Brand damage, regulatory and compliance, climate change
We are committed to helping everyone create a home they love and this includes making it easy and affordable for our customers to shop and live sustainably. To achieve this, we need to understand and improve our environmental, social and governance (ESG) impacts across our supply chains.
Our commitments include reducing our carbon footprint, progressively improving the sustainability of raw materials and packaging, and ensuring that our suppliers (and colleagues) operate in accordance with recognised standards that uphold human rights and safety, and prohibit modern slavery.
We need to ensure our products are legal, fit for purpose, sourced ethically and, increasingly, meeting customer demand for higher environmental credentials. We have a pragmatic, risk-based approach, focusing primarily on products which are Dunelm branded or exclusive to us. These ranges account for 80-90% of our revenue and are sourced from around 150 suppliers with approximately 850 manufacturing sites. Gradually, we have extended our overall approach to cover other products such as food and drinks served in our Pausa cafes and third-party warehouses which store our products.
Our focus on ethical sourcing and the prevention of modern slavery extends to all of our suppliers of goods and services, and all suppliers are required to commit to our Code of Conduct (or equivalent policy). Further details are set out in our Ethical Code of Conduct, which is available here, and our most up-to-date modern day slavery statement, which is available at here.
Although Covid-19 related restrictions on travel and the closing of operations limited the number of site audits against our Code of Conduct that were carried out during the year, overall our progress was not materially affected. We learned that during the Covid-19 crisis our customers became more mindful about the environment and the sustainability of products, including evaluating ways to ‘make do’, reuse and upcycle, backing up the rationale behind product development ideas that were already in our pipeline.
Suppliers have to demonstrate compliance before we onboard them.
Our Quality Manual sets out our standards including factory approval process, audit requirements, sharps policy and manufacturing standards.
During the year, we developed our sustainability 2021 sourcing roadmap, taking into consideration environmental and social risks. This work helps set product sourcing priorities, standards and aspirations on a risk-assessed basis and covers five areas: materials, manufacturing, packaging, transportation and customers.
We are currently assessing our carbon footprint, but based on industry estimates the materials used in our products account for around 40% of our total carbon footprint. Some of our high-volume materials also entail other environmental and social risks. Based on these factors, our priority focus areas for materials are: cotton, timber, animal-derived materials (e.g. sheepskin, leather and feathers) and palm oil.
We use cotton in most of the textile-based products that we sell, such as bed linen, curtains and fabric. Cotton is farmed in over 100 countries and its production and export is vital to economies in many developing countries. However, there are also environmental and social risks associated with its farming and processing (e.g. high water and pesticide use, and poor regional working conditions). In 2019 we worked with a third-party specialist to map our cotton supply chains against these risks and identify high-risk regions or suppliers. Our first step is to work with suppliers to increase scrutiny and seek documented evidence to demonstrate compliance with our responsible sourcing standards. If no action is taken within an acceptable period, Dunelm will stop buying products from that supplier and supply chain. More information can be found in our Cotton Responsible Sourcing Policy, available to view and download here.
Timber is a scarce resource owing to illegal harvesting and deforestation. This is a global issue as forests play a critical role in limiting climate change and supporting biodiversity. In Europe, timber importers must comply with the European Timber Regulations (EUTR), which enforce demonstration of legal sourcing, and we request this information from suppliers who use timber or paper in Dunelm products. We also support the Forestry Standards Commission (FSC) certification scheme, which sets standards for well-managed forests.
We are working with an independent third-party to assess risks in our timber supply chains based on timber type and country of origin. This work is part of our commitment to source 100% of timber and paper in our own brand products from responsibly managed forests by 2025. We are also looking to introduce recycled timber in our products and reviewing other certified schemes. More details can be found in our current Responsible Sourcing Policy: Timber and Paper, available here.
Although we aim to seek alternatives if possible, some materials used in our products come from animals. These products include sheepskin and leather (used predominantly in our furniture ranges), down and feathers, wool and animal hair (used in quilts, pillows, cushions and upholstery). Our policy is unequivocal – we only use humanely-sourced materials, which are a by-product of the food industry and from conventionally farmed animals. No materials are sourced from reptiles, exotic or domestic animals, and no real fur may be used. We ban imports from certain countries where poor practices have been identified, for example, in the tanning process. Our animal and welfare policy is guided by the Farm Animal Welfare Committee’s Five Freedoms and used in conjunction with all current UK, EU and international animal welfare legislation and relevant import and trade regulations. More details can be found here.
We set ourselves the target of using sustainably sourced palm oil in all Dunelm brand and Pausa products by the end of FY20. At June 2020 our compliance was 90%. We have engaged a third-party assessor to manage this on our behalf alongside our responsible timber and cotton programme. We anticipate meeting our target of 100% by December 2020.
In 2019 we established a process to assess the environmental practices of all sites that manufacture our own brand products. This covers assessments for water, energy, waste and emissions reduction. We have assessed over 50% of our sites and already have a far better view of where we can make the most positive impact. For example, we have identified opportunities to reduce emissions by reducing pack sizes and weight and optimising use of transport. Much of this work overlaps with our packaging reduction initiatives. We will align this work to the carbon reduction targets that are being developed in FY21 to enable us to set priorities with our suppliers.
We use a third-party assessor to manage our social compliance auditing and modern day slavery due diligence. The Dunelm Quality team receives ‘live’ updates of supply chain risk ratings and works closely with our third-party assessor to actively manage continuous improvement of factory standards. We hold an industry-leading position, having carried out ethical audits in over 99% of Tier 1 supplier factories (for Dunelm own brand and exclusive products) with over 37% of audited supplier sites graded low risk, and a further 35% medium risk. The programme has been extended to our Pausa suppliers and third-party branded suppliers. In 2020 we launched our supplier portal that sets out compliance standards for working conditions in all our factories.