Sainsbury’s Fairly TradedReport 2019/20

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2Our strong heritage of sourcing with integrity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3A history of investing in sustainable sourcing and communities across the globe . . . . . . . . . . . . . . . . . . . . . . . . 4

The Sainsbury’s Fairly Traded Model . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5Challenges in the tea supply chain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5Our vision for change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6A visualisation of our tea supply chain from leaf to cup . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7How we are supporting farmers in practice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8Better understanding farmers’ perspective . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

Governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10Governance and the Sainsbury’s Foundation Advisory Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10The Sainsbury’s Foundation Advisory Members . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11Our Producers and the First Cycle of Projects at a glance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

Our Impact . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12Case Studies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

Learnings and Next Steps . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

Key activities of 2019/20 Financial Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

Independence and Assurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

Appendix . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

ContentsJ Sainsbury plc Fairly Traded Report 2019/20 2 Introduction

J Sainsbury plc Fairly Traded Report 2019/20 3 Introduction

Earlier this year, we launched our commitment to be Net Zero in our own operations by 2040 .

We have significantly invested in becoming a more sustainable operation, as we continue to source our products ethically and sustainably . Sourcing with Integrity helps us to improve social conditions and environmental protection throughout our supply chains, whilst also securing the future availability of our products for our customers .

As part of our work in this area, we established the Sainsbury’s Fairly Traded tea pilot in 2017 to help drive the environmental, social and economic sustainability of tea farmers, workers and their communities in Malawi, Rwanda and Kenya .

This pilot builds on a strong heritage of sourcing with integrity at Sainsbury’s . It represents just one example of the work we are doing in this area and we recognise the importance of reporting transparently on our progress . Across the 18/19 and 19/20 financial years we have invested £660,300 (GBP) to support the communities in our Sainsbury’s Fairly Traded tea supply chain, in the form of premium distributed to producer groups . A further £ 678,400 (GBP) of Sainsbury’s Fairly Traded Social Premium has been ring-fenced and will be disbursed to fund future investments . I hope you will find this update helpful and as ever, we welcome your comments .

Simon RobertsChief Executive Officer6th August 2020

Our strong heritage of sourcing with integrity

J Sainsbury plc Modern Slavery Report 2019/204 Introduction

A history of investing in sustainable sourcing and communities across the globe

1869

1994

1998Became a founding member of the Ethical Trading Initiative (ETI). Since then we’ve worked on various initiatives addressing ethical issues in global supply chains, such as trafficking and slavery in the Thai fishing industry

2004Began our partnership with the Woodland Trust. We’ve since raised over £7 million and planted over three million trees – mitigating 750,000 tonnes of CO2

2007Launched the Sainsbury’s Dairy Development Group in 2007 and today we have farmer and grower development groups covering our main agriculture and horticulture supply chains

Launched the Fair Development Fund with Comic Relief to transform the lives of small producers in developing

countries. This is in addition to the charitable partnership with

Comic Relief, which has raised over £100m since 1999

2012Launched our project with Sukambizi Association Trust tea growers in Malawi, supporting the development of tea plant nurseries and farmer training to increase productivity and quality

2017

2018

Started supporting Fairtrade. Today, we remain the world’s largest retailer of Fairtrade products. We sold £300m+ worth of Fairtrade products in 2017/18

Joined the World Cocoa Foundation, the UK Roundtable for Sustainable Soya and the Cambridge Institute of Sustainable Leadership Water Agreement to drive more sustainable production and practices in agricultural supply chains

Signed the Cerrado Manifesto to tackle deforestation in one of the world’s most biodiverse regions

Marine Stewardship Council ranked us the best supermarket in the world for sustainable fish

2020

Committed to investing £1 billion over twenty years towards becoming a Net Zero business across its own operations by 2040, aligned to the highest ambitions of the Paris Climate Change Agreement and a decade ahead of the UK Government’s own target.

Announced our Net Zero by 2040 Commitment

2019As a member of the Consumer Goods Forum, we are working as part of the Forest Positive Coalition of Action to drive collaborative action on commodity-driven deforestation, notably on Palm Oil, Soy and Timber products.

Sainsbury’s was founded as a dairy shop, with the promise of higher quality milk and butter, at affordable prices

Since then, and particularly over the last 20 years, we have invested in several UK and international development projects and partnerships

J Sainsbury plc Fairly Traded Report 2019/20

J Sainsbury plc Fairly Traded Report 2019/20 5 The Sainsbury’s Fairly Traded Model

Challenges in the tea supply chain. Often, they remain poor with little access to finance, investment, and financial predictability.After water, tea is the most popular beverage in the world - in Britain alone we drink 165 million cups of tea a day . As the UK’s second largest supermarket, we understand the importance of tea for our customers, and the need to secure its sustainable supply .

Tea is also the main source of income for millions of families in emerging countries, and can play a significant role in the economic development of rural communities .

In East Africa, climate change is already affecting the crops and livelihoods of farmers . Increasingly, tea farmers face extreme weather, from record high temperatures to more unpredictable rain patterns . Building more sustainable and resilient tea crops has become a critical challenge in protecting incomes of smallholder tea farmers and workers in the region .

We also recognise that global trade systems disadvantage smallholder farmers and pluckers . Often, they remain poor with little access to finance and investment and financial predictability . This is partly due to the fact that tea is traded as a commodity . Long-term commitments across the supply chain are the exception rather than the rule, and farmers usually have little knowledge who the end-consumer of their tea is .

Whilst more than two decades of certification has gone some way to supporting communities, we believe we need to go further to drive improvements that will equip move vulnerable producers to face the combined challenges of biodiversity loss, climate change and global inequalities in trade .

We launched the Sainsbury’s Fairly Traded tea pilot to start working more directly with our tea farmers to help them address these challenges, and the priorities they identify .

Judith BatchelarDirector of Sainsbury’s Brand

J Sainsbury plc Fairly Traded Report 2019/20 6 The Sainsbury’s Fairly Traded Model

Tailored information, support and training

Environmental sustainability and stewardship

Social development and community empowerment

Sustainable investment

Greater financial predictability

Economic resilience

What we hope to achieveWhat we put in

Our vision for change

Contributing to the UN Sustainable Development Goals

J Sainsbury plc Fairly Traded Report 2019/20 7 The Sainsbury’s Fairly Traded Model

A visualisation of our tea supply chain from leaf to cupSainsbury’s tea supply chain in East Africa

Smallholder tea

Growing green leaf tea

Sainsbury’s customers

Drinking and enjoying tea

Sainsbury’s supermarkets

Selling tea

Tea estateFirst stage tea processing

Tea farmers’ organisation

Buying tea to sell on or support with training

and inputs

ExportersTransporting tea

Packer / Processor Blending and packing tea

Creating a space where even the most vulnerable have a voice

Able to access a guaranteed route

to market

A Sainsbury’s Fairly Traded social premium available for each producer

organisation – based on the volume of tea sold and given at a value at least equal to the Fairtrade Premium – for

them to invest in their businesses and communities

Each producer organisation receives annual volume forecasts which support greater financial predictability

Valuable information and data generated through the Sustainability Standards programme

Visibility of where and how money is being spent to ensure accountability

A Sainsbury’s Fairly Traded minimum price – set at a value at least equal to the Fairtrade minimum price - for their tea, which protects against market fluctuations

Opportunity for transparent,

participatory and longer-term

relationships throughout the

value chain

More sustainable, resilient supply chains for tea into the future

Transparency in how the social premium has been spent and its impact

Consistently high quality product, at a fair price

J Sainsbury plc Fairly Traded Report 2019/20 8 The Sainsbury’s Fairly Traded Model

A Minimum Price Guarantee for their tea: Pegged against the Fairtrade minimum price, to protect against global price fluctuations that can result in farmers producing at a loss . This means our producers are guaranteed to receive at least $1 .4 (USD) per kilo of tea . Global tea prices have usually stood higher than this threshold over the length of the pilot however, and 95% of the Fairly Traded tea was purchased from producer groups above this minimum price .

Sainsbury’s Fairly Traded Social Premium:A premium producers accrue on top of the payment they receive for the tea they produce . Pegged against the equivalent Fairtrade premium, at 0 .5$ (USD) per kilo of processed tea since the launch of the programme .

Using data to drive local solutions: The Sainsbury’s Sustainability Standards programme and its self-assessment tool that focuses on tea-specific issues, and highlights areas that producers might want to include, such as water management or training of workers .

Longer-term commitments: Our producers receive annual volume forecasts that enable better financial predictability . We believe that building more sustainable and resilient supply chains through longer-term partnerships will benefit producers and Sainsbury’s . This approach contrasts with how tea is often purchased globally, where blends and purchasing patterns mean that retailers do not always source from the same producers from one quarter to the next .

How we are supporting farmers in practiceProducers benefit from a premium to invest in their businesses and communities, as well as a minimum price guarantee. They develop plans for how to invest their social premium, informed by needs-based planning and external data and insight.

J Sainsbury plc Fairly Traded Report 2019/20 9 The Sainsbury’s Fairly Traded Model

One of the areas we wanted to understand, through our farmer-driven programme, was how this supply chain could be managed diffidently than if it was working through an existing certification scheme . By gathering regular feedback from farmers, we were better able to understand their priorities, awareness of the programme and the level of democratic representation in their producer organisations . We worked in partnership with Mobile Accord in early 2019 to distribute mobile-surveys to close to 2,000 smallholders across Rwanda and Malawi through the Geopoll platform . It was free for farmers to respond and the anonymised results were shared with representatives to help inform the future design of projects .

In Malawi and Rwanda we have provided farmers and workers access to an anonymous hotline, which enables them to share any issues they may experience with the programme . However, despite communications of the existence of the hotline through posters and SMS, we have received very few messages to date . In the coming months, we will be trying to understand if this is an access issue or if there are no concerns to report .

Our vision for the pilot has always been to empower farmers and workers to build their

own resilience within their business and wider community through targeted support and engagement . We know they are best positioned to identify what initiatives and investments will drive this resilience . We have committed to support smallholder farmers to organise collectively, and work with representative structures such as co-operatives that, equipped with the data and insights that we share, can develop plans that truly address the needs of their communities . Our model requires that farmer and worker representatives consult with their community when designing projects . This approach differs from how things work under a certification programme, most notably that Sainsbury’s would not have been able to share data, such as highlighting upcoming risks to do with climate change, with the intention to influence plans .

We’ve appointed and funded three support staff, one from each region, to liaise directly with producer organisations, supporting them as needed and advising them on the planning and implementation of projects . They also monitor and report on project progress . Building this direct communication and trust has been essential to the set-up of the Sainsbury’s Fairly Traded approach during this pilot .

Case Study - Breaking down information by genderTo ensure the priorities of the many female smallholders that grow our Sainsbury’s Fairly Traded tea in Malawi are represented, all data collected through these mobile surveys was disaggregated by gender . This showed that both female and male farmers, that represent 62% and 38% of the smallholder population respectively, ranked farm productivity as their highest priority area, followed by access to electricity and education (see table below) . Equipped with this information, their representatives chose to invest the Sainsbury’s Fairly Traded Social Premium in fertiliser, rural electrification and school bursaries .

Despite making up 62% of the farmer population at the Sukambizi Association Trust (SAT), which represents over 11,000 farmers in Malawi, we noted that the share of female respondents to our survey was only 30% . We also know that in households that only have one mobile phone, the respondents could have more often been male, potentially leading to their disproportionate representation . This highlights the need to hold individual, in-person surveys in addition to the mobile phone ones, which we will be carrying out through our partners on the ground in the future .

To further support structures and projects that represent women farmers and their interests, we require that women be part of the boards and committees that decide on projects for producer organisations . There is also a requirement that they consult with the community in groups that include at least 30% women .

Better understanding farmers’ perspective

Priority Sector for Investment Share of Responses by Gender

0

5

10

15

20

25

30

MaleFemale

HealthcareBusiness Training

Roads & Bridges

EducationElectricityFarm Productivity

J Sainsbury plc Fairly Traded Report 2019/20 10 Governance

Governance and the Sainsbury’s Foundation Advisory Board*

Producer Groups sell tea to our tea packer and accrue a premium

Producer Groups design detailed plans for projects, informed by external data with the help of support staff

The Sainsbury's Foundation Advisory Board reviews plans, and shares any feedback with producers

Producer Groups adjust plans based on this feedback

The Advisory Board makes a recommendation to Sainsbury's based on adjusted plans

Sainsbury's make a funding decision based on this recommendation

* The Sainsbury’s Foundation is the name Sainsbury’s gives to its not-for-profit initiatives including its Sainsbury’s Fairly Traded programme . The Sainsbury’s Foundation is a trading name only . All Sainsbury’s Foundation funds are ring-fenced by Sainsbury’s and applied for social and/or charitable purposes .

“The Advisory Board’s

experience of the Fairly Traded Tea Pilot has provided lots of

useful lessons for Sainsbury’s. Not all were surprising to us, and these will be looked at in more detail, but they include:

• Smallholder organisations vary enormously both between and within countries

• The ability of even the more developed ones to identify and articulate locally identified priorities often requires support

• Considerable assistance was needed in-country to produce more developed proposals for the distribution of the Fairly Traded premium payments

• Decisions to purchase particular quality and quantities of a commodity like tea are primarily driven by consumer tastes, and will vary over time

• The cost of managing and supporting an effective social premium model are significant

Will DayIndependent Chair, The Sainsbury’s Foundation

Advisory Board

J Sainsbury plc Fairly Traded Report 2019/20 11 Governance

Pauline Tiffen

A proven track record of working with under-represented farmers and workers to drive understanding and improvement in complex global supply chains.

Pauline has more than 30 years’ experience in social and ethical enterprise from co-ops to the World Bank. She was founder of pioneering farmer-owned, fair trade companies Cafédirect and The Divine Chocolate Company.

Jamie Laing, Secretary

Jamie is a Group Safety Business Partner, responsible for ensuring the safety of our colleagues and customers in Scotland, NI and ROI. He is also Chair of People Know How, a social innovation charity in Edinburgh.

Judith Batchelar, OBE

With over 35 years’ experience in the food industry, Judith is responsible for all aspects of Sainsbury’s product offering, from ethical and sustainable sourcing through to product development, quality and packaging.

Jason Elton

Jason is based at Sainsbury’s Kempshott (near Basingstoke) and is an Online Delivery Driver. He works closely with colleagues from across the Sainsbury’s Retail Group, as part of his role as a National Great Place to Work Representative.

PaulDuckels

In a finance career spanning 22 years, Paul has worked in a variety of roles at Arcadia, KPMG, M&S and Starbucks, before spending the last 13 years in commercial finance at Sainsburys, where he is currently the Head of Trading Finance.

Paul Cleal

Strategic thinker on international development, bringing practical business and personal experience of working in one of our key sourcing regions, Sub Saharan Africa.

Paul acts as a board member or advisor to organisations on strategy, leadership and change. Over the last 30 years Paul has worked in local and central government and was a partner in PwC for 16 years.

AndyWales

Sustainable development matchmaker and innovator with extensive experience of social, environmental and commercial aspects of agricultural value chains.

Andy matches entrepreneurs with multinationals’ value chains to deliver social impact. He is a Senior Advisor for the Global Innovation Fund and has recently joined BT as Chief Digital Impact and Sustainability Officer.

Will DayWill brings a wealth of experience in sustainability and not-for-profit enterprise leadership, and is a Fellow of the University of Cambridge Institute for Sustainability Leadership.

AliceChapple

An expert in establishing approaches to evaluating risk and impact to support longer-term investment strategies.

After her director role at Forum for the Future, Alice established the consultancy Impact Value, advising companies, development finance institutions and other investors on commercial strategies which deliver the best impact for society and the environment.

The Sainsbury’s Foundation Advisory Members

Sainsbury’s Internal Advisors

Independent Chair

External Advisors

J Sainsbury plc Fairly Traded Report 2019/20 12 Our Impact

Our Producers and the First Cycle of Projects at a glance November 2019 – March 2020

MalawiSukambizi Association Trust (SAT)

KenyaKenya Tea Development Agency

James Finlay Kenya (including Finsbury’s Community Based Organisation)

Rwanda Assopthe Cooperative

Sorwathe Ltd

We are working with five producer organisations as part of the pilot, from which we source our Red Label Fairly Traded teas.

26,900 people directly impacted

15,100 Females

10,700 Males

100households connected to the electric grid

3.3 million tea seedlings grown and planted

560,000 tree seedlings grown and planted

3 water boreholes dug and water pumps installed

2,400 bags of fertiliser 100% subsidised

4 bridges built connecting people and businesses

4 cooperative management and staff training sessions. Average attendance of 62

6classrooms built in primary schools

In the first cycle of Sainsbury’s Fairly Traded activities, from November 2018 to March 2020, 28 projects were co-funded through the Sainsbury’s Fairly Traded Social Premium across Rwanda and Malawi.

Of the £660,300 GBP Sainsbury’s Fairly Traded Social Premium distributed over the 18/19 and 19/20 financial years, £401,000 GBP was disbursed to co-finance these projects, the remainder going toward an ongoing, second cycle of activities .

J Sainsbury plc Fairly Traded Report 2019/20 13 Our Impact

Case Study 1: Tea Nursery

Sainsbury’s began supporting the SAT tea nursery some years before the Sainsbury’s Fairly Traded pilot, helping to establish it together with our supply chain partners . The nursery aims to strengthen farmers’ incomes by enabling access to newer, more productive tea variants that rejuvenate their tea trees at a price they can afford .

With the support of the Sainsbury’s pilot, 1 .2 million tea nursery seedlings were sold to over SAT 1,100 farmers, that will rejuvenate up to 100ha of tea crops . These new clones give a better colour to the processed tea and are more heat resistant, the importance of which is clear as large areas of tea trees in neighbouring farms began browning in late 2019 due to the extreme heat . The tea seedlings are sold at cost, to ensure the long-term financial viability of the operation .

Last year temperatures in Mulanje, southern Malawi, reached 40C . This, combined with winter extremes of heavy rainfall, means tea planted in the 1960s do not survive the stresses of altered growing conditions caused by climate change . The Sukambizi Association Trust now have the largest area of modern clones in Malawi, a country whose ageing tea trees is a significant threat to the continuation of the industry in the country .

“This project was very beneficial to the

locals. Farmers were able to access high quality seedlings easily which helps them

to grow more tea and make more money

Mr Alex MasombweNursery caretaker

Case Study 2: Water Boreholes

In Malawi, three boreholes were dug to improve water access for 400 households . Prior to the project, villagers had to walk up to one mile to the closest stream or well to collect water and wash their clothes .

Case Study 3: Rural Electrification

100 households, school buildings and local businesses have been connected to the electric grid in Malawi with the support of the pilot .

Recognising that access to electricity enables social and economic development, the Sukambizi Association Trust has partnered with the social enterprise MEGA in Malawi to expand this access .

MEGA uses electricity generated from the river to provide a renewable and affordable source of energy to tea farmers and their community .

This has helped students study longer in the evenings, increased feelings of safety in the area and connect teacher’s houses and classrooms to electricity .

Case Studies

Credit: www .mega .mw

J Sainsbury plc Fairly Traded Report 2019/20 14 Our Impact

Case Study 4: Crèches

In Rwanda, the Assopthe Cooperative and the Sorwathe factory have used the Sainsbury’s Fairly Traded Social Premium to open four crèches for farmer and factory workers’ children .

These offer a safe and welcoming environment for approximately 80 children . This enables parents in childcare – most often mothers – to return to work earlier, or offers an alternative to their children staying in the fields while they pick tea .

Case Study 5: Weighing Sheds

SAT has also invested to improve one of the final steps in the process of collecting tea from individual smallholder growers; building two new weighing sheds . The sheds provide a clean, cool area to weigh green leaf and to store plucked tea whilst awaiting collection, allowing farmers to protect the quality of their tea and work in more sustainable conditions in response to the extreme weather conditions brought about by climate change .

“The modern sheds are a game changer. The Greenleaf tea from the farmers is

well protected from rains and sunshine which helps it fetch good prices thereby

increasing income of smallholder farmers. Farmers are excited about this project.

Mr KamanagaSAT Block Leader

Case Study 6: Bridges

SAT has built two bridges with the support of the pilot . As well as improving connection for the community, the first bridge will provide faster access to the factory, and improve the freshness of the tea it processes . The second, a footbridge, saves a significant walk for school children in the area, and improves access to medical care and different markets for all .

“Women used to travel about 8 kilometers

to access health services on the other side of the river. Secondary school boys and girls were also travelling the same

distances or they would take chances to cross the rivers and many deaths were

occurring. The bridge has changed lives of many people in my village

Luciano MpangaGroup Village Headman

“I felt immensely proud of what the Sukambizi Association Trust had

achieved with the funding, and to be a part of Sainsbury’s in providing such a

strong foundation for their future. Every penny has been well spent after careful

consideration of what would have the greatest impact on improving lives and businesses. It was great seeing how we could improve so many lives, hand-in-

hand with creating great products for our customers. Considering that there is more

funding on the way, I am excited to see the next phase.

John OwlesSainsbury’s In-country

Category Technical Managerfollowing his visit of the Sukambizi Association Trust

in Malawi in November 2019

2020 will see a second cycle of activities for SAT, Assopthe and Sorwathe, with a number of projects having already begun . In Kenya, the James Finlay Kenya tea estate and the Kenya Tea Development Agency are due to begin their first cycle of activities . We will continue to report on their progress .

Covid-19 Response

Credit: HATANGIMANA Remy Charles

Although early government measures seem to have prevented a more severe progression of the Covid-19 virus across Rwanda, Malawi and Kenya, the risk remains significant in the region . Poorer communities with little access to healthcare are particularly vulnerable .

In response, producer groups have implemented various safety measures, such as social distancing in fields and factories, and providing hand-washing stations at tea weighing sheds . Flexibility on allocation of the Sainsbury’s Fairly Traded Social Premium is critical in response to this . Farmers can redirect funds previously allocated to agreed projects to fund emergency resources . Two producer groups have taken up this option . One has chosen to donate food staples to vulnerable families, and another to distribute masks, soap and water buckets to the wider community .

J Sainsbury plc Fairly Traded Report 2019/20 Learnings and Next Steps

Over the past three years, Sainsbury’s, the Advisory Board and its producers have learnt a lot through the pilot and we committed to share these insights and learnings, which will help to guide our approach in the future:

Farmer satisfaction We know from farmer focus groups that Sainsbury’s Fairly Traded producer groups have said they are highly satisfied with their participation in the programme . In particular, they have found value in:

• increased access to technical and qualitative data delivered through their participation in the Sustainability Standards data collection programme

• increased visibility of their supply chain through to the final customer

• assistance in project monitoring

We are working to ensure our surveys reach more people .

Project management supportProducer groups sometimes lack resources and capacity to design and manage the development of large-scale projects that meet the needs of the farmers and workers they represent . We found that many representatives did not have the training to develop detailed business plans and that, combined with a lack of robust monitoring, this could lead to delays in the implementation of multiple, concurrent projects . The presence of Sainsbury’s Fairly Traded support staff has been critical in building this local capacity . By supporting and advising on the planning, management and reporting of projects, they have helped producers deliver these projects faster, and gain key skills for the long term .

Data and insights importanceThe importance of data insights has been very clear . Through certification producers were not regularly offered clear and tailored insights to design projects . Technical data, including from our Sustainability Standards programme, as well as survey data collected directly from farmers, has allowed producer groups to design plans that match the needs of their businesses, farmers and their community . This relies on groups engaging in our programme, which we appreciate takes them some time and resource, but the high level of engagement with this programme suggests the value that producers find this adds .

The need for infrastructure projectsIn Rwanda and Malawi the majority of the Sainsbury’s Fairly Traded Social Premium has funded construction projects; classrooms, crèches and community buildings . Whilst responding to a clear need, these projects pose certain risks .

We are mindful of the responsibility we have to ensure that any construction funded by the Sainsbury’s Fairly Traded Social Premium is safe and of a high quality . Lack of maintenance can render projects unsafe or unusable in the long-term and lack of agreements with local authorities can mean that they end up not being used as originally intended . Therefore, where producers have proposed such projects, the Sainsbury’s Foundation Advisory Boardi has challenged them to share plans for the long-term maintenance of these sites, including financial allocations from current budgets, as well as agreements with the school or local authorities to ensure the responsibility for maintenance and use is agreed from the outset .

“The Fairly Traded programme has helped us develop a much stronger relationship with Sainsbury’s. We are working closely together to bring significant benefits to our farmers and the community, and we

are learning a lot in the process.

Through a joint approach with Sainsbury’s we have improved our monitoring and reporting processes, which has really

improved the quality of the projects we have suggested investing in.

Austin ChangaziGeneral Manager, Sukambizi Association Trust,

Malawi

Learnings15

Credit: Rohith PeirisCredit: Rohith Peiris

J Sainsbury plc Fairly Traded Report 2019/20 16 Learnings and Next Steps

Developing closer and longer term relationshipsIn some supply chains, the introduction of a closer relationship with Sainsbury’s has been hard to achieve . Where senior management have been unwilling to allow producers to take a more active role in decision-making, we have strongly encourage this . However, where management has been unwilling to facilitate this, we have taken the difficult decision to move away from these suppliers and only work with suppliers who enable representation from across their producers .

Resource required from Sainsbury’s to run the programmeOperationally, the rollout of Sainsbury’s Fairly Traded has been resource intensive to achieve . There has been a clear need for project management support to producer groups for example, which led to Sainsbury’s funding of support staff in each country . This is in addition to the time allocated to programme management within Sainsbury’s Sustainability and Tea Category teams . We recognise this is would be an unsustainable model with our aims to support more producers around the world in our supply chains who face similar challenges . This will help inform the evolution of our approach in the future .

This is not a “one size fits all” approachThere is an increasing business case based on our materiality work to invest in people, places and products within our value chains worldwide where we can make the most difference and the need is greatest . This means that the current Sainsbury’s Fairly Traded model is unlikely to be - for many of the reasons listed above – the most appropriate model for our other vulnerable supply chains, which stretch to over 70 countries worldwide and hundreds of raw materials .

Case Study – Facing MismanagementFollowing confirmed mismanagement of funds within the top leadership structure of one of the cooperatives that supplied Sainsbury’s Fairly Traded tea, it was decided after extensive investigation and consultation that we would need to find an alternative approach to distributing the accrued Sainsbury’s Fairly Traded Social Premium in this case . Our objective was to ensure individual producers that had contributed to our products could benefit from the premium they were due . We worked with local representatives and partners to develop plans that reflected farmers’ priorities and in early 2020/21 financed these without putting the premium at risk . This highlighted the importance of due diligence to ensure we work with partners we can trust, and having strong relationships on the ground that enable tailored solutions .

Next stepsIn the coming year we will continue to track and provide support in the implementation of the second cycle of projects, whilst continuously improving our approach through discussion with farmers and analysing the data we capture .

Looking aheadCollaborationAs part of a global system, we source products from across multiple countries and our producers work with customers all around the world . We are all being impacted by challenges such as climate change and biodiversity loss, and as such need to work together on the solutions . That’s why we are part of initiatives such as the Consumer Goods Forum and Ethical Trading Initiative, where we can collaborate with others to ensure we are sourcing sustainably now and into the future .

Data and TechnologyThe information and tools available to help more efficient and resilient production, whilst also protecting people and planet is improving and already being used in some of our supply chains . Using Oceanmind, for example, we can ensure fish is coming from legal sources and similar satellite technology can help track and prevent deforestation risk . We need to develop and use tools better and put them in the hands of people who need them .

Knowledge and VisibilityGlobal supply chains remain complex and sometimes opaque . Whilst we will always need to rely on our suppliers to manage social and environmental risks, gaining increased visibility of our supply chains is critical to properly assessing the challenges faced by farmers and workers . It also allows us to monitor and control the progress made in addressing them .

Support and DependencyIt is always our aim to ensure producers are not solely reliant on Sainsbury’s for the survival of their business . It is our role to support, build mutually beneficial relationships and enable suppliers to have the most resilient businesses they can .

J Sainsbury plc Fairly Traded Report 2019/20 17 Key activities of 2019/20 Financial Year

First cycle of activities benefitting farmers, workers and the community• The Sukambizi Association Trust completing

18 of the 19 projects planned in their first cycle of Sainsbury’s Fairly Traded activities, which began in November 2018 . The Assopthe Cooperative completing the six projects planned, and the crèche opened by the Sorwathe Cooperative continuing to welcome children .

• Local partners advising on the day-to-day management of projects, and reporting on progress

Second cycle of activities planned• Sharing of detailed plans for funded

projects by The Sukambizi Association Trust, Assopthe Cooperative, and the James Finlay Kenya factory with the Sainsbury’s Fairly Traded Advisory Board .

• Sainsbury’s Fairly Traded local consultants supporting producer organisations in budgeting, feasibility and key considerations in the drafting of producer plans, such as impact of projects on most the vulnerable in the community .

• Agreeing on timelines for the disbursement of funds and implementation with producer groups .

Engaging farmers• Running of focus groups with cooperative

management to collect feedback on the overall Sainsbury’s Fairly Traded programme, and our ways of working .

• Engaging farmers through mobile phone surveys, to collect data on key priorities for the community, as well as awareness of the programme .

• Communicating existence of a confidential grievance mechanism to farmers and communities in Malawi and Rwanda .

Governance Structure• Four meetings of the Sainsbury’s

Foundation Advisory Board held .

• Establishing an approach to verification of project implementation and impact .

• Tailored advice from the Advisory Board on producer plans, including on the long-term financial independence of projects, or how to maximise impact for farmers and their community .

• Visit reports by local consultants and Sainsbury’s team shared with the Advisory Board .

Capturing impact• Producers share key metrics on their

projects, including the number of beneficiaries, disaggregated by gender where relevant .

• Local consultants verifying this information through visits and review of registers, invoices and other supporting evidence

Distribution of funds

Key activities of 2019/20 Financial Year

Credit: Rohith Peiris

Sainsbury’s Fairly Traded Social Premium accrued by producer groups

£441,7001

(GBP)£897,0002

(GBP)

Distributed to Sukambizi Association Trust

£134,3001

(GBP)£436,6002

(GBP)

Distributed to the Assopthe Cooperative

£53,9001 (GBP)

£21,3002

(GBP)

Distributed to the Sorwathe Factory

£10,8001

(GBP)£3,4002

(GBP)

2018/19 2019/20

1[Independently assured by PwC] . For details and 2019/20 basis of preparation, see here .2[Independently assured by PwC] . For details and 2018/19 basis of preparation, see here .

J Sainsbury plc Fairly Traded Report 2019/20 18 Independence and Assurance

PriceWaterhouseCoopers LLP has provided independent assurance for the third year of the pilot .

The assurance work is in accordance with ISAE 3000 (Revised) and they apply the Institute of Chartered Accountants in England & Wales (ICAEW) Code of Ethics .

The scope of work focuses on:

• The sum of Sainsbury’s Fairly Traded Social Premium accrued by supply chain parties over 2019/20

• The Sainsbury’s Fairly Traded Social Premium disbursed to supply chain parties over 2019/20

Independence and Assurance

J Sainsbury plc Fairly Traded Report 2019/20 19 Appendix

Basis of preparation for the 52 weeks to 7 March 2020Introduction

This report supports the preparation and reporting of Sainsbury’s Fairly Traded social premium funds raised and disbursed by Sainsbury’s during the 52 weeks to 7 March 2020 (“2019/20”).It is the responsibility of Sainsbury’s management to ensure that appropriate procedures are in place for the external reporting of Sainsbury’s Fairly Traded performance as set out in this document . These procedures ensure that:

• the reported information accurately reflects Sainsbury’s Fairly Traded social premium funds raised and disbursed for the reporting period;

• the calculated Sainsbury’s Fairly Traded social premium funds raised and disbursed are consistent with the stated definitions;

• any assumptions made as well as the accounting and calculation methods are clearly described; and

the level of transparency is sufficient to enable users to have confidence in the integrity of the reporting .

DefinitionsSainsbury’s Fairly TradedThe registered trademark ‘Sainsbury’s Fairly Traded’ . Products labelled as ‘Sainsbury’s Fairly Traded’ contain commodities from supply chain parties who have either signed a memorandum of understanding (“MOU”) with Sainsbury’s and its suppliers, or where an equivalent MOU is in negotiation but has not yet been signed . In instances where these products contain commodities from supply chain parties who have not signed an MOU with Sainsbury’s and its suppliers, or where there is not an active MOU negotiation occurring, that portion of the product is excluded from this performance measure . The MOU sets out the terms on which the signatories agree to work together to deliver the supply of the commodity in accordance with Sainsbury’s Fairly Traded programme .

Social PremiumOver and above the commodity cost, this is a sum of money that is ring-fenced in a fund (i .e . allocated and personal to the Supply Chain Party who has supplied the commodity to which the Social Premium attracts, but also ring-fenced from Sainsbury’s corporate funds) and paid in accordance with terms agreed between Sainsbury’s and the supply chain party .

Social Premium is an amount at least equal to the Fairtrade Premium as per www .fairtrade .net

Supply Chain PartyA farmer or producers’ organisation, hired labour organisation, processor, exporter, packager, trader and/or any other party involved in the supply of tea which has signed an MOU, or where an equivalent MOU is in negotiation but has not yet been signed .

Sainsbury’s Fairly Traded Social Premium Funds (“Funds”)The sum of all Sainsbury’s Fairly Traded social premium commodities purchased during the 2019/2020 reporting year .

AppendixSainsbury’s Fairly Traded Reporting Criteria July 2020

Sainsbury’s Fairly Traded performance measures

Performance measureReported performance (Selected Information)

A The total amount of Sainsbury’s Fairly Traded Social Premium Funds raised through the purchase of ‘Sainsbury’s Fairly Traded’ products in 2019/20 measured in GBP Sterling .

£ 897,000

B The disbursement(s) from Sainsbury’s Fairly Traded Social Premium Funds to a supply chain party for 2019/20 measured in GBP Sterling .

Sukambizi Association Trust £ 436,600

Assopthe Cooperative £ 21,300

Sorwathe LTD £ 3,400

J Sainsbury plc Fairly Traded Report 2019/20 20 Appendix

A. Sainsburys Fairly Traded social premium funds raised 1. Performance measureThe total amount of Sainsbury’s Fairly Traded Social Premium Funds raised through the purchase of ‘Sainsbury’s Fairly Traded’ products in 2019/20 measured in GBP Sterling .

2. ScopeSainsbury’s suppliers source commodities from a number of producers and growers (supply chain parties) across various countries . Where a memorandum of understanding has been signed (or is actively worked towards as detailed above) between Sainsbury’s, the supplier and the supply chain party, these commodities are then used for the production of Sainsbury’s for sale in store and online .

Sainsbury’s recognises the liability for the social premium funds accrued by Sainsbury’s in 2019/2020 in relation to products labelled as Sainsbury’s Fairly Traded as outlined in Appendix A .

3. Performance data preparations and assumptionsSainsbury’s requires all suppliers who purchase Sainsbury’s Fairly Traded products on its behalf to comply with the conditions of our Supplemental Clauses . This requires all suppliers who purchase Sainsbury’s Fairly Traded products on its behalf to submit a detailed template in accordance with Sainsbury’s four-weekly financial period . This template includes required information, such as product specifications and source country to calculate the funds due by producer or grower .

This template is used to calculate the social premium accrued by multiplying the volumes (in kg) associated with each commodity purchase by the supplier by the Fairly Traded social premium factor of USD$0 .5/kg .

Sainsbury’s Fairly Traded Social Premium Funds are calculated by summing all social premium commodities purchased in the financial year and then converting into GBP using the average annual exchange rate for the reporting period .

B. Sainsburys Fairly Traded social premium funds disbursed to producer organisations 1. Performance measureThe disbursement(s) from Sainsbury’s Fairly Traded Social Premium Funds to a supply chain party for 2019/20 measured in GBP Sterling .

2. DefinitionsDisbursement: The payment of Sainsbury’s Fairly Traded Social Premium ring-fenced by a Supply Chain party to this Supply Chain party by Sainsbury’s, according to an agreed schedule of payments . Each payment is intended to fund the development of projects agreed between the Supply Chain parties and Sainsbury’s .

3. ScopeAny disbursement by Sainsbury’s which was received by supply chain parties in 2019/20, using Sainsbury’s Fairly Traded funds raised and ring-fenced . Due to a time lag in accruing social premium funds and disbursing payments in line with an agreed schedule of payments, some disbursements made during 2019/20 are from Sainsbury’s Fairly Traded funds raised and ring-fenced in 2018/19 .

Any payment must be in accordance with terms agreed between Sainsbury’s and the supply chain party .

4. Performance data preparations and assumptions• Sainsbury’s compiles a list of all Fairly

Traded payments to supply chain parties from our internal payment platform . Evidence of each financial transaction is reviewed internally, including confirmations of disbursement by Sainsbury’s and receipt by recipients . Each payment made by Sainsbury’s to supply chain parties is in USD .

• Each payment is converted into GBP using the average annual exchange rate for the reporting period .

Commodities/Products in scope for Sainsbury’s Fairly Traded Social Premium Funds 2019/20

Commodity SKU Code SKU Description

Own Label Tea 7852841 JS Red Label Tea Bags 80’s 250g

7852849 JS Red Label Tea Bags 160’s 500g

7852857 JS Red Label Tea Bags 240’s 750g

7852970 JS Red Label Decaf Tea Bags 80’s 250g

7852976 JS Red Label Loose Tea 250g

7852981 JS Gold Label Tea Bags 80’s 250g

7852997 JS Gold Label Tea Bags 160’s 500g

7853000 JS Gold Label Loose Tea 250g

7963005 JS Red Label Anniversary TB 40’s 125g

7853172 Basics Tea Bags 40’s 100g

7111032 CAFE Tea Red Label One-Cup 1100 Bags ORD

7853136 JS Extra Strong Tea Bags 80’s 250g