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Corporate Responsibility

Growing and developing our business depends on the continued support and trust of five important groups of people:

• Customers – those who buy our products
  
  
• Colleagues – those who work in the Group
  
  
• Investors – those who own our shares and provide us with capital
  
  
• Commercial partners – those who supply us with goods and services
  
  
• Community – those who live around our sites and wider society as a whole

We have responsibilities with regard to each of these groups – some set out in law, but many arising from their expectations of us. For Home Retail Group, being a responsible retailer means understanding their expectations and living up to them, often having to balance their competing demands.

Our key responsibilities are:

• serving customers to their complete satisfaction
  
  
• providing a working environment that is conducive to the recruitment and retention of the widest possible range of talented staff
  
  
• providing a safe and healthy place of work
  
  
• providing products of the appropriate quality, including responsible product sourcing and retailing, product safety and reliability
  
  
• encouraging responsible labour, environmental and social practices in the Group's supply chain
  
  
• improving the Group's environmental performance, principally our use of energy, the impact of our transport fleet, materials use and waste management
  
  
• developing strong community relationships in support of our business objectives

Failure in any of these areas could damage our brands and business performance. However, our approach to corporate responsibility also presents us with opportunities. Our ability to identify changes in society and social trends means we can quickly adapt our business to take advantage of new markets as issues emerge, leading to commercial and social benefit.

Customers

Customers’ satisfaction – with both the product and their shopping experience - is one of the strongest drivers of our performance. We have processes dedicated to understanding and responding to our customers’ views and treating our customers fairly, and have developed a range of policies and standards in response.

First and foremost, customers judge us on product range, shopping experience and our value proposition. They also want assurances on product safety and quality. In addition, evidence suggests that customers increasingly consider other issues like ethics, integrity and responsibility in product sourcing and manufacture in their overall view of a retailer. We aim to ensure these factors are positively associated with our brands.

We also need to ensure that we meet changing consumer demands, which are increasingly for efficient, eco-friendly products. For example:

• In response to the summer drought of 2006, we introduced our ‘WaterWise’ campaign at Homebase. This campaign provided useful information on water restrictions and clearly labelled products that made it easier for customers to adapt to the water shortage (for example, drought tolerant plants and mulches).
  
  
• We have a comprehensive policy on sourcing wood products. We aim to increase the amount we buy from independently certified well-managed forests and reduce the risk of illegal or undesirable materials anywhere within our supply chain.

Further information on these and other initiatives and our policies relating to product issues can be found on our website www.homeretailgroupcr.com

Colleagues

The quality of any business depends strongly on its people. To operate successfully we need people who are well trained, informed and motivated. Providing the right working environment helps us attract good people and motivate and retain the valuable colleagues we have. There are also sound reasons to train and develop our people: it makes them better at their job and enables us to fill more of our vacancies through internal promotion rather than recruiting externally. Finally, we have ethical and legal obligations to ensure that our colleagues work in safe conditions and to contribute as far as possible to their health and wellbeing.

We set out our standards through a number of policies, including:

• Equal opportunities
  
  
• Disability
  
  
• Bullying and harassment
  
  
• Grievance
  
  
• Health and safety
  
  
• Training and development
  
  
• Whistleblowing
  
  
• Employee involvement

As an example, disabled persons have equal opportunities when applying for vacancies, with due regard to their aptitudes and abilities. We have procedures to ensure that disabled employees are fairly treated and that their training and career development needs are carefully managed.

We aim to motivate and keep staff informed on matters that concern them at work and involve them through local consultative procedures. Where there are recognition agreements with trade unions, the consultation process is established through national and local trade union representatives and through joint consultation committees. Business information (for example on financial and economic topics) is also disseminated through management channels, conferences, meetings, publications and Internet sites.

We offer all our salaried staff a competitive remuneration package together with a range of additional employee benefits. These include bonus payments depending upon individual and company performance. Schemes offering shares, share options and the acquisition of shares are available for employees. This encourages their contribution to the Group’s performance. We also offer colleagues a childcare scheme that provides working parents the chance to enjoy savings on their childcare costs.

Investors

Effective management of corporate responsibility can increase shareholder value. For example, in the area of eco-efficiency, rising prices for energy and waste disposal make efficiency savings increasingly attractive.

We have annual targets to reduce energy consumption, transport impacts, materials use and waste volumes. In addition, we have an overall aspiration towards zero landfill waste by 2010 which is supported by an extensive recycling programme in our stores and distribution centres. We have achieved a milestone in the period under review by reversing the trend of increasing amounts of waste going to landfill as our recycling has increased from 26% to over 40%.

We have increased our use of renewable and low carbon energy. This together with lower energy consumption reduced our CO2 emissions from building energy use by over 20%.

Commercial partners

Labour standards and human rights within the supply chain are one of the most important responsibilities for a retailer. Home Retail Group’s network of suppliers and agents is extensive and includes a number of regions where these issues may present challenges. We are responsible for understanding our supply chain and the conditions within it, for dealing with active or conspicuous abuses and for engaging with suppliers to communicate our customers concerns on these matters and to support them as they improve standards.

The Group has a set of Supply Chain Principles which are published on our website. They are supported by a detailed code of practice and by a supplier manual, both of which explain and illustrate the standards we expect. We made a number of small changes in the period under review including revisions to our terms on workers’ freedom of association to encourage better consultation mechanisms and support the right to collective bargaining. The supplier manual has been translated into Chinese and presented face-to-face to key overseas suppliers.

Over the past three years, we have audited 85% of our direct overseas suppliers. Whilst the process of audit and re-audit is an effective way to find and deal with the worst abuses, such as the use of forced or child labour, we are increasingly concluding that our scope to influence the background culture is limited. This is particularly relevant when dealing with issues such as working hours, wage rates and access to independent worker representation. We are therefore seeking new approaches to the problem, based on closer relationships with our suppliers and engagement with non-governmental organisations and other interested parties.

Community

Our community and charity work offers significant opportunities. At the most basic level, healthy communities make for healthy businesses so we aim to play our part in them. There are also clear benefits from improvements to our public profile and reputation. But perhaps the strongest motivator is internal; taking part in community activities is popular with our staff. In a competitive environment for recruitment and retention, this kind of positive experience can make an important difference to our performance.

We have invested over £800,000 in community initiatives (including £336,000 from the GUS Charitable Trust). Our community work is focused on two charity partnerships: one working with Argos and one with Homebase. Each is selected for a period of two years: Argos is just reaching the end of a very successful two-year partnership with Help the Hospices whilst Homebase is embarking on year two with Marie Curie Cancer Care. The Argos ‘Tick to Give’ initiative also enabled Argos customers to elect to add 20p to their purchase which was then donated to Help the Hospices on their behalf.

Each charity partner is selected from a shortlist by a staff vote, and then becomes the focus for fundraising and giving for stores. In July 2007, Argos is launching a new partnership with Leukaemia Research (UK) and Barretstown (Republic of Ireland) who both focus on cancer-related illnesses and dedicate their resources to improving the quality of life for those affected.

The GUS Charitable Trust was funded by GUS plc prior to the demerger in October 2006 with such donations funding projects in the period under review. The community programme in future years will be financed through direct contributions recorded and spent in the relevant year.

Management and governance of Corporate Responsibility (“CR”)

CR is the responsibility of the company secretary. The Board receives regular updates, focusing on the significance of and risks associated with CR issues.

The Operating Board plays an important role in policy approval and also in agreeing significant initiatives and investments. A sub-committee of the Operating Board has been formed to act as a corporate responsibility steering group. The steering group’s terms of reference include:

• reviewing external developments and emerging best practice
  
  
• monitoring implementation of policies
  
  
• recommending corporate responsibility policies to the Operating Board
  
  
• monitoring corporate responsibility risks
  
  
• overseeing external corporate responsibility reporting

The Group’s corporate responsibility policies and performance have been assessed by a number of independent third parties in the past year:

• The Group is listed in the FTSE4Good Index, meeting all the relevant social and environmental criteria.
  
  
• The Group is also listed in the Dow Jones Sustainability Index, which selects the top 10% from a universe of 3,000 global companies, based on comprehensive sustainability criteria.
  
  
• The Group was one of only three retailers short listed for the 2007 Retail Week CSR Award.

The Group produces a comprehensive on-line CR Report each year, and all disclosures are independently verified. Full data can be found at www.homeretailgroupcr.com.

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