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Stakeholder Engagement and Section 172 Statement

Following the introduction of the Companies (Miscellaneous Reporting) Regulations 2018 applicable to the Company from 1 January 2019, the Company is required to include a statement in its Annual Report and Accounts which describes how the Directors have had regard to the matters set out in section 172(1) (a) to (f) of the Companies Act 2006 (the ‘Act’) when performing their duties during the year under review. Additionally, Provision 5 of the 2018 UK Corporate Governance Code issued by the FRC states that the Board should understand the views of the Company’s key stakeholders and describe how it has taken into account the matters set out in section 172 of the Act in Board decision-making. The Board believes that consideration of these factors is and has always been, an essential part of good decision-making and it is a rolling agenda item at Board Meetings. The Statement below provides information on how its stakeholders have been considered by the Board during the year in both its near and longer-term decision-making.

The Company’s principal stakeholder groups are: its people; suppliers; customers; local communities in which it operates; and shareholders.

The Company had to make many difficult decisions during the year, some planned, some not, and some which unfortunately had direct negative impacts on certain stakeholder groups:

  • Closure of the vast majority of the business in March 2020 due to the impact of COVID-19, and furloughing of 93% of the UK workforce
  • Strictly limiting product purchasing for several months to preserve cash, with an immediate impact on suppliers, and customers experiencing reduced product availability in the following months including due to raw material constraints
  • Suspension of the ordinary dividend, with a resulting withdrawal of dividend income for shareholders which include many colleagues
  • Compulsory redundancies announced as a consequence of the Transport Integration and Network Consolidation projects, with a direct impact on colleagues, their families, and local communities.

However, the Board believes that these decisions and the actions taken were firmly in the best interests of all stakeholders as they preserved the financial stability of the Company during the impact of COVID-19 and will additionally support its future success. Due to its size and reach, the Company is pivotal to the industry in the UK and an important conduit for supporting the participants within it. The Company’s instability would have had serious ramifications for all participants including its people, customers and suppliers. Additionally, any financial instability would have had negative repercussions for the Company’s shareholders, banks and pension providers. The halting of product purchasing and dividends was vitally necessary to protect the Balance Sheet against the unknown impact, duration and consequences of COVID-19. Furloughing people and drawing financial support through the governmental job retention schemes allowed the Company to preserve employment, prioritise the safety and protection of its people, and take a phased approach to fully reopening while becoming COVID-19 Secure. To better support its people through the period, the Company elected to pay an enhanced form of the UK Government’s Job Retention Scheme.

The redundancies arising from the Transport Integration and Network Consolidation projects forming part of the ongoing Operational Improvement Programme did not come as a consequence of COVID-19, having always been anticipated for implementation, albeit Transport Integration was accelerated against the COVID-19 backdrop. It was very unfortunate that the redundancies came amid such an unsettling period, and the Company sought to support all affected people as best it could and offer new vacancies created by the reconfigured network to affected people.

Many lessons were learnt during the year and the impact of COVID-19 exposed some weaknesses, including the need to elevate communication channels with its people and customers and employ more effective methods. Additionally, with hindsight and greater clarity of what the UK Government meant by the word “essential”, the Company would have remained more open during the first national lockdown as customer demand and their continued operating exceeded expectations. The Company subsequently remained fully open during the following lockdowns in 2020 to continue supporting its customers and maximise financial performance.

The Board believes it has exited 2020 with a stronger business and improved levels of engagement with its stakeholders through the actions it has undertaken, and will continue to pursue.

The Operational Improvement Programme (as detailed on page 22 of the 2020 Annual Report) is making the business more resilient and relevant through the combination of better servicing of customers following increased insight and segmentation work, and material cost savings. This will create an improved financial performance and enhanced growth prospects. Additionally, the Programme has and will continue to introduce: 1) more efficient working practices and, therefore, an improved working environment for people; 2) more strategic and mutually beneficial relationships with suppliers; and 3) a lessening of the Company’s carbon footprint and impact on climate change through the Transport Integration project.

The Company has and will continue to put in place more mechanisms to engage with and gain feedback from stakeholders, and is undertaking a far more proactive approach. Many actions were taken as a consequence of feedback received and ongoing review during the year, including those below. 

People

  • Lessening the net redundancies under the Transport Integration and Network Consolidation projects having considered feedback from business leaders on the proposed reconfigured network.
  • Enhancing driver pay and making changes to terms and conditions to reflect the increased deliveries per vehicle under the Transport Integration project.
  • Launching of an engagement portal in 2021 as another method to deliver communications, and provide support and recognition
  • Introducing a complaint escalation process to alleviate pressure and the potential negative impact on customer-facing people
  • Supporting wellbeing and promoting collaboration following the unsettling impact on people of the Network Consolidation. Actions included the introduction of a training school of excellence, mentoring, and clearly defined role descriptions at the new Ipswich distribution centre.

Customers

  • Introducing direct feedback and complaint mechanisms, and increasing the use of focus-groups to gain greater insight
  • Making improvements to customer service in response to feedback, including modifications to the relaunched B2B websites and more tailored marketing and promotions
  • Establishing a dedicated key accounts team to better support and service larger customers
  • Enhancing the existing trade counter network, and roll-out in an improved configuration in response to feedback and increased preference for ‘click and collect’

Suppliers

  • Implementing a more strategic group-level approach, with dedicated resource
  • Increasing the partnership approach and benefit to both parties through focusing on improving supply chain efficiencies
  • Introducing joint business plans with suppliers and product-specific tender processes

Shareholders

  • Articulating Capital Allocation Priorities having directly sought and considered feedback from larger shareholders (see page 9 of the 2020 Annual Report)
  • Publishing a Materiality Assessment, and forthcoming full ESG Strategy Report in May 2021 to provide a clear roadmap on strategy and responses to key ESG issues (see page 37 of the 2020 Annual Report)
  • Reinstating the ordinary dividend as swiftly as possible
  • Increasing disclosure around the Operational Improvement Plan, including the timing and quantification of the benefits arising (see page 16 of the 2020 Annual Report)

 

Through supporting its stakeholders, the above actions will support the delivery of the Company’s Strategy (see page 12 of the 2020 Annual Report).

Following thorough consideration of the above and all other activities and undertakings detailed in this Annual Report, the Board considers it has fulfilled its duty in respect of section 172, both individually and collectively, and that it has acted in the way it considers would be most likely to promote the success of the Company for the benefit of its members as a whole (having regard to the stakeholders and matters set out in s172(1) (a) to (f) of the Act) in the decisions taken during the year ended 31 December 2020.