Sustainability Task Force on Climate-related Financial Disclosures (TCFD) continued Indicative timeframe, Link to TCFD main risk TCFD sub risk post Dunelm’s categories categories mitigation Risk Opportunity principal risks TRANSITION Policy and Medium Risk of increased taxation as UK Reduce fuel costs by partnering with Business RISKS legal risks Government aims to meet its own leading low-carbon logistics providers. efficiency (related to a climate change commitments. Key areas Warehouse and distribution savings lower-carbon relating to Dunelm include: increased through efficiency improvements in economy) taxes for energy, plastic, vehicle fuel logistics, packaging reduction, picking taxes, waste and overall ‘carbon tax’. and route optimisation. Long Increased costs associated with building Long-term cost savings through move to Business efficiency standards, including renewable energy. efficiency legislation to remove and replace gas-fired heating and refrigerants. Short/ Extended producer responsibility is Potential longer-term savings in Business Medium increasing costs of operational waste procurement and inventory costs by efficiency disposal (products, packaging and raw moving to a more circular business model. material waste). Reduction in waste management costs by phasing out single-use plastics and improving reuse and recycling schemes. Market Medium Increasing demand for more sustainable Benefiting from decreasing costs of Business risks materials (recycled, recyclable) – alternative and/or climate-stable raw efficiency currently a scarce resource. This may materials, while increasing reputation increase costs. as a sustainable retailer. Future-proofing our business through the above, particularly in relation to new product development, decreasing reliance on narrowing supply chains, improving processes and distribution efficiencies and gaining preferential access to financing to support future growth. Medium/ Demand for more durable products/ Increased sales of products, which help Competition, Long repair and reuse/circularity leads to customers lead more sustainable lifestyles.market and lower sales of new products; potential Increasedrevenue from customersproducts loss of sales to competitors who have a associated with circularity (e.g. upcycling). more sustainable offer. Reputational Medium/ Failureto attract/retain customers if we Enhanced brand and reputational Competition, risks Long are not perceived as a responsible credentials, leading to wider, and more market and company. loyal customer base. customers; Brand damage Medium/ Failure to attract/retain colleagues if we Enhanced brand and reputational People and Long are not perceived to be a responsible credentials, leading to wider, and more culture company. loyal colleague base. Medium/ Failure to attract/retain investors/ Easier access to capital through enhanced Finance and Long pressure from investment community if disclosure and investor relations activities. treasury we are not perceived as a responsible company. Medium/ Bank or other finance is not available or Easier access to capital and improved Finance and Long has a higher cost due to poor lending conditions through enhanced treasury sustainability credentials. disclosure and investor relations activities. PHYSICAL Acute Medium/ Extreme weather events could cause Work with distribution suppliers to improve Supply chain RISKS risks Long significant transport disruption. efficiencies and ensure resilience to disruption (related to potential disruption. physical Medium/ Extreme weather events (flood, drought, Benefiting from decreasing costs of Business impacts of Long wildfire, storm surge) could increase alternative and/or climate-stable raw efficiency climate competition for land use and impact materials, while increasing reputation change) availability or cost of raw materials. as a sustainable retailer. Chronic Medium/ Water stress/soil degradation/ Refine supplier selection process and Business risks Long deforestation creates raw material work with existing suppliers to improve efficiency; shortage, for example cotton, timber, resilience and sustainability in the Brand palm oil and coffee. supply chain. damage; Competition market and customers 50 DUNELM GROUP PLC ANNUAL REPORT & ACCOUNTS 2021