Sustainability CIRCULAR ECONOMY continued Responsible sourcing and Supply chain tiers manufacturing As we do not manufacture the majority of the products that we sell, we engage regularly with our suppliers to ensure they know their responsibilities Tier 4 Tier 3 Tier 2 Tier 1 Tier 0 as a Dunelm supplier and take ownership for compliance and progress towards our targets. All Fibre Fabric and Tier 1 Final Office, suppliers sign up to our Ethical Code of Conduct processing cotton sub- product retail, (which aligns to international labour standards suppliers contractor factory distribution and includes an enhanced section on Modern centres Day Slavery and a commitment to improve their environmental performance) and to our standard terms and conditions. Recently, we have evolved our audit programme to include environmental risks alongside ethical and social risks, which we have monitored for many years. ETHICAL ASSESSMENTS AND AUDITING We expect our supplier partners to demonstrate full compliance with the social, ethical and environmental standards set out in our policies in a transparent manner. Who needs an audit? All sites that manufacture a finished product for Dunelm (Tier1 suppliers) must provide a low-to medium-risk graded ethical audit (not more than two years old) and a valid building and fire safety certificate. Our ethical audit programme has been extended to cover all warehouses that hold stock of Dunelm branded product and selected Tier 2 sites. In response to our findings, we review and raise our audit standards annually – making it harder to reach our internal targets but ‘doing the right thing’ for the long term, see page 74. In FY21 , If action is not taken within an acceptable period, our ability to audit sites and close off corrective Dunelm will stop buying products from that supplier actions was hampered temporarily by Covid-19 and supply chain. This year we implemented restrictions. At FY21 we had in-date audits for unannounced, full spot check audits in UK sites on 89% of Tier 1 factories. InFY22 we intend tompa a risk basis and during FY21 we audited over 40% all Tier 2 textiles suppliers and extend our ethical of applicable sites. This was a major initiative which programme to them. focused on areas such as ‘right to work’, minimum wage payments and Covid safety. We plan to We use an independent third-party expert Verisio increase the frequency of spot checks in FY22. to assess, grade and monitor the social and ethical performance of the supply chain for both product ENVIRONMENTAL ASSESSMENT and third-party service providers. Corrective AND AUDITING actions and timescales are logged on digitised In FY21, we continued to roll out processes to supplier scorecards on our web portal, giving a assess the environmental practices of sites that ‘live’ overview of individual supplier performance. manufacture our own brand products, including We work closely with our suppliers – especially key water, chemicals, emissions and energy use. partners – to help them rectify any issues within We moved from a trial stage to working with agreed timescales. However, where participants independent supply chain verification specialists for refuse to engage in continuous improvement or our major/high-profile supply chain materials and to supply minimum documentation, we will not introduced an assessment programme to support compromise our supply chain integrity. the verification of recycled materials. We also joined the Textiles 2030 industry group and committed to their targets to reduce the environmental impacts of textile sourcing, see page 58. 56 DUNELM GROUP PLCANNUAL REPORT & ACCOUNTS 2021