Climate Change Data

Environmental Metrics

ESG Focus Areas

• Environmental care
• Customer experience
• Employee engagement

Environmental Achievements

• Overall footprint decreased 7.5% from 7,297 tonnes to 6,752 tonnes of CO2e
• Overall waste tonnages decreased despite additional sales and acquisitions, maintaining waste management objectives to deliver a high recycling and recovery rate. Achieved over 98.3% of waste diverted from landfill.
• Majority of Macfarlane sites now purchase electricity through renewable sources.
• Four sites registered as FSC® accredited.

Social Achievements

• Reduction in accident frequency rate to lowest figure for 4 years
• Launch of new Safe Operating Procedures across Packaging Design and Manufacture Operations and Group Logistics
• 178% increase in reporting of Safety Observations
• Introduction of award scheme to encourage the reporting of safety observations
• New online safety awareness training introduced
• Increase in training hours for Packaging and Labels business in 2019 to 16 hours per employee (Group average 15 hours)

Governance Achievements

• Annual review of Board effectiveness and Board Committees effectiveness
• Consideration of Board composition with a focus on diversity
• Review of succession planning for Executive and Non-executive Directors
• Appointment of Andrea Dunstan as nominated Employee Director

Climate Goals & Targets

Environmental Challenges

• Weaker demand and sales price deflation impacting sales revenue from existing customers
• Demand weakness in the automotive sector impacting Packaging Design and Manufacture sales
• Increasingly competitive conditions in the retail sector impacting Labels’ margin
• Raw material price fluctuations
• Property costs
• Working capital investment recovery
• Financial liquidity
• Decentralised structure management
• Defined benefit pension scheme deficit

Mitigation Strategies

• Good growth in new business offsetting weaker demand and sales price deflation
• Actions to improve operational performance and margins in Packaging Design and Manufacture
• Effective management of input price changes on paper-based products
• Close work with suppliers to manage price movements
• Alternative supplier relationships to minimise dependency
• Redesigning packs to reduce packing costs
• Assigning, selling, or sub-leasing non-operational sites
• Rigorous management of trade receivables
• Regular review of inventory levels and order patterns
• Maintaining appropriate level of committed bank facilities
• Providing staff with right working environment, information, and sales tools
• Comprehensive management information system with KPI monitoring
• Closing the scheme to new members in 2002, amending benefits, and making deficit reduction contributions
• Careful review of potential acquisition targets and established due diligence and integration processes

Supply Chain Management

Responsible Procurement

• Close work with suppliers to manage price movements and ensure robust supply chain

Climate-Related Risks & Opportunities

Physical Risks

• Increased frequency of extreme weather incidents

Transition Risks

• Increased raw material prices
• Increased business interruption
• Reduced economic activity

Reporting Standards

Frameworks Used: ISO 14064-1:2006, TCFD

Certifications: ISO 14001, ISO 9001, FSC®

Third-party Assurance: EcoAct

Environmental Metrics

ESG Focus Areas

• Environmental
• Social
• Governance

Environmental Achievements

• Overall waste tonnages decreased despite additional sales and a further acquisition, maintaining waste management objectives to deliver a high recycling and recovery rate. Achieved over 99.2% of waste diverted from landfill.
• Majority of Group sites now purchase electricity through renewable sources.
• Twelve sites registered as FSC® accredited.

Social Achievements

• Maintained effective communication with employees during the pandemic.
• Provided mental health awareness training for senior managers.
• Implemented employee engagement activities and care packages.

Governance Achievements

• Board reviewed and approved the revised incentive programmes for employees.
• Board approved the repayment of government support received through VAT and PAYE/NIC deferrals and grants received for furlough payments.
• Board approved the reinstatement of market guidance and the recommencement of dividends.

Climate Goals & Targets

Environmental Challenges

• Covid-19 pandemic impacting demand, cash flow, supply chain, and employee wellbeing.
• Brexit-related risks to supply chain.
• Increased bad debt experience.

Mitigation Strategies

• Implemented safety protocols, furlough scheme, and remote work options.
• Stress-tested financial position and took actions to preserve cash.
• Maintained service to customers and adjusted staffing levels.
• Reviewed and implemented procedures to reopen sites safely.
• Monitored and mitigated supply chain disruptions.
• Increased diligence over customer credit and working capital management.

Supply Chain Management

Responsible Procurement

• Close collaboration with suppliers to promote sustainable business practices and supply more environmentally friendly products.
• Use of an Environmental Product Matrix.

Climate-Related Risks & Opportunities

Physical Risks

• Increased frequency of extreme weather incidents

Transition Risks

• Increased raw material prices
• Increased business interruption
• Reduced economic activity

Opportunities

• Development of energy-efficient products

Reporting Standards

Frameworks Used: TCFD

Certifications: ISO 14001

Third-party Assurance: EcoAct

Sustainable Products & Innovation

• Bespoke sized boxes with inserts for Halfords children’s bikes, reducing plastic packaging.

Environmental Metrics

ESG Focus Areas

• Climate change
• Customer engagement
• Employee engagement
• Supplier engagement
• Community engagement
• Governance

Environmental Achievements

• 20.7% CO2e intensity reduction in 2021 (1.6% absolute reduction)
• 99% of Macfarlane Group waste diverted from landfill
• Ordered five new electric trucks to be added to the delivery fleet in 2022
• Achieved a Gold rating in the EcoVadis sustainability survey (top 5% globally in the industry)

Social Achievements

• Launched employee assistance program aimed at improving mental well-being
• Average of 16 hours of training per employee in 2021 (increase from 10 hours in 2020)
• Company-wide bonuses at record levels in 2021, with 87% of employees receiving a bonus

Governance Achievements

• ESG is now a standing item on the Board agenda
• Appointment of Aleen Gulvanessian as a new Non-executive Director in October 2021
• Triennial review of remuneration policy, consulting with largest shareholders

Climate Goals & Targets

Environmental Challenges

• Challenging market conditions, including supply shortages of some materials and significant inflationary pressure on input costs
• Impact of Covid-19 pandemic
• Supply chain disruptions
• Increased input prices in all product categories
• Introduction of the Plastics Tax in April 2022

Mitigation Strategies

• Effective sourcing and increasing the efficiency of logistics and property portfolio
• Working closely with customers to pass through input price changes and minimize impact
• Maintaining strong partnerships with key suppliers
• Investment in a new Customer Relationship Management system
• Action plans to minimize the impact of the Plastics Tax

Supply Chain Management

Responsible Procurement

• Ethical sourcing (member of Sedex)
• Circular design & sustainability requirement training for procurement colleagues and Innovation Lab teams

Climate-Related Risks & Opportunities

Physical Risks

• Extreme weather events (flooding)

Transition Risks

• Changing customer behaviours
• Increased regulatory focus
• Risk of losing market share due to unfavorable environmental credentials

Opportunities

• Development of energy-efficient products and services
• Providing customers with unbiased advice on sustainable packaging

Reporting Standards

Frameworks Used: TCFD

Certifications: FSC®

Third-party Assurance: EcoAct (Atos)

Sustainable Products & Innovation

• Packaging Optimiser tool

Awards & Recognition

• EcoVadis Gold rating

Environmental Metrics

ESG Focus Areas

• Climate change
• Sustainable packaging
• Community investment
• Diversity & Inclusion
• Employee wellbeing

Environmental Achievements

• Reduced absolute scope 1 and 2 carbon footprint by 765 tonnes (11%), from 6,676 to 5,911 tCO2e. 628 tonnes of this reduction related to the sale of Macfarlane Labels.
• Increased renewable energy share to 88% (from 67% in 2021).
• 77% of customer spend on products attracting Plastic Packaging Tax switched to products with over 30% recycled content.
• Introduced first 16T electric truck to the fleet.

Social Achievements

• Launched colleague volunteer days, with 204 hours donated to charity.
• Launched partnership with Blue Cross charity.
• Increased Net Promoter Score to 50 (from 48 in 2021).
• Launched new Diversity, Equality and Inclusion Policy and training.
• Improved employee engagement survey participation rate to 57%.

Governance Achievements

• Appointed first female Chair, Aleen Gulvanessian.
• Increased female representation on the Board to 33%.
• Appointed a new Head of Sustainability.

Climate Goals & Targets

Environmental Challenges

• Slowdown in spend from the e-commerce sector.
• Inflationary pressures on operating costs (labour, energy, logistics).
• Increased input prices for paper and polymer-based products.
• Uncertainty over the impact of the cost of living on customer demand.
• Rising operating costs (labour and energy).
• Increasing interest costs.
• Risk of losing market share due to not being perceived as sufficiently environmentally friendly or by moving too fast in this area.
• Risk of increased frequency of extreme weather events affecting operations.

Mitigation Strategies

• Effective management of input price increases.
• Investments in IT and more efficient Distribution Centres to improve productivity.
• Focus on sustainable packaging solutions to reduce customers' carbon footprint.
• Introduction of electric delivery vehicles.
• Investment in solar panels at sites.
• Working with customers to redesign packs and reduce packing costs.
• Switching to alternative products to minimise the impact of the Plastic Tax.
• Prioritising engagement with potential new customers in growth sectors.
• Maximising benefits from the 'Packaging Optimiser' tool.
• Achieving benefits from IT investments.
• Accelerating progress in Europe through the 'Follow the Customer' programme.
• Realising benefits from the new distribution centre in the North-West of England.
• Planning a second major site consolidation in the East Midlands.
• Maintaining focus on working capital management.
• Supplementing organic growth through acquisitions.
• Staggered 2023 salary increases with the lowest earners receiving the highest increases.

Supply Chain Management

Responsible Procurement

• Strong partnerships with key suppliers.
• Focus on sustainable sourcing (FSC certified paper and timber).

Climate-Related Risks & Opportunities

Physical Risks

• Extreme weather events (flooding).

Transition Risks

• Changing customer behaviours (less packaging, more sustainable materials).
• Increased regulatory focus (Plastic Packaging Tax).

Opportunities

• Development of energy-efficient products and services.
• Helping customers reduce their carbon footprint.

Reporting Standards

Frameworks Used: TCFD

Certifications: FSC

Third-party Assurance: EcoAct (Atos)

Sustainable Products & Innovation

• Recyclable and recycled-content packaging.

Awards & Recognition

• Silver EcoVadis rating

Environmental Metrics

ESG Focus Areas

• Climate Change
• Diversity & Inclusion
• Governance
• Community Investment
• Supply Chain Sustainability
• Employee Well-being

Environmental Achievements

• 22% reduction in overall carbon emissions relative to 2019 baseline
• 89% of electricity sourced from renewables in 2023
• Five fully electric trucks operational with four more on order for 2024
• 11% improvement in fuel efficiency through driver performance program
• Solar panels installed at Grantham manufacturing site
• Recycled over 7,300 tonnes of packaging waste on behalf of customers

Social Achievements

• 66% reduction in accident frequency rates since 2016
• Diversity, Equality and Inclusion training program rolled out across Group management
• Over 750 volunteering hours provided during the year
• Supported strategic charity partner, Blue Cross, through fundraising, volunteering and logistics
• 'You said, we are taking action' initiative implemented to address employee feedback

Governance Achievements

• ESG Committee established with senior business leaders and direct reporting line to the Board
• Chief Executive and majority of senior management team have personal performance objectives on ESG
• Second full disclosure to Carbon Disclosure Project (CDP) completed
• Extending consideration and disclosure of climate-related risks under the Task Force on Climate-Related Financial Disclosures (TCFD) framework

Climate Goals & Targets

Environmental Challenges

• Significant cost and operational challenges in transitioning to a fully electric delivery fleet
• Limitations to charging infrastructure
• Uncertainty around the future viability and efficiency of electric commercial vehicles
• Maintaining operational capacity while transitioning to electric vehicles

Mitigation Strategies

• Investing in fully electric trucks
• Implementing driver performance program to improve fuel efficiency
• Installing on-site charging points
• Collaborating with leasing partner to accelerate electric vehicle uptake
• Developing a new Supplier Code of Conduct
• Strengthening supplier audit and assurance arrangements
• Undertaking Scope 3 mapping exercise to baseline total carbon emissions across the value chain

Supply Chain Management

Responsible Procurement

• New Supplier Code of Conduct
• Mandating Sedex membership for high-risk overseas suppliers
• Increased FSC certification across Group sites

Climate-Related Risks & Opportunities

Reporting Standards

Frameworks Used: Greenhouse Gas Protocol, Global Reporting Initiative (GRI), Task Force on Climate-Related Financial Disclosures (TCFD), CDP

Certifications: FSC (Forest Stewardship Council)

Third-party Assurance: EcoAct (independent expert review); EcoVadis (gold status)

UN Sustainable Development Goals

• Goal 7 (Affordable and Clean Energy)
• Goal 12 (Responsible Consumption and Production)
• Goal 13 (Climate Action)
• Goal 5 (Gender Equality)
• Goal 8 (Decent Work and Economic Growth)
• Goal 17 (Partnerships for the Goals)

Sustainable Products & Innovation

• Extended paper-based consumables range
• Increased recycled content on plastic products
• Introduced reusable packaging products
• Launched most sustainable stock-box range