 10% in2001/02.Set up a trial in 2 stores to collectrainwater for non-potable use.

Achieved: reduced waterconsumption by 10% in stores.Achieved by peer group reportingto highlight poor performing storesand to target mains leaks, usingcistern dams and percussion taps.Trial underway to collect rainwaterin Pontypridd and Bridgend stores.

Go to pg 28 to see graph.




19

Environment

Social & Community

ExceededExpectationsCompletedAchievementKPI’s

OnTrack

UnderDevelopment

Training and Development:Aim: Introduce ‘talent spotting’ toensure all our people are given theopportunity to develop for the future,to help Tesco achieve its customerservice objectives.

Achieved: Promoted 800 of ourpeople into managers last year and60% of staff completed new trainingpackage. (Bronze, Silver, Gold)Programme is on track to delivertalent planning programme.

Waste and Recycling Programme:Increase percentage of secondarypackaging waste recycled to 70%and no. of green trays used by 5million by year end 2001/02.

Achieved: 69% of all cardboardand 80.5% of secondary plasticpackaging waste recycled. Thisamounts to 173,889 tonnes ofcardboard, 12,314 tonnes of plasticand 162 million green tray trips anincrease of 6 million trays (greentrays have replaced cardboardboxes for sending goods intostores).

Biodiversity Programme: 60% offresh produce suppliers sign up toNature’s Choice Code of Practice.

Achieved: 60% of suppliers signedup to Nature’s Choice code ofpractice. Nature’s Choice is aCode for growers that coversenvironment, habitat, wildlife andgood agricultural practice.

Develop new stores on brown fieldsites: 80% of new stores andextensions to be developed onbrownfield sites.

Exceeded: 90% new stores andrefits development programmebuilt on brown field sites.Brownfield sites are areas of landthat have been previously usedfor development. These sites oftenneed clearing and improvingenvironmentally prior todevelopment.

Organics Aim: To be No. 1 UKsupermarket for organics.Measured by TNS market sharedata.

Achieved: No.1 UK retailer fororganics, with of a total of 28% ofUK market share. Biggest annualsales growth compared tocompetitors. Achieved byincreasing the range to over 1000products and improving theavailability in stores.

6th annual BiE Survey of Businessin the Environment Index 2001:To be in top 3 supermarkets.

Achieved: 2nd by supermarketsector. 22nd in FTSE100 and 36th

overall.



The Tesco Corporate SocialResponsibility

20

Social & Community cont...

ExceededExpectationsCompletedAchievementKPIs

OnTrack

UnderDevelopment

Achieved: Created 10,686permanent new jobs last year.

Regeneration: Develop ongoingprogramme of urban regenerationpartnerships.

Achieved: 3 partnershipscompleted in Leeds, Durham andGlasgow, delivering over 1,000jobs to long term unemployed localpeople. A new programme isunderway in Alloa, Leyland, Batleyand Beckton. 5 furtherprogrammes announced, butsubject to planning consent.

Business in the CommunityPerCent Club: To maintainmembership of PerCent Club bycontributing 1% of pre-tax profitsto the community.

Achieved: Contributions exceeded£12.2 million last year.

Education – ‘Computers forSchools’ Programme: £70 millionworth of equipment given toschools, 22,000 schoolsparticipate.

Achieved: £71.16 million worth ofICT equipment given to schoolsin 10yrs. 22,094 schoolsparticipated in scheme, the highestno. to date.

Communication in the SupplyChain: Launch Supply ChainMasterclasses for Farmers andsuppliers with Harper AdamsUniversity College and NFU.

Achieved: 2 Masterclasses run in2001/02 on fresh produce andretail supply chain. 4 more plannedfor 2002/03, including regionalorganic masterclasses.

Local Sourcing: Initiative to helplocal suppliers by marketing localproducts in store.

Achieved: 3,000 local lines and7,000 regional food productsranged in local stores. Over 1,000Scottish and over 500 Welsh lines.British local foods includingCornish clotted cream, cheeseand early season new potatoes.Products clearly labelled withScottish, Welsh and British flags,county name and where possiblethe farm where it was grown.

Supply Chain Labour Standards:Develop and deliver training andawareness programmes to allTechnical and Buying Managerson ethical issues.

Achieved: Training package onethical trading developed anddelivered to 25% of our BuyingManagers, as part of a trial.SA8000 training delivered to 75%of Technical Managers.

Staff retention: Staff turnover to be18.5% or less for stores, 8% orless for distribution and 8.5% orless for head office, for all staff withmore than one year’s service.

Achieved: Met or exceeded aimsfor each of these figures - 18%,7% and 8% respectively.

Employment opportunities:Aim: To create permanent new jobsas part of a sustainable growthstrategy for the UK business as weincrease the number of stores andsales floor area.


21

Case StudiesSection 8Our key successes are summarised in the Executive Summary Section of this Review.

The following case studies help demonstrate therange of our extensive programme and thebenefits we can bring:

Case Study:

Mobile Phone Recycling SchemeIn November 2001, Tesco launched thescheme to encourage customers to recycleold and unwanted mobile phones and helpraise money for charity at the same time.

Our target is to recycle 1 million mobile phones.Special envelopes are available at Tesco storesand a donation is made of £5 to charity or £2.50to charity and 250 Clubcard points, for everymobile phone recycled. Customers have thechoice of three charities for the donation tobenefit: Alzheimers Society, NCH, or the CysticFibrosis Trust. To date, the scheme has recycled95,000 phones and raised £150,000 for charity.

The scheme has good environmental and socialbenefits. It is estimated that of the 4 millionmobile phones replaced each year, only 5% arerecycled and so many end up in landfill sites. Thescheme reconditions the newer phones for use indeveloping countries, and where this is notpossible the phones are broken down into theircomponent parts for recycling and reuse, such asprecious metals. In this way, fewer phones aresent to landfill, toxic metals are removed safely,benefiting the environment. The recycling

operation is carried out by XS Tronix.

Case Study:

Christmas Card RecyclingSchemeTesco teamed up with the Woodland Trust,the UK’s leading woodland conservationcharity, to encourage people to recycle theirChristmas cards.

Recycling bins were put in stores during Januaryand February 2002 and proved to be very popular.Tesco customers collected a fantastic 16.8 millioncards, or 330 tonnes, the equivalent of savingover 2,310 trees. So, Tesco customers have notonly saved trees, but also have reduced theamount of waste going to landfill sites and raisedadditional funds for the Woodland Trust to plantmore woodland across the UK.

Case Study:

Tesco Computers for SchoolsThe Tesco Computers for Schoolsscheme enables local schools to claimthe latest ICT equipment, providingpupils with invaluable computerskills.

In 2001, we celebrated a decade of Computers forSchools – the longest running schools’ promotion.Since the start of the scheme Tesco has givenaway over £70 million worth of ICT equipment toover 22,000 schools across the country.

2001 was an extremely successful year, in whichover 4,000 computers and 66,000 other items ofcomputer equipment were given to schools. Over1,500 new schools signed up to the scheme lastyear, bringing the total number of schools


22

registered to over 66% of the UK’s schools.

Greenside Primary School in Stevenage is aperfect example of how Computers for Schoolshelps local education. Greenside is a small specialneeds school that found, due to its size, it neverreceived enough vouchers from pupils and theirfamilies. The school asked Tesco for help and wesuggested a number of ways for them to try toincrease the number of vouchers they collected,such as linking with local elderly homes andappeals on the local radio station. We alsosuggested that they apply for a Tesco CommunityAward. As a consequence, Greenside tripled theamount of vouchers they collected and won aTesco Community Award, enabling them to gettwo new PCs, software and two new digitalcameras.

Case Study:

Tesco Teaching MasterclassTesco and Harper Adams UniversityCollege joined forces 2 years ago toset up the Tesco TeachingMasterclass – an innovative schemethat aims to develop high qualitygraduates for the retail and foodsupply chain sector.

This has resulted in the introduction of new retailmodules and the opportunity for undergraduatesto have a one-year paid sandwich placement withTesco or one of our suppliers. Students gainunique access to the retail industry and anopportunity for graduate recruitment at the end ofthe degree. Tesco staff made 8 presentations toclasses and conferences in the last year, and SirTerry Leahy was the Guest of Honour at theGraduation Ceremony in 2001.

The Supply Chain Masterclass programme includesone-day seminars, for farmers and people fromthe food industry on agriculture and the supplychain. One of the most successful was theOrganics Masterclass, organised to help producersunderstand the challenge of working together to

meet the growing demand for organic food in theUK. The event consisted of a series of talks fromindustry experts and was attended byrepresentatives from all parts of the supply chainto discuss the challenges facing organic farmersand producers, to improve communication, andencourage a partnership approach within theindustry.

Case Study:

Tesco Centre for OrganicAgricultureThe Tesco Centre for Organic Agriculture based atNewcastle University, was set up to provideresearch, development support, advice andtraining for the organic food and farming industry.

The research aims to find solutions to theparticular problems of organic agriculture thatcannot be treated in conventional ways, such aspests and diseases, and to look at the viabilityand sustainability of large scale organic farmingversus conventional techniques. The learnings willbe shared with the whole agricultural industry asit is envisaged they will aid both organic and non-organic farmers.

Case Study:

Animal WelfareTesco sponsors the Food AnimalInitiative (FAI) at Oxford UniversityFarm, which is run on a commercialbasis with the support of theUniversity's research teams,particularly the Department ofZoology.

FAI aims to demonstrate that good animal welfaremakes good business sense through the practicaland commercial application of welfare systems, toshare knowledge, and provide training for farmersand the food industry. FAI will also work oneducation programmes which aim to raise


23

awareness of food and farming. The research isnon-invasive based on observing the behaviour ofanimals in their environment.

Case Study:

Supply Chain Labour StandardsTrainingIn 2001, we developed a new coursefor our Buyers to raise theirawareness of ethical issues, the ETIand worker welfare.

The ‘Buying with Your Eyes Open’ training coursewas very well received. It was successfully trialedin our Fresh food team and will be rolled out toother commercial teams in the future. In addition,Tesco Technical Managers have been trained toSA8000 ethical auditing standards and in theprinciples of the ETI.

Case Study:

How our supply chain worksIt is a commonly held belief that Tesco buys fooddirectly from farmers and primary producers. Thisis not the case. Customers buy products fromTesco which are either Tesco own brand orbranded goods - such as Heinz, Coca Cola etc.

Tesco buys its own brand products from suppliers.All products are supplied to Tesco in a finishedstate, ie they have been washed, processed andpacked prior to delivery to the Tesco store and sono processing is done by Tesco.

The suppliers buy the raw materials for theirproducts from a variety of other suppliers orproducers or growers or farmers and then processthe product in some way to produce the finishedproduct that Tesco sells.

So, the trading relationships are between Tescoand our customers and between Tesco and oursuppliers, the latter of which are covered by theDTI Code of Conduct. Our suppliers have trading

relationships with their own suppliers who couldbe secondary suppliers, packers, processors orgrowers or farmers, i.e. primary producers.

So, Tesco does not buy directly from any primaryproducers, growers or farmers. That is why Tescois indirectly the biggest customer of UKagriculture.

Take for example, liquid milk for sale in Tescostores. Dairy farmers produce milk and sell it to aprocessor or dairy, who collect it from the farmand take it to a factory for processing. Here it isheat treated e.g. to produce pasteurised or UHTliquid milk. It also undergoes processing to meetlegal and technical standards for example, tomake semi-skimmed or skimmed milk, byremoving some of the fats. The processor/supplierthen packs the milk in retail pack sizes forcustomers, and then packs it for distribution tostores. The processor will then deliver the retailpacks of milk directly to stores. Once it reachesthe store, staff put the packs of milk on theshelves for customers to buy. So, Tesco buysretail packs for sale to customers from theprocessor/supplier, not from farmers or producers.Nor do we process the product.


24

Case Study:

Tesco Charity of the YearWith our staff we aim to raise atleast £1 million per year for ourCharity of the Year. Our past TescoCharities of the Year have beenAlzheimer’s for whom we raised over£2 million, and in 2000, MacmillanCancer Relief for whom Tesco raisedover £3.2 million – the largestamount raised in a single year by oneorganisation for a charity.

Staff involvement is the key to the success of ourCharity of the Year Initiative. For example, lastyear, our staff arranged a triathlon - 400 stafftook part, in teams and as individuals raising atotal of £500,000 for Alzheimers - the 2001Charity of the Year.

The Tesco Charity of the Year 2002 is the CysticFibrosis Trust and Tesco staff throughout the yearwill be taking part in events and activities to raisefunds. Tesco encourages staff fundraising forcharity by adding a 20% top up from the TescoCharity Trust to all the money they raise. Thisapplies to the Tesco Charity of the Year as well asother local charities we fund raise for.

Case Study:

RegenerationThrough our regeneration schemesTesco has restored derelict brown fieldsites in urban areas, often by cleaningup polluted land. The programmeaddresses the barriers tounemployment in the area, providesjob skills training to local people andhelps long-term unemployed localpeople get permanent jobs with Tesco.

Seacroft, Leeds was our first regenerationpartnership culminating in the opening of thestore in October 2000. The key to its success wasunderstanding the barriers to unemployment inthe area and tackling these. At Seacroft, it wasaccess to child care facilities and local transportlinks. The Seacroft partnership involved Tesco,Leeds City Council, The Employment Service, EastLeeds Family Learning Centre, USDAW, Asda StJames (developers) and Quarmby Constructionand created 500 jobs, including the employmentof 243 long-term unemployed.

St Rollox in Glasgow opened in November 2001following a partnership between Tesco, GlasgowChamber of Commerce, Glasgow North, NorthGlasgow College, the local authority and USDAW.This created 600 jobs, 200 of which were given tolong-term unemployed local people.

Case Study:

Life-long learningWe believe that all our staff - fromwarehouse staff or general assistantsat the start of their career, throughto our most senior managers - shouldbenefit from the best support andtraining that we, as an employer, canprovide.

It is essential that we develop all of our people tothe best of their abilities. Our People Managersplay a key role in ensuring that our staffunderstand how their individual performance androle supports Steering Wheel plans. Every personhas a personal development plan to ensure thatthey have the skills to do their job and access toworld-class training and skills development.


25

We are developing a new training anddevelopment scheme called ‘Life-long learning’. Ithas been trialed in our Welham Green depot inpartnership with USDAW and Hertford College. Itprovides the option of either on-line learning orfacilitated courses. So far 25% of the employeesin Welham Green have participated and it hasimproved motivation and employee relationships.It will be rolled out to four other distributioncentres in the near future.

Case Study:

Our Commitment to Our PeopleLast year we launched a new way ofcommunicating with all our people.

Each week, every member of staff has a 5 minutebriefing - called

Team 5, carried out by their manager who hasbeen specially trained.

We deliver 3 key messages for the week whichcould be about customers, staff or what ishappening in stores.

This is backed up by posters in the staff areas ofthe store. The feedback from our staff is that thishas really helped them understand how to keepup to date with the latest information. We supportthis with regular handover meetings of themanagement team, to ensure that everyoneknows what is happening, and supported by aSteering Wheel meeting to review the store'sperformance each week.

We have set ourselves a target to reach all ourstaff every week, and we check how we are doingthrough our viewpoint survey, our annual staffsurvey. 65% of our staff say that they are gettingTeam 5 each week, and we aim to improve onthat this year.

Case Study:

Living the Tesco ValuesAt the heart of everything we do atTesco is the core purpose 'To createvalue for customers to earn theirlifetime loyalty.' The way that weachieve this is by working by ourValues. They shape and underpineverything we do.

To recognise and celebrate those who have shownexamples of living the Values, we give ValuesAwards. One of our Values Awards winners wasLynn Mucklin, who works on the dairy section inour Hull store.

Lynn went far beyond the call of duty when shesaved the life of a customer. Lynn raised thealarm when she realised that an elderly customerwho shopped in the Hull store at the same timeevery week had failed to turn up. Lynn alerted thepolice who found the elderly lady collapsed in herhome, where she lived alone. She has now madea full recovery and police told Lynn that herdedication to her job and quick thinking hadsaved the lady's life.

Case Study:

RecruitmentAs part of our business strategy toserve customers better, we wantedto build our in-store pharmacy offer,but to do this we needed to recruitpharmacists.

Recruitment proved challenging and so we carriedout research to understand what pharmacistswanted from their work. From this research weestablished that many pharmacists seethemselves first and foremost as clinicians withpatients and that they valued less the retailingpart of their role. The irony of this was that Tesco


26

wanted to recruit pharmacists to fulfil the role ofclinicians in store to give customers advice and soserve them better.

So we devised a visual recruitment campaignaimed at showing pharmacists that we wantedtheir skills as clinicians. By understanding whatpeople want from work we applied the rightmarketing skills and so could recruit the rightpeople for the business.

Looking forwardTesco has already announced severalnew schemes that will be integratedinto our CSR programme for 2002/03and beyond.

Case Study:

Race for lifeTesco is proud to announce it issponsoring Race for Life 2002.

Race For Life is a series of 100 events throughoutthe country where women of all ages cometogether to walk, jog or run 5km to help raisemoney for research into cancers that touchwomen’s lives.

Working with Cancer Research UK, through Tescostores and in the local community, we aim to helpincrease the number of women taking part from160,000 in 2001 to 250,000 including 10,000 ofour staff, and the amount of money raised from£9million to £12million. This follows our very

popular campaign last summer to promote the ‘5a day’ message to encourage people to eat fruitand reduce the risk of cancer.

Case Study:

Missing Child InitiativeTesco will be working with thecharity PACT (Parents and AbductedChildren Together) and ACPO(Association of Chief Police Officers)to launch missing child posters inTesco stores.

Posters will go up in over 700 Tesco stores aroundthe country appealing for information on some ofthe thousands of youngsters who have beenmissing for many months.

Last year approximately 40,000 children wentmissing in the UK. Of those, 1,300 were stillmissing two weeks after being reported to thepolice – and almost half had been abducted.Experience shows that posters are one of themost effective ways of helping the public to helpthe police locate and retrieve missing children.With 12 million customers passing through Tescostores every week, we hope to raise awareness ofthe thousands of missing children and help reunitethem with their loved ones.

Case Study:

Royal Highland Education TrustTesco is sponsoring the ‘Taking theClassroom into the Countryside’project with the Royal HighlandEducation Trust.

The project will give children living in Scotland thechance to learn first-hand about food productionand farming - connecting the consumers of thefuture with their food and how it is produced.

How Corporate Social Responsibility fits into our corporate business plan

Corporate Steering Wheel

How are we going toachieve our goals?

Corporate Social Responsibility

CommunityEnvironment

Environment KPIs

Energy EfficiencyFuel Efficiency

Waste & Recycling

Water Conservation

Biodiversity -Nature’s Choice

Organics

Brownfield sitedevelopment

To create value forcustomers to earn

their lifetime loyalty

Core Purpose

Cus

tom

er Plan People Plan

Operatio

nsP

lanFinance Plan

Customer

Finance Operations

People

Community KPIs

Charity

Race for Life -cancer awareness

Education

Supply Chaincommunication &training

Local sourcing

Supply ChainLabour standards

‘Support for thebusiness’segment


27

There are a series of KPIs within the other 3 quadrants of the Steering Wheel. For example, the people quadrants ofthe Steering Wheel. For example, the people quadrant contains KPIs on staff training, development, retention,morale, etc.


28

Total Energy Consumption(UK stores) - sqft/pa

kwh/

sqft

12097/98 98/99 99/00 00/01 01/02

130

140

150

160

170

Total CO2 Emissionstonnes/sqft/pa

45

50

55

60

97/98 98/99

65

70

Year

Tota

l C02

tonn

es/s

qft

99/00 00/01 01/02

Tesco aims to reduce its energy consumption in order to reduce carbon dioxide emissions, the impact on climatechange, and reduce costs. We are on track to complete our 8 year programme to reduce our energy consumptionper square foot by 35% by 2006.

Data for core business in UK.

A key source of carbon dioxide is the burning fossil fuels. Carbon dioxide is generated through electricityconsumption and from vehicle emissions. Our goals to reduce our energy consumption and improve fuel efficiencywill reduce the volume of carbon dioxide generated per square foot on a like for like basis.

Notes: Data for UK. DEFRA conversion factor used.


29

Tesco lorry fleetcarbon dioxide (CO2) emissions

1250

1270

1290

1310

99/00 00/01

1330

1350

CO

2 to

nn

es p

er m

illio

n m

iles

01/02

Year

Water Consumption in Tesco

Year

cub

ic m

etre

per

sq

uar

e m

etre

of S

ales

Flo

or

99/02 00/02 01/021.3

1.4

1.5

1.6

1.7

1.8

1.9

2.0

Tesco uses large fleets of lorries for its distribution system between its depots and stores. Since 1999, we haveimproved the fuel efficiency of our fleet year on year. This has resulted in savings of 150,580 gallons of fuel and55,257 tonnes of CO2 per million miles travelled. In total, since 1999, our fuel efficiency has saved the equivalent of1.8 million tonnes of CO2.

Notes: Data for UK LGV distribution fleet only. DEFRA conversion factor used.

Tesco reduced water consumption in stores by 10% last year. Using water wisely is an important environmentalinitiative to reduce the overall impact of our stores as water will be an increasingly scarce resource. It has financialbenefits by reducing store overheads. These savings form part of our step change programme and are reinvested tocreate value for customers and thus earn their lifetime loyalty.


30

ton

nes

Plastic Recycling (in thousand tonnes)

97/98 98/99 99/00 00/01 01/02

Year

2000

4000

6000

8000

10000

12000

14000

0

Paper/Card Recycling (in thousand tonnes)

Year

ton

nes

97/98

20000

40000

60000

80000

100000

120000

140000

160000

180000

098/99 99/00 00/01 01/02

Last year, through recycling and waste minimisation programmes, Tesco reduced the amount of packaging used byreplacing secondary packaging with green trays to transport goods to stores. We recycled 173,889 tonnes ofcardboard and 12,314 tonnes of plastic from our own operations.

Notes: Data for UK only.


31

Green Trays

00/01 01/020

20

40

60

80

100

120

140

160

180

mill

ion

trip

s

Year

Volume of Waste to Landfill(in thousand tonnes)

0

50000

100000

150000

200000

250000

98/99 99/00 00/01 01/02

ton

nes

*

Since 1998 Tesco has reduced the amount of waste sent to landfill by 82,000 tonnes. This was achieved throughinitiatives to reduce the amount of waste put into the business by using more efficient merchandising units andgreen trays.

Note: Date for the UK business, based on budget figures.* Figures for estimated waste to landfill

Our re-usable Green Tray scheme was incorporated into our distribution system to deliver products to stores. Thissaves secondary packaging and waste. Not only have the Green Trays replaced the cardboard boxes and otherpackaging that would have previously used, but they also reduce the amount of damage to products and thusproduct waste. This system has saved over 46,000 tonnes of cardboard a year - the equivalent of 322,000 trees.


32

Year

TESCO - Refrigerant Replacement Programme

HFCsHCFCsCFCs

93/9

4

94/9

5

95/9

6

96/9

7

97/9

8

98/9

9

99/0

0

00/0

1

01/0

2

CFC

Rep

lace

men

t Pro

gram

me

Com

plet

e

% T

ota

l Tes

co R

efri

ger

ant B

ank

0102030405060708090

100

Number of Suppliers Accredited for Natures Choice in UK and Worldwide

Natures ChoiceSuppliers

Total No ofSuppliers

1994 1995 1996 1997 1998 1999 20010

25

50

75

100

125

150

175

200

Tesco completed its CFC refrigerant gas replacement programme for UK stores at the end of 1999. We are on trackto complete the replacement of HCFC refrigerant gases by 2004, ahead of the legal deadline to do so. CFC andHCFC refrigerant gases are ozone depleters and have to be phased out by 2006 following the Montreal protocol.

Nature’s Choice is a code of practice covering biodiversity, good agricultural practice, conservation andenvironmental management. This scheme was developed by Tesco and ADAS (Agricultural Development AdvisoryService) for farms that supply Tesco with fresh fruit, vegtables, salad. Having accredited the majority of our UKsuppliers to the code over the last decade, we are now focusing on our overseas suppliers to the UK.

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