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Corporate responsibility review 2011/12

Wm Morrison Supermarkets PLC

Food with thought

Corporate responsibility review

2011/12W

m M

orrison Supermarkets PLC

Who we are

Corporate responsibility review 2011/12 Wm Morrison Supermarkets PLC

Food is at the heart of what we do and we are passionate about it. Perhaps not surprising for a food retailer, but what is unusual is the way our business is structured.

Where possible we source locally, buy direct and manufacture at our own sites. We distribute to stores through our own network. This gives us close control over provenance, freshness and reduces waste, which means we can offer fantastic food at affordable prices.

Over the 2011/12 financial year, affirming our vertical integration model, we opened 37 new stores, acquired two manufacturing sites and opened a major new distribution centre.

We remain the UK’s fourth largest supermarket by retail sales as well as the second largest fresh food manufacturer. We pride ourselves on the quality of the fresh food we prepare in store and serve over 11 million customers each week.

Awards won in 2011/12

Fresh Produce Retailer of the YearDrinks Retailer of the YearFresh Flower Supermarket of the YearHighly Commended: Seafood Retailer of the Year

Best UK Company for Organisational Learning

Business Leader of the YearRising Star Award

Employer of the Year

Bakery of the Year (Morrisons Wincheap)

Best Scottish storeBest Welsh storeHead office initiativeMost innovative produce


Fresh Meat, Game and Poultry


Retailer of the YearMultiple Retailer of the Year

10 Morrisons Fishmongers awarded

Carbon Trust StandardRe-accredited

Corporate responsibility review 2011/12 1

Overview1 What’s in our Review2 Chief Executive’s statement 3 Responsible retailing

Friendly people…4 Introduction6 Training and skills7 Service and talent8 Ethics and conduct9 Colleague engagement and wellbeing10 Health and safety11 Whistleblowing and standards

Making great food affordable…

Making…12 The Morrisons farming programme15 Raw material sourcing16 Pesticide usage16 Commodities19 Fair working conditions

Great food…20 Healthy choices20 Promoting ‘fresh’22 Public Health Responsibility Deal

Affordable…26 M savers26 Great Taste Less Waste28 Food waste prevention schemes28 Packaging29 Recycling29 Carrier bags29 Charging for bags30 Reducing operational carbon emissions32 Refrigeration32 Store waste management32 Operational water management33 Logistics

For everyone34 Assessing our impact in town centres36 Supporting our local communities37 Tackling workplace and social exclusion38 Let’s Grow40 Save the Children partnership41 Uniform donations42 National charity collections42 International support

Governance44 KPIs48 Governance49 Management Board50 Stakeholder engagement51 Policy52 Government relations55 Assurance

Cover imageMarcin Czaderna, Baker, St Albans. We make 37 different varieties of bread from scratch in over 420 in store bakeries.

Friendly peopleSkilful people are our biggest asset.

Page 4

Making great food affordableMaking great food requires all the right ingredients.

Page 12

For everyoneOur food costs less because of careful management.

4

What’s in our Review

Annual report and financial statements 2011/12

This document reports on progress in our corporate responsibility programme from our financial year (52 weeks ended 29 January 2012) unless otherwise stated.

The Review should be read in conjunction with our Annual report and financial statements for 2011/12 which can also be found online.

www.morrisons.co.uk/crwww.morrisons.co.uk/corporate/ar2012

Scope of this Review

Annual review 2011/12

Also see…

Features

Overview2 Wm Morrison Supermarkets PLC

Friendly people making great food affordable for everyone.

Morrisons is different. We’re different because of our investment in skilled, service driven colleagues, our fresh food focus, our extensive manufacturing capability and our close relationships with British farm suppliers.

By making the most of these differences we’re building a business that’s about being ‘friendly people making great food affordable for everyone’.

To achieve this we’re committed to operating in a way that is not only right for our colleagues, suppliers and customers but also ensures we make a positive contribution to society and take good care of the environment. This Review shows that we’re making good progress against that commitment.

We want our customers to be served by ‘friendly’, engaged, skilled colleagues. Last year we reached a significant milestone on our talent agenda, with over 100,000 colleagues supported with training and a recognised qualification in retail skills or customer service.

‘Making great food’ starts with great ingredients, carefully selected and managed. Our farming programme was recognised at the Food & Farming Industry Awards for the contribution it makes to supporting British farmers. Further investment in our own farm at Dumfries House in Ayrshire allowed us to develop new programmes such as the re-establishment of traditional beef cattle breeds.

We’ve also made progress on responsible sourcing of food and ingredients that are traded globally, such as fish, palm oil and timber. These issues are challenging, but we are committed to playing our part by supporting systems that encourage sustainable trade.

‘Great food’ means a fantastic range of products that customers enjoy, with good availability and meaningful information to help people plan a balanced weekly shop. Our work on health, wellbeing and nutrition has been a key element of the successful launch of new product ranges.

Efficient processes, a vertically integrated business model and a cost-conscious culture enable us to drive out unnecessary waste. Ultimately, this helps us to offer our customers great food at ‘affordable’ prices. Over the last year whilst we’ve continued to grow we’ve also been able to reduce our carbon emissions and waste to landfill from stores.

In a tough economic climate we’ve also responded further to the needs of our customers in a very visible way with the successful launch of M savers.

‘For everyone’ relates not only to our customers but also to how we play our part in society. Let’s Grow helps excite young people about fresh food, appreciate its importance and understand better where it comes from. We reached more schools this year than ever before and shared our expertise on a Government Taskforce which was established to promote food growing in schools. Continuing our work on education, we’ve worked for a second year with Save the Children to help fund its award winning Families and Schools Together programme across the UK.

At Morrisons we are proud of what makes us different. By reinforcing these differences we’re building a business that is about ‘friendly people making great food affordable for everyone’ and that operates in a way that takes good care of people and the environment. In 2012 we’ll build on our momentum and maintain focus on making Morrisons ‘Different and Better than Ever’.

Dalton PhilipsChief Executive

Stores

475Customers per week

11m+Employees

131,000+

Chief Executive’s statement

Overview

Friendly people...M

aking great food affordable...For everyone

Governance

3Corporate responsibility review 2011/12

Friendly people making great food affordable since 1899…

Organisations that stand for something and reinforce this with their actions build trust. They are more likely to be around for the long term and contribute positively to society.

We have a strong heritage of providing service, quality and value for our customers, based on a distinctive offer centred on fresh food, craft skills and a vertically integrated business model. This approach to business has helped our company become one of the leading UK PLCs and in 2011 we delivered our best performance ever.

Looking ahead we will continue to draw on our strengths and be clear about what we stand for. The way we articulate this to our colleagues is that we should be ‘friendly people making great food affordable for everyone’.

This year’s Review follows this narrative to better illustrate how the particular focus areas of our corporate responsibility programme support this approach to doing business whilst taking good care as we grow.

Our conviction remains the same. We report on our existing commitments and key performance indicators as well as setting new targets where appropriate. We have included more detail and new reporting areas reflecting the development of our programme and responding to feedback from stakeholders.

This year, the Management Board asked Two Tomorrows to provide independent assurance of the Review and related key processes in the programme. In addition to a third party view on our work and how we communicate progress, assurance will provide valuable, critical feedback which will inform further development and how we report in the future.

The Assurance Statement is included in this Review — pages 55–56

Martyn JonesGroup Corporate Services Director

Responsible retailing

Friendly people…4 Wm Morrison Supermarkets PLC

We want Morrisons to feel different for our people so that it feels different for our customers.

We are committed to cultivating an environment in which everyone can develop. We also want our communities to benefit from our growth plans, by creating opportunities for local people.

Central to our approach is an award winning training and skills programme which allows our colleagues to be the best they can be. We believe this creates a positive and engaging working environment which leads to the best experience for our customers; one that attracts new shoppers, creates loyalty and brings people back time and time again.

RecruitmentAt Morrisons we believe in creating winning environments to bring the best out of our people. For us that means working with local people and ensuring that our employees are representative of our communities.

In 2011, we opened 37 new stores, creating 6,000 new jobs. Through 2012 we will create more than 7,000 new jobs as we continue our store expansion programme and develop our manufacturing and logistics operations.

We continue to invest in young people and their development. Our recruitment process also provides specific opportunities for people who struggle to gain a foothold in the labour market.

Typically, more than half the employees at a new store are previously unemployed and 75% are from the local area. We provide similar opportunities elsewhere in the business, for example, in our new Willow Green distribution centre which opened in 2011. We applied a tailored pre-employment programme designed to help new colleagues become job ready.

By giving people access to entry level jobs, qualifications and prospects, anyone can move through our business and build a career. By fostering a culture in which colleagues have the chance to develop the skills and confidence needed to progress in their careers, we believe that ordinary people can achieve extraordinary things.

To find out more about careers at Morrisons visit: www.morrisons.co.uk/corporate/jobs

Our Values

Can doGetting things done

One teamWorking well together

Bringing the best out of our peopleWe’re constantly learning and looking to improve on where we are

Great selling and serviceWe love to sell and serve

Great shopkeepingSetting the standard in all areas of our business

Fresh thinkingAlways looking for new and better ways of doing things

Skilful people are a company’s biggest asset

We want our people to have all the tools they need to do their job to the best of their ability and provide great service with a smile.

Friendly people…

Overview

Friendly people...M


Governance


“I’ve worked as a fishmonger for over 30 years and we value craft skills the same way we’ve always done. We’re always looking for new ways to excite our trainees and bring out the best in our people.”

Andrew SpeightMorrisons Fish Specialist

Morrisons trainee fishmongers on a new skills development programme at Billingsgate Seafood Training School.


Training and skillsMorrisons AcademyIn total, around 30% of our senior management team has progressed in the business from the shop floor. Around 95% of our store managers are also promoted from within.

Last year over 5,500 people progressed from the shop floor to managerial positions and our ambitious growth plans mean that there will be more opportunities than ever before.

Through our award winning Morrisons Academy we are able to support people at all stages in their career. In the last 12 months we have delivered over one million training days.1

Masterclasses have been developed with industry specialists to up-skill colleagues in areas such as wine and food matching, produce, cheese and floristry.

Through the Morrisons Academy, we hit our target to train over 100,000 colleagues in retail skills or customer service with a nationally recognised qualification at QCF Level 2 (equivalent to five GCSEs at grade C or above).

Our apprenticeship programme supports the Government’s broadening scope of training provision. They fulfil a variety of needs: technical for highly skilled jobs, craft skills such as butchers, bakers and fishmongers and general apprenticeships for people needing a first helping hand to get on the career ladder.

All apprenticeships have their merits but we believe they should be categorised more clearly so that the wider public better understands how they fit into a career structure. They are available to existing and new employees of all age groups.

Over the year over 4,000 colleagues moved into junior management roles having first successfully completed an apprenticeship. We’re committing to training 15,000 apprentices in 2012.

Friendly people… – continued

Case study

Mastercraft

We believe we have more craft trained people than any other retailer. To further reinforce the role these colleagues play in making great food, we launched our Mastercraft competition. Over 1,000 of our butchers, bakers, fishmongers and cheesemongers entered. The best showcased their skills in a ‘Masterchef’ style finale. In 2012, the four winners will have the opportunity to further develop their skills and expertise.

Commitment for 2012All new colleagues joining Morrisons will train for a QCF Level 2 diploma in either retail skills or customer service as part of the Retail Skills Training Programme, with the option of increasing this to a full apprenticeship.

Since the introduction of the Academy in 2009 we have seen a 7% increase in productivity and a 6% increase in retention.

1 Approximately 786,000 of these days are the first three months for new retail colleagues undertaking the in-house training, providing our people with specialist knowledge for their function as well as consistent core skills – all linked to our Values, ensuring we strengthen and preserve the unique Morrisons culture.

Overview

Friendly people...M


Governance


Hello, Offer, Thank (HOT) serviceWith more customer facing colleagues in our stores than any other UK supermarket, we have a unique opportunity to set ourselves apart from the competition by delivering excellent customer service.

In 2011 we developed our Coaching for Service programme, which championed our new HOT initiative promoting warm and friendly customer service. Over 3,500 senior store managers attended the programme and following the event, 110,000 store colleagues received cascaded skills coaching.

As a result, we’ve seen a significant step change in our customers’ perception, including a 21% increase in the degree to which customers would recommend us to others and a 56% increase in the number of compliments we receive. Additionally, we’ve recorded leading service scores in mystery shopper exercises carried out by the industry publication The Grocer.

Leadership talentIn partnership with Leeds Metropolitan University and Leeds Carnegie, we established a Centre of Excellence for Coaching.

The centrepiece is a Coaching for Performance programme, built with input from former Commonwealth champion Matthew Syed, which translates methods of winning sports teams into success in the business environment.

Over 4,000 managers from retail, manufacturing, logistics and head office have now attended Coaching for Performance since 2010. The resultant common mindset approach to motivating, training and rewarding our people has become a way of life at Morrisons.

Coaching our people to be the best they can be has significantly increased how our colleagues feel about working for the Company.

Through the skills they acquire from this programme, our managers are better able to offer meaningful support, stay close to workload pressures and coach ‘on the go’.

During January 2012, we successfully launched the first M Futures cohort for Foundation Degree candidates in partnership with Bradford University and Elmfield Training. The programme consists of 12 modules combining classroom and work based learning. Candidates have access to a variety of resources including online support and on the job coaching for the duration of the three year programme.

AboveMark Johnson, Store General Manager, Camden, which was named Store of the Year at our Better than Ever Awards.


Training and skills development in 2012We will continue to build our talent pipeline and through our accelerated development programme for future business leaders we will further develop M Futures – our programme for graduates and school leavers.

We will continue to offer industry leading apprenticeships as well as engaging with interested parties and Government on the debate about how best to recognise and enhance their value in the modern workplace.

We will strengthen our Coaching for Performance programme further, to incorporate The Morrisons Way; the values and behaviours we expect all of our leadership team to live by.

On the top floor, we’ll progress our unique Advanced Leadership programme, which prepares members of our senior management team to become the executive directors of the future.


Case study

Women in business

Morrisons was one of the first major businesses to respond to the Lord Davies review into women on boards. Last year we committed to increasing the female representation on the Company’s senior management group from 13% to 30% by 2014. We are making strong progress on this commitment and we now have 20% representation at this level.

Through our participation in the Pearls Women in Business initiative, we’re also providing our talented women with external networking and development opportunities for the next stage of their career in senior management.

Ethics and conductEquality and diversity policy Equality and diversity at Morrisons is about respecting difference. We treat all colleagues, customers, job applicants, contractors, suppliers and visitors fairly, equally and with respect. We value the diverse skills and talent that different individuals can bring to our Company.

At Morrisons, we will not tolerate any form of discrimination, victimisation, bullying or harassment on account of an individual’s difference. In addition to legislative requirements, our business values and policies protect the rights of individuals on the grounds of gender (including pregnancy), sexual orientation, religion or belief, marital status (including civil partnership status), age, race (including ethnic or national origin, colour or nationality) and disability. Colleagues are not treated less favourably on account of working part-time, being on a fixed term contract or being a trade union member.

Ongoing training for colleagues, as well as actively putting our policy and procedures into practice, supports a culture which is equal as well as diverse.

We take positive action to address any under-representation of a particular group within our business. For example, we identified women in senior management positions as being an area of focus for 2011.

Overview

Friendly people...M


Governance


Colleague engagement and wellbeingEngagementIn 2011, over 100,000 of our colleagues participated in our colleague opinion survey to give us their thoughts on life at Morrisons. As a result of their feedback, we invested in enhanced family friendly policies, ensuring that we offer support at key stages of our colleagues’ lives. This led to significant improvements to our maternity, paternity, bereavement, sickness and compassionate leave policies.

Regular dialogue is a fundamental building block for engaging our colleagues and we continue to seek their views. Our Pulse Survey regularly invites over 12,000 colleagues to answer a colleague opinion survey and consistently attracts a 90% response rate.

RewardsKeeping colleagues informed of our revised rewards package was considered a priority. To address this we sent colleagues a comprehensive update to complement enhanced online and workplace information. As well as outlining details of our new family friendly policies, hardship fund, enhanced holiday and sick pay we reminded colleagues of existing opportunities and benefits. These include profit share (which 113,000 colleagues benefited from in 2011), a share saving scheme and a colleague discount card.

To recognise long service, colleagues receive a service award which gives recipients an increase in extra benefits at various years of service. At 25 years, we help our colleagues celebrate this landmark anniversary in style, with a 25 years’ service event. In the last 12 months over 500 colleagues have attended.

WellbeingOur focus on creating long term employability, by carefully balancing care and respect for our colleagues with the commercial needs of the business, is proving successful. Our wellbeing programme, which began in 1993, has helped produce a 60% fall in absence. Absence is now at 3.3%,1 despite a five-fold increase in colleague numbers. Our commitment to colleagues’ health and wellbeing is exemplified through our in-house occupational health team who support and advise colleagues on their return to work.

We recognise the physical challenges facing our colleagues at manufacturing and logistics sites. We now operate a fast track muscular-skeletal physiotherapy service which provides on-site diagnosis and treatment.

Over the last year, we also provided 27,000 free flu jabs to our colleagues and continue to offer free independent and confidential advice through the Retail Trust. We also provide health screenings and last year introduced healthier menus in our staff canteens.

Retirement In 2011 we established a Morrisons Plus Retirement Club, which provides benefits and support to our retired colleagues. Over 5,000 colleagues are now signed up to Morrisons Plus.

In April 2012 we announced a new type of deferred benefit pension scheme that will provide a guaranteed pension fund on retirement. The new scheme will be available for colleagues to enter, regardless of where they work in the Company.

“USDAW has been very concerned about the pensions of shop workers and so the announcement by Morrisons that it is to offer our members the opportunity to guarantee their pension fund when they choose to retire is something we wholeheartedly support.”John HannettUSDAW

1 As at 31 December 2011.


Health and safetyWe are committed to achieving and maintaining the highest standards of health and safety across the Company. We have achieved a downward trend in accident rates since 1999. However, we recognise that maintaining this trend will become more difficult as we expand and the Group becomes ever more complex.

We benchmark our performance against competitor organisations and against those companies in wider industry who are recognised as having world class safety management systems.

Our Management Board adopted the joint Health and Safety Executive and Institute of Directors guidance ‘Leading Health and Safety at Work’. They received refresher training during the year delivered by our legal advisers.

Despite our rapid expansion our enforcement record remains excellent. The manufacturing and logistics divisions did not receive any formal enforcement action in 2011, whilst the stores had only two prosecutions resulting from localised systems failure. It is our policy to cooperate fully with the enforcement authorities and take whatever action is reasonably practicable and available to us to prevent further incidents and put in place suitable remedial actions.

Commitments in 2012In order to ensure our colleagues and customers enjoy a safer place to shop and work, we will, during 2012, convert our health and safety management system to the internationally recognised standard BS OHSAS 18001:2007 Occupational Health and Safety Management Systems. This is based on the principles of continuous improvement and we believe it will help us achieve our target of an accident rate reduction of 20% in total accidents and 30% in reportable accidents (under the provisions of the Reporting of Injuries, Diseases and Dangerous Occurrences Regulations) over the period 2011 to 2013.

We are in the process of instilling both a top down and bottom up approach to the management of safety within our manufacturing division. We are actively involving our frontline employees in the identification of issues and their resolution before they have the opportunity to cause harm.

All managers throughout the Group now receive health and safety training provided by the Group health and safety team as well as ongoing expert advice and assistance.

2011 1,355,009

2010 1,380,758

2009 1,350,771

2008 1,460,773

2007 1,435,864

2006 1,528,346

2005 1,586,650

2011 38.4

2010 40.5

2009 41.6

2008 46.6

2007 46.3

2006 48.7

2005 48.9

2011 119,177

2010 122,846

2009 130,463

2008 128,992

2007 139,509

2006 136,732

2005 149,751

1. Retail 80%2. Logistics 13%3. Central 1%4. Manufacturing 6%

1

2

34

1. Electricity �57%2. Gas 9%3. Haulage 9%4. Staff travel �3%5. Business miles 1%6. Refrigeration 19%7. Waste 2%

1

2

3

6

7

54

1. Good �38%2. Neutral 40%3. Bad 19%4. Not sure �3%

1

2

3

4


1. Good 69%2. Neutral 20%3. Bad 8%4. Not sure �3%

1

2

3

4

1

2

34

45,000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Rate of colleague accidents (per 100,000 colleagues)*

Total carbon footprint (tCO2e/yr) 2011 Footprint breakdown by division (tCO2e/yr)

Carbon intensity for the combined estate (kgCO2e/ft) 2011 Footprint breakdown by source (tCO2e/yr)

Haulage carbon emissions (tCO2e/yr)

40,000

35,000

30,000

25,000

20,000

15,000

10,000

5,000

0

Rate of colleague accidents *Reportable and non-reportable accidents (excluding agency workers and contractors)


Overview

Friendly people...M


Governance


Whistleblowing and standards‘Tell Us’We encourage all colleagues to be aware of their working environment and the actions of other employees and third parties around them.

‘Tell Us’ allows colleagues to raise any concerns they have about practices that may affect the business and our reputation, such as fraud, damage to property, bribery, breaches of health and safety law, breaches of food safety law, unethical behaviour and environmental issues.

‘Tell Us’ operates through an independent third party and is completely confidential to encourage colleague participation.

Bribery and corruption We run our Company honestly and will not tolerate bribery or corruption from any of our colleagues in any of our dealings or relationships.

Everywhere we operate we have systems in place to prevent bribery and corruption and meet the law in the UK (specifically the Bribery Act 2010).

1 Employee stability is defined as the percentage of employees remaining within the Company (year on year) who have been employees for more than one year.

2 As at 31 December 2011.

Friendly people – results Colleague engagement has improved by 3% since we started our Climate Survey

Absence 3.3%

Labour turnover 16.17%

Employee stability 86.95%1

The benefit of these improvements is estimated to be worth approximately £12m to the Company.2

Awards

In summing up the win in March 2011, Oracle Retail Week judges said: “This retailer has led the way in developing thousands of its employees, helping its people gain qualifications and develop skills which in turn help the business retain its unique point of difference”.

Grocer Gold Award for Employer of the Year in June 2011 for the second year running, thanks to what the judges described as our “all-round holistic approach” to staff training and development. The judges cited our commitment to skills development through apprenticeships and QCF qualifications and our work with vulnerable people.

Following our announcement about the 100,000 sign-ups, Morrisons was named the Best UK Company for Organisational Learning by the Chartered Institute for Personnel Development (CIPD) in October 2011.

Morrisons was named as one of the top 100 Apprenticeship Employers 2011 in the Times. We were the only retailer to make the list.

Making great food affordable…12 Wm Morrison Supermarkets PLC

To make great food products you have to start at the source. That means working closely with farmers, seafood suppliers and food manufacturers.

Where we have influence we encourage and promote responsible practices and a longer term view throughout our supply chain.

The Morrisons farming programmeBritish farming and its long term viability is essential to our business. We don’t just buy from the farmers we work with; we support the farming community. To do this more effectively we established an expert-led programme in 2009.

Our farming programme now covers a broad range of issues from keeping British farm products competitive and affordable to strengthening our commitment to animal welfare and environmental improvement.

At the core of the programme are our supply chain groups that help us to ensure that the work we do is fully focused on current practical issues affecting suppliers and their concerns for the future. The groups are comprised of farmers and processors.

Sustainable farmingWe now have well established supply chain groups representing dairy, eggs, chicken and beef. Looking ahead, with advice from our groups, we plan to invest over £2m in the next four years through further applied research into long term sustainable farming.

One of the key features in 2011 was the strengthening of our farming programme’s focus on helping to produce affordable food sustainably.

We completed 16 projects to support the development of our agricultural sectors in these challenging times. Below are some examples of the innovative work that we undertook.

Animal welfareMuch of our work in 2011 was on welfare in our chicken and egg production system. We moved our fresh UK sourced housed chickens to a higher welfare regime where all birds get access to environmental enrichment. This includes natural light, bales, pecking objects and perches, and improves the lives of birds that are not under free range or organic regimes.

To verify the benefits we concluded one of the first commercial research projects, in partnership with Bristol University, to look at environmental enrichment in housed systems. The results showed a significant improvement in bird welfare.

Birds supplied to us are now monitored weekly against key welfare indicators through a database management system. We believe this is more effective than a standard annual audit process.

We have also completed two major scientific reviews to support our free range egg producers. This included a review of existing and emerging health issues affecting free range hens.

Animal welfare is also a key feature in our dairy ‘focus farm’ events. This year we provided training for farmers on cow comfort and commissioned a detailed study that looked at the latest information around housing the 21st century dairy cow.

Making...

“I think the environmental enrichment in all the sheds holding Morrisons chickens is brilliant. As soon as you look in there you notice the difference. The windows make it a really bright, well lit area and the birds are really active.”Billy DaviesFarmer

Making great food requires all the right ingredients

That starts with close relationships with suppliers we trust, innovation in the present and careful planning for the future.

Overview

Friendly people...M


Governance


“Despite the poor weather conditions we managed to have a good crop of barley to feed our pedigree herd of traditional shorthorn cattle and all the livestock came to the winter in good order.”

Andrew RobinsonMorrisons Farm Manager

Andrew Robinson, Farm Manager

at the Morrisons Farm, Dumfries House, Ayrshire.


Animal feedsMany will be aware of the debate around GM crops and their use in animal feeds (soybean in particular). Some retailers, including Morrisons, maintained a requirement that feeds used for poultry should not come from GM sources.

This was inconsistent with feedstock guidance for other species, added cost for suppliers and there is no evidence of any negative impact to human health.

With the challenges around changing patterns of global crop production systems and the need to increase food supply we reviewed our policy and announced that we would allow poultry suppliers the choice to use feed incorporating GM crops for non-organic poultry production.

Morrisons Farm at Dumfries HouseOur farm in Scotland continues to be a valuable asset to promote the benefits that British farming offers our business and a clearer understanding of the challenges.

In addition to work to build the farm’s infrastructure, in 2011 we undertook three significant projects. The first was to have land prepared for a high protein crop that we hope will provide us with home grown material and limit our need to purchase proteins for animal feed.

We’ve used the findings in our grasslands report to start a five year programme to develop the grassland on the farm, so that we have the most productive soils with the lowest inputs.

Finally, we are trialling new technologies that improve efficiency and welfare. We are part of a project that uses smart collars for cattle. The devices alert our farm manager of any health issues for individual animals by sending a text message the moment a problem arises.

BiodiversityIn tandem with our research on improving free range egg production systems, we concluded the development of our ‘Nature’s Nest’ range enrichment project. Nature’s Nest eggs can be found in our stores and represent the practical application of a number of studies. The development work focused on tree planting and creating biodiversity action plans for our egg producers. The aim is to further improve conditions on the farms for the hens and, at the same time, enhance the local environment.

The programme was established with advice and support from the Farming & Wildlife Advisory Group. The conditions associated with the scheme, in particular the planting of local native tree species which encourage hens to use the space available for them, must be adhered to by suppliers of eggs sold under our Nature’s Nest brand.

Reducing the environmental impacts of farmingWe conducted a survey on the carbon footprint of 110 dairy farms to find out how we can continue to reduce Greenhouse Gas emissions while keeping our farmers competitive. The results were very encouraging, indicating that our farmers are well on the way to meeting Government targets. The differences between the top third and bottom third provided clear direction on how we can help suppliers improve. Our view, based on the work we conducted, is that the most profitable farm businesses are also the most environmentally efficient.

The success of this project led to the development of a series of ‘focus farms’ that are able to share their best practice with other dairy farmers.

We plan on conducting similar emissions related surveys across our chicken and egg supply base in 2012.

Soils and grasslands are Britain’s biggest asset in both arable and livestock farming. They are often the only main asset that is passed from generation to generation. We completed a major project, at the request of one of our dairy farmer groups, to provide the latest knowledge around resilient grassland management.

The result is an innovative report that has been distributed to all our dairy farm suppliers. We have also used the same principles to showcase effective soil and grassland care on our own farm at Dumfries House.

AboveDavid Evans (centre), Head of Agriculture.

Making… – continued

Overview

Friendly people...M


Governance


Fruit and vegetablesPopular produce such as carrots, broccoli, swede, potatoes, cabbage, parsnips, onions, sprouts and strawberries can all be British in our stores when fully in season.

In August at peak season, we calculated that on one day we had over 146 British lines in store, which equated to around 13m pieces of fresh fruit and vegetables.

Again, because we have direct relationships with farmers we are able to buy whole crops and have them transported to our own manufacturing sites. There, they are washed, graded and packed before we transport them through our network to stores.

This gives us flexibility in how the crop is used. Smaller vegetables can be used in a different way, sold through our ‘M savers’ lines or used in animal feed if damaged. It means we waste less, reduce costs and offer customers greater value.

WheatFurthering our commitment to British sourcing and our vertical integration model, in 2011 we launched a new range of breads specially produced at our own central bakeries, which now use 100% British wheat.

Raw material sourcingWe operate a complex and fast paced business, but it’s incumbent on us to ensure that the decisions we take about how we operate and where we buy from are undertaken with care. Supporting sustainable supply chains through purchasing, particularly for certain key commodities for own brand products, is a significant part of our commitment to responsible business.

Supporting British producersOur business model is unlike our competitors’ and we believe it has inherent benefits in terms of competitive advantage as well as reinforcing our credentials around provenance and sourcing.

Where possible we source fresh British produce locally and process or manufacture food in our own facilities. We distribute through our own modern transport fleet into stores where highly trained colleagues prepare fresh food responding to customer needs. The extent to which we do this places us in a very different position to our competitors. It means we are able to minimise waste and make more efficient use of the valuable raw material we buy.

Over the year we increased our manufacturing capability with two new sites and will acquire more in 2012 as part of our strategy to extend this part of our business alongside more stores.

MeatIn 2011 we maintained our commitment to buying fresh (unprocessed) beef, pork and lamb from British suppliers. Our meat buyers contract with farmers to buy their livestock and have them transferred direct to our own abattoirs.

Large cuts of meat called primals are then transported to stores where our butchers can cut them exactly how customers want them. We also supply our own food preparation sites to make our own pies, sausages, cooked meats and other products.

It adds up to a better deal for farmers, close control over quality, more choice for customers and importantly, from a sourcing perspective, better use of valuable resources.


Pesticide usagePesticides are a range of products that are designed to protect plants. Many are altered versions of natural chemicals such as pyrethrums derived from chrysanthemums. Correctly used, pesticides protect crops from insects, weeds and diseases, prevent contamination in storage and safeguard human health by stopping crops being contaminated by fungi.

We carefully manage the use of pesticides by our suppliers on fresh fruit and vegetables through a risk assessment process. This protects workers, the environment and consumers. This is especially important for control of produce that comes from outside the European Union.

Our programme helps to minimise the occurrence of pesticide residues, phase out more hazardous variants, promote bio-pesticides and encourage best practice around the world.

In the European Union, limits are set on how much residue can legally remain in food. These limits are called Maximum Residue Levels (MRLs) and in the UK are regulated by the Chemical Regulation Directorate. Pesticide MRLs are not safety limits but are based on good agricultural practice and are usually well below the levels that would be of concern for people’s health.

We have a comprehensive residue testing programme aimed at crops and countries where residues are more likely to be found. Our facilities test over 450 types of chemical on selected samples. In 2011, only 2% of samples exceeded the relevant MRL (compared to a retail average of around 5% from sample testing, according to the Government in their most recent report). Where samples exceed an MRL, we ensure the supplier addresses the issue and we carefully monitor their operation.

New reports suggest that some pesticides may have an unintended negative impact on bee populations. To start to address this, our controlled pesticide list has been amended to

exclude chemicals that may harm bees. More generally, we are also taking a more structured approach to phase out pesticides of concern, such as endosulfan.

In 2012 we will build on the training and technical support available to suppliers as well as promoting integrated pest management. Our programme is critical to maintaining the high standards we set for our fresh fruit and vegetables, particularly as we extend the variety of fresh produce available in store.

CommoditiesWe are committed to playing our part in a wider movement in food retailing that supports responsible sourcing.

SeafoodSeafood is a major source of natural capital. It generates significant economic output, affects livelihoods around the world and is a major element in global food security.

Fresh seafood is a significant part of our in store experience for customers and our fishmongers take pride in offering customers a wide variety (over 50 types) of seafood over the year. In 2011, we maintained our Marine Stewardship Council (MSC) chain of custody accreditation, giving customers the confidence that MSC certified fish on offer on the counters has come from a sustainable source.

On our counters our fresh tuna is Responsible Fishing Scheme approved and in terms of accredited schemes, all our Scottish salmon has Freedom Food status.

In relation to canned tuna and tuna used in own brand products, we’ve continued to work with suppliers to move towards the commitment we made in early 2011 to buy tuna that, by the end of 2013, is either pole and line caught or sourced from fisheries free from fish aggregation devices.


Overview

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Governance


Our own manufacturing sites bought RSPO ‘Book and Claim’ (GreenPalm) certificates corresponding to the palm oil we used in own manufactured products. We will do so again for 2012 and our challenge is to move to fully segregated palm oil as it becomes more widely available.

We’ve also made good progress on labelling own brand products that contain palm to clearly state on the pack ‘palm oil’ instead of a more generic ‘vegetable oil’ description.

SoyaLike palm oil, the growth of soya plantations fed by increasing global demand has had a significant impact on natural habitats, particularly in South America.

We have now joined the Round Table on Responsible Soy (RTRS) alongside other retailers. RTRS is an organisation promoting responsible supply chains for soya production with a focus on protecting biodiversity and land management.

We have not yet made a time-bound commitment to RTRS sourced soya as the RTRS system remains in its relatively early stages. We will continue to support its development.

Most soya (around 80%) in the UK presents itself in animal feed so we are looking at practical ways to reduce reliance on this type of feed through the Morrisons farming programme. This longer term solution remains a work in progress but we will make any research findings public if they can be proven and clearly established.

TimberWe have a long term commitment to sell own brand products that use timber as their source from certified supply chain systems. This ensures careful management of forests and prevents unregulated deforestation, which is a factor in climate change and leads to the reduction of biodiversity.

Alongside many other businesses we have been supportive of certification systems such as the Forest Stewardship Council (FSC) scheme. Our internal paper based resources and marketing materials are sourced from FSC accredited suppliers.

In store, all our own brand tissues, toilet rolls and household wipes, as well as all greeting cards, are FSC certified. In 2012, we will review relevant categories to see where there are opportunities to increase FSC (or equivalent) coverage.

Issues such as responsible global fish sourcing, however, cannot be tackled alone. We take active participation in sourcing groups such as the British Retail Consortium Fish Sustainability Group. In 2011 we were one of the initial signatories to an important coalition of fish industry businesses brought together by ClientEarth to form the Sustainable Seafood Coalition. The current focus of the group is to establish a voluntary industry code on claims-led labelling, positive reform of European policy on issues such as discards and promoting responsible alternative choices to ease pressure on popular species.

We announced that we will launch our own seafood processing business. The Company has acquired a site in Grimsby and it will be equipped for seafood production by the end of 2012. Morrisons will be the first major food retailer in the UK to source fish direct from the quayside and process it for sale across the country.

In addition to the appointment of a new Head of Commercial Seafood last year, we have invested in additional specialist resources in fisheries and aquaculture to focus our business more keenly on sourcing and sustainability.

“Morrisons is supporting the development of the Sustainable Seafood Coalition and, on a practical level, the production of voluntary codes of conduct which we see as an essential element of a longer term solution for sustainable seafood.”ClientEarth SSC Secretariat

Palm oilConcern over the use of palm oil and its derivatives stems from the way palm oil plantations have been created. In some cases, replacing valuable primary forests has resulted in loss of biodiversity and threatened people’s livelihoods.

Alongside other companies we support a responsible supply chain system administered through the Roundtable on Sustainable Palm Oil (RSPO).

This is a complex issue, but by working with suppliers we have moved ahead towards our publicly stated target to use sustainable palm oil in own brand products by 2015.

BelowPalm fruit image courtesy of RSPO.

BelowFSC certified toilet rolls.


FlowersWe acquired Flower World in 2011, further extending our credentials in fresh flowers and strengthening our vertical integration strategy. Flower World is one of the leading flower importers and distributors in the UK and prides itself on having strong working relationships with both growers and farmers.

Most of our UK and European flower growers now have membership to one of the following environmental certification schemes:

• LEAF(LinkingEnvironmentandFarming);

• BOPP(TheBritishOrnamentalPlantProducers);

• GLOBALG.A.P.

Suppliers outside of the EU are also regularly audited by Flower World to ensure high standards throughout our global supply chain.

Afriflora is a major supplier of our roses from growers in Ethiopia. They are members of the Fair Flowers Fair Plant certification scheme and follow internationally recognised standards such as MPS-A and MPS-SQ. They also provide long term investment into community projects focused on education, healthcare, working conditions, sustainability and the environment.

In addition, Morrisons is a member of a new HRH International Sustainability Unit group concerned with flower growing around Lake Naivasha in Kenya. Issues over water use and the effect on the lake ecosystem must be addressed to protect the environment and local livelihoods.

FairtradeWe support Fairtrade with a variety of products in store in key categories. Fairtrade certification can address important issues in poorly performing supply chains. It leads to decent working conditions, local sustainability and fair terms of trade for farmers and workers in the developing world.

All of our roast and ground coffee is now Fairtrade and in 2011 we made a major commitment by switching the majority of our granulated and baking sugar through our supplier Tate & Lyle to Fairtrade. The move means that we became Europe’s largest seller of Fairtrade sugar and an additional £1.2m of Fairtrade premiums will be paid annually to primary producers overseas.

GMWe maintained our long established policy to exclude any GM ingredient in own brand products. This forms part of our core product specification and we carefully control this through an ongoing monitoring programme.

BelowAll our in store flowers are now supplied by our Flower World subsidiary.


Overview

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Governance


Fair working conditionsWe are committed to fair working conditions for people in our supply chain. Our approach drives best practice and improves conditions for workers at home and abroad.

All our suppliers agree to abide by our Ethical Trading Code, which sets out fundamental rights for employees and obligations for the supplier. We audit own brand suppliers against the core criteria of the Code through an independent company, Fair Working Conditions (FWC). We select candidates for audit based on a risk assessment process. This means that we focus on areas where there may be concern such as emerging markets, poorer application of local laws, high labour turnover or areas highlighted by reports from stakeholders.

In the vast majority of cases we achieve a successful outcome because we focus on mutually beneficial common goals based on a partnership approach. Suppliers fall foul of the process where they have either materially breached the Code, present a number of failures but do not recognise this or do not effectively address areas of concern.

Since its inception in 2007, our global auditing programme has made significant headway in promoting better employment standards. 2011 was another productive year.

Almost 100% of UK suppliers audited by FWC have achieved compliance with the Morrisons Ethical Trading Code. Specific areas of improvement in the UK included health and safety standards, the eradication of excessive overtime practices and insistence on uniformity of hiring practices for employment agency workers.

AboveFWC audits have included fruit picking on UK farms.

In China, the major challenge was the reluctance of many workers to openly express their concerns to FWC auditors. With greater experience, FWC auditors began to win employees’ confidence. Workers are increasingly volunteering additional comments and invaluable insight into understanding site conditions. The majority of management act on this feedback, responding with meaningful positive change.

FWC has conducted a limited number of audits in India, but targeted tea audits identified some of the most significant failures observed in recent years. As suppliers began to better understand international standards and appreciate the benefits of a healthy working environment, commitments have been made to long term corrective action plans with immediate tangible improvements.

Likewise in Bangladesh where initial findings for some suppliers raised issues. FWC, on our behalf, has made the case for ethical employment practices and employers responded positively to effect improvement. Sensitive issues such as discrimination have been tackled head on. A number of initially non-compliant suppliers obtained full FWC approval in 2011.

In other regions, Kenya being a good example, pragmatic FWC supplier support, education and guidance regarding multiple, but often minor, irregularities was all that was required to give potential suppliers the opportunity to gain accreditation.

The challenges confronted by FWC vary immensely from one geographical region to another but the objective, the promotion of best employment standards, is a borderless constant.

...Great food...


There are many elements to ‘great food’ and in the context of being responsible we focus on health and nutrition.

As a food business, we must take responsibility to promote health and wellbeing to both our customers and colleagues as an essential part of daily life. We want to make it easier for them to make healthier, informed choices and engage in more active lifestyles.

Over the past year, we’ve seen a number of developments in our work on healthy living, including further investment in nutrition and food innovation teams. Behind the scenes, a nutrition tool was designed to assist our developers in the creation of healthier products across our portfolio. This will help us to reduce salt and saturated fat, where possible, and without compromising on taste.

Healthy choicesEat Smart All of our Eat Smart products are either low fat (less than 3%) or significantly reduced in fat and/or sugar. To be included in our Eat Smart range, products must also meet strict criteria for calories, saturated fat, sugar and salt. Eat Smart products are designed to support customers who are following a calorie controlled diet. We regularly promote Eat Smart products in our in store magazine and online.

Little green badges On a variety of our own brand packaging, you’ll find green badges that highlight products which we would encourage customers to consider as a part of a healthy balanced diet.

Throughout 2012, our plan is to revive and further improve our healthy product range in line with the relaunch of our chilled meal solutions.

Nutritional website We launched ‘Market Street Nutrition’ on our website, allowing customers to check the nutrition of items which are made or prepared in store. The information currently covers the in store bakery, cake shop, salad bar, oven fresh counter, pizzas and sandwiches.

www.morrisons.co.uk/food-and-drink/healthy-eatingwww.morrisons.co.uk/market-street/nutritional-information

Promoting ‘fresh’Fresh produce is the starting point of our stores. Our new concept stores, established in 2011, firmly placed fresh fruit and vegetables at the forefront of customers’ minds. In 2012 we will be rolling out expanded lines of fresh fruit and vegetables across our stores to further increase customers’ interest.

Commitments for 2012We will extend calorie labelling at the point of choice for those products which are made and prepared in store. We aim to display this information online. We’re also aiming to provide calorie information for all our out of home eating options.

In addition, we plan to update the nutritional information on our website further by expanding into the areas not currently covered, such as Market Street counters.

Great food is what we offer day in, day out

Being responsible means healthy choices, promoting fresh, clear information, helpful guidance and practical advice.

Salt reductionWe are aiming to reach the Government’s salt reduction targets set for the end of 2012 across our own brand range of products.

Overview

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Governance


“In the M Kitchen we try and make all our food development as healthy as possible. We’ve recently been working on putting recipes together that have nutritional benefits and are low in fat but with loads of flavour.”

Neil NugentExecutive Chef and Head of Innovation

Developing new products in our M Kitchen. Neil Nugent (right) and in-house chef, Robert Craggs (left).


…Great food… – continued

Pledge Progress

Food

Out of home calorie labelling “We will provide calorie information for food and non-alcoholic drink for our customers in out of home settings from 1 September 2011 in accordance with the principles for calorie labelling agreed by the Responsibility Deal.”

We have expanded our team of nutritionists to support the provision of calorie information for our café and takeaway items.

We rolled out calorie labelling to our café counter items, such as cakes and sandwiches in August 2011 and provide calorie information on all menu items in our cafés.

Since September 2011, all of our in store produced pizzas display calorie information on pack. We plan to roll out calorie labelling on a new range of in store produced sandwiches, sub rolls and baguettes throughout 2012.

We are working to provide calorie labelling at the point of choice on other areas of Market Street (e.g. our Oven Fresh counter). Where possible we display this information on our website, to help customers make healthier choices.

Salt reduction “We commit to the salt targets for the end of 2012 agreed by the Responsibility Deal, which collectively will deliver a further 15% reduction on 2010 targets.”

For some products this will require acceptable technical solutions which we are working to achieve. These targets will give a total salt reduction of nearly 1g per person per day compared to 2007 levels in food. Achieving the public health goal of consuming no more than 6g of salt per person per day will require collective action by the whole industry, Government, NGOs and individuals.

We’ve expanded our nutrition and product development teams to work towards the 2012 salt reduction targets, while maintaining product quality and safety. This follows the successful delivery of the 2010 Food Standards Agency salt targets.

The 2012 salt targets have been incorporated into Morrisons production standards, which were communicated to both our manufacturing sites and suppliers earlier this year. This was followed by updates to our internal specification system, supporting the development of new products and the reformulation of existing products.

Guidance was disseminated during manufacturer and supplier training days. A number of our products already meet the 2012 targets, including pre-packed bread, pasta sauces and many of our ready meal ranges.

Trans fats “We have already removed, or will remove, artificial trans fats from our products by the end of 2011.”

Morrisons removed all artificial trans fats from own brand products in 2008.

Alcohol

Alcohol labelling “We will ensure that over 80% of products on shelf (by December 2013) will have labels with clear unit content, NHS guidelines and a warning about drinking while pregnant.”

All Morrisons own brand alcohol products already have labels that clearly display:

• unitalcoholcontent;

• NHSguidelines;

• warningaboutdrinkingwhilepregnant;

• responsibilitystatement;and

• drinkaware.co.uk.

Government Public Health Responsibility DealIn 2011, Morrisons signed up to the Government’s Public Health Responsibility Deal, in which we committed to take a range of actions to improve customer and colleague health.

This Deal is expressed through a series of pledges covering food, alcohol, physical activity and health at work. We are asked to report on the progress on each of the pledges.

Here is a summary of activity specifically linked to the Deal.

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Governance


Pledge Progress

Awareness of alcohol units, calories and other information “We will provide simple and consistent information as appropriate in the off-trade (supermarkets and off-licences) as well as other marketing channels (e.g. in store magazines) to raise awareness of the units, calorie content of alcoholic drinks, NHS lower-risk drinking guidelines and the health harms associated with exceeding the guidelines.”

We provide simple and consistent information in store to support the responsible consumption of alcohol as well as in our customer magazine and on our website.

This is supported by in store point of sale which promotes responsible drinking and discourages excessive consumption (e.g. raising awareness of Drinkaware’s ‘Why let the good times go bad?’ campaign).

Morrisons emphasis on combining alcohol with food also underpins our commitment to responsible retailing. Our descriptive shelf edge labels for wines and malt whisky give clear tasting notes and appropriate food matches for the product.

We also use our magazine to help customers keep track of their alcohol consumption. The customer magazine features a ‘Here to help’ page, which explains the unit content and calorie content of standard alcohol measures, such as a glass of wine or pint of beer.

In addition, our website features the Drinkaware logo and responsibility statement on relevant ‘food and drink’ pages.

Tackling under-age alcohol sales “We commit to ensuring effective action is taken in all premises to reduce and prevent under-age sales of alcohol (primarily through rigorous application of Challenge 21 and Challenge 25).”

Morrisons age verification policy ‘Challenge 25’ was relaunched in November 2011. Our colleagues will ask any customer who they think looks under 25 to prove they are over the legal age of 18 before purchasing alcohol.

We test the rigorous application of this policy by using simulated test purchases. All of our systems in relation to the sale of age restricted products were signed off as best practice by our Trading Standards Primary Authority.

Support for Drinkaware “We commit to maintaining the levels of financial support and in-kind funding for Drinkaware and the ‘Why let the Good times go bad?’ campaign as set out in the Memoranda of Understanding between Industry, Government and Drinkaware.”

We are maintaining the levels of financial support and in-kind funding for Drinkaware. In-kind support includes the promotion of the Drinkaware website, logo and/or messaging on:

• allownbrandproductlabels;

• instoremarketingsuchasshelf-edgelabelsandpointofsale;

• relevantpagesoftheMorrisonswebsite;

• everyeditorialpageofourcustomermagazinewhichincludesanalcohol product; and

• allMorrisonsadvertisingthatfeaturesalcohol.

Advertising and marketing alcohol “We commit to further action on advertising and marketing, namely the development of a new sponsorship code requiring the promotion of responsible drinking, not putting alcohol adverts on outdoor poster sites within 100 metres of schools and adhering to the Drinkaware brand guidelines to ensure clear and consistent usage.”

Our advertising partners adopt the Outdoor Media Centre’s Standard of Best Practice, which commits to not displaying alcohol advertising on static panels located within a 100 metre radius of schools.

We make it clear that alcohol is a product for adults and do not stock products which could unduly appeal to children.

We display simple and consistent information to raise awareness of unit content and health advice, which adopts the Drinkaware campaign’s messaging to educate customers on responsible drinking.

All Morrisons advertising which features alcohol also displays the Drinkaware logo and a responsibility statement.

Community actions to tackle alcohol harms “In local communities we will provide support for schemes appropriate for local areas that wish to use them to address issues around social and health harms and will act together to improve joined up working between associated schemes.”

We are a member of seven Community Alcohol Partnership programmes in the UK and to date have committed to assistance on a further two yet to be set up.

Our stores have provided trainers and training materials for stand alone sessions as well as extending an invitation to local businesses to attend these events.


Pledge Progress

Health at work

Chronic conditions guides “We will embed the principles of the chronic conditions guides (developed through the Responsibility Deal’s health at work network) within HR procedures to ensure that those with chronic conditions at work are managed in the best way possible with reasonable flexibilities and workplace adjustments.”

Our health service starts with prevention. This year we provided 27,000 free flu jabs to our colleagues, along with free health screenings. We also operate a physiotherapy service at a selection of our manufacturing and logistics sites where colleagues receive on the spot diagnosis and treatment.

Colleagues with long term conditions are encouraged to seek occupational health advice within the early stages. Where sickness absence is unavoidable, colleagues are supported by regular contact with their HR manager and an occupational health nurse.

Our occupational health team works closely with human resources managers and external agencies to facilitate a return to appropriate duties sympathetic to the individual’s medical problems. Return to work may be assisted by reduced hours (increased as appropriate), redeployment to alternative duties and the provision of aids or modification of equipment and workstations.

Occupational health standards “We will use only occupational health services which meet the new occupational health standards and which aim to be accredited by 2012/13.”

We have our own in-house occupational health team, including fully qualified occupational health nurses, which offers support to all our colleagues and managers. The team is on hand to help colleagues across the business with a wide range of health issues, from back or knee pain to stress and anxiety.

Health and wellbeing report “We will include a section on the health and wellbeing of employees within annual reports and/or website. This should include staff sickness absence rate.”

This Review and our Annual report and financial statements contain relevant details on the health and wellbeing of colleagues. Absence rate was 3.3% to 31 December 2011.

Healthier staff restaurants “We will implement some basic measures for encouraging healthier staff restaurants/ vending outlets/buffets for staff.”

Our staff restaurants always offer a variety of fresh fruit and vegetables, ensure that water is freely available and serve controlled, responsible portions. We have taken a range of measures to help reduce salt consumption. This includes removing salt shakers from the tables and ensuring that vegetables and starchy food like pasta and rice are cooked without adding salt.

We will build on this with the roll out of a new menu in 2012, which will include more calorie and nutritional information. Low fat and healthy option indicators will assist colleagues in making well balanced food choices. To support this initiative, we plan to engage our canteen colleagues through our professional ‘M Kitchen’ chefs. This programme will aim to educate our catering colleagues to promote healthier options.

Physical activity

Community “We will use our local presence to get more children and adults more active, more often including engaging communities in planning and delivery.”

Our Let’s Grow programme aims to inspire children to get more active, supporting the development of gardening clubs and growing schemes at school.

Over 5m children in the UK now have access to Let’s Grow equipment, which means half of the UK’s children can get stuck in to gardening, learn more about where food comes from and enjoy a health enhancing activity.

In a wider context we offer health screening, eating advice, smoking cessation and weight management advice to our customers through our pharmacies. In 2011, we opened seven more at our stores (117 in total).

…Great food… – continued

Overview

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Governance


Pledge Progress

Physical activity guidelines “We will contribute to the communication and promotion of the Chief Medical Officer’s revised physical activity guidelines.”

Morrisons website features a range of pages on health and wellbeing. This includes a section on ‘Healthy Living’ which communicates the Chief Medical Officer’s (CMO) guidelines on the benefits of daily exercise. Our website’s focus on health is complemented by our in store magazine.

We are also looking to raise awareness of the CMO’s guidelines to colleagues, through the display of Change4Life messaging in stores.

Active travel “We will promote and support more active travel (walking and cycling). We will set measurable targets for this health enhancing behaviour.”

Many of our colleagues already walk or cycle to work, but we are keen to inform those who don’t consider alternatives to the car.

We have ‘travel plans’ in a number of our stores and other sites across the UK (e.g. head office) which are designed to raise awareness of active travel and make it easier for staff to take alternative modes of transport to work (including walking and cycling).

Action we have taken includes the provision of secure, safe and accessible bike parking at our locations across the country and the promotion of ‘Team Green British Bike Week’, offering incentives to colleagues who cycle to work. Looking ahead we plan to build on our travel plan commitments and expand our communications to colleagues on the benefits of, and opportunities for, active travel.

Physical activity in the workplace “We will increase physical activity in the workplace, for example through modifying the environment, promoting workplace champions and removing barriers to physical activity during the working day.”

Morrisons senior management led the way in creating a culture where sport and physical activity are encouraged by taking part in the Great North Run in September 2011.

We promote physical activity in a number of ways: our colleagues have access to discounted membership of health clubs, we support initiatives such as ‘Team Green British Bike Week’ and we communicate opportunities to participate in locally organised physical activity.

In partnership with Save the Children we produced a staff fundraising calendar. This identifies the major national events which provide opportunities for fundraising for our charity partner, all of which revolve around physical activity, along with ‘active’ fundraising ideas such as sports tournaments and dancing competitions.

We are looking to expand the opportunities available to colleagues to increase physical activity, such as fitness challenges and exercise classes for staff in head office.

Inclusion “We will tackle the barriers to participation in physical activity faced by some of the most inactive groups in society.”

At Morrisons, we have over 131,000 colleagues, all from a variety of different backgrounds. While our focus is primarily on expanding opportunities for all colleagues to take more exercise, we have engaged in activity that is more targeted.

The Morrisons Plus Retirement Club was launched in May 2011, and helps our former colleagues stay connected to the Company and enjoy an active retirement. In addition to retaining certain staff benefits, Morrisons Plus provides opportunities for former colleagues to return to work during busy seasonal periods and take part in volunteering.

…Affordable…


Keeping products affordable for our customers is at the very heart of our business. That does not mean compromising on quality or service.

Our size creates efficiency of scale and on top of that we find innovative ways to take out cost and waste. All of which leads to a better deal for customers.

M savers As the difficult economic climate continues, unemployment, slow wage growth and higher levels of inflation mean that many household budgets have become even tighter. The cost of living is forcing many families to make conscious decisions to not only cut back on their luxury spend but also compromise on basic essentials such as fresh food.

Morrisons commissioned research into food spending within the UK through the Department of Economics at Cranfield School of Management. It highlighted that 5.2m households defined as living in poverty spend 15.5% or more of their total weekly outgoings on food and non-alcoholic drinks alone, up from 14.5% in 2007. This figure is set to worsen as the increasing rise in the general cost of living continues to outstrip wage increases.1

“We believe that the weekly shop should be as affordable as possible for everyone and that all of our shoppers should be able to enjoy tasty, nutritious and varied meals. This research was invaluable to us when developing the M savers range.”Richard HodgsonGroup Commercial Director

At Morrisons, our stores serve a wide customer demographic, so our aim is to offer high quality food for all family budgets regardless of income.

Feedback from customers and brand panels told us that the overall quality, look and feel of our value products needed improvement. In response to this we launched M savers in 2011. M savers’ core aim is to offer a range of groceries at the most competitive prices without compromising on quality.

M savers: over 400 M savers lines are now available in stores;

£7.3m sold per week; that’s a £1.5m increase compared to our original value range; and

sales up 39% year on year.

Great Taste Less WasteAs a nation, we throw away 7.2m tonnes of food and drink from our homes every year. This accounts for at least 17m tonnes of CO

2e (equivalent in emissions). Wasting food is not just an environmental burden, it also costs the average family around £680 per year.2 As households continue to spend cautiously, this seems like an unnecessary economic waste.

Our Great Taste Less Waste campaign launched in 2009. It supports the Waste and Resources Action Programme (WRAP) collective target to reduce household food and waste by 4% by the end of 2012. The campaign helps our customers to make the most of their food and save money through helpful planning, cooking and storage advice.

Our current campaign is visible to customers both online and in store through three main channels.

More meals for your money Providing customers with simple, nutritious and creative recipe ideas to make the most of their leftover foods.

Best Kept labelling On our fresh fruit and vegetable packaging you will find the ‘Best Kept’ label. This tells you where the product is best kept when storing at home, helping it to taste better and last longer. Best Kept labels also feature on our easy pick bags to help customers when picking loose produce items.

On-pack tips We provide our customers with on pack freezing and defrosting advice alongside information on how this affects sell-by and use-by dates.

1 Numbers of households living in poverty are calculated using the standard definition of households with a weekly income of 60% or less of the median household weekly income. In 2010, median income in the UK was £413 per week; therefore a household would be deemed to have an income that was below the poverty level if its income was £248 per week/£12,896 per annum. Data sourced from DWP publication: ‘Households below average income; an analysis of the income distribution 1994/95 to 2009/2010’.

2 Figures published on the WRAP website – www.wrap.org.uk

Our food costs less because of careful management

Customers look for value in store, we create efficiencies behind the scenes.

Overview

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Governance


“Our manufacturing capability is what makes our business different to other food retailers. We cut out the middleman and link producers directly to our stores.”

Martyn FletcherGroup Manufacturing Director

Cutler Heights is one of our manufacturing sites.

At Cutler we wash, grade and pack fresh fruit and vegetables

before distribution to stores.

…Affordable… – continued


“Morrisons ‘Great Taste Less Waste’ campaign helps consumers waste less and make the most of the food they buy every day. In conjunction with WRAP’s Love Food, Hate Waste programme and other retailers the campaign has made an important contribution to the 1.1m tonne reduction in household food waste WRAP recently reported.” Richard SwannellWRAP Director, Design & Waste Prevention

Reviving communications in 2012We recognise that there’s more we can do to communicate and inform our customers on the issue of food waste.

We will revive our food waste communications to our customers both in store and online. Our messaging will mainly focus around encouraging and advising our customers on how they can further cut their food waste at home.

Removing the ‘best before’ dates on fruit and vegetables We want customers to use their judgement to assess the quality of our fruit and vegetables rather than be unduly influenced by a best before date. We believe this will help to reduce unnecessary food waste and we will begin to remove best before dates from our packaging in early 2012.

Using only display until dates will encourage customers to rely on their judgement about when produce is good to eat. If customers also follow our ‘Best Kept’ advice, produce should be perfectly good to eat for even longer.

Food waste prevention schemesAcross our operations, our aim is to ensure that there is as little wasted food as possible. For example, in stores before products reach the end of their shelf life, we take positive action to clear them by reducing the price or using the food in our own staff canteens. This is our preferred approach, as we believe it also serves to engender a healthy respect for food throughout our business. Close financial control, training and streamlined stock rotation enable us to manage this process effectively to ensure the minimum amount of waste possible.

FareShareWe continue to work with the national food charity FareShare to help tackle any potential food waste within our supply chain. By working with our suppliers, FareShare redistributes any surplus food that can’t be sold in our stores to a community-based network of organisations working with the most vulnerable people in society.

The offer of free food encourages disadvantaged people into an environment where they can receive appropriate support and enables recipient organisations to reinvest funds into improving services such as housing advice, medical services and training. All of which is designed to help people rebuild their lives.

Company Shop This year we also began working with Company Shop. They buy and sell own branded food that our suppliers have manufactured but is surplus to requirements and could be wasted and sent to landfill. Products with incorrect labelling, damaged cases, or packaging design issues are collected under a carefully controlled process from suppliers by Company Shop. Stock is then sold at a discounted price through the company shops of businesses in food retail.

Our partnership with Company Shop also provides benefit to suppliers who would otherwise have to pay for disposal of the goods.

PackagingPackaging plays a fundamental role in protecting food from damage, but there is still a common misconception that food retailers do not carefully consider how much material they use.

Essentially, it’s about balance. At Morrisons, our aim is to limit the amount of packaging used, whilst ensuring the protection of food in transit. Through the use of smart packaging, we’re able to prolong shelf life and ultimately prevent food waste. Both from a customer satisfaction point of view and from a waste and emissions perspective, getting packaging right is of critical importance to us.

Along with other retailers we are signatories to the second phase of the Courtauld Commitment. Part of this commitment is to reduce the carbon impact of our packaging by 10% by the end of 2012. In practice this means increasing both recycled content and recyclability whilst reducing the weight of own brand packaging without affecting its protective properties.

The latest figures we submitted to WRAP showed that we had achieved a 7% weight reduction which according to WRAP’s conversion calculation translates to a 4% absolute reduction in the carbon impact of our packaging.

Packaging reduction examples (annualised savings)Glass lightweighting Reducing glass thickness across a range of jarred sauces has saved over 79 tonnes.

Wine carriers Respecification of our wine carriers has reduced packaging weight by over 90 tonnes.

Banana hooks Improved merchandising of bananas onto hammocks has saved over 220 tonnes of packaging.

Flower packaging We saved 72 tonnes of card last year by taking 2cm off the flower box flaps. In addition, all of the card Flower World imports is recycled back again into the flower boxes, which contain 95% recycled board.

Overview

Friendly people...M


Governance


Recycling At Morrisons, we encourage our customers to reduce and recycle their waste. We do this by working with local authorities to provide a range of recycling facilities. We have 4,259 recycling banks in stores and car parks, giving our customers easy access to recycling facilities as part of their shopping routine.

Over the past couple of years, we’ve worked with the Salvation Army and our charity partner Save the Children to provide textile banks within many of our car parks for customers to recycle their old clothing.

The bags themselves have undergone changes since our programme began by reducing their size and the thickness of each bag to contain 10% less plastic. However, they are made to be durable enough to be reused rather than for single use, which if used appropriately significantly reduces their overall environmental impact.

We continue to have strong sales of small and large reusable polypropylene bags, our reusable wine carrier (made of recycled PET plastic bottles) and jute bag. The life cycle analysis of these types of bag shows that if properly reused they can have longer term environmental benefit.1

Last year we introduced a new ‘bag for life’ made of recycled plastic material to encourage customer reuse. When a bag for life is damaged, customers can take it back to their local Morrisons and we’ll replace it with a new one, free of charge, and we can recycle the bags returned to us.

Overall, the best way to reduce impact is to reuse standard bags and then recycle them when worn out. We offer customers this facility in all standard stores by placing carrier bag recycling units for our customers’ use, situated in prominent positions in main entrance areas.

Charging for bags In October 2011, the Welsh Assembly Government introduced a compulsory regulation for charging for ‘single use carrier bags’. This applied to virtually all retailers and most types of standard carrier bag. Each bag is now subject to a charge of 5p. We have elected to donate all the proceeds (net of VAT) from the charges applied in our Welsh stores to our charity partner Save the Children.

We also introduced charging voluntarily in our store in Gibraltar, with proceeds going to local charity partners.

The regulation in Wales has reduced our carrier bag usage by over 80% (as at 6 April 2012). Retailers are not competitively disadvantaged because the regulations apply across the board and customers have the same expectation in any supermarket.

We will report online during 2012 specific details of bag sales in Wales.

2011 highlights: clothing banks – 3,425 tonnes donated;

Christmas card collection – 251 tonnes donated (approximately 18.5m cards);

redundant Morrisons uniforms – 20 tonnes donated; and

Save the Children clothing banks – 611 tonnes donated.

Carrier bagsStandard carrier bag usage continues to be an area of concern for the business and of public interest. On the one hand the issue itself is portrayed as symbolic of a wasteful modern society. On the other, the practice of giving customers bags to carry and protect their shopping for transport is a practical issue and seen as part of customer service.

Since 2006 we have implemented a number of measures to manage and reduce customer reliance on standard carrier bags. We refreshed the programme in 2011 and have seen standard bag numbers down by 0.9% compared to last year (or down 3.3% like-for-like) despite a 1.3% increase in our customer footfall.

The number of standard carrier bags provided to customers over the year was 1.1bn. However, our reduction policy has seen bag numbers fall by 21.7% since 2006 despite opening nearly 100 more stores in the same period. Bag numbers per customer transaction have reduced from around four to less than two.

1 Environment Agency Report ‘Life Cycle Assessment of Supermarket Carrier Bags’, published July 2011.

Recycle Now labellingCustomers will recognise that we’ve changed the on pack recycling advice on our products from the Morrisons ‘Recyclopedia’ system to Recycle Now.

Throughout 2011, we continued to roll out the labelling scheme across product ranges to ensure clear and consistent on pack recycling advice in line with industry best practice. We aim to replace Recyclopedia on

all products over the next three years.


We keep our carbon strategy under review as the Company continually grows. We will need to revise and adapt the programme further in 2012 and beyond to meet business needs.

One of our performance indicators compares emissions against the relative combined square footage of the business. This ‘carbon intensity’ comparison gives us useful trend information about how operationally efficient we are as we go about our business.

2011 1,355,009

2010 1,380,758

2009 1,350,771

2008 1,460,773

2007 1,435,864

2006 1,528,346

2005 1,586,650

2011 38.4

2010 40.5

2009 41.6

2008 46.6

2007 46.3

2006 48.7

2005 48.9

2011 119,177

2010 122,846

2009 130,463

2008 128,992

2007 139,509

2006 136,732

2005 149,751


1

2

34


1

2

3

6

7

54


1

2

3

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1

2

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4

1

2

34

45,000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011





40,000

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30,000

25,000

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15,000

10,000

5,000

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Reducing operational carbon emissionsThe issue of climate change is one of the greatest challenges to the global community. As well as the clear moral case for tackling emissions reduction, changing climate patterns are a material issue for our business as they are a major threat to food security. At a more immediate level, effective resource management and reducing waste (which contributes to emissions) are fundamental to managing our cost base.

Managing and reducing operational emissions with a longer term view creates resilience and longer term efficiency. This ultimately benefits our customers as it supports our strategic position to maintain competitive and affordable prices.

We announced in 2010 our ambitious target to reduce operational carbon emissions in absolute terms by 30% by 2020 (from our original 2005 baseline). The target was set to be in alignment with Government aims and applies not only to our stores but also to our manufacturing facilities and logistics operations.

We have made further progress during 2011 and in total have now reduced emissions by 14.6% compared to 2005.1

Retail was the main focus for reduction projects during the year, with projects delivering annualised savings of over 48,000 tCO

2e/yr.

2011 1,355,009

2010 1,380,758

2009 1,350,771

2008 1,460,773

2007 1,435,864

2006 1,528,346

2005 1,586,650

2011 38.4

2010 40.5

2009 41.6

2008 46.6

2007 46.3

2006 48.7

2005 48.9

2011 119,177

2010 122,846

2009 130,463

2008 128,992

2007 139,509

2006 136,732

2005 149,751


1

2

34


1

2

3

6

7

54


1

2

3

4



1

2

3

4

1

2

34

45,000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011





40,000

35,000

30,000

25,000

20,000

15,000

10,000

5,000

0


In summary, reduction was made across the business as a whole by using less gas, sending less waste to landfill and savings from transport efficiency. Reductions from electricity conservation in stores were offset by growth in the manufacturing side of the business.

The figures reported in this Review relate to our direct emissions and do not include emissions associated with carbon embedded in products or emitted by suppliers.

We focus our attention on emissions that we have control over and can monitor effectively. The difficulty of carbon reporting to include emissions outside our direct control represents a significant challenge.

We have started to address this with specific projects where we believe we can make a difference. An example is our work with dairy farmers, through the Morrisons farming programme, looking into renewable energy options.

1 Where 2005 baseline data is not available for store acquisitions, emissions are estimated based on data once the store becomes operational within our estate. All carbon emissions figures reported in this section are calculated on a calendar year basis (not financial year). SKM Enviros has undertaken the preparation of the operational carbon footprint utilising energy, refrigerant gas, fuel, waste business and staff travel data supplied by Wm Morrison Supermarkets PLC. The methodology used to calculate the carbon footprint is based on the DEFRA/DECC and GHG Protocol reporting guidelines.


2011 1,355,009

2010 1,380,758

2009 1,350,771

2008 1,460,773

2007 1,435,864

2006 1,528,346

2005 1,586,650

2011 38.4

2010 40.5

2009 41.6

2008 46.6

2007 46.3

2006 48.7

2005 48.9

2011 119,177

2010 122,846

2009 130,463

2008 128,992

2007 139,509

2006 136,732

2005 149,751


1

2

34


1

2

3

6

7

54


1

2

3

4



1

2

3

4

1

2

34

45,000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011





40,000

35,000

30,000

25,000

20,000

15,000

10,000

5,000

0


2011 1,355,009

2010 1,380,758

2009 1,350,771

2008 1,460,773

2007 1,435,864

2006 1,528,346

2005 1,586,650

2011 38.4

2010 40.5

2009 41.6

2008 46.6

2007 46.3

2006 48.7

2005 48.9

2011 119,177

2010 122,846

2009 130,463

2008 128,992

2007 139,509

2006 136,732

2005 149,751


1

2

34


1

2

3

6

7

54


1

2

3

4



1

2

3

4

1

2

34

45,000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011





40,000

35,000

30,000

25,000

20,000

15,000

10,000

5,000

0


Overview

Friendly people...M


Governance


Operational reduction projectsOur stores are where we use the most energy and so we focus our attention on reduction projects in our retail division. If successful, we extend development projects across the estate to achieve greater impact.

Our future storesOne clear challenge to our reduction programme is the growth and direction of our retail business. Our future stores design has greater emphasis on fresh food, Market Street and in store food preparation (alongside more visually interesting displays). This means we will use comparatively more energy unless we can innovate or find technological solutions.

It’s a dilemma. On the one hand we want customers to be interested and excited by fresh food and have easy access to it. On the other, we need to reduce energy use and waste.

By trialling concepts before we roll them out fully we are able to test effectiveness so that we can negate impact over the longer term.

Voltage optimisationVoltage stabilisation units are specialised energy saving technology devices which correct the main incoming voltage from 240v to 220v. Ninety two stores had this fitted in the financial year.

Ventilation controlThis technology balances the amount of fresh air being brought into stores based on the number of people inside. It analyses store environmental data and then operates at variable speeds depending on the requirement. We fitted 365 stores with this technology.

Store building controlAll of our stores have a Trend building management system that controls heating and the environment. We added in new technology to improve the system to 263 stores.

Reclaiming heat for hot waterThis innovative technology uses heat generated from refrigeration systems to heat up to 90% of the hot water used in store. We rolled this out to 57 stores.

energywise We launched a targeted campaign to run throughout 2012 called ‘energywise’ to promote, support and reward energy saving by colleagues in stores.

Stores are set reduction targets and will be able to track performance with a new detailed monthly report. As well as a full communications pack for stores, maintenance surveyors (as part of their regular visits) provide additional advice and guidance linked to the campaign.

Peterborough, Stanground storeAs part of our programme to trial ‘store of the future’ innovation we made Stanground our greenest store to date. We believe that once fully operational Stanground should produce a carbon saving of around 29% compared to an equivalent comparable 2010 store. Features include:

running fridges and freezers on natural refrigerants reducing the store footprint by 29%;

using only LED lighting combined with intelligent control and natural lighting;

heat reclaim systems from fridges and freezers to heat the store and most of the hot water;

a south facing solar wall to capture heat from sunlight and use it to warm the store;

rainwater harvesting for WCs and watering the plants and trees around the store; and

charging points for customers who have electric cars.

AboveStanground, our latest lower energy store in Peterborough.


Operational water managementChanging climate patterns, population growth and agriculture affect water resource and availability. At an operational level our approach to water has been an active reduction programme based on monitoring, the use of smarter systems, recycling and reduction.

We invested capital in the installation of our own metering equipment. Over 700 meters were placed into the estate with the remainder planned for installation in 2012. Once completed and coupled with data capture devices, we will have accurate next day reports for scrutiny. This will give us a clearer picture of water usage and drive better resource management.

It also allows us to plan effectively for the longer term, review and modify behavioural issues and build on the routine installation of water saving devices in a more targeted way.

Over the course of the year we’ve also installed more leak detection systems, water saving devices such as push taps in washrooms, higher automation to standardise water use and flow reduction equipment to reduce unnecessary waste.

Simple system changes, whilst challenging to install in busy stores, make a significant contribution to effective reduction. So, for example, rainwater harvesting at our store in Illingworth has to date saved 1.2m litres of water since 2009.

Throughout 2012/13 we’re aiming to make a 10% reduction in cost for water usage through accurate consumption data and greater efficiency at stores and petrol filling stations.

Our future challenge is to effectively extend our influence on water management through our supply chain. There is a general recognition that this is where most water is used (in food production itself). In addition to effective management of our own operational use, we should encourage suppliers to do the same.

Refrigeration Refrigeration is critical across the business for keeping food fresh and preventing waste. However, the traditional gases used in the plant and chillers can be harmful if released into the atmosphere. A small amount of leakage of some refrigerant gases is equivalent to large amounts of carbon dioxide.

We’ve made reducing the impact of our refrigeration central to our wider carbon reduction strategy. We continued our policy to install more plant which uses carbon dioxide as the main refrigerant gas. The environmental benefit is that the global warming potential from any leakage is far lower.

We fitted a further 18 CO2 based plant installations in stores in addition to the 70 already in the estate. We underlined our commitment, with the help of Jesse Norman MP, by officially opening the Natural Refrigerant Technology Centre in Hereford. The facility supports our programme by thoroughly testing equipment under a variety of conditions before installation at stores.

We extended our use of hydrocarbon based systems for smaller chillers (integral and storage units) as standard where we use new units or replace older ones.

Compared to our baseline year in 2005, we have reduced carbon emissions due to refrigerant loss by 43%.1

AboveColin Coe, Refrigeration Capital Projects Manager.

Store waste managementWe have made further progress in waste management from stores. Our commitment is to send zero waste direct to landfill by 2013.

Store waste, recycling and diversion analysis 2011/12 Tonnes Percentage

Card 111,374.90

Polythene 8,372.48

Light tubes 75.71

Oil 5,449.19

Animal bi-product (ABP) 4,871.37

Other recyclables 508.01

Diverted trade waste 51,138.04

Total recycled/reprocessed 181,789.70 94.36%

Landfill 10,859.96 5.64%

Total waste produced 192,649.66 100.00%

1 For refrigerant gas loss the 2005 baseline data does not incorporate data for stores acquired from 2005 onwards.


Overview

Friendly people...M


Governance


LogisticsMorrisons haulage fleet is a key part of our operations, transporting goods to and from our network of stores, manufacturing facilities and depots. Increased fleet efficiency means that we’ve successfully reduced our haulage emissions compared to 2010, despite continued growth within our business.

How this reduction has been achieved Driver training All of our drivers are fully trained on mileage efficiency and journey planning. This ensures vehicles are used correctly and are travelling on the most effective routes to minimise both time and mileage.

Double deck trailersWe increased the number of double deck trailers in our fleet. These trailers transport up to 80% more volume per trip, which also helps us to reduce road miles.

Euro 5 engine technologyAll of our current fleet now use more modern Euro 5 engine technology, which also helps to limit our nitrogen oxide emissions.

Refrigerated trailersWe rolled out the use of mains power for our refrigerated trailers as an alternative to diesel when at our depots. This has helped our business to save 673,110 litres of diesel.

2011 1,355,009

2010 1,380,758

2009 1,350,771

2008 1,460,773

2007 1,435,864

2006 1,528,346

2005 1,586,650

2011 38.4

2010 40.5

2009 41.6

2008 46.6

2007 46.3

2006 48.7

2005 48.9

2011 119,177

2010 122,846

2009 130,463

2008 128,992

2007 139,509

2006 136,732

2005 149,751


1

2

34


1

2

3

6

7

54


1

2

3

4



1

2

3

4

1

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34

45,000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011





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30,000

25,000

20,000

15,000

10,000

5,000

0


Willow Green – Green by name, green by natureIn 2011 we opened Willow Green, our new distribution centre based in Bridgwater. The centre transports all grocery, household, chilled foods and bread for the South West and South Wales area.

The mile long site was renamed Willow Green after we held a local newspaper competition for school children to invent a new name. Alice Nunn, created the winning name which earned her school 5,000 Let’s Grow vouchers and a special tour of the site for her class.

In addition to the greener elements of its design and build we promote carbon awareness to visitors and colleagues through our on site ‘green information centre’, which electronically reports current energy savings.

AboveOur new Willow Green regional distribution centre.

Willow Green environmental features: BREEAM ‘Excellent’ rated building;

ammonia refrigeration (natural refrigerant);

optimum natural daylight levels within the warehouses;

high air tightness to avoid unnecessary heat loss;

natural ambient warehouse roof turret ventilation;

treated rainwater harvesting;

efficient variable speed compressors/fans;

intelligent control system monitoring responding to external conditions, demand and plant performance;

energy efficient T5 light fittings are specified throughout with LED lighting externally, all controlled using presence detection and daylight measurement;

monocrystalline/thin film photovoltaic technologies employed with an anticipated associated saving of 5.8% of the predicted carbon emissions of the development;

refrigeration waste heat recovery system to heat the cold store ceiling void and beneath floor heating mat;

ambient warehouse and transport office solar water heating systems; and

efficient air source heat pump systems for heating and cooling the administration areas.

For everyone34 Wm Morrison Supermarkets PLC

We want to be an integral and positive part of the community.

That takes more than just making great food that people can afford. It means supporting local people.

Assessing our impact in town centresWe want to see strong and vibrant high streets – not least because this is where many of our stores are located. The Portas Review published in December 2011 made a number of interesting recommendations to help revive our town centres.

One idea is for local people to come together and form ‘Town Teams’ to promote their high streets, supported by Government funding. Morrisons is already supporting bids for Town Teams in Kirkby-in-Ashfield, Kirkham and Frodsham. We are a strong presence in these local high streets and want to play an active part in their regeneration.

Last year we commissioned independent research to assess the impact of our stores on four different town centres. The survey sought the views of local traders in areas where a Morrisons supermarket has opened in the previous four years. These were:

Hartcliffe, Bristol

Rothwell, Leeds

Wednesbury, Sandwell

Welling, London

The review has given us useful information that is helping to shape our approach to new store openings. This is particularly important now that we have started to open local convenience stores. We opened our first three ‘M local’ stores in 2011.

In Ilkley, for example, we took time to speak with local business and incorporated over 30 locally sourced products. This included products from a local butcher, local brewery and from one of our recruitment partners, social enterprise Create.

We received criticism for not reopening a store in Tunbridge Wells. We responded to an approach to do so and to develop positive links to the local community through a specific website to keep local people informed and to receive comments.

Our research results

Impact on local businesses: 78% of businesses considered that the impact on their business had either been good (38%) or neutral (40%).

19% considered the impact on their business to be negative

Impact on town centres: a high proportion (57%) of those surveyed considered the impact had been good for the town.

19% thought the impact had been negative.

Impact on shoppers: 69% thought that the store had a positive or neutral impact on shoppers in town centres.

8% considered the impact to be negative.

For everyone

Our local communities are where our operations have

the most visible impactIt’s essential that we actively build good relationships and

ensure we operate as a responsible and thoughtful neighbour.

2011 1,355,009

2010 1,380,758

2009 1,350,771

2008 1,460,773

2007 1,435,864

2006 1,528,346

2005 1,586,650

2011 38.4

2010 40.5

2009 41.6

2008 46.6

2007 46.3

2006 48.7

2005 48.9

2011 119,177

2010 122,846

2009 130,463

2008 128,992

2007 139,509

2006 136,732

2005 149,751


1

2

34


1

2

3

6

7

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2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011





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30,000

25,000

20,000

15,000

10,000

5,000

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2011 1,355,009

2010 1,380,758

2009 1,350,771

2008 1,460,773

2007 1,435,864

2006 1,528,346

2005 1,586,650

2011 38.4

2010 40.5

2009 41.6

2008 46.6

2007 46.3

2006 48.7

2005 48.9

2011 119,177

2010 122,846

2009 130,463

2008 128,992

2007 139,509

2006 136,732

2005 149,751


1

2

34


1

2

3

6

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1

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45,000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011





40,000

35,000

30,000

25,000

20,000

15,000

10,000

5,000

0


2011 1,355,009

2010 1,380,758

2009 1,350,771

2008 1,460,773

2007 1,435,864

2006 1,528,346

2005 1,586,650

2011 38.4

2010 40.5

2009 41.6

2008 46.6

2007 46.3

2006 48.7

2005 48.9

2011 119,177

2010 122,846

2009 130,463

2008 128,992

2007 139,509

2006 136,732

2005 149,751


1

2

34


1

2

3

6

7

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1

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34

45,000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011





40,000

35,000

30,000

25,000

20,000

15,000

10,000

5,000

0


2011 1,355,009

2010 1,380,758

2009 1,350,771

2008 1,460,773

2007 1,435,864

2006 1,528,346

2005 1,586,650

2011 38.4

2010 40.5

2009 41.6

2008 46.6

2007 46.3

2006 48.7

2005 48.9

2011 119,177

2010 122,846

2009 130,463

2008 128,992

2007 139,509

2006 136,732

2005 149,751


1

2

34


1

2

3

6

7

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1

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3

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1

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1

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34

45,000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011





40,000

35,000

30,000

25,000

20,000

15,000

10,000

5,000

0


2011 1,355,009

2010 1,380,758

2009 1,350,771

2008 1,460,773

2007 1,435,864

2006 1,528,346

2005 1,586,650

2011 38.4

2010 40.5

2009 41.6

2008 46.6

2007 46.3

2006 48.7

2005 48.9

2011 119,177

2010 122,846

2009 130,463

2008 128,992

2007 139,509

2006 136,732

2005 149,751


1

2

34


1

2

3

6

7

54


1

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3

4



1

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3

4

1

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34

45,000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011





40,000

35,000

30,000

25,000

20,000

15,000

10,000

5,000

0


2011 1,355,009

2010 1,380,758

2009 1,350,771

2008 1,460,773

2007 1,435,864

2006 1,528,346

2005 1,586,650

2011 38.4

2010 40.5

2009 41.6

2008 46.6

2007 46.3

2006 48.7

2005 48.9

2011 119,177

2010 122,846

2009 130,463

2008 128,992

2007 139,509

2006 136,732

2005 149,751


1

2

34


1

2

3

6

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1

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45,000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011





40,000

35,000

30,000

25,000

20,000

15,000

10,000

5,000

0


2011 1,355,009

2010 1,380,758

2009 1,350,771

2008 1,460,773

2007 1,435,864

2006 1,528,346

2005 1,586,650

2011 38.4

2010 40.5

2009 41.6

2008 46.6

2007 46.3

2006 48.7

2005 48.9

2011 119,177

2010 122,846

2009 130,463

2008 128,992

2007 139,509

2006 136,732

2005 149,751


1

2

34


1

2

3

6

7

54


1

2

3

4



1

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3

4

1

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34

45,000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011





40,000

35,000

30,000

25,000

20,000

15,000

10,000

5,000

0


2011 1,355,009

2010 1,380,758

2009 1,350,771

2008 1,460,773

2007 1,435,864

2006 1,528,346

2005 1,586,650

2011 38.4

2010 40.5

2009 41.6

2008 46.6

2007 46.3

2006 48.7

2005 48.9

2011 119,177

2010 122,846

2009 130,463

2008 128,992

2007 139,509

2006 136,732

2005 149,751


1

2

34


1

2

3

6

7

54


1

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3

4



1

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3

4

1

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34

45,000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011





40,000

35,000

30,000

25,000

20,000

15,000

10,000

5,000

0


2011 1,355,009

2010 1,380,758

2009 1,350,771

2008 1,460,773

2007 1,435,864

2006 1,528,346

2005 1,586,650

2011 38.4

2010 40.5

2009 41.6

2008 46.6

2007 46.3

2006 48.7

2005 48.9

2011 119,177

2010 122,846

2009 130,463

2008 128,992

2007 139,509

2006 136,732

2005 149,751


1

2

34


1

2

3

6

7

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45,000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011





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Overview

Friendly people...M


Governance


“I was a full time mum for 12 years before joining Morrisons. The pre-employment training helped me to get back into the workplace, meet some great people and gain a good career in retail.”

Alison SherlockCheckout Operator, Salford store

“After completing my degree, I gained some experience in administration roles but found it difficult to get work. I just needed a starting point and a chance to get going in a successful company.”

Camilla HigginsAdministrator, Salford store

Hazel Blears MP co-chaired the initial community meeting we

held at Salford Lads Club prior to recruitment for our new store.


Supporting our local communitiesWe support local causes that our customers and colleagues care about in order to drive positive community spirit. We do this by partnering with local schools, charities and community groups.

We provide support to thousands of charities, by allowing them to collect and bag pack within our stores. As local residents, our store colleagues know better than anyone the needs of their own neighbourhood; consequently all of our local charitable and fundraising activity is arranged through each individual store.

In addition, our store managers regularly engage with schools and community groups by offering store tours and talks on Morrisons, what makes us unique and our passion for fresh food. We recognise that there is still more work for us to do in supporting our local neighbourhood. We know from feedback that our approach sometimes varies from store to store and could benefit from greater consistency. Our plan is to refresh our current community strategy so that our engagement better supports the needs of local people.

In 2012, we will be making improvements to our community messaging and engagement by trialling new style community boards in our stores. Our redesigned boards will act as in store hubs providing a variety of customer information such as charity partnerships, local fundraising, news and updates, travel information to and from our stores, ‘what’s on in your local area’, recruitment opportunities, Let’s Grow in the community and recycling facilities available in store.

Our information boards will be trialled initially in six stores during the first half of 2012. If successful, they’ll be rolled out to the rest of the retail estate.

Our store opening in Salford also gave us an opportunity to foster stronger community engagement through targeted recruitment which we aim to build on during 2012. Our case study opposite sets out more details.

For everyone – continued

BelowWe supported Daybreak’s ‘Get Britain Reading’

campaign and customers generously dropped off children’s books in their local stores.

Overview

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Governance


Tackling social exclusion Pre-employment training is a standard process for any new store opening. We’ve now developed this on several levels.

As well as supporting people who have found it difficult to break into the workplace because they may not have been in education, previous employment or training for a while, we’ve taken recruitment further to tackle more challenging workplace exclusion.

Through our partnership with Leeds based social enterprise Create and other partners, we’re engaging with people from vulnerable groups to help them back to work in selected new stores. In 2010 we started to look at working with people from excluded backgrounds, in particular people who had been homeless. This isn’t philanthropy but, in fact, it’s provided a programme for existing colleague development as well as an excellent recruitment campaign. With targeted training, people coming through the scheme become committed team members and deliver strong performance and customer service.

In 2012 we will reach the commitment we made in 2010 to employ 1,000 people from vulnerable groups through this tailored approach.

Support in educationAnother example of training outreach was developed with Vale College in Cardiff in a partnership with Morrisons that gives experience, confidence and skills to young people not in education, employment or training.

The college currently now runs three projects with Morrisons, partnering with disadvantaged young people on the Entry to Vocational Studies (EVS) course and a Level 2 Retail Knowledge course. The Entry to Vocational Studies course recently won an award for overcoming deprivation, sponsored by the Welsh Government.

Case study

Salford – Opened December 2011

In Salford, 60% of colleagues in our local store were taken from the unemployment register and 10% from vulnerable groups.

We helped kick-start recruitment with pre-employment training at Salford College after last summer’s riots in an area where we were planning to open a store. The training was designed to develop skills in communications and customer services and give a greater understanding of what it takes to work in retail.

Create were able to provide more specific pre-employment training in its production kitchen and café for 20 previously homeless and disadvantaged young people from the area.

Salford has changed dramatically over the last decade and currently a third of all wards remain within the 10% most deprived in Britain. Before the economic downturn, unemployment in Salford was falling faster than in other parts of Greater Manchester, but this is now in danger of being reversed.

Our strategy was to act as a catalyst for community regeneration and bring together the different organisations working in the area. For us, this kind of engagement is win-win: people get jobs, regeneration receives a boost and we get the commercial benefits of being a valued part of the community. We are looking at adopting this engagement strategy where appropriate as we plan and open new stores.

“The rising level of unemployment is having a devastating effect on young people in Salford, which is why I am so pleased by the way Morrisons has engaged with the local community, actively encouraging people to apply for positions and offering support and training to equip applicants to succeed. It is vital that other companies follow their lead and provide good quality job opportunities. In these difficult economic times it is really important that local jobs can be taken by local people.”Hazel Blears, MP for Salford and Eccles

“We believe that big problems need big solutions and these solutions are delivered through working in partnership. Alongside Morrisons, Salford and Manchester City Councils and local homeless agencies we believe that together we can make a real difference to homeless people who need a hand up and not a hand out.”Sarah Dunwell, Chief Executive of Create

Visit: www.createfoundation.co.uk for more information

BelowPre-employment training given by Create.



Let’s GrowChildren are our future customers. To ensure they make the right choices, we believe we should encourage healthy eating and a better understanding of fresh ingredients and cooking.

In 2008, we created Let’s Grow – our award winning community investment programme that allows children to experience first-hand the story of fresh food by encouraging them to follow a healthier lifestyle through the practical experience of growing fruit and vegetables.

Developed with the backing of the Department for Children, Schools and Families, Let’s Grow also teaches children to become more knowledgeable about the life cycle of food and the environmental benefits of growing their own produce.

Moving into its fifth year, Let’s Grow continues to develop, with over 26,500 schools in total registered across the country.

How it works Vouchers are issued for every £10 spent in our stores and can be redeemed for gardening equipment, plants and seeds. In recent years, following feedback, we’ve extended the catalogue range to include items such as fruit bushes, grape vines and cooking kits.

Schools are encouraged to bring Let’s Grow into their curriculum via learning materials designed by the National Schools Partnership, to cover Key Stages 1 to 4. These include online teaching resources, lessons plans, activity sheets and assembly guides.

Let’s Grow also supports schools should they wish to meet people from their local Morrisons store. Our store managers work with schools to develop fun and engaging store visits, assemblies and lessons, bringing the food story to life and showing them how fruit and vegetables go from field to fork.

Feedback from schools The National Schools Partnership conducted research1 on behalf of Morrisons into the overall success of the 2011 Let’s Grow programme. We wanted to better understand its social impact.

The research has helped us to shape development in 2012 and beyond.

79.6% of schools surveyed gave Let’s Grow a rating between 8 and 10 (out of 10) for excellence.

93.5% of schools surveyed will be participating in the Let’s Grow scheme going forward.

67.5% of schools surveyed think that Let’s Grow should carry on as it is and that there is no need for improvements.

28.6% would like to see minor improvements.

Let’s Grow and academic achievement It is difficult to attribute pupil success in school directly to one programme, but over 50% of teachers reported that they have seen a positive correlation between participating in Let’s Grow and academic achievement.

2011 1,355,009

2010 1,380,758

2009 1,350,771

2008 1,460,773

2007 1,435,864

2006 1,528,346

2005 1,586,650

2011 38.4

2010 40.5

2009 41.6

2008 46.6

2007 46.3

2006 48.7

2005 48.9

2011 119,177

2010 122,846

2009 130,463

2008 128,992

2007 139,509

2006 136,732

2005 149,751


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1. Yes – we have 10.8% seen a significant positive impact

2. Yes – we have 39.2% seen some positive impact

3. We have seen 0.5% no impact

4. We have not 32.2% been able to measure it

5. Don’t know 17.3%

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1 Qualitative research: 10 school visits, 14 in-depth teacher discussions, 31 in-depth parent discussions, two creative sessions with subject leaders and educational consultants/experts. Quantitative research: 622 respondents completed the online survey questionnaire.

Highlights: over £12m worth of equipment to over 5m pupils across the UK;

26,500 schools have registered to Let’s Grow;

11,000 pairs of wellies;

34,000 watering cans;

361,000 packets of seeds;

64,000 trowels; and

8,900 greenhouses.

AwardsGreen Award 2010 – Best Green Educational Project IPA Award 2011 – Best Integrated CampaignMA Award 2012 – Best and Most Effective Long Term CampaignChelsea Flower Show 2009 – Bronze Flora Award

Figures from 2010.

Overview

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Governance


Let’s Grow in 2012 We are aiming to extend the programme out into the wider community and provide schools with more of what they need to help children to learn more about the food cycle for themselves.

Engagement with stores We want to further encourage our stores to actively engage with their local Let’s Grow schools and create good community links. In 2012, there will be greater encouragement for our store colleagues go out and visit local schools. We will revive our communications and reissue our Let’s Grow packs to store colleagues, which include resources for colleagues to present to schools and assist with school store visits.

Skills development and learningNew for 2012 are 22 specially created videos featuring Blue Peter gardener Chris Collins, which give step-by-step guidance on tasks such as composting and growing beans. Whilst these are aimed at children, they also help teachers to plan lessons.

Alongside the videos we have also created full teaching resource packs for six cooking lessons. Each lesson includes a plan, presentation slides, and activities for the children.

Case study

Holmfirth High School

Engaging pupils through gardening Holmfirth High School is using their school garden to engage students who are having behavioural or learning difficulties. Once a week, their teacher takes groups of boys that need more exercise and more motivation out to tackle dry stone walling. It gets them outdoors doing something practical that’s related to gardening.

“Thursday afternoons I work with year sevens who haven’t settled into school or older children that have got emotional or behavioural problems and learning difficulties. We hope that in doing gardening, they might open up and if there are things wrong they might discuss them.”Headteacher, Holmfirth High School

The school has access to a vegetable patch, flower beds and a polytunnel and have high hopes of building a community peace garden that the whole school will be able to enjoy. After being involved with Let’s Grow for four years, the peace garden is the next big focus in terms of gardening equipment collection and space development.

Additionally, the school is trying to get gardening into as many aspects of the curriculum as possible. They have started including poetry writing about the garden for creative writing.


“This FAST programme is the first of its kind in Yorkshire and is an innovative, bustling, exciting and fulfilling programme. It has been an overwhelming success, showing improved attendance and children’s attainment in basic skills, as well as deepening and enhancing community cohesion. A brilliant experience for all those involved.”Colleen JacksonHeadteacher, Marshfield Primary School

“We have clearly seen how our families have developed through attending the FAST sessions. It has empowered many parents to feel confident to speak up for themselves where they would have been more hesitant before.

Our school data shows that the majority of children have made better than expected progress academically since the start of the project.” Roger MitchellHeadteacher, Ripple Primary School

“The FAST programme’s impact on the wellbeing of the families involved is well documented. FAST manages to make parenting fun and has provided both staff and families with a very positive experience and has allowed many neighbours to become friends.” Mary BerrillQuality Improvement Manager, West Dunbartonshire

“Morrisons fundraising efforts in 2011 means that Save the Children helped over 3,520 children so far through our FAST programme and many more will benefit in 2012. The money customers and colleagues raise will change the lives of children and families for the better while helping to create a stronger sense of community.

This enables us to expand our UK programme on a transformational scale ensuring that together we will be able to make a long term difference for some of the most disadvantaged children in the UK.” Tanya SteeleDirector of Fundraising, Save the Children

Save the Children partnership We launched our two year partnership with the international charity, Save the Children. Our main focus has been to raise money for their Families and Schools Together programme in the UK.

We set ourselves the target to raise £4m for Save the Children by the end of January 2013.

Thanks to the huge generosity and efforts of both customers and colleagues we raised £1.78m in 2011 and successfully funded 22 programmes across the country. In addition, we raised another £0.5m for Save the Children’s emergency appeals for the Japan tsunami and the food crises in East Africa.

Families and Schools Together (FAST) FAST is an award winning, early intervention programme, which has a positive influence on the lives of some of the UK’s most disadvantaged children.

It’s designed to enable parents to better support their children’s education, take a more active role in their child’s schooling and play a greater part within their local community. FAST builds relationships between schools, families and local communities, whilst also nurturing children’s key stage learning and development.

Each FAST programme brings together up to 40 parents and 80 children aged between three and eight years for eight weekly sessions. Families then participate in activities proven to improve children’s wellbeing and academic performance, both in the short and long term. It costs around £36,000 to run a FAST programme.

LeftChildren taking part in a FAST graduation event.

2011 highlights: 22 FAST programmes are now up and running;

3,520 children in these schools will improve their success at school;

1,760 parents will have increased their confidence to support their children; and

720 FAST team members will be fully trained.


Overview

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Governance


Examples of our colleague fundraisingMany of our colleagues took part in 2011’s Great North Run to raise funds for our Save the Children partnership. Among the runners taking part in the 13.1 mile course were seven members of our Management Board. Together they raised over £90,000.

Our Group Manufacturing Director Martyn Fletcher and a team of 30 across the business succeeded in walking the Yorkshire Three Peaks. Collectively the team raised over £20,000 for Save the Children.

A team from our Sittingbourne distribution centre took on the gruelling challenge of cycling to every Morrisons store they service, travelling over 573 miles in just nine days. They also held a community ‘Fun Day’ attended by 400 local people. Their fantastic efforts raised more than £10,000.

Stamford store colleagues Nigel Walters and Kevin Robertson cycled 80 miles from our Dereham store in Norfolk to their store in Lincolnshire, helping to raise £3,000.

£1,100 was raised by Kilmarnock colleagues who organised a car-boot sale including tombola and home baking stand in their store car park.

Uniform donationsIn December 2011, we donated over a thousand boxes of school uniform clothing to Pentrebane Primary School in Fairwater. The school is a participating member of a Save the Children’s FAST scheme.

The donation of the school clothing helped families with some essentials in the run up to Christmas.

“The cost associated with school uniform is yet another occasion when parents feel the squeeze, especially when living costs keep on rising. We are delighted to be working with Morrisons to help families taking part in our FAST project who might be struggling with these increasing costs by providing school uniforms.”James PritchardHead of Save the Children in Wales

AboveUniform donations.


Charity engagement abroadAlthough we are a British food retailer, we operate a global supply chain. Our community engagement programme typically focuses around the neighbourhoods in which we operate in Britain. However, throughout 2011 we’ve had the opportunity to support a variety of worthy causes abroad.

International Health Partners (IHP)Each year, hundreds of healthcare professionals travel to developing countries to take part in short term medical missions, which provide essential treatment to those critically in need. Often, these professionals can experience shortages of the most basic pharmaceutical care.

Our pharmacy team works in partnership with IHP to donate these essential medicines to their doctors’ travel packs which are used in the first phase of response in natural disasters. Last year, we donated 500,000 packs of both paracetamol and ibuprofen to the cause.

In 2011, the Queen’s Award for Enterprise was presented to IHP for their efforts. Morrisons was also recognised at the event and we were presented with a Partnership Award.

“Thanks to the tremendous support of organisations such as Morrisons, over the past seven years IHP has been able to send a total of £100m worth of medical aid to areas of great need in 82 countries around the world.”Alex HarrisDirector of Industry and Government Relations International Health Partners

One FoundationWe support the work of One Foundation by stocking One products in our stores. The One Foundation are a registered UK charity working with communities in Africa and developing countries to help address some of the most vital humanitarian issues, including famine, HIV, malnutrition and poor sanitation.

As part of a well thought out brand strategy, One Foundation funds relevant projects within African communities through the sale of their associated products.

One products at Morrisons:One WaterAll of the profits from sales of their 500ml and 750ml water bottles fund water supply projects.

One Supersofty Toilet TissuesAll of the profits from sales of the household toilet tissue fund sanitation and hygiene projects.

Born to ShineWe supported the ITV entertainment show Born to Shine, in aid of Save the Children. The show raised £2.1m.

The show first aired in July 2011 and ran for six weeks. In each episode, talented children mentored three celebrities to learn a new skill, ranging from tap dancing to playing an instrument. Viewers were able to vote for their favourite act, with proceeds from the calls going to Save the Children.

Born to Shine on the roadWe teamed up with Save the Children to bring the Born to Shine experience to life through our store roadshows. Children were given the opportunity to learn dance skills from members of the famous dance troupe Diversity and award winning dance choreographer John Graham. All money raised at the roadshows also went to Save the Children.

National charity collectionsSt John AmbulanceWe gave St John Ambulance together with St Andrew’s First Aid in Scotland and St John Wales a three day fundraising slot throughout all of our stores. Their volunteers managed to raise £170,000 through this coordinated effort.

Children in NeedEvery year, we actively encourage our colleagues to support Children in Need’s national campaign by fundraising throughout our stores. Through till bucket collections alone, our customers and colleagues helped to raise £145,577.


Overview

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Governance


Fundraising appeals (international)When natural disasters strike, the effects can be devastating to the communities involved. We are able to provide support by holding emergency response appeals throughout our stores. Funds raised can provide essential food, safety, comfort and lifesaving care.

In March 2011, we responded to the earthquake and tsunami that hit the coast of Japan by holding in store collections for our charity partner Save the Children’s Japan Earthquake Tsunami Relief. Thanks to the generosity of our customers and colleagues, we raised £395,995. This helped to provide immediate support, essential materials and services specifically tailored to the children affected by the tragedy.

Millions of people in East Africa have been left in need of essential food, water and healthcare from the effects of the worst drought in 60 years. Many are critically malnourished and those in worst hit areas are at risk of dying. We supported the work of Save the Children through their East Africa Appeal. The appeal has been providing funds for Ethiopia, Kenya and Somalia to alleviate the suffering caused by the droughts by providing essential emergency relief. Together we raised £153,163.

Case study

Khwikhwi School Malawi – One Foundation

Previously, Khwikhwi School did not have any toilets. Combined with the lack of sanitation facilities, this meant that pupils were vulnerable to waterborne diseases such as cholera. Thanks to the sales of One Toilet Tissue at Morrisons, a sanitation block comprising eight toilets, two urinal blocks and a handwashing station have now been installed at the school. As a result of the sanitation block, attendance at the school has increased and pupils now receive training in hygiene and the importance of handwashing.

AboveRaise a Smile is our overarching fundraising brand, designed to engage colleagues and customers.

Governance44 Wm Morrison Supermarkets PLC

KPIs – Friendly people...

Issue: Attracting, developing and retaining a vibrant and motivated workforce that reflects our Values, and delivers great customer service.

Commitments and associated KPIs

Progress update Status Challenges to address in 2012

Deliver sector leading training and skills development to our people.

Over one million training days1 delivered in 2011 and industry awards recognised our commitment, including Best UK Company for Organisation Learning by CIPD.

1 Approximately 786,000 of these days are the first three months for new retail colleagues undertaking on the job training.

Ongoing Independent verification of ‘sector leading’ training.

Deliver accredited training to 100,000 store colleagues in retail skills and/or customer service by the end of the 2011.

Over 100,000 colleagues have received training, accredited up to NVQ Level 2 (recognised as the equivalent of five GCSEs).

Achieved Embedding equivalent training for all new store colleagues.

Develop craft skills to further establish our Market Street and fresh food credentials.

New programmes include a fishmonger module at Billingsgate, craft specific training and approximately 300 craft based apprenticeships.

Ongoing

Over 15,000 colleagues to receive apprenticeship training in 2012.

New Communicating the benefit of providing apprenticeship training for colleagues and its role in upskilling and longer term job creation.

Colleague retention

Build colleague stability and retention through the application of our Values.

Labour turnover 16.17%

Absence 3.3%

Labour stability has increased from 85% in 2010 to 86.95% in 2011.

Figures as at 31 December 2011.

Ongoing Increasingly difficult, having achieved year-on-year improvements since 2008.

Develop a positive and dynamic management culture. 1,000 Senior Managers to receive ‘Coaching for Performance’ Training.

Exceeded target and reached 4,000 trained by end of 2011/12.

Achieved

Increase female representation in our senior management group to 30% by 2014.

Up to 20% in 2011. Ongoing Maintaining a positive trend and suitable training and colleague engagement.

Develop M Futures (graduates) and our Advanced Leadership Programme (Senior Management).

Established programmes and rolling out during 2012.

New

Reflects our values

The ‘Morrisons Way’ (leadership behaviours) launched in 2012 will be incorporated into our Coaching for Performance training.

New Operational issues to roll out and manage training and then measure performance.

Motivated workforce

Monitor, measure and improve colleague conditions and workplace experience across the Group.

Regular Pulse Survey incorporated into business operation (7 in 2011).

Ongoing Further improvements sought from survey results. Need to monitor trends, to evaluate and help determine focus areas.

Programme of updating and improving workplace terms and conditions in 2011 including a suite of ‘family friendly’ policies.

Ongoing Maintaining and updating policies to keep ahead of our main competitors.

Continually improving customer experience and service

Develop HOT service criteria, monitoring and measuring performance.

Over 3,500 senior store managers received initial training and cascaded this out to 110,000 colleagues overall in 2011.

21% improvement in customers recommending us to others.

Ongoing Maintaining performance in a competitive market.

Health and safety

Convert H&S management system in line with BSOHSAS 18001:2001.

New To deliver the changes in 2012.

Overall reduction in accident rate of 25% by 2012 (2007 baseline).

Achieved in 2011.

Established new target (see below).

Achieved

Reduce accident rates by 20% and reported accidents by 30% by the end of 2013 (2011 baseline).

Rate showing consistent reduction. New Reaching targets against a growing and increasingly complex business.

Overview

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Governance


Making…

Issue: Commitment to British food.



Extend our 100% British ranges. Maintained 100% British fresh meat and poultry and in season produce.

Moved to 100% British wheat for all of our own manufactured bread.

Ongoing Difficult to maintain as we continually grow.

Further development of our British manufacturing base to maintain levels of supply.

Establish applied farm research programme to support British farming.

Research completed and published in 2011.

Free range hen health review. A major issue for our free range producers. Our report offered ways to tackle emerging disease threats.

Dairy farm carbon footprint. To better understand the state of the industry and its ability to reach GHG emissions targets, we footprinted 100 suppliers. Efficiency advice will support a more sustainable supply chain and we have now run our first focus event to share best practice.

Soil and fertility. Produced a groundbreaking report into our country’s ‘biggest asset’ in a farmer friendly document.

Complete Projects under development:

• poultry–furtherresearchonthebenefitsofenvironmental enrichment for housed chickens;

• dairy–strengtheningbio-security;

• dairy–housingthe21stcenturydairycow;

• dairy–managingpricevolatility;

• eggs–diseasesurveillanceonfreerangefarms;

• agriculturalindustryhealthandsafety;and

• GMfeedstockshifttosustainabilityfocus.

Issue: Farm animal welfare

Enhance farm animal welfare policies and auditing processes by 2013.

Chicken welfare standards revised to include environmental enrichment (all standard chicken).

Free range egg ingredient for fresh products under review (with potential to extend to all products).

Imported pork undergoing an independent welfare audit against UK standards.

Ongoing Practical application from our research programme into our supply chain.

Issue: Effective management of material from areas of recognised ecological or environmental value (particularly key commodities). Work with independent third parties and suppliers to gain independent certification and accreditation.

Palm oil

By 1 Jan 2015 utilise RSPO certified fully segregated palm across all own brand products.

Own manufactured products are now supporting RSPO supply chain systems (GreenPalm certificates covering non-segregated palm).

Progress reported to WWF for 2011 Palm Oil Scorecard. Morrisons scored 8/9.

On target Ensuring suppliers are making progress to support a switch to sustainable palm oil.

Soya

Review utilisation of RTRS (or equivalent) sourced soya in own brand products and in animal feed.

Joined the Round Table for Responsible Soy (RTRS) and support a potential move to a certified responsible supply chain system.

As 80% of soya used in the UK is in farming animal feed we have commissioned a report through our farming programme to establish if there is potential to move feedstock to a certified system.

Ongoing Our view at present is that there remains no clear path on utilising responsibly sourced soya.

Concerns remain over the cost to suppliers and availability on the market. Time bound commitment to RTRS or equivalent cannot yet be made.

To commission evaluation on soya’s potential to be sourced in the UK.

Fish

Sustainable seafood policies to apply across all own brand ranges by 2013.

Fish counters re-accredited under the Marine Stewardship Council chain of custody programme.

Joined the Sustainable Seafood Coalition (SSC) to establish a more collaborative approach across the sector to policy, management and consumer information.

Ongoing Re-establish sourcing credentials and more effective communication with customers.

Building responsible sourcing into our new fish manufacturing supply chain.


Issue: Demonstrating leadership in quality of supply for own brand products.



Original target – 500 own brand suppliers to achieve Morrisons ‘Gold (Value Added) Standard’ by 2013.

Now superseded by overarching redevelopment programme for all own brand suppliers.

Initially trialled the Morrisons Gold Standard.

Gold Standard has been redeveloped into Morrisons Food Manufacturing Standard. Launched with own brand food suppliers in October 2011.

Morrisons Formulated Product Manufacturing Standard (predominantly health and beauty, and household) also established in 2011.

Revised

Complete

Effective introduction and auditing of required standards into the pipeline for product development as we move through a three year cycle of developing and reformulating all own brand products.

Issue: Working conditions in the supply chain.

Maintain an effective risk rated auditing programme for own brand suppliers.

600 detailed site audits for Morrisons Ethical Trading Code (aligned with the ETI Base Code) compliance to be completed by 2013.

Ongoing programme, conducted globally. Outsourced to ‘Fair Working Conditions’ who conduct full site assessments and directly engage with workers based on our signposting on a risk assessment basis.

On target Maintaining effective and targeted coverage in an increasingly complex and expanding supply chain.


Issue: Health and wellbeing. Promoting healthy choices for customers and food education to support healthy balanced lifestyles.



Continually developing our approach to nutrition and formulation of products.

Providing customers with clear, consistent advice.

We reported fully on our commitment to support the Department of Health’s Public Health Responsibility Deal.

Made significant progress to display calorie information on Café and Market Street products.

More progress on salt reduction through reformulation.

Ongoing

Ongoing

Ongoing

Reporting to the Department of Health on our work in 2012 and work proposed for 2013.

Continue to listen to customer feedback and develop improved nutrition policies.

To meet the Responsibility Deal salt reduction targets by the end of 2012.

…Great food…

Overview

Friendly people...M


Governance


Issue: Helping customers with food waste reduction, storage, cooking advice and communication.



Great Taste Less Waste campaign. Maintained throughout 2011 with in store communication, website and customer magazine.

Ongoing Needs to be refreshed with new ideas and communication.

Issue: Packaging reduction.

Courtauld II Commitment. Reduction of the carbon impact of packaging by 10% by the end of 2012 (2009 baseline).

Reported progress in 2011 for Courtauld Commitment. Analysis of our packaging data showed an overall absolute reduction of 4% for the reporting year (2010) from 2009.

On target Across the sector primary packaging is the greatest reduction challenge because of ongoing optimisation for a number of years.

Issue: Carrier bag reduction.

Ongoing carrier bag reduction year-on-year.

Carrier bags reduced in absolute terms by 0.9% despite a further 37 stores being added to the estate.

Introduced first Morrisons ‘bag for life’ to encourage reuse.

Ongoing Continual challenge to reduce numbers when the business continues to expand.

Issue: National waste management framework.

Zero waste direct to landfill from stores by 2013.

94.36% diverted in 2011.

Continuing reduction management at store level, managed centrally.

On target Remaining 5.64%.

Issue: Climate change, resource management and resilience.

30% absolute reduction in carbon emissions by 2020 (2005 baseline).

Further reduction (progress). At end of 2011, reduced to 14.6%.

New environmentally efficient store built at Peterborough to bring together a number of energy and resource reduction measures. Analysis of the results to establish efficiency.

Planning future projects has been central to work over the last year as the business grows yet further.

Launched a major internal energy reduction campaign to engage colleagues across the business to reduce energy use.

On target This is a very challenging target because of its ‘absolute’ requirement and our continued significant expansion.

Our Store of the Future roll out needs to be carefully monitored as initial results show an increase in energy usage.

Operationally our challenge is to have greater emissions management reduction built in to offset increased energy usage.

Issue: Operational water management

Reduce water cost by 10% in 2012/13. Increased monitoring through our own meters installation programme.

New Assessment of water management in our wider supply chain.

…Affordable…

Issue: Supporting the development of fresh food know-how and cooking confidence in the wider community.



Develop Let’s Grow as a vehicle to engage young people with fresh food, supported through education.

18,500 schools re-registered in 2011.

3m more vouchers given away in 2011 compared to 2010.

Generosity and community perception up 10% since activity began.

Ongoing Wider community engagement outside the school environment.

Issue: Social cohesion and support. Supporting national and local good causes that matter to our colleagues and customers.

Charity partnership with Save the Children aiming to raise £4m by end of 2012.

Main area of support is to fund early intervention work through Families and Schools Together Programmes (FAST).

22 FAST programmes established to date.

£1.6m raised for Save the Children in 2011.

On target Roll out of FAST schemes across the country and developing relationship with Save the Children to maximise the campaign.

For everyone


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About our corporate responsibility programmeDevelopmentOur first full published corporate responsibility report was published in 2006/7. Prior to this we included a social responsibility report in our Annual report and financial statements. During this period of strategic review for the Morrisons Group the corporate responsibility programme was more clearly defined after consultation with key stakeholders including customers, colleagues and suppliers. The programme was linked to a three year optimisation plan, up to 2010, which determined strategy and identified material issues for the Group as a whole.

The three key areas of focus for the programme were set out in 2007 as:1. Environment Taking good care of our planet – climate change, waste, sustainability.

2. Society Taking good care of our shoppers, colleagues and their communities – work, neighbours, living.

3. BusinessTaking good care as we go about our business – sourcing, supply, engagement.

Our 2008/9 Report was the first of three that were designed under the ‘Today’ headline. The intention was to make the Report accessible and engaging and was supported by linked branding in our stores, in other corporate documents and online.

By 2009/10 the programme reached a significant milestone as we completed most of the original targets. Key performance indicators were reviewed by directors on the CR Project Leadership Team during 2009 and revised commitments and associated KPIs were established and published.

Essentially, whilst the style of our communications have changed, our priorities remain the same. The structure of this Review follows a narrative of ‘friendly people making great food affordable for everyone’. The issues we cover have evolved from the outline we established in 2007.

Governance and performanceBest practice in responsible business performance and reporting is constantly developing. Our current corporate responsibility programme reflects both changes in the operation, scale and development of the Morrisons Group and influencing economic, social and environmental factors.

In 2011, leadership of the programme was realigned to our corporate senior management structure. Strategic development and policy associated with corporate responsibility were placed within Group Corporate Services.

Central commitments and KPIs are now managed under the stewardship of relevant Management Board Directors. Management Board Directors responsible for specific corporate responsibility commitments or KPIs are assessed on their achievements as part of their Professional Development Review.

Progress reports and approval for significant strategic developments are presented to the Management Board (quarterly). Progress and notification of significant strategic developments are also reported to the Corporate Compliance and Responsibility Committee (bi-annually) for review and comment.

The Management Board is chaired by Chief Executive Dalton Philips. It has detailed terms of reference and is responsible amongst other matters for development and implementation of strategy (subject to the overall supervision by the Main Board), financial performance, reporting and control, risk management and the development of corporate policies and procedures of the Group.

The Corporate Compliance and Responsibility Committee is chaired by Penny Hughes, a Non-Executive Director, and performs an oversight, monitoring and advisory role for key areas of corporate governance and development including health and safety, environmental, competitive and ethical compliance and corporate responsibility.

Further details of our Management Board members and the Corporate Compliance and Responsibility Committee can be found in the 2011/12 Annual report and financial statements.

Assurance This year we asked Two Tomorrows to review this document under the Assurance Standard AA1000AS (2008) and to provide management feedback. This external critical analysis, together with wider stakeholder engagement, will enable us to further develop responsible business practice.

We have published a copy of their Independent Assurance Statement on pages 55–56.

Governance

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Overview

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Governance


Management Board

1 Dalton Philips Chief Executive

2 Richard Pennycook Group Finance Director

3 Neal Austin Group Logistics and Supply Chain Director

4 Martyn Fletcher Group Manufacturing Director

5 Mark Harrison Group Retail Director

6 Terry Hartwell Group Property Director

7 Richard Hodgson Group Commercial Director

8 Martyn Jones Group Corporate Services Director

9 Norman Pickavance Group HR Director

Key to imageManagement Board

View online atwww.morrisons.co.uk/corporate/ar2012


Govt and Regulators

Suppliers

Empl

oyee

s

CustomersCommunities

Investors

NGOs

Suppliers want our custom, a reliable trading relationship and the best price.

Employees want good working conditions, job security, satisfaction and opportunities to develop a career.

Customers want quality, responsible products at a fair price with good service.

Communities are where our operations have the most immediate impact. They require us to be a good neighbour and bring employment and investment.

Government and Regulators set the rules and regulations but also ask for support to deliver Government policy.

Non Governmental Organisations ask us to follow their advice, change or adapt the way we operate.

Investors expect a good return on their money; that we grow, find opportunities and mitigate risks.

Stakeholder engagement

Stakeholder engagement is vital to ensuring that our approach to sustainable business is both relevant and effective. It enables us to identify issues and opportunities, respond to changing needs, adhere to best practice and reflect different views and feedback on our business operation.

Communities – This year we undertook research to look at the impact our stores can have on the high street. For greater social benefit, job creation needs to be rooted in the locations where stores operate to reflect the community. We’ve worked hard to ensure our recruitment supports applicants from across the community and can up-skill people once they are part of the business.

Customers – We gain feedback from customers directly from customer services, insight, market research, focus groups, panels, our website, correspondence and social media.

They recognise environmental and wider sustainability issues and want us to make it easier for them to be supportive through their buying habits but without additional cost.

Employees – Over the year we’ve built significantly on our formal employee engagement with a Company wide Climate Survey and seven follow-up Pulse Surveys throughout the

year to monitor progress. We’ve already implemented a new suite of family friendly policies that promote our employment terms ahead of our main competitors in a number of areas.

Government and regulators – We have regular dialogue, respond to consultations, support initiatives and enter debate on business issues. Government policy can be implemented with legislation and increasingly sector specific voluntary agreements such as the Public Health Responsibility Deal.

To illustrate how this can support responsible business we have set out some highlights on pages 52–54.

Investors – As well as direct comment and review from shareholders we also engage with institutional advisory bodies and research analysts for corporate environmental, social and governance performance. Feedback over the last year, for example, has suggested we include health and safety information in this year’s Review.

Non Governmental Organisations (NGOs) – From industry associations, unions, campaign organisations to charities, we continually engage and work with NGOs both formally and informally. At a basic level, we will respond through correspondence. Where requests are linked to our operational capability, policy or strategy they will assessed in the most relevant part of the Group and may be raised up to Management Board level.

Suppliers – We trade with companies all around the world and our challenge is to ensure that their operation is aligned with our Values, policy and responsible business practice. Through our terms of trade, monitoring processes, technology, supply chain, certification and auditing we work hard to ensure compliance.

Overview

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Governance


Our corporate responsibility programme is supported by our wider policy development framework which both informs the business and codifies agreed actions.

Over the last year we have developed a more systematic approach to policy which is supporting our responsible business agenda in relation to sourcing for own brand products.

Just as we do not seek to advertise products that aren’t in stock, so we do not make policy commitments overnight or in isolation. Last year, for example, we strengthened the sustainability of our fish sourcing in response to concerns over declining stocks. Our specific commitment on tuna was made only when we were confident that we could deliver it and is part of a broader strategy on commodities whose popularity and versatility create pressure on the natural environment.

How we prioritise where to take action and when will depend on a number of factors, not least the business case for change, the environmental impact and related social concerns. We draw on expertise in the business and consult with external stakeholders to identify current and future pressure points in the supply chain. We then discuss with senior directors, buying teams and suppliers what is achievable and over what timescale.

Once we have agreed our approach, it is disseminated to our supply base and to colleagues across the business.

There are of course challenges. In our business we have hundreds of buyers sourcing tens of thousands of products. Neither the buyers nor the products are fixed. Specifications change over time and colleagues will move around the business to broaden their experience. In such a dynamic environment there is always the risk that our policy commitments slip out of focus or are not properly followed.

We have addressed this concern with two major systems developments. In 2009/10 we completed a new data system to set technical requirements and capture accurate specification information on own brand products.

Last year, we improved our internal communication of policy by creating a central online briefing centre to make it easier for commercial colleagues, particularly those involved in new product development, to keep on top of our broader commitments. This also helps our colleagues in customer facing roles give clear information about where we stand on issues of concern, from the sourcing of key commodities to the protection of workers’ rights and animal welfare.

We know that customers are focused on broader social and environmental issues. To help them make informed choices and shop to their values, summaries of our core responsible business policies are available for people to scrutinise on our website.

Visit: www.morrisons.co.uk/corporate/policy

Food quality and product safetyProduct quality and safety are of critical importance to us. We work closely with suppliers and manage our own manufacturing facilities in accordance with strict standards. Food hygiene practices are taken very seriously across the Group and monitored both through internal auditing and external bodies such as environmental health developments.

In 2011 we began a transitional programme transforming all Morrisons own brand products through our 020 programme. This means reviewing around 11,000 products, benchmarking for quality and value and improving the range.

In doing so, we have taken a total quality approach to our supporting technical processes and standards. Our aim has been to deliver exceptional own brand products at affordable Morrisons prices. This means that we consider every aspect of the product that contributes to the customer’s experience of quality from packaging, cooking instructions, the way the product is presented in store through to issues such as formulation and nutritional guidelines.

In 2011, we communicated our Morrisons Food Manufacturing Standard to all our suppliers and they are now assessed against this standard on a regular basis. All new food suppliers and manufacturing sites are successfully assessed against this standard before they can supply Morrisons. Our food standard is complementary to global food safety initiative recognised certification schemes such as BRC and ISO22000. It has been developed specifically to focus suppliers on those areas where we find the most issues relating to product safety and quality.

Our Formulated Product Manufacturing Standard will be launched in 2012.

Policy Suppliers


We maintained an active engagement programme with the UK Government, Welsh and Scottish Assemblies during 2011 both independently, and through our trade association, the British Retail Consortium. We are open and transparent about the work we do with Parliamentarians, which focuses on the benefits of retail to communities and the economy. We also try and give our perspective on issues that may affect how we operate, such as where legislation has unintended consequences on our business and our people.

As part of our engagement we take time to show Parliamentarians and Government officials how we work, respond to requests for information, talk about how food retail operates and highlight our different business model.

Highlights below illustrate how government relations supports our responsible business agenda with straightforward, practical engagement.

Evidence to GovernmentLords CommitteeWe gave oral evidence to the House of Lords Committee in their inquiry into Innovation in Agriculture. Our evidence focused on the work of our farming programme and our vertical supply chain. Following this we were invited to meet with DEFRA officials to discuss the programme and the steps we have taken to support our farming suppliers on carbon efficiency.

Welsh Affairs Select Committee We gave oral evidence at the Welsh Affairs Select Committee as part of its inquiry into inward investment in Wales. We were able to discuss our existing investment in Wales, the training we give to colleagues and the investment in manufacturing we had made at Deeside.

Members of ParliamentSkills Minister in CamdenSkills Minister John Hayes met colleagues at our Camden store to recognise their achievements in gaining an apprenticeship. The visit took place during National Apprenticeship Week, when we announced we were the biggest provider of apprenticeships in the UK this year.

MPs in stores and in our communitiesWe invited a number of MPs to our stores to see how we work and to meet colleagues and customers throughout the year. We also completed a series of visits around our community based Let’s Grow programme to showcase its impact on pupils schools and wider community. In total we took 23 members of Parliament to local schools to see the programme in action and to meet pupils. This included a visit by the DEFRA Secretary of State, Caroline Spelman to a constituency school. She returned in 2012 to launch the Growing in Schools Taskforce report.

Andrew Lansley in Cambourne storeHealth Secretary Andrew Lansley was invited to a store to see our pledges under the Public Health Responsibility Deal in action. He witnessed our commitment to always have 50 promotions on fruit and vegetables in any week.

“Government has a role to play, but it is clear that we cannot do this alone. That is why we want to see businesses like Morrisons continue to work in partnership with local authorities, charities, health professionals and individuals”.Andrew LansleyHealth Secretary

BelowRt Hon. Caroline Spelman MP, Secretary of State, at a Let’s Grow school.

RightRt Hon. Andrew Lansley CBE MP, Health

Secretary, at a store visit with Martyn Jones, Group Corporate Services Director.

AboveJohn Hayes MP, Skills Minister, with apprentices.

Government relations

Overview

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Governance


EventsSave the Children at party conferenceCorporate Services Group Director Martyn Jones spoke alongside Save the Children CEO Justin Forsyth, DfID Secretary of State Andrew Mitchell and Chancellor George Osborne, at the Save the Children event at the Conservative party conference. He spoke on our support for the FAST programme and outlined our commitment to raise over £4m for the charity during our two year partnership.

Top female colleague celebrated in No 10One of our trading directors, Lisa Miao, attended a women in business summit at 10 Downing St following her Everywoman in Retail award. The Prime Minister commended companies who have pledged to increase the number of women in senior positions, and challenged more to follow suit. In his review in February, Lord Davies recommended that the FTSE 100 should be aiming for a minimum of 25% female board representation by 2015 and that the FTSE 350 should be setting their own challenging targets. Morrisons has a target to achieve over 30% female representation on the Main Board.

OfficialsCabinet Office and Health Department officials visit BradfordWe hosted a group of Cabinet Office officials at Farmers Boy and one of our stores in Bradford. We discussed research into behavioural science and our efforts to encourage customers to make healthier choices. In store, we showed them our pharmacies and discussed how they deliver healthcare to often hard to reach communities, particularly out of hours. We were highlighted in the annual report from the Behavioural Insights Team for reducing the prominence of alcohol in our stores.

Chair of the Food Standards Agency (FSA)The Chair of the FSA, Lord Rooker, visited our Colne abattoir and our food manufacturing site Farmers Boy in Bradford. Lord Rooker was keen to see how we operated within a vertically integrated business structure.

Presentation to Chinese Government delegationWe were asked to present to a delegation of Chinese Government officials who were on a fact finding mission to the UK. The delegation from the Ministry of Commerce were keen to understand more about how we maintain strict food standards through vertical integration.

BelowCabinet office and Health Department officials at ‘M Kitchen’


Manufacturing and distributionIndustry and Parliament Trust VisitWe are the UK’s second largest fresh food manufacturer, and this forms a major part of our communications with Government.

This is why we hosted a group of MPs on a one day tour of Morrisons. The group of ten MPs and one MEP came to Bradford as part of the Industry and Parliament Trust’s ‘Made in Britain’ campaign designed to show Parliamentarians some examples of great British manufacturers. The group visited Kirkstall store and the M Kitchen and finished with a tour of Farmers Boy in the city centre.

Vince Cable in Bradford to discuss manufacturingWhen Business Secretary Vince Cable came to Bradford to discuss the role of manufacturing in rejuvenating the city, we were able to make the case to him that food manufacturing is a key element to growing the economy.

Transport Minister visitTransport Minister Mike Penning visited our Yorkshire distribution depot, J41. We discussed the reductions in vehicle miles and haulage emissions that we have achieved through our efficient transport modelling. This was just after his department announced they will allow a trial of longer lorries following their recent consultation on the issue. Research suggests that high volume semi-trailers would allow up to 13% more loading space than current articulated lorries.

Technology Centre in Hereford officially openedLocal Hereford MP Jesse Norman opened our refrigeration technology centre, joined by local councillors, business leaders and Morrisons colleagues. The centre is run for us by Arctic Circle, and will train up to 1,000 engineers every year in natural refrigerants technology. The opening also involved the Mayor and around 30 members of the local business community.

Community impactMary Portas High Street studyWe presented Mary Portas with the findings from a report we commissioned on the impact of our stores on the high street. In the four town centres surveyed, 78% of businesses said we have had a positive or neutral impact on their trade. The majority believe we have been good for the town.

Sitting on the DEFRA ‘Growing Schools Taskforce’We provided advice, support and shared best practice with DEFRA to help with their aim to make, ‘every school a growing school’. The final report was published in Spring 2012.

Morrisons sign up to ‘Social Mobility Compact’We signed up to the Deputy Prime Minister’s ‘Social Mobility Compact’. The compact complements what we already deliver through our HR policies. Commitments include improving skills and creating jobs by providing opportunities for young people to get a foot on the ladder, with a focus on people who are not currently in education, training or employment. Our support of the Compact and the Deputy Prime Minister’s Youth Contract is closely linked to our past in the 16–24 Alliance.

‘Early Intervention Tzar’We met the Government’s ‘Tzar’ on early intervention to discuss our work on the FAST programme with Save the Children. Graham Allen, MP for Nottingham North, came to find out what led us to support what he described as “one of the best early intervention programmes out there”.

We are supporting Mr Allen in his continued work on early intervention.

Government relations – continued

Overview

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Governance


Scope and objectivesTwo Tomorrows (Europe) Limited has undertaken independent assurance of the Morrisons Corporate Responsibility Review 2011/12. The assurance process was conducted in accordance with AA1000AS (2008). We were engaged to provide Type 2 assurance, which covers:

• evaluationofadherencetotheAA1000APS(2008)principlesof inclusivity, materiality and responsiveness (the Principles); and

• thereliabilityofspecifiedsustainabilityperformanceinformation.

In addition to checking key claims relating to the principles made throughout the Review, we checked the key claims and data describing Morrison’s sustainability performance in the following five key areas: Carbon, Waste, Training and Skills, Healthy Food and Supply Chain.

We used the Global Reporting Initiative (GRI) Quality of Information Principles as criteria for evaluating performance information.

Responsibilities of the Directors of Morrisons and of the assurance providers

The Directors of Morrisons have sole responsibility for the preparation of the Review.

We were not involved in the preparation of any part of the Review. We have no other contract with Morrisons and this is the first year that we have provided assurance.

Our statement represents our independent opinion and is intended to inform all of Morrisons stakeholders. We adopt a balanced approach towards all stakeholders.

Our team comprised Jason Perks, Judith Murphy, Elvin Ozensoy and Rob Pearson. Further information, including individual competencies relating to the team can be found at: www.twotomorrows.com

Basis of our opinionOur work was designed to gather evidence with the objective of providing a moderate level of assurance as defined in AA1000AS (2008). We undertook the following activities.

• ReviewofthecurrentsustainabilityissuesthatcouldaffectMorrisons and are of interest to stakeholders, including a comparison with peers and issues raised in the media.

• Interviewswithselecteddirectorsandseniormanagersresponsible for management of sustainability issues and review of selected evidence to support issues discussed. This included five Management Board Directors whose responsibilities covered the five key areas. We were free to select interviewees.

• ReviewofMorrisonsapproachtostakeholderengagementand recent outputs of the engagement.

• ReviewofinformationprovidedtousbyMorrisonsonitsreporting and management processes relating to the Principles.

• Sitevisitstoreviewprocessesandsystemsforpreparing site level sustainability data and implementation of the sustainability strategy. In addition to visiting the Head Office to interview senior managers and gather evidence, we selected three sites to cover the different aspects of the business: the store in Camden, the logistics site in Wakefield and the bakery manufacturing site in Wakefield.

• Reviewofsupportingevidenceforkeyclaimsandspecifiedsustainability performance information in the Review.

• Reviewoftheprocessesforgatheringandcollatingdatain the five key areas and, for a sample, checking how the data was actually consolidated.

• Fordatacollatedbyexternalagencies,wecheckedthatthedata provided are accurately included in the report, reviewed the processes used by these agencies to collate data, but did not check the actual calculations. This applies to all carbon data collated by external agencies, and absolute reduction in the carbon impact of packaging under Courtauld Commitment 2 externally published by WRAP.

Findings and opinionWe reviewed and provided feedback on drafts of the Review and where necessary changes were made by Morrisons. On the basis of the work undertaken, nothing came to our attention to suggest that the Review does not properly describe the extent of Morrisons adherence to the Principles or its performance against specified sustainability areas.

In terms of data accuracy, nothing came to our attention to suggest that the data in the five key areas have not been properly collated from information reported at operational level, nor that the assumptions utilised were inappropriate. We are not aware of any errors that would materially affect the Group data in these five areas.

Observations Without affecting our assurance opinion we also provide the following observations.

This Review is a positive development by Morrisons in its approach to corporate responsibility and is a fair representation of the maturity of the Company’s management arrangements. The enhanced coverage of issues compared to previous years provides a more complete account for Review users. The linkage made in the Review between the Company strategy and the ‘Making great food affordable for everyone’ brand commitment is also helpful.

We were encouraged that areas for improvement have been identified and the corporate responsibility leadership team recognises the need to address them. Future Reviews should be even more specific and direct about some of these challenges.

Assurance


Inclusivity concerns the participation of stakeholders in developing and achieving an accountable and strategic response to sustainability.

• Morrisonshascreatedarangeofapproachestoengagementwith key stakeholder groups. The progress made in employee engagement through the introduction of monthly ‘pulse’ surveys and follow-up to feedback is a significant example of recent developments. However, the approaches currently lack a formalised structure and co-ordination. There would be benefit in reviewing the approaches as a whole to identify opportunities for further improvement and to integrate stakeholder groups’ views into Morrisons overall understanding of corporate responsibility. For example, more engagement with customers to explain the efforts being made to reduce packaging would be beneficial.

• Morrisonshasincludedanumberofstakeholderquotesin the Review that focus on highlights. This should continue to be developed and increased in future Reviews, with a greater balance of highlights and challenges, to enable readers to further understand the Company’s corporate management approach.

Material issues are those which are necessary for stakeholders to make informed judgements concerning Morrisons and its impacts.

• WebelievethattheReviewcoversMorrisonskeymaterialissues. A positive step in improving issue coverage this year is the inclusion of issues not previously reported, such as health and safety and pesticides. We noted that the level of coverage in the Review was not always proportionate to the overall level of importance of the issue. While we accept that coverage may be relative to the level of activity this year, or particular stakeholder group interests, we recommend reviewing the coverage in future Reviews.

• Morrisonshastakenstepstoidentifyitsmaterialissuesandtakes into account stakeholder feedback through mechanisms such as the Priority Issues Radar and the Group Risk Register. We were, however, unable to identify an ongoing systematic company wide process to determine materiality and recommend Morrisons adopt a more formal stakeholder based process in future. This would help inform corporate strategy and the relevant governance mechanisms, and help to determine the level of coverage and priority in future Reviews. Communication of the outcomes of this materiality assessment will also help readers understand which are the most important aspects of Morrisons corporate responsibility programme.

Responsiveness concerns the extent to which an organisation responds to stakeholder issues.

• Wenotedthegovernancearrangementsforcorporateresponsibility issues at Management Board level and recommend that these be further developed with more regular formal reviews and with a greater linkage to corporate strategy and brand.

• ThesummaryofcommitmentsandKPIstogetherwithprogress in driving improvements in performance is helpful. There are some areas where it would be useful to see more quantitative KPIs such as for raw materials, water management, food waste, and waste from manufacturing sites. We recommend developing the range of KPIs reported to help readers understand the performance described. A prioritisation of the commitments and KPIs would also be helpful.

Assurance – continued

• Morrisonsprogrammestominimiseandreusefoodwastewere a notable highlight. We also noted the range of approaches to providing employment for young people and those often excluded. Initiatives such as those in Salford are welcome and we look forward to seeing this and similar approaches being implemented more widely across the Company. Morrisons farming programme is another demonstration of the Company going beyond the minimum requirements through its vertical integration business model.

Performance information.

• Whilewefoundevidencetosupportspecifieddata,thedatacollection systems would benefit from a more consistent company wide integrated approach and clearer definition of data boundaries. We understand Morrisons is developing its approach to this in a number of areas as the business continues to grow and consolidate. Improvements in the reporting scope should also include performance information for agencies and contractors where these agencies are a key part of the vertical integration business model.

• WerecommendthatfutureReviewsdescribeorprovidereferences to more detailed descriptions of methods used to gather and report performance data. For example, we understand that Morrisons is in the process of developing data protocols for its People data which will cover most of the People indicators in the Review. We recommend that these are published alongside the Review to give transparency for the basis on which data is reported.

• Watermanagementinfoodretailandmanufacturingsectorsis becoming an increasingly important issue. Although water management was not one of the focus areas of our assurance process this year, we noted that Morrisons is in the process of improving data collection systems for water consumption and setting targets. We recommend that next year’s Review provide performance metrics and additional information on the implications of water use at the Company’s manufacturing, retail sites and supplier farms, in the context of challenges and opportunities for the sector.

Two Tomorrows (Europe) LimitedLondonMay 2012

Jason Perks Director

Two Tomorrows (Europe) Limited trading as Two Tomorrows is an international consultancy that helps companies to perform better and create value by doing business in a sustainable way. www.twotomorrows.com

Compiled byWm Morrison Supermarkets PLCHilmore House, Gain LaneBradford BD3 7DL

DesignSalterbaxter www.salterbaxter.comTelephone: 020 7229 5720

The Annual report and financial statements, the Annual review and summary financial statements in both paper and HTML format, and the Corporate responsibility review were designed and produced by Salterbaxter.

PhotographyRichard MoranMike Goldwater

PrintingPureprint

Paper stock: This report is printed on 9lives Offset uncoated, a 100% recycled paper. 9lives Offset is manufactured to the certified environmental management system ISO 14001.

Corporate responsibility review

2011/12W

m M

orrison Supermarkets PLC

Information at your fingertips

Telephone0845 611 5000

Visit our websitewww.morrisons.co.uk

Wm Morrison Supermarkets PLCHilmore House, Gain LaneBradford BD3 7DL

CorporateOur corporate website, www.morrisons.co.uk/corporate, has the following sections.

Work with MorrisonsCareer opportunities and information about working for Morrisons. For our dedicated recruitment website, go to www.iwantafreshstart.com

Media centreLatest releases about the growing estate of Morrisons, along with promotions and product news.

Corporate responsibilityHere you can find out about our corporate responsibility ethos, including how we take good care of our environment, society and how we go about business. www.morrisons.co.uk/cr

Steven ButtsHead of Corporate Responsibility [email protected]

InvestorsUser-friendlyPresentations, announcements and financial reports can be quickly and easily downloaded or viewed on-screen as PDFs. You can easily navigate around the Annual report and financial statements 2011/12 on-screen, viewing only the parts you want to, at www.morrisons.co.uk/corporate/ar2012

WebcastsWebcasts of the Directors delivering the preliminary results for 2011/12 on 8 March 2012 are available.

Shareholder informationOther relevant shareholder information is available, for example share price history, dividends, financial calendar and AGM minutes.

Electronic communicationsElectronic communications (eComms) is the fastest and most environmentally friendly way to communicate with our shareholders.

Instead of receiving paper copies of the annual and interim financial results, notices of shareholder meetings and other shareholder documents, you will receive an email to let you know this information is available on our website.

Visiting our website to obtain our results reduces our environmental impact by saving on paper and also reduces our print and distribution costs.

Sign up to eComms on our website at www.morrisons.co.uk/corporate and follow the investor eComms link.

About MorrisonsYou will find information about the Group, its operations, strategy and structure, and past financial information.

ConsumerOur website, www.morrisons.co.uk, allows you to learn more about Morrisons and our offering.

Offers• Latest promotions • Specific product offerings • Press releases/marketing • Sign up for our latest offers by email

Market StreetMore about our unique in-store offering, along with video presentations of where our food comes from and how to buy, cook and present it. You can now find nutrition information for Market Street on our website.

Food and drinkInformation about our food ranges, healthy eating and mouth-watering recipes along with ideas of what drink goes well with each recipe.

Family lifeFrom entertainment to bringing up baby and looking after your pets. View our current and archived bi-monthly magazine and read our handy health information for the whole family.

Our suppliersRead about what food is produced fresh near your home and explore our seasonal calendar to see which foods are fresh at different times of the year.

Let’s GrowInformation about our Let’s Grow scheme, including how to register, facts, how it works and teaching resources.

KiddicareSee our range of baby and toddler products and order online at www.kiddicare.com

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