As detailed in the ESG Report, the Board is committed to developing its strategy and performance in relation to its environmental impact, and has engaged two specialist consultancies to support the strategy work and reporting. The newly published Materiality Assessment on see page 38 of the 2020 Annual Report has identified the Company’s most significant ESG-related risks and opportunities, and an ESG Strategy Report due to be published in May 2021 will detail the Company’s approach to addressing these risks and opportunities, and disclose a set of KPIs and metrics to allow measurement of progress in this regard.
One of the Company’s commitments is to reducing its contribution to Greenhouse Gas (‘GHG’) emissions and climate change. As detailed to the right, the Company’s transport activities account for the vast majority of its direct (Scope 1) emissions and, therefore, transport is the Company’s most immediate area of focus. The Transport Integration project, focused around more effective and efficient utilisation of the delivery fleet, is currently in the roll-out phase and is already making meaningful progress in this area. Benefits to-date are detailed on page 48 of the 2020 Annual Report.
To-date, there has only been a negligible direct impact on the Company’s operations and performance from climate change, and while it presently remains difficult to accurately model the impact of climate change projections on the business and its’ business model, the ESG Strategy Report will provide a roadmap for reducing the Company’s environmental impact.
The Company’s SECR (‘Streamlined Energy and Carbon Reporting’) Disclosure is provided on page 110 of the 2020 Annual Report and details its Scope 1 and 2 energy consumption and associated GHG emissions for 2020 and the prior year. Meaningful comparison to 2019 is difficult due to the significant impact COVID-19 had on the Company’s business particularly in the second-quarter when the vast majority of the Company’s operations were temporarily closed. The Company’s direct (Scope 1) GHG emissions predominantly arise from fuel sources used in its transport activities, which typically account for approximately 90% of its Scope 1 emissions, with the remainder due to natural gas usage at various sites. Its indirect Scope 2 GHG emissions arise mostly through electricity consumption at sites. Notwithstanding the upcoming ESG Strategy Report, the Company is continuing to develop its approach to reducing its Scope 1 and 2 GHG emissions, as outlined in the table below:
The Company’s indirect Scope 3 GHG emissions arise predominately from global supply chains and end-of-life treatment of sold product.
The Company will be disclosing its Scope 3 GHG emissions for the first time, in accordance with the GHG Protocol guidance, at the same time as the ESG Strategy Report in May 2021.
This process will support the Company in accelerating its work with suppliers to improve supply chain efficiencies and promote more sustainable products.
Notwithstanding the forthcoming disclosure, the Company is already taking steps to reduce its Scope 3 GHG emissions through the following actions:
One of the Company’s General Managers is a Non-Executive Director of Carpet Recycling UK, a not-for-profit membership association working to reduce the amount of carpet waste being sent to landfill, and has insight into the recyclability and waste issues facing the industry which he reports on to members of the Executive Team who report to the Board. The Company is a core funder member of Carpet Recycling UK, and 16 of the Company’s sites are signed-up to Recofloor, the national vinyl flooring recycling scheme.
Plastic packaging, cardboard poles and wooden pallets make up the bulk of the waste arising from the Company’s operations. These packaging ancillaries are currently a necessity in order to protect products during transit through the distribution network. The below table outlines the actions the Company is taking in relation to waste arising from its operations:
Outside of GHG emissions, recyclability and waste is a key issue for the industry, and, as a consequence, will be a key area of focus for the Company’s long-term sustainability strategy. Plastic is used in the manufacturing processes of many floorcovering products, and whilst many manufacturers are now producing product lines utilising recycled plastic, the end-of-life recycling processes and uses for waste product remain limited. Increasing waste management regulation beginning to be applied across many industries will likely lead to future cost increases around collection, disposal and recycling R&D for participants in those industries. The Company supports this increasing focus on waste management and expects to play an important role within its industry, working in conjunction with all participants.
In-line with FRC recommendations, and the FCA requirement for premium listed companies, the Company will be reporting in alignment with the TCFD (‘Task Force on Climate-related Financial Disclosures’) recommendations in its next Annual Report and Accounts for the financial year ending 31 December 2021.
The Company’s Environmental Policy, which is reviewed and updated annually, is publicly available on its website (Environmental Policy) and accessible to all employees via the intranet.
The Company is not a large consumer of water, which it primarily uses for cleaning its commercial vehicles, and is actively engaged in limiting usage where possible. Water consumption in 2020 was 36,640 cubic metres (2019: 38,431), with year-on-year comparisons not meaningful due to the impact of COVID-19 as detailed above.
Reducing direct impact on the environment
Following trials in 2019, the Company commenced the roll-out of its Transport Integration project in 2020, and by the end of the year it had been implemented across an area that accounted for approximately 25% of the Company’s UK deliveries.
The project results in increased deliveries per vehicle, a reduced number of vehicles needed to serve local areas, and a meaningful reduction in fuel consumption and CO2 emissions across the group.
The below data demonstrates the success of the project in Headlam’s ‘North’ operating region which was completed in 2020, with full national roll-out scheduled to be complete by early Q4 2021.
Average deliveries per vehicle:
2019 (weeks 1 - 52) > all business delivery runs > average deliveries per vehicle = 12
2020 (weeks 44 – 52) > ‘North’ delivery runs following transport integration > average deliveries per vehicle = 16