Serving our customers and communities

Valuing our people, contributing to a strong society and placing the Pepco Group at the heart of a responsible and efficient supply chain.

Valued supply chain

Our sourcing business, PGS, manages a supply chain comprising 385 vendors using 743 factory production sites and is responsible for sourcing 88% of our own-label products. We work with our suppliers to develop sustainable product options which meet our customers’ preferences at an affordable price point, which is made possible through the commercial advantage provided by PGS.

Owing to the scale of Pepco Group’s operations and the significant investment in our supply chain, we have the opportunity to support economic development, industry and employment opportunities. By implementing responsible sourcing policies and practices throughout our supply chain, Pepco Group aims to procure products and services in an ethical, sustainable and socially conscious way, bringing positive impacts to the people and economies in which we operate, as well as minimising any negative environmental impacts.

Improving working conditions for workers – one of many success stories in FY23

In December 2022, we audited a ready-made knit garments manufacturer in the outskirts of Dhaka, Bangladesh. The factory failed our initial audit for these reasons:

failure to pay minimum wages to 23 workers of total 570 workforce;
dangerous working conditions, e.g. no automated smoke detection and fire alarm system, locking feature on exit door; and
inadequate building approval and fire licence coverage for factory.

Following our audit, the factory management started taking the necessary corrective action. We worked closely with the factory in the remediation process by reviewing their CAP progress report and guiding them to take appropriate corrective action. As a result, the following improvements were made:

factory management pay at least minimum wages to all workers since our audit; and
automated smoke detection and fire alarm systems were installed and building construction approval and fire licences were obtained from the Local Government authority.

In April 2023, on request of the supplier, we arranged an unannounced follow-up audit in the factory and the factory was assessed as CAT 3 by resolving all Zero Tolerance issues. Due to our audit process, living conditions of several workers in the factory were improved.

Our approach

We have strong policies in place to protect the integrity of our supply chain, including a Pepco Group Supplier Code of Conduct which applies to all suppliers and contractors. The Code of Conduct is aligned with the Ethical Trading Initiative (ETI) Base Code, an internationally recognised code of labour practice founded on the conventions of the International Labour Organisation (ILO). It includes expectations concerning human rights (with specific reference to child labour), ensures colleagues in factories are treated fairly, and lays out our position on bribery, transparency and unauthorised subcontracting as well as environmental provisions

Working with our supply chain

Supporting social and ethical practices

We believe in helping our suppliers to continuously develop their social and ethical standards in partnership with the Group. As part of this, we prioritise:

1

Commitment to developing the livelihoods of the people who make our products, which includes ensuring that the workers in our supply chain are:

working willingly and not forced to work;
not discriminated against by their employer;
working in safe working conditions and are not exposed to dangerous working conditions; and
receive all due wages for their work.

2

Providing support for suppliers to help them develop and improve their workers’ livelihoods through safe working conditions, fair wages and other basic human rights.

3

Supporting our suppliers to contribute to sustainable development through partnerships such as the Heart to Heart charity described in the exceptional employer section below.

4

We have a risk-based audit approach, taking into consideration factories’ geographic location, reputation, the type of manufacturing process and the most recent ethical audit rating. Frequency of audits are increased based on the risk associated with the factory.

Supplier environmental practices

In FY23, the Group developed a voluntary set of Pepco Group Environmental Guidelines For Suppliers which cover the following key areas:

environmental management system;
environmental regulations;
recording and minimising greenhouse gases (GHGs);
waste management;
increased water usage efficiency;
chemical management;
safeguarding natural resources and biodiversity;
sustainable packaging; and
sustainable raw material sourcing for products.

Supplier performance in FY23

100%

of new suppliers were screened using Ethical Trading Initiative-aligned criteria.

1,548

audits were performed at 1,154 factories. Ethical audits were undertaken either by our own compliance team or by third-party audit companies.

175

We supported improvement in standards at 175 factories, successfully remediating critical issues and enhancing their risk ratings from CAT 5 or CAT 4 to CAT 3 or above.

97%

of our factories categorised as no to medium risk – CAT 1, CAT 2 or CAT 3.

Demonstrating the strength of our stance, contracts with 22 factories were terminated for repeated infringements of our Code of Conduct and violating our Zero Tolerance Policy.

137

New business placement was restricted in 137 factories with high-risk violation e.g. CAT 4 or CAT 5 rating.

Exceptional employer

Investing in people to support growth is one of our four strategic pillars. By striving to be an exceptional employer, we aim to support our colleagues and ensure that they thrive – we believe that, in order to serve our customers well, our employees should love what they do.

As a large retail organisation spanning multiple countries and employing more than 47,000 colleagues, we absolutely recognise the vital role they play in supporting our growth and continued success. We feel a real responsibility to work with them in creating an environment where they experience a sense of value and support where they can truly be the best version of themselves.

Opportunities to progress internally are actively encouraged and we work together to enable both personal fulfilment and opportunities for progression.

We have a combined commitment throughout the Group to ensure that we foster a great experience for all our colleagues, regardless of their role and location. This includes, but is not limited to, fair and regularly reviewed competitive pay, providing career progression opportunities, effective employee engagement, creating an inclusive environment with clear and supportive people policies. Furthermore, we place a strong focus on the role of culture and leadership in shaping our colleagues’ experience.

Our performance management process encourages career and development conversations, promoting employees’ ideas and thoughts regarding their career journeys while ensuring managerial support throughout the process. This has resulted in over 2,709 internal promotions in our Pepco operating company during FY23 among our staff, of which, over 91% are women.

Dignity and respect

We continue to focus on diversity, equality and inclusion and regularly review our colleague data in all aspects, from attracting a diverse talent pool to collating feedback via the annual “Your Voice” survey enabling us to create an environment where everyone feels they belong.

Health and safety

As a retail organisation, we pay special attention to health and safety. Our general approach is focused on the operations, each market organisation has a team to manage all relevant health and safety matters. In each country we implement advanced health and safety standards and comply with legal obligations.

Strong society

Serving our customers and communities

At the core of our business model is our aim to provide value to our customers, which is confirmed by our stakeholders through our materiality assessment. For us this means providing our customers with affordable, high-value products, from convenient stores, sourced in an ethical and sustainable way. Given the current inflationary environment, we are committed to supporting customers in meeting the challenges of the cost-of-living crisis and contributing to the raising of living standards in society.

Through its operations, the Group provides employment, development and investment opportunities in the communities where it operates resulting in a “multiplier” effect into the local economy and the livelihoods of local people. As part of its operations the Group also supports community-based initiatives and charity work.

Local communities and charitable support

In each of our European markets, the Group and its operating companies support projects aimed at equalising educational opportunities for children and young people from disadvantaged backgrounds, strengthening their personal development, mental health and empowerment.

Some of the many projects supported during the year are described below:

Poland: 8 summer camps were provided for 360 children through the care of Society of Children’s Friends.

Romania: through the Concordia Humanitarian Association, Pepco supported additional classes for 154 children in underprivileged communities in Prahova.

Croatia: a reforestation programme aimed at educating our customers and young people about the importance of forests and climate change, planted 3,000 trees.

Slovenia: the Pepco Life Academy programme educates teens about human and citizen rights through a series of workshops.

Serbia: workshops for children and youth on building self-esteem and educating on modern addiction diseases (i.e. internet games, shopping, betting).

Bulgaria: “My future with art” project in cooperation with Fusion Foundation educates children in different types of visual arts: fine, applied and craft, and presents various opportunities for professions related to the visual arts.

In the UK, our Poundland Foundation continues to go from strength to strength, supporting more families than ever with the Kits 4 Kids grants programme and helping back the vital work of our charity partners Make-A-Wish®, Tommy’s and Whizz-Kidz.

Since we launched in May 2021, over £1.8m in grants has been awarded, supporting over 10,000 families in our communities. The Foundation provides help in three key areas: our national charity partnerships, the provision of community grants and inspiring Poundland colleagues, customers and suppliers to support causes they care about in their communities.

To date

4,840 beneficiaries at 600 sports clubs have been supported through our Kits 4 Kids programme, helping kids keep active through sports.

211 Make-A-Wish® wishes have been granted for children who don’t have the luxury of time on their side.

5,277 Tommy’s families have been helped to keep their babies safe.

124 children and young people at Whizz-Kidz have received life- changing mobility equipment.

Across all our UK stores, “Pennies”, a digital charity box roll-out has now been completed giving customers the opportunity to donate a small amount of money.

In October 2022, we launched a charity partnership with Barretstown in the Republic of Ireland. Barretstown runs residential camps for children with a serious illness. During the first year, €250,000 was raised and donated.

The School of Hope in Bangladesh and India provides free education and lunch to students, as well as awareness training on social issues, thus improving conditions for garment workers living near those schools. The schools also offer skills and training programmes for students’ family members to enable them to achieve financial independence. Heart to Heart is a Shanghai- based charity which provides corrective surgery for children with congenital heart disease.

We are proud of the work we do to support communities around the world that are connected to our value chain.

Pepcoolture Masters

We introduced a “Pepcoolture Masters” programme in FY23 to promote Company culture and recognise employees who embody Pepco values: growth, team spirit, simplicity, respect, and love of the customer.

During the programme’s implementation in 16 markets, we emphasised a fundamental belief that “being appreciated every day at work matters”.

Nearly 1,200 nominations came fin from across all markets. These were submitted by peers, who highlighted nominees whose values are genuinely reflected in their actions.

In collaboration with our local coordinators, we announced 99 local winners in each of the quarterly editions. This group included six global winners, one for each value and one for Pepco Management team’s special prize.

Sustainability

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Environment

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Governance

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