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Sustainability Report 2014

Finlays Sustainability Report 2014 3

Introduction 1.1 Foreword – Managing Director James Finlay Limited, Ron Mathison 4

1.2 Key highlights 6

1.3 Scope of report 10

1.4 Management approach to sustainability 11

1.5 Sustainability commitments and supporting actions 12

About Finlays2.1 Corporate profile 16

2.2 Finlays fast facts 18

2.3 Group structure 22

2.4 Global network 23

Group Performance Review 20143.1 Environment – energy, water, waste, carbon 26

3.2 Economic contribution 34

3.3 People – occupational health & safety, training, community 35

Governance4.1 Group operating companies 38

4.2 Legal form and governance 40

Appendicesi) Swire Group sustainable development policy 44

ii) Group performance data 45

Contents

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We recognise that when the communities in which we operate grow and prosper, so do we. Our continued success is dependent on the health of the environment, the welfare of our people and the prosperity of the communities which support our activities. This is our sixth annual sustainability report. It covers the consolidated activities of Finlays at Group level based on the Global Reporting Initiative’s (GRI) Sustainability Reporting Guidelines at GRI Level 4.1. We continue to focus on the key areas of energy, water, waste, carbon emissions and people; biodiversity and community engagement feature prominently throughout this report.

Ron Mathison Managing Director James Finlay Limited

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2014 Highlights

We have continued our focus on conserving scarce and valuable water resources. Green water utilisation on our tea estates in Kenya and Sri Lanka has increased substantially and Horticulture’s water management on Ibis farm has become more efficient, allowing for less crop stress during the dry season and better overall land utilisation. Our Extracts business made substantive improvements in waste management following the successful pilot of a new effluent treatment plant. Decentralisation of our Fresh Produce pack houses in Kenya has produced impressive reductions in waste and transportation costs and has increased the quality and shelf life of our produce. Elsewhere renewable energy resources are being piloted throughout our businesses. In Kenya we are trialling solar electrification in our villages together with shared solar hubs. The anaerobic digester biogas plant has now been running successfully for the last six months delivering renewable thermal and electric energy from flower, tea and human septic waste. These investments in alternative forms of renewable energy have reduced our grid reliance, carbon emissions and increased waste recovery. There is still so much that needs to be done but overall we are making good progress.

Continuous Improvement

In 2009 we set our first sustainability targets on waste, energy, carbon and water. They were top down stretch targets and have proved to be more difficult to achieve than expected. We have learnt that a more incremental approach is more effective than big bang initiatives and shifted our focus for the next three years to delivering steady continuous improvement. These ‘bottom up’ targets are more achievable and are directly aligned with activities and budgets. We are also introducing a better data capture system to allow business units to analyse their performance on demand. Each business now has an efficiency target for water, waste, energy and carbon based on total usage and per unit of production. Additionally we have specific targets to increase our own generation of renewable energy, rainwater harvesting and reduce waste to landfill. Sustainability targets and objectives are now embedded into the fabric of day to day operations.

Collaboration

Most of the problems we face are systemic and too big for any one organisation to tackle on their own. We support the multilateral approach where we work with other major players across industry and come together to find solutions for the common good. It is challenging and time consuming to build and maintain relationships with all the various stakeholders who all have different opinions and priorities. However, collaboration is essential if we are to achieve widespread, meaningful and lasting change. We have therefore made it our business to play a greater role in leading initiatives, to tackle some of the major issues we face across the Group. We favour taking a more holistic approach when trying to solve difficult sustainability issues, spending time in understanding root causes and properly differentiating cause and effect.

Multi Stakeholder Engagement

Imarisha Naivasha: The multi-stakeholder Imarisha watershed management initiative is now in its fourth year. It oversees the restoration of the Lake Naivasha basin and has established a foundation for long term sustainable development. Finlays has held the chair of the Imarisha management board since its inception which aligns well with the Group’s sustainability commitment to play a leadership role in watershed management.

Tea 2030: is now in its third year looking for common consensus on sustainability challenges facing the tea industry. The end goal is to create a shared vision of what the global tea industry can do together to ensure it has a prosperous and sustainable future. The Tea 2030 group has set up three platforms for collaborative action to address systemic issues impacting now and in the future on the tea industry. These platforms will drive change across the tea industry.

Ethical Trading Initiative: Our commitment to fair and ethical trading has always been a core value at Finlays. Our Horticulture business has been a member of the Ethical Trading Initiative for 11 years and we have recently extended membership to the whole Group. Like all corporate members, Finlays agreed to adopt the ETI Base Code, an internationally recognised set of labour standards which is based on the International Labour Organisation and closely mirrors our own values. Membership amongst other things, seeks to ensure that employment is freely chosen, freedom of association is respected, working conditions are safe and that no discrimination is practiced. Membership also requires a commitment to pay a living wage that is economically viable.

Empowerment and Welfare

Gender empowerment and welfare remain top of our agenda. Much progress has been made in both areas over the last seven years but much more needs to be done. We have recently recruited a new Gender Empowerment Manager and a Welfare Manager in our tea estates business in Kenya and are working closely with the community in the schools and villages to improve awareness and support mechanisms.

Trade not Aid

The financial pressures currently being faced by tea plantation companies in Africa and Sri Lanka should not be underestimated. Labour costs have been rising at double digit growth for the last ten years and energy costs have soared. Tea prices, on the other hand, have not. If wages continue to rise at these unsustainable levels there will be no alternative for the large plantation companies but to further mechanise to reduce labour costs. This will lead to a loss in jobs and livelihoods. Wage increases need to be supported either by productivity improvements or by a rise in tea prices. The solution is not to provide more aid or force an uneconomic redistribution of paper thin margin; we need to address the root cause of poverty which is the low tea price and the absence of a premium for hand plucked versus machine harvested leaf. The focus must be on how to add more value to drive premium pricing. That might be through communicating the health benefits of tea, by focussing more on quality and seasonal varieties, on lifting value through innovative blends and re-packaging, by communicating the importance of sustainably produced pesticide free tea, and by differentiating the quality of hand plucked versus machine harvested tea. Simply put, for tea plantations to be socially and environmentally sustainable they also need to be economically viable.

Key highlights in numbers

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In 2009 a strategic decision was taken to transfer the operational rights of four estates in the Ragala Group, of Udapussellawa Plantations to two private independent companies. Unfortunately the conditions attached to the agreement were not met and at the end of 2014 the Estates were taken back into the Group to avoid further neglect and to address the delay and non-payment of statutory dues to their workers.

Production on the estates had declined significantly since the transfer in 2009 due to the absence of Good Agricultural Practices (GAP) and poor overall management. As an example, the average yield of Delmar Estate had eroded by 25%, to an average of 870 kg made tea per hectare from 2010 to 2014, as against 1,165 kg made tea per hectare per year from 2005 to 2009.

Machinery maintenance had been neglected and, as a consequence the quality of the product was deteriorating which resulted in the price dropping below cost, year on year. Trust and confidence in the management by the workforce had deteriorated, causing low worker productivity. This was exacerbated by an inflated workforce, an imbalance in the ratio of male to female workers and the statutory requirement of offering a minimum of 25 days of work per month. With all these issues, the estates were running heavy losses.

With the understanding, knowledge and experience we have recently gained from turning around Hapugastenne Plantation’s Passara group of estates we are confident that it will not be long before we are able to return the reclaimed estates to profitability.

We have added a further 1,770 ha of tea estates comprising additional production of 1.9 million kg and 2090 employees.

The estate management team was re-structured with Managers from Finlays estates taking charge of three of the four estates. Since the take-over we have drawn up and implemented a development plan for field and factories which identified those areas that required attention in the short and medium term. Enhancement of product quality is a priority in order to improve prices after which we will work towards all-round improvements and cost efficiencies to ensure that the fields and factories match up to those of to our other Finlays estates. We have also initiated a study to identify other crops which could be grown, in addition to timber, as cash crops for medium term returns.

We have refurbished the Delmar and Waldemar factories due to reopen later in 2015 to process Green and Oolong teas. This will enable us to attract small-holder leaf which, with leaf from Waldemar Estate, will ensure that the factory is run at maximum capacity whilst hopefully generating a premium over the price of normal black tea.

We believe that the crop diversification strategy applied across the other estates will be vital in achieving land productivity improvements in the region. Trials are underway with cinnamon and research is being carried out into the prospects for coffee and other potential new crops. Timber plantations planted by Finlays prior to the transfer of these estates, are now growing vigorously providing us with opportunities to convert some into cash before re-establishing more Fuel wood plantations.

We are targeting Rainforest Alliance accreditation by 2016.

Reclaiming Ragala

The challenges of reintegrating failed tea estates back into the Finlays family.

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The report covers all main units in Finlays with the following exclusions:

• James Finlay Pakistan, whose main business is shipping and insurance, given the size of the operation.

• The tea trading offices in Dubai, Indonesia, Vietnam and Malawi only partially report given the small size of these offices.

• Casa Fuentes in Argentina and Autocrat in the US as they were acquired mid-way through 2014.

Our partners in instant tea manufacture Tres Montes Lucchetti (Chile) and Damin Foodstuffs (China) are included in sales numbers only.

The report records performance against two sets of objectives:

i) Finlays group indicators, which are those that apply to all our businesses.

ii) Finlays business unit indicators, which are selected by each business unit to reflect its main challenges, details of which can be found within the individual business unit reports.

Reporting period

The report is for the calendar year 2014. This follows previous annual reports of 2009, 2010, 2011, 2012 and 2013.

Our methodology uses the indicators based on Global Reporting Initiative (GRI) guidelines and carbon measurement is based on WRI/WBCSD GHG protocols.

If there are any queries about this report please contact [email protected] or write to:

Sustainability Report James Finlay Limited Swire House 59 Buckingham Gate London SW1E 6AJ


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Scope of report

Finlays is a business with a wide range of diversified activities. The Head Office provides oversight, facilitation and guidance to support each business in a common set of core issues. Measurable targets are managed and reported on under: water, waste, carbon, energy, economic impact and health & safety.

Head Office also works with and across business units where there are industry initiatives or issues that require to be managed centrally. A good example of this is Tea2030 (see page 43).

Each business is expected to identify issues material to their future sustainability and implement a plan to mitigate and/or adapt to the changing scenario. These issues are inculcated into their overall business strategy and resourced and prioritised accordingly. Target setting is the responsibility of each business and is tied into the budgeted financial performance.


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Management approach to sustainability

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In 2008, working with our partners, Forum for the Future, we developed a long-term and stretching sustainable development strategy for Finlays. We explored the major trends and uncertainties that the company could be facing over the coming years and how to become a more resilient and sustainable company. From this process we identified a set of five high level group sustainability commitments by which we now guide our actions and evaluate our success:

Delivering a sustainable future

Business

We will address social, political and environmental issues by demonstrating that it is more financially rewarding to be sustainable

• Undertake regular business performance, taking action to increase the long term sustainability of our business portfolio over time;

• Explore new business opportunities in keeping with our sustainability goals;

• Maintain sufficient diversity in both our markets and products to ensure resilience;

• Make the true cost of production (economic, environmental and social) clear and ensure, over time, that it is reflected in the price of the product over time;

• Communicate openly with our supply chain, the local community, pressure groups and the wider public about the case for sustainable development;

• Behave with honesty and integrity.

Environment

We aim to have ‘zero net impact’ as our minimum environmental standard. Overall we commit to making a positive contribution to environmental recovery and resilience

• Develop a comprehensive understanding of the likely impact of climate change and implement appropriate adaptation measures for our operations and the communities in which we operate;

• Undertake to be carbon restorative and minimise emission of other greenhouse gases;

• Continuously improve our resource management, practice excellence in our management of water resources and reduce our waste generation; reduce and eliminate the use and release of pollutants wherever possible;

• Lead the way in community watershed management;

• Protect and enhance biodiversity in the countries in which we operate;

• Demonstrate and promote sustainable pest and disease management, eliminating any negative impact on the environment;

• Maintain soil health through sustainable agricultural practices and avoid soil degradation by taking measures to prevent contamination and erosion;

• Demonstrate excellence in forestry management.

People

We strive to make Finlays an enjoyable and rewarding place to work, an organisation that nurtures and develops its people for the benefit of the individual, the company, and the community.

• Employ our workforce according to universal international standards and treat employees fairly, with dignity and respect;

• Protect the health of our workforce and promote healthier lifestyles;

• Ensure that all employees, and their resident dependents, have access to food and shelter, sanitation, clean water and primary healthcare;

• Develop our employees’ life and business skills and empower all our employees to make their voices heard through democratic worker representative bodies;

• Demonstrate leadership in equal opportunity employment, thriving as an ethnically and culturally diverse company; encourage and facilitate female representation and the contribution of women to the business;

• Reward our employees for achieving the company’s business objectives;

• Educate our employees on the values and principles of sustainable development.

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Communities and Partners

We will take an active leadership role in dealing with sustainability issues, and share our knowledge for the benefit of our suppliers, communities and society in general.

• A collaborative approach to addressing sustainability challenges and policy, engaging with growers, suppliers, customers, government, NGOs, union and industry bodies;

• Adopt a leadership role in supplier and smallholder development; demonstrating and providing best practice for our suppliers in crop selection, sustainable farming techniques, production processes and environmental management;

• Make sure we become a catalyst for positive change in the communities we serve.

Products

We will develop and provide sustainable products and services that contribute positively to the health and well-being of society.

• Reduce the lifecycle impact of each of our products and ensure sustainability is built into our New Product Development processes;

• Provide research and development capability exploring innovative, sustainable processes and products;

• Deploy sustainable processing technologies to increase product efficiency and competitiveness;

• Package our products in the most sustainable way possible using sustainable packaging innovation;

• Transport our goods in the most efficient and sustainable manner possible;

• Be proactive in supporting an equitable and ethical trading environment for our products.

The Group GRI Indicators have been chosen to complement our sustainable development strategy. Group Indicators reported against are: G4, EN3, EN4, EN8, EN10, EN15, EN16, EN22 and LA6 in accordance with ‘core’.

• Energy: continuously improve our resource management

• Water: practice excellence in our management of water resources

• Waste: continuously improve our resource management and reduce our waste generation

• Carbon: undertake to be carbon restorative and minimise emissions of other greenhouse gases

• Economic: demonstrate that it is more financially rewarding to be sustainable

• People: to make Finlays a rewarding and enjoyable place to work

The medium term 2014 targets were set against 2009 data. As there was little or no data pre-2009, these targets were set as a starting point. Improved data collection and understanding on the ground has allowed the businesses to define their own targets both for the short-term and medium-term. More details on these targets are on page 29.

About Finlays

Corporate profile

Finlays is a vertically integrated and geographically diversified agribusiness taking a leadership role in sustainability. Sustainability is pivotal to our success; it lies at the very heart of what we do and what we stand for. It provides the common thread that pulls the Group’s different business units together.

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Tea, Coffee, Rubber and Timber

Our Tea Estates in Kenya, Sri Lanka and Argentina cover more than 13,000 hectares, producing 53 million kilos of black tea annually. We are one of the only tea companies in the world to be involved in every aspect of the complex process of growing, trading, blending, extracting, packaging and distributing tea. Finlays is one of the largest suppliers of Fairtrade tea and coffee in the world.

Finlays tea trading interests account for more than 60 million kilos of tea a year while the Company is the world’s largest supplier of quality tea extracts including instant teas and aromas, dealing with all the world’s top beverages companies. The Company also has businesses in the UK and Sri Lanka sourcing, blending and packaging private label tea (and in the UK coffee) for customers in the UK, the Middle East and Japan.

It is also the leading private label packer of roast and ground coffee in the UK.

As well as managing 6,000 hectares of timber in Kenya, Sri Lanka and Argentina, the Company also produces 950,000 kilos of rubber latex annually in Sri Lanka, 200,000 stacked metres cubed (stm3) of Eucalyptus and Cyprus per year.

Flowers and Fresh Produce

Finlays Horticulture is involved in the growing, processing, packaging, marketing and distribution of cut flowers and premium prepared fresh vegetables. Finlays Horticulture is a supplier to most of the UK’s leading retailers, including Marks & Spencer, Tesco, Sainsbury’s, the Co-operative, Morrisons, Waitrose and Next.

The company has major farming interests in Kenya and South Africa through its wholly-owned subsidiaries, Finlays Horticulture Kenya and Finlays Horticulture South Africa. We are the largest vertically integrated added-value horticultural producer and exporter of fresh produce and flowers from Africa to the EU.

Finlays markets and sells flowers in continental Europe through Omniflora, a wholly-owned subsidiary based in Frankfurt. Omniflora supplies fresh flowers to major retail multiples in Germany, Austria, Switzerland, Norway and Luxembourg. Omniflora is committed to supplying ethical flowers, sourced from socially and environmentally responsible growers. The company trades almost exclusively in Fairtrade accredited roses sourced from FLO (Fairtrade Labelling Organisation) certified farms.

FV SeleQt is a joint venture business between Finlays Horticulture and the Best Fresh Group formed to market premium fresh vegetables in Europe. The operation is based in Poeldijk in The Netherlands. The Best Fresh Group brings an expertise of marketing and distributing salads, vegetables and fruits in Continental Europe and this combined with Finlays expertise of both growing and sourcing vegetables makes FV SeleQt a compelling proposition for European customers. FV SeleQt currently supplies 15 customers all over Europe and are fully accredited for Fairtrade, Max Havelaar and IFS

Other activities

Our subsidiary Dudutech, an integrated pest management company produces large quantities of biological control organisms to control common pests and diseases at its insect production facilities in Naivasha, Kenya. These indigenous beneficial insects have helped Kenyan growers to reduce their dependence on synthetic pesticides by almost 70% since 2004. Equally important, Dudutech also provides training to ensure that all their customers can maximise the benefits of Integrated Crop Management (ICM). ICM is a way of farming, it is not merely the use of biological products.

Another Finlays subsidiary, Skytrain, is a dedicated cargo-handling and freight forwarding agency, with facilities at Jomo Kenyatta International Airport in Nairobi, handling sea and air freight export for fresh produce from East Africa.

Finlays has a controlling interest in Finlays Colombo, a Sri Lankan based business quoted on the Colombo Stock Exchange. Its activities include warehousing of tea, blending and packaging tea for export, insurance broking, environmental services and represents Cathay Pacific, for which it acts as General Sales Agent. Finlays Colombo also owns Sri Lanka’s largest and technologically most advanced cold storage facility, together with a factory which manufactures green tea.

Finlays and its subsidiaries are well experienced in the environmental and social issues that come with the cultivation of tea, timber, flowers, vegetables and other such crops.

Founded in Glasgow, Scotland, in 1750, Finlays began as a trader and manufacturer of cotton before expanding into tea in the 19th century, following the collapse of the British cotton industry.

Over the years, Finlays has diversified to reduce its reliance on tea plantations. Finlays is now one of the leading players in the UK cut flower and fresh produce industry.


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To recap, Imarisha Naivasha was set up in 2011 by the Kenya Government, as a multi-stakeholder platform to address, set in motion and coordinate activities to reverse the decline of the natural environment in the Naivasha Basin and establish a foundation for long term sustainable development. This was a unique departure from the traditional way that Government had addressed similar challenges in the past, involving the participation of a majority of non-governmental stakeholders appointed to the management board of Imarisha. This structure aimed to harness the already established but uncoordinated private sector engagement in the support of environmental and social projects and link this with a broader interaction of other stakeholders who rely on the natural resources of the Naivasha Basin for their livelihoods.

Finlays has held the chair of the Imarisha management board since its inception which aligns well with the Group’s sustainability commitment to play a leadership role in watershed management.

The SDAP identified priority areas which needed to be tackled in order to start to reverse the negative influences causing degradation of the environment in the basin. Success in realising these objectives over the period from 2012 to 2017 is measured by the extent that the four outcomes of the SDAP are achieved.

To address each of these priority areas, the strategy is to engage with development partners and donors who can provide the necessary expertise, experience and resources to formulate and action appropriate responses.

Between the inception and adoption of the SDAP, a

period of about six months, Imarisha undertook a range of “no-regrets” activities aimed at engaging with stakeholders to create awareness of the role of Imarisha through implementation of small environmentally focused projects. These included, tree nurseries and tree planting, domestic biogas installations, improvement of fish handling facilities, solid waste management and rainwater harvesting amongst others. In addition, capacity building was undertaken with the twelve Water Resource Users Associations (WRUAs) who had been established earlier and whose role was to assist with water resources management throughout the basin. Finance for these activities was provided by Government and by the UK Retailer Group, (M&S, ASDA, Sainsburys, and Tesco) who were encouraged from the start by the Prince of Wales’ International Sustainability Unit (ISU) to recognise a collective responsibility to support the restoration of the environment of an area which formed a major part of their international supply base for flowers and vegetables sold in their UK supermarkets.

In early 2013, Imarisha with WWF were successful in securing funding of €4million from the Royal Netherlands Embassy, in Nairobi, to undertake a 5 year programme of activities under a project titled the Integrated Water Resources Action Plan (IWRAP). This aims to address a broad scope of issues that contribute to the outcomes of the SDAP. These included resolving issues relating to the management of and access to the lake riparian land; the development of options for small holder farmers and pastoralists throughout the basin; institutional support of the Water Resources Management Authority (WRMA), and capacity building and establishment of a communications

What’s new: Imarisha Naivasha

Lake Naivasha is the hub of the Kenyan floriculture sector where Finlays has substantial investment.

We last reported on the Imarisha Naivasha initiative in 2012, soon after the publication of its Sustainable Development Action Plan (SDAP).



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platform to enhance the ability of the Imarisha secretariat to exercise its function of coordination and monitoring of developmental activities.

Under the IWRAP programme, stakeholder conferences have been held, including an annual event to advise stakeholders on the progress towards meeting the SDAP outcomes. Also, several workshops supported by the Governor of Nakuru were held to address the management of the lake riparian land, as the area gradually became more extensive with the steady decline in lake levels. Finally annual meetings for both national and international academic institutions have taken place to update stakeholders on their research activities and setting up a biodiversity monitoring system.

In March 2013, Kenya entered into a new constitutional era with the introduction of a devolved system of government that provided for the formation of 47 county governments supported by a central administration. A consequence of this change was a temporary suspension of the re-appointment of board members of many government institutions including Imarisha whose board mandate expired in May 2013. The uncertain status caused by this situation necessarily affected Imarisha’s ability to formally engage with new development partners, but fortunately due to the considerable interest shown both nationally and internationally in Imarisha’s participatory structure and the progress made in addressing the challenges faced in the basin, the Government fast tracked the appointment of a new board and this was gazetted in April 2015.

Despite the lacuna through 2014, the Imarisha secretariat continued to oversee the execution of projects already set in motion and it was able to secure the continued financial support from M&S and Sainsburys. Their contributions were invested in a new project co-funded by GIZ, the German development institution, named the Naivasha Basin Water Stewardship project. This focussed on support for all 12 WRUA’s to improve the efficiency and capacity to manage water supply in their respective WRUA areas.

Over the two years since publication of the SDAP, Imarisha has overseen the implementation of more than 50 projects located throughout the basin, all geared to the outcomes of the SDAP. These have been funded through a combination of Government, private sector and donor funding. This has given Imarisha immediate impetus to executing its mandate. However, for longer term financial sustainability, Imarisha needs to be able to rely on a more predictable source of income generation that can be combined with project specific funding. A proposal is being formulated to establish a sustainable development fund which will aim to encourage support from industries operating in the basin, both large and small, as well as from overseas businesses who sell products grown in Naivasha.

Imarisha has made good progress and now with a new board in place with a tenure of three years it should have the necessary continuity and resources to pursue the outcomes of the SDAP.


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The Group comprises of eight businesses encompassing Tea Estates, Extracts & Ingredients, Beverage Packing, Flowers, Fresh Produce, Logistics & Services, Forestry & Rubber and Integrated Pest Management. Each business has a number of business units operating in various countries around the world.

Finlays head office is located at Swire House, 59 Buckingham Gate, London SW1E 6AJ.

We also have trading offices all over the world.

Group structure


We employ over 39,000 employees on flower farms in Kenya, South Africa and China*, and tea plantations in Kenya, Sri Lanka and Argentina.

Global network

Our primary markets are in the UK, USA, Asia and, increasingly, continental Europe.

Total Net sales: £561,448,000.

Total capitalisation broken down in terms of debt and equity: £317,126,000 (Equity £233,934,000 Debt £83,192,000).

*Yunnan Taikoo Flowers Limited and Taikoo Young Plants (Yunnan) Limited were sold in 2014.

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Examples include the introduction of more sustainable fleets, routes and fuel consumption systems, improved refrigeration and run continued awareness campaigns. Overall direct non-renewable energy consumption is down by 14% on 2013 figures.

In Finlays Horticulture South Africa consumption reduced by 15% by permanently reducing coal use.

An estate-wide rewiring initiative, as part of a wider infrastructure development project in Tea Estates Sri Lanka, has reduced energy consumption by 15% in 2014.

The Group achieved the set target of 10% increase in renewable energy consumption, despite direct renewable energy production decreasing in 2014 as a result of prevalent drought conditions in Sri Lanka and dry weather in Kenya.

Contributing to the increased generation and consumption of the Group’s direct renewable energy is the new biogas plant in James Finlay Kenya. The biogas plant came online in July 2014 and the digester produced 1.5% of JFK’s power distributed in 2014. The combined heat and power system (CHPs) has the potential to generate, on average 2,354 kWh, providing scope exists to increase the energy provision from the plant.

Energy

Energy saving initiatives implemented throughout the Group has resulted in a reduction of total energy consumption of 11% since 2013. Therefore the Group met the 5% reduction target.


2015 targets (2013 baseline data):

• Total energy reduction of 4%

• Renewable energy no more than a 2% reduction

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Medium term targets came to an end in 2014 with varying success. We are now moving from a top-down to a bottom-up approach to setting targets. Considerable data has been generated over the years giving us much insight into the businesses.

Each business now has an efficiency target for water, waste, energy and carbon based on total usage and per unit of production. Additionally we have tightened specific targets in increasing our own generation of renewable energy, rainwater harvesting and reducing waste to landfill.

In some areas targets are higher than the current, but these reflect business growth. For instance in Energy we expect by 2016 a 7% reduction but by 2017 this will end in a 1% increase due to increased production. In waste we have targeted for a 10% reduction, while in water we see a slight increase due to better utilisation for crops of farming land. However we have targeted a 4% increase in rainwater harvesting across the business.

Finlays Colombo have ambitious plans for generating significant solar energy from their cold storage facility, in what will a first for us in Sri Lanka. The business has focused on implementing management systems with energy and water audits. Innovation has been a priority at Beverages with small but interesting initiatives such as improving natural light, solar lighting tubes, rainwater harvesting, biomass boilers; all this to meet a 3% reduction in overall energy use in 2015 and increased proportions of renewables used.

James Finlay Kenya have set ambitious targets based on continuous improvement. Competitions between factories on energy and water usage have assisted in improving performance. Targets include a 3% reduction in energy usage, 6% reduction in water use with a 29% increase in rainwater harvesting in 2015.

Finlay Beverages have made significant performance improvements in the last 5 years, focusing on maintaining performance in energy use. After 5 years Finlay Beverages managed to achieve zero to landfill and have followed this up with an ambitious 27% reduction in total waste by 2017.

Horticulture in South Africa have been improving their performance year on year and have set achievable targets with a 3% energy reduction, 14% reduction per unit of production in water and 5% reduction in total waste.

Tea Estates Sri Lanka despite the addition of four new sites aim to maintain and improve on their performance. Major focus includes an increase in rainwater harvesting by 82% and continual improvement reducing total waste by 18%.

Finlay Extracts & Ingredients have had production issues which hindered putting in place meaningful targets. The improvement in their systems have for the first time given us some meaningful targets. These include a 27% reduction of firewood use, a 45% reduction in water consumed and to recycle 70% washing water by 2017.

Horticulture Kenya made significant changes to the structure of their business, with more product grown on site and the relocation of pack-houses. In light of this restructure much work will be done to up-grade the current energy infrastructure and they will be reviewing their targets at the end of the year.

Setting meaningful targets linked to volumes, products and budgets has not been easy. The targets must be backed with a programme of initiatives and include as many people as possible to be successful.

If Finlays is to be truly sustainable then the targets have to be achievable, realistic and be inculcated into the fabric of operations. Only then can we make the change in performance required to be more sustainable.

Tracking new targets

In 2009 we set our first sustainability targets on waste, energy, carbon and water. They were overly ambitious but much knowledge was gained.


From 2009 the accuracy of data collection and reporting improved as meters were installed and data management systems put in place.

Increased consumption of blue water in 2014 in Sri Lanka and Kenya occurred as businesses contended with reduced rainfall and dry weather. Tea estates blue water consumption increased by 4% and Finlays Horticulture Kenya increased by 11%. Despite the low rainfall green water capacity was increased in James Finlay Kenya by 91% and Tea Estates Sri Lanka by 10% on 2013 data, resulting in both business meeting their 2014 targets.

The Group’s performance in achieving the 2014 target of a 5% increase in green water consumption was missed. However increased rainwater harvesting is being undertaken in Mount Kenya, from which the Group should reap the benefits from 2015 onwards.

Continued sustainability initiatives are being explored and implemented throughout the Group. In Europe, Omniflora have reduced water consumption by 12% from 2013 through minimising water volumes dispatched with the products and increased use of dry packs (Modified Atmosphere Packaging).

Horticulture remains the largest consumer of water and continues to implement water saving initiatives such as wetland systems and increase green water harvesting to lessen the reliance on and consumption of blue water.

In 2014 the Group achieved 5% of the total water consumption to be received from recycled and reused water.

One business remains to meet zero water returned to open ground; tea extracts factory in Saosa. A pilot project was initiated in 2013 and positive findings were presented in 2014, which will hopefully lead to a full effluent system being built in 2015.

Water

The Group’s net water consumption increased by 6% and missed the absolute target of 15% reduction on the 2009 baseline. The increase is indicative of growth and expansion within the Group through more efficient utilisation of our own land for growing.

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tFinlays Sustainability Report 201428

2015 targets (2013 baseline data)

• Total Water consumption to increase by a maximum of 3%

• Rainwater harvesting increase by 3%

• Zero untreated water to be discharged

The Mount Kenya region is characterised by a severe dry season lasting from January to the end of March, when very little rain can be expected. With clear days and high radiation levels, this period of the year is ideal for crop production. It is also the time of the year when Kenyan production is in greatest demand in the UK due to a lack of UK and European production.

For Ibis Farm to take advantage of this season there was insufficient water storage to last one hundred days without having to reduce irrigation to established crop. During this time the farm relies exclusively on water captured and stored in the rainy season to see it through the dry season, as no water is extracted from the rivers during the dry months.

Lack of water storage was identified as the single biggest issue facing the sustainability of Ibis, leading to:

• Inability to irrigate crops to their full requirements at the most crucial time of the year (Jan – Apr) leading to reduced yields and stressed crops.

• Inability to increase the farmed foot print in order to reduce the fixed cost element of the business per unit delivered (stem or kg)

• Inability to increase the farmed foot print and thus improve land utilisation.

At the end of 2012 it was decided to embark on a 3 phase water expansion project on Ibis that would see the water storage capacity increased from 750,000m3 to 1,300,000m3 by 2015. The total investment in the two reservoirs was slightly over one million US dollars over the two years. With additional water, Ibis is able to achieve two crucial targets: farm more area and apply more water per hectare resulting in improved yield and reduced overhead costs per unit produced. Infrastructure was also upgraded to ensure water was in the right place at the right time.

Using Runner Beans as an example, table 1 shows the relationship between yield and irrigation.

Table 1. Yield and Water

2011 2012 2013 2014

Runner bean picks (kg)

676,823 462,818 494,625 735,265

Kg / ha 15,453 11,717 16,488 22,977

% increase yield

-24% 41% 39%

M3 irrigation* / tonne picked

2.7 2.7 2.3 2.2

% decrease in irrigation / tonne picked

-2% -12% -4%

*Daily available water / ha

Water is a scare resource; if we are to run a sustainable farming business we should endeavour to reduce overall water consumption to sustain our business. Having effective and robust water management systems and the knowledge in place will effectively allow us to grow more, with less.

Ibis water

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For Ibis farm in the Mt Kenya region, going from an unsustainable to a sustainable farm has all been about water. The growing of vegetables, herbs and lilies for the UK and European markets has been transformed by a major investment and focus on water resources.


Overall waste has increased since 2009 due to more accurate recording and reporting of waste figures and can be attributed to more waste being reused, recycled and recovered over the years. Recycling increased by 20%, reuse by 239% and recovery is up by 66% since 2009.

Omniflora reduced waste per stem by 31% in 2014 and met the annual target to reduce overall waste by 5% on 2013.

Horticulture waste per tonne of production has reduced by 53% on 2013 primarily due to vegetable processing operations being relocated to the farms. Horticulture Kenya achieved an impressive 79% reduction in waste going to landfill as vegetable waste reduced through less perishes within transit.

The Group’s goal to achieve overall zero to landfill remains unmet, however, our European businesses and Finlay Beverages did achieve zero to landfill throughout 2014. Finlay Beverages are sending coffee grounds to be recovered externally for energy production. Work continues in the remainder of the Group to achieve zero waste to landfill.

With the introduction of our biogas plant in Kenya, we have the potential to recover significant amounts of organic waste. The plant became operational in July 2014. The Group has seen an increase of 12% waste recovered since 2013.

Finlay Extracts & Ingredients now contribute 34% of the Group total waste production. Finlays Horticulture remains the largest contributor with 59%. These proportions are expected given the nature of each business, and continued work and improvements are planned to meet the new medium-term targets through further initiatives.

Waste

The Group’s total waste produced in 2014 increased by 15%. Despite this James Finlay Kenya reduced waste to landfill by 19%, as more waste was recycled (improvements in national availability) and training and awareness campaigns being delivered.

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• Overall Waste consumption to reduce by 9%

• Waste sent to landfill to be reduced by 7%

The biological effluent treatment plant, comprising of sedimentation and facultative ponds, has been performing below expected standards on a regular basis and certainly outside consented limits set out by the Kenyan Environmental Authority (NEMA). The site is currently operating under a NEMA Improvement Notice, which requires on-going assessment and evidence of demonstrable performance improvement. Finlays have undertaken pilot work with the agreement of NEMA to find a long-term sustainable solution to this problem.

In order to resolve our challenges, Finlays sought the expert opinion and guidance from numerous third party waste management companies. Feedback was consistent and we were advised to run the plant with more balanced effluent and proprietary biological seeding agents with a catalyst of molasses. The experts agreed the biological system should work perfectly with proper seeding.

Unfortunately, this approach did not deliver the requisite improvement and therefore Finlays carried an in-depth investigation of the treatment methods adopted by other extract manufacturers. A cross-functional team of experts developed and piloted a treatment process, combining chemical and biological treatment of effluent, previously developed in the original Serentea Factory in Sri Lanka. The pilot plant was retrofitted with a simple chemical treatment step utilising the effluent sedimentation clarifier used in Mara Mara, but modified to operate as a dissolved air floatation (DAF) clarifier to reduce the COD and colour load prior to biological treatment. This process incorporated common and inexpensive chemicals such as Alum and Lime in a dosing stage with limited polyelectrolyte treatment. The pilot plant process was commissioned in May 2014 and has been further developed, refined and implemented with a high rate bio-filter and activated sludge system operating at 1% of a full commercial plant and a DAF clarifier operating at 10% of a full line capacity at Saosa Factory.

The pilot plant remains in continuous operation with significant improvement being demonstrated. The photographs below of the in-feed to the effluent treatment plant (left) and the treated effluent (right) clearly show the improvement.

Both of these steps are currently being operated in the combined process.

With all colour removed, and significant clarity obtained, COD/BOD loads are also now within the levels acceptable to NEMA. It is believed that using existing Factory reed beds and facultative ponds, after excavation and cleaning, to further treat the clear effluent shown in Figure 2 aerobically, will further reduce the BOD and COD load of discharged treated waste water. The pilot plant has demonstrated that we can reduce the COD/BOD load achieved at each point in the process and has demonstrated a robust capability to effectively treat extract factory effluent to acceptable International environmental standards.

Based on these outcomes it has now been decided to upscale and upgrade effluent treatment at Saosa so that it will consistently deliver our regulatory, environmental and sustainability commitments.

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Treating effluent at Saosa Factory


Figure 1 shows colour reduction across chemical treatment

Figure 2 shows colour reduction across the biological high rate filter and activated sludge process.

Treating tea effluent is a very difficult task and experts across the industry have encountered significant challenges in effectively treating tea waste in a sustainable and environmentally compliant manner. There is limited research and best practice guidance on liquid tea effluent treatment; which has presented some significant challenges since the Finlays Saosa extracts factory was established in 2006.

Carbon

Since 2009, scope 1 emissions have reduced by 13%, seeing the Group narrowly missing the target to reduce emissions by 15% by 2014.

Scope 1 emissions were down by 6%, meeting the 2014 target as a result of increased fleet and fuel system efficiencies implemented in Kenya and across the group, improved refrigeration in Finlay Flowers BV and the UK. Finlays Horticulture South Africa also contributed by reduced coal use.

The Group’s direct non-renewable energy consumption reduced by 14% even with an increased requirement due to unreliable grid delivery and low hydro production. Reduced fuel consumption is reported as Finlays Horticulture Kenya relocates pack-houses to the farms and better fuel management systems are put in place.

The scope 2 target of 5% reduction was missed by 1% as purchased electricity consumption reduced despite

the increased requirement. Hydropower reduced due to weather conditions in Kenya and Sri Lanka in 2014. Since 2009 Scope 2 emissions have decreased by 26% as third party energy purchases have decreased by 11%.

Scope 3 emissions have reduced by 22% since 2009. In 2014 overall emissions were up by 3%. Finlay Extracts & Ingredients and Finlay Beverages reduced emissions by 10% and 15% respectively, due to reduced air and land freight.


• Scope 1 emissions to reduce by 3%

• Scope 2 emissions to reduce by 1%

• Scope 3 emissions to not exceed an increase of 0.1%

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Carbon Scope 1 reduced by 13% and Scope 2 by 26% since 2009. Therefore the Group met and exceeded one of the two targets to reduce emissions by 15%.

Scope 1 and 2 cover direct emissions sources (e.g., fuel used in company vehicles and purchased electricity), Scope 3 emissions cover all indirect emissions due to the activities of an organisation.

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When it comes to carbon the farm’s main source of energy is coal, both direct and indirect. Direct from two boilers on site produce both heating in the winter and steaming in the summer months. As approximately 120 tonnes of coal could be consumed per week on the farm, FHSA has been researching sustainable alternatives.

Steps to reduce coal consumption include boiler refurbishments and the acquisition of a portable, more efficient steam machine. Steaming, as a means of controlling weeds and weed seeds has been applied in horticulture operations for over 100 years. At FHSA steam is generated at 10 bars and circulated around the farm through overhead steel pipes into the greenhouses. It is then blasted onto the soil under tarpaulins at approximately 250km per hour, a process which takes approximately 4 hours to steam an area of 223 m2 at 60ºC. In 2013, FHSA used 1,295 tonnes of coal to steam an area of 139,242m2 using this method and produced approximately 18,000 tonnes of Carbon Scope 1 emissions.

The new steaming machine runs on diesel fuel, is portable and generates steam at 200ºC which is injected into the soil through a lattice of hollow injection pins to a depth of 15 cm. A process which is more efficient as the steam can be directed to where it is needed and not blanketed, overheating throughout the greenhouse. Steam is applied for between 5 and 10 minutes, the soil is then covered with reused greenhouse plastic to trap the steam for as long as possible.

After two months, the steaming machine shows great sustainable benefits:

• Increased health and safety and the decrease in environmental pollution through burning less coal.

• 1,671 tonnes of coal emits approximately 966.24 tonnes of CO2e compared to 118,579 litres of diesel which emits approximately 320.16 tonnes, seeing a reduction of 202%. In 2014 Carbon Scope 1 was reduced by 11% as a result of boiler repair and cessing steaming in Q4.

• The ability to select the steam area will allow FHSA to increased productivity in summer when demand is highest: planting a further 100,000 more stems in the summer months.

Sustainable steaming

Finlays Horticulture South Africa (FHSA) is moving forward in sustainable management. The primarily chrysanthemum farm located in Tarlton, Gauteng, South Africa is implementing sustainable management through looking to improve efficiencies in the consumption of water, energy, waste and carbon production.


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Finlays is committed to addressing social, political and environmental issues by demonstrating that it is more financially rewarding to be sustainable.

Our business understands that we need to take an active leadership role in dealing with sustainability issues;

we need to share knowledge and engage with communities in which we operate. This will benefit our suppliers, our communities and society in general, whilst seeking to be financially profitable.

Our economic contribution includes: direct employment, buying from local, regional and global suppliers, alongside the distribution and retailing of our products.

Investment over many years and into the future – in our fields, factories and on our land – has resulted in significant economic contributions to the countries in which we operate and has created direct employment for thousands, and indirect employment for many more.

In the year ending 31 December 2014, Finlays generated £655.7 million in economic value, the majority of which was distributed through the course of our business to our employees, shareholders, suppliers and governments, as well as, to local communities through our sustainability activities.

2014 saw the economic value ‘retained’ as a significant negative at -£24.6m (prior year was +£3.8m) and primarily relates to a poor performance from Kenya.

In 2014 Finlays funded £3.6million towards community investments, including projects such as the construction of laboratories, classrooms, libraries, dormitories and green water tanks for primary and secondary schools within Bomet and Kericho districts in Kenya.

Economic contribution

Direct economic value generated

Revenues

Revenues plus interest and dividend receipts, royalty income and proceeds of sales and assets

£566.6m

Economic value retained

-£24.6m

Economic value distributed

Operating costs

Cost of materials, services and

facilities

Employee wages and benefits

Cost of employees

salaries and benefits

Payments to providers of

capital

All financial payments made to the providers of

the organisations capital

Payments to government

Tax paid including

remittance taxes and excise taxes

Community investments

Voluntary contributions

and investment of funds in the broader community

£470.1m £80.5m £12.1m £24.9m £3.6m

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Commitment and leadership towards health and safety from the senior leaders in our business is critical to delivering that duty. Driving improvements in the management of Health and Safety is the responsibility of the Group Director for Compliance and Risk and the Divisional Managing Directors.

As part of our management of Health and Safety across the Group we track performance against a number of Key Performance Indicators. These include total incidents and lost hours per incident rates for every 100,000 hours worked. In the last year the lost hours incident rate fell by 27% to 43 hours per incident. In the same period the total incident rate remained broadly flat at 3.6 incidents per 100,000 hours worked.

Our aspiration remains zero accidents and that is what we are working towards. However, we operate in a number of different locations across the globe where local attitudes towards Health and Safety remain challenging. Therefore we ask all of our businesses to drive an agenda

of continuous improvement through the setting of local annual health and safety objectives. In addition we ask our businesses to drive a number of specific Health and Safety initiatives. These include a celebration of World Day for Safety and Health and Road Safety Week where the profile of various aspects of Health and Safety are raised through employee competitions, events and training courses.

We have a number of qualified health and safety professionals across the group. Regular training, inspections and audits are conducted by both our in- house teams, external consultants and the directors of the business.

Our strategy to deliver against the objectives we have set include an improvement in Health and Safety competency at all levels across the business, driving accountability for Health and Safety through those responsible for operations and making improvements to the timeliness and accuracy of our Health and Safety communications.

People

At Finlays, Health and Safety is paramount. We see it as our duty to protect everyone who is involved in or affected by our operations and we take this responsibility very seriously.


Injury rate*

Injury rate

male

Injury rate

female

Occupational disease rate

Occupational disease male

Occupational disease female

Lost day rate

Lost day male

Lost day female

Sri Lanka 8.63 4.28 4.34 0.00 0.00 0.00 0.48 0.24 0.24

Africa 5.38 3.34 2.04 0.45 0.28 0.17 17.25 10.70 6.54

Europe 6.68 3.79 2.88 0.00 0.00 0.00 18.08 10.27 7.81

RoW 2.03 0.99 1.03 0.00 0.00 0.00 1.52 0.75 0.78

Fatalities 2 employees

*Injury rate includes both minor and major and fatalities

Rates are calculated using 200,000 hours: The factor 200,000 is derived from 50 working weeks @ 40 hours per 100 employees.

By using this factor, the resulting rate is related to the number of employees, not the number of hours


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• James Finlay Limited

• James Finlay (Kenya) Limited

• Finlay Beverages Limited

• The New London Tea Company Limited

• Finlay Extracts Limited

• Finlay Tea Solutions UK Limited

• Finlay Tea Solutions US Inc

• Autocrat LLC (Acquired 2014)

• Finlay Hull Limited

• Finlay Vietnam Limited

• James Finlay (ME) DMCC

• James Finlay (Blantyre) Limited

• James Finlay Mombasa Limited

• Xiamen James Finlay Limited

• Hapugastenne Plantations PLC (91.8%)

• Newburgh Green Teas (Pvt) Limited (54%)

• Udapussellawa Plantations PLC (91.5%)

• Casa Fuentes S.A.C.I.F.I. (Acquired 2014)

• Finlays Colombo PLC (96.7%)

• Finlay Properties (Pvt) Limited

• Finlay Cold Storage (Pvt) Limited

• Finlay Rentokil (Ceylon) Limited

• Finlay Airline (Agencies) Limited

• Finlay Insurance (Brokers) Limited

• Finlays Maldives (Pvt) Limited

• Finlays Linehaul Express (Pvt) Limited (50%)

• Finlays Horticulture Investments Limited

• Finlays Horticulture South Africa (Pty) Limited

• Finlays Horticulture Kenya Limited

• Finlays Horticulture Tanzania Limited

• Skytrain Limited

• Finlays Fresh Produce UK Limited

• Finlay Flowers BV

• Finlay Flowers UK Limited

• Omniflora Blumen Center Gmbh

• Yunnan Taikoo Flowers Ltd (sold 2014)

• Taikoo Young Plants (Yunnan) Limited (50%) (sold 2014)

• FV SeleQt BV (51%)

• Dudutech Limited

Group operating companies

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Ethical membership

Our core belief in fair and ethical trading existed long before these concepts became familiar to industry and consumers and was behind our forging a relationship with the Ethical Trading Initiative (ETI).

The Ethical Trading Initiative is a leading alliance of companies, trade unions and NGOs that promotes respect for workers’ rights around the globe.

Like all corporate members of ETI, Finlays agreed to adopt the ETI Base Code, an internationally recognised set of labour standards, which is based on the standards of the International Labour Organisation and closely mirrors our own values. Membership is essentially a partnership to implement the key tenets of the Base Code in our supply chain. Amongst other things, it seeks to ensure that employment is freely chosen, freedom of association is respected, working conditions are safe and that no discrimination is practiced. Membership also requires a commitment to a living wage, the concept of which Finlays supports, and which, in partnership with Fairtrade, it has helped shape the debate through research involving Finlays Horticulture Kenya. Finlays Horticulture first joined the ETI some eleven years ago and from March this year, membership has been extended to the entire Finlays Group.

Finlays welcomes wider ETI membership because it formalises and gives structure to our varied activities which underpin ethical trading. These include an increased focus on gender empowerment in James Finlay Kenya, (a new post of Gender Empowerment Manager

was created and filled in 2014), and an ongoing initiative which looks at a broad spectrum of issues and challenges to operating ethically and seeks to manage these in a systematic way, managed by a newly created Welfare team.

There are mutual benefits from Finlays membership of ETI. Finlays is able to collaborate with some of the world’s leading players in ethical trade and increase the effectiveness of our ethical trading strategies. We can call on ETI’s experience, support and resources and engage in constructive dialogue on a range of ethical trading issues. By our membership of the ETI we are also able to demonstrate to retailers and customers our commitment to ensuring that our employees are able to benefit from continued improvements to their working conditions. For their part, ETI gain from having a long established, respected name like Finlays endorse ETI membership and can call on our depth of experience in tea and horticulture production.

Finlays has committed to a three year ethical trading strategy on labour standards which will require us to demonstrate tangible progress, in further improving working conditions in areas such as living wage and gender empowerment.

Ultimately, sustainability in its broadest sense means being in business for the long term. Finlays commitment to sound ethics has created a solid bedrock for this and our ETI membership reflects and formalises that commitment.


If there has been one constant during the 250 years of the Group’s existence which has endured, it is the characteristic of our culture that probably best defines Finlays approach to business and is a major contributor to our long term sustainability as a company. This characteristic is high ethical standards. It is a consistent thread running through the fabric of all our operations and is a key reason why Finlays has endured for so long.

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Legal form and governance

James Finlay & Co. was a partnership until 1909 when a private company was incorporated as James Finlay & Company Limited before being floated on the Glasgow Stock Exchange in 1924.

The Company was re-registered as a public limited company, styled James Finlay PLC in 1981. Acquired by John Swire & Sons Limited in 2000 when it was renamed James Finlay Limited, the Company is now a subsidiary of Finlay Group Limited which in turn is a wholly-owned subsidiary of John Swire & Sons Limited.

Main Board

The Main Board, which is tasked with organisational oversight and setting strategy, comprises four Executive Directors responsible for various aspects of the business, three Non-Executive Directors representing the shareholder, John Swire & Sons Limited, and three Independent Non-Executive Directors.

Merlin Swire Non-Executive Chairman

Ron Mathison Executive Director – Group Managing Director

Julian Rutherford Executive Director – Group Finance Director

Julian Davies Executive Director – Group Director Compliance & Risk

Martin Hudson Executive Director – Chief Executive Officer: Finlays Horticulture Investments Ltd

James E Hughes-Hallett Non-Executive Director

Stuart Strathdee Independent Non-Executive Director

Giles Weaver Independent Non-Executive Director

Isabella Wemyss Independent Non-Executive Director

The Chairman of the Board is Merlin Swire who is a Non-Executive Director and a Director of the Company’s parent, John Swire & Sons Limited.

Divisional Boards

Each Division is overseen by either a statutory or a management board comprising senior executives and representatives of the Main Board. Like the Main Board these meet quarterly.

Sri Lanka

In Sri Lanka, the Group operates through three publicly listed companies in which it has controlling stakes. They are fully compliant with corporate governance regulations applying in Sri Lanka.

Internal audit

The Group has an extensive Internal Audit function which is monitored by a series of committees that report to a Group Audit Committee comprising two Independent Non-Executive Directors and one representative of John Swire & Sons Limited.

Policies and procedures

Employees are made fully aware of their responsibility for ensuring that the Group conducts its business in accordance with applicable laws and regulations through a set of polices and procedures. These include a Group Corporate Code of Conduct and a Whistleblowing Policy. Guidance notes have been issued to employees on such matters as competition compliance and the UK Bribery Act. All relevant staff have also been given appropriate training on these and other issues.

Each business unit maintains a Risk Register and the main board formally reviews the consolidated Group Risk Register annually.

Employee forums

Throughout the Group our employees have opted to use a number of different options to engage in good employee/management dialogue. This includes Trade Union recognition and also democratically elected worker forums. A variety of other internal communications vehicles are also used to facilitate interaction between management and employees, such as employee feedback forms, conferences, workshops, magazines and newsletters.

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41Finlays Sustainability Report 2014 41Finlays Sustainability Report 2014

An update on Tea2030

If we want to fulfil the concept of tea as a hero crop then we need to start proactively tackling some of these systemic issues. Since 2012, Tea2030 has identified and begun work on three systemic interlinked platforms which cover the value chain from producing to consumers:

Sustainable Landscapes: is a new way for the industry to look at challenges in production. Led by Rainforest Alliance we have been pulling together three case studies examining holistically a region/area and the challenges to long-term viability. Landscapes focuses on root causes, rather than on ‘nice to do’ projects, and is to be owned, designed and driven by the producers. The case studies have looked at Mau in Kenya, Malawi and Assam.

Issues such as livelihoods and poverty in some regions are symptoms not of poor collective bargaining, but with the poor returns from tea due to soil erosion affecting yields. As a result the amount a plucker can harvest is reduced, limiting the income the estate receives and its ability to pay its workforce. Focus needs to be on supporting interventions at the root rather than just addressing the symptoms.

Market Mechanisms: the opportunities to sell tea and/or mitigate and manage risk and increase visibility, transparency and liquidity in the market are limited. This curtails investment in the manufacture of tea and the ability to maintain the quality expected by consumers.

A number of options have been evaluated including an index-linked hedging market, which it is hoped might be, developed and launched in the future.

Engaging Consumers: by focusing on the tea product itself, rather than the packaging or media characters/personalities it hoped to stimulate the perception and profile of tea. The intention is to develop and launch a campaign to connect consumers with tea.

None of these are easy to do in an industry that in many ways is fragmented, (compared to coffee and cocoa) and which is relatively disorganised at a strategic level. If we are to have a sustainable tea industry that can really fulfil the mantle of a ‘hero’ crop we must change to the way the industry operates. As we go forward we will be establishing a Leadership Group, trialling a web based best practice tool, expanding Tea2030 to the US, and pushing further work on the three platforms referred to above.

There is a long road ahead. The Tea2030 initiative was launched to identify some of the systemic issues impacting the tea industry now and in the future. Finlays is involved in all three platforms and are committed to focusing efforts in these areas and working collaboratively with others for a better future.

Tea has positive impacts on society, economies and the environment in many producing countries. For consumers it is a natural, healthy beverage that has strong social and cultural meaning. In many ways tea is and can be seen as a ‘hero’ crop. Yet as an industry we often devalue tea, pushing lower qualities, promoting packaging and reacting to social issues.

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Appendices

Our policy

• Industry leadership: We aim to be leaders in sustainable development in the industries in which we operate.

• In our operations: We will:

• Be a good steward of the natural resources and biodiversity under our influence and ensure that all potential adverse impacts of our operations on the environment are identified and appropriately managed.

• Do our best to safeguard the health and safety of all our stakeholders.

• Provide an environment in which all employees are treated fairly and with respect and can realise their full potential.

• Encourage suppliers and contractors to promote sustainable development.

• Encourage the responsible use of our products and services by our customers and consumers.

• Bring value to the communities of which we are a part and enhance their capabilities while respecting people’s culture and heritage.

Making it happen

• All companies in which the Swire Group has a controlling interest will have action plans for applying this policy in a way which is relevant to their business. We will encourage other companies in which we have an interest as a shareholder or through our supply chain to implement similar policies.

• We will encourage and empower our staff to be proactive on sustainable development matters both at work and in the community.

• We will monitor our performance and report it regularly.

• We will review this policy periodically, having regards in particular to stakeholder dialogues.

Swire Group sustainable development policy

We aim to create long term value creation for our shareholders. Achieving this depends on the sustainable development1 of our businesses and the communities in which we operate. To achieve sustainable development we aim:

• To achieve net zero impact on the environment

• To cause zero harm

• To excel as corporate citizens.

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cyFinlays Sustainability Report 201444

1 Sustainable Development is development that meets the needs of the present without compromising the ability of future generations to meet their own needs. – “Our Common Future”, 1987 – World Commission on Environment and Development.


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Energy (Gigajoules)

Energy 2013 2014 y-oy +/- %

Finlays Group Direct renewable 1,644,521 1,455,503 -11%Direct non-renewable 503,399 433,521 -14%Indirect renewable 131,393 125,731 -4%Indirect non-renewable 122,318 128,179 5%Total 2,401,630 2,142,934 -11%

Tea Estates Direct renewable 967,849 961,009 -1%Direct non-renewable 79,492 70,523 -11%Indirect renewable 36,423 34,780 -5%Indirect non-renewable 21,997 30,021 36%Total 1,105,761 1,096,333 -1%

TESL Direct renewable 258,349 213,731 -17%Direct non-renewable 20,344 18,873 -7%Indirect Renewable 16,258 10,175 -37%Indirect Non-renewable 13,355 19,477 46%Total 308,305 262,256 -15%

JFK Direct renewable 709,500 747,278 5%Direct non-renewable 59,148 51,650 -13%Indirect renewable 20,165 24,605 22%Indirect non-renewable 8,642 10,545 22%Total 797,456 834,078 5%

Beverages Direct renewable 0 0 0%Direct non-renewable 12,557 11,170 -11%Indirect renewable 3,192 2,899 -9%Indirect non-renewable 10,686 9,707 -9%Total 26,435 23,776 -10%

Colombo Direct renewable 42,709 35,120 -18%Direct non-renewable 14,974 12,453 -17%Indirect renewable 11,297 8,152 -28%Indirect non-renewable 9,107 14,450 59%Total 78,087 70,175 -10%

Extracts & Ingredients Direct renewable 629,667 456,591 -27%Direct non-renewable 67,864 42,330 -38%Indirect Renewable 28,068 23,534 -16%Indirect Non-renewable 10,177 8,036 -21%Total 735,777 530,491 -28%

Horticulture Direct renewable 4,296 2,783 -35%Direct non-renewable 328,511 297,045 -10%Indirect non-renewable 52,413 56,366 8%Indirect renewable 70,351 65,965 -6%Total 455,571 422,158 -7%

Fresh Produce Direct renewable 0 0 0%Direct non-renewable 2,003 1,741 -13%Indirect renewable 0 1,840 0%Indirect non-renewable 9,480 7,843 -17%Total 11,483 11,424 -1%

Flowers Europe Direct renewable 0 0 0%Direct non-renewable 16,455 19,362 18%Indirect renewable 824 4,716 472%Indirect non-renewable 22,651 18,101 -20%Total 39,930 42,179 6%

Horticulture Africa Direct renewable 4,296 2,783 -35%Direct non-renewable 308,621 275,941 -11%Indirect renewable 51,589 49,810 -3%Indirect non-renewable 35,298 40,021 13%Total 399,804 368,555 -8%


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Finlays Group Energy by Source Gigajoules

Indirect Energy Electricity – renewable 125,731

Electricity – non renewable 128,179

Direct Energy

Renewable Biomass power 0

Biomass thermal 1,451,321

Hydroelectric, solar, etc. 4,182

Non Renewable Diesel transport 123,009

Diesel stationary 63,261

Gasoline/petrol 27,824

LPG 1,595

Main gas 42,476

Kerosene 2,836

Propane 102

Coal 172,244

Oxyacetylene 174

Energy (Gigajoules)


Water 2013 2014 y-oy +/- %

Finlays Group Net water 8,658,197 9,163,979 6%

Recycled and Reused 525,393 463,533 -12%

Green 838,498 755,371 -10%

Blue 7,819,698 8,408,608 8%

Tea Estates Net water 195,759 205,385 5%

Reused 0 0 0%

Green 3,591 4,899 36%

Blue 192,168 200,486 4%

JFK Net water 150,975 167,691 11%

Reused 0 0 0%

Green 1,166 2,233 91%

Blue 149,809 165,458 10%

TESL Net water 44,784 37,695 -0.16%

Reused 0 0 0%

Green 2,426 2,667 0.10%

Blue 42,359 35,028 -0.17%

Beverages Net water 2,035 1,996 -2%

Reused 0 0 0%

Green 0 0 0%

Blue 2,035 1,996 -2%

Colombo Net water 60,601 63,325 4%

Reused 512 3,954 672%

Rainwater 0 0 0%

60,601 63,325 4%

Extracts & Ingredients Net water 367,521 357,203 -3%

Reused 4,198 1,806 -57%

Green 0 0 0%

Blue 367,521 357,203 -3%

Horticulture Net water 8,032,281 8,536,070 6%

Reused 520,683 457,773 -12%

Green 834,907 750,472 -10%

Blue 7,197,374 7,785,598 8%

Fresh Produce UK Net water 12,236 11,741 -4%

Reused 0 0 0%

Green 0 0 0%

Blue 12,236 11,741 -4%

Flowers Europe Net water 47,104 43,319 -8%

Reused 0 0 0%

Green 0 0 0%

Blue 47,104 43,319 -8%

Horticulture Africa Net water 7,857,305 8,481,010 8%

Reused 520,683 457,773 -12%

Green 834,907 750,472 -10%

Blue 7,022,398 7,730,538 10%

Water (m3)

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Waste (Tonnes)

Type Source m3

Green water Harvested rain water 755,371

Blue water Municipal mains water 101,987

Surface water (lakes, wetlands, rivers) 7,644,523

Ground water 662,098

Recycled and reused Water treated before reuse 461,727

Water not treated before reuse 1,806

Total water use 9,627,512

Net water use 9,163,979

Waste Tonnes

Reuse Green Waste 3,449

Plastic 32

Paper & Cardboard 34

Metal 4

Electrical 2

Other 298

Recycle Green Waste 3,313

Plastic 1,306

Paper & Cardboard 3,784

Metal 224

Electrical 28

Other 1,024

Recover Green Waste 34,064

Plastic 1

Paper & Cardboard 2

Metal 1

Electrical 0

Other 505

Landfill Green Waste 5,587

Plastic 11

Paper & Cardboard 76

Metal 2

Electrical 0

Other 6,211

Water (m3)

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Waste (Tonnes)

Waste 2013 2014 y-oy +/- %

Finlays Group Recycled 10,362 9,678 -7%Reused 7,490 3,819 -49%Recovered 30,882 34,571 12%Landfill 3,242 11,886 267%

Tea Estates Recycled 204 457 -124%Reused 113 39 -65%Recovered 3,485 2,592 -26%Landfill 502 456 -9%Total Waste 4,304 3,544 -18%

JFK Recycled 158 374 138%Reused 0 0 0%Recovered 3,134 2,315 -26%Landfill 20 16 -19%Total Waste 3,311 2,705 -18%

TESL Recycled 113 83 -27%Reused 46 39 -15%Recovered 351 277 -21%Landfill 482 439 -9%Total Waste 993 839 -16%

Extracts & Ingredients Recycled 479 231 -52%Reused 166 1,546 831%Recovered 4,726 7,567 60%Landfill 1,957 10,766 450%Total Waste 7,328 20,110 174%

Colombo Recycled 21 115 441%Reused 60 9 -85%Recovered 0 0 0%Landfill 130 235 80%Total Waste 212 358 69%

Beverages Recycled 243 373 54%Reused 325 239 -26%Recovered 31 146 365%Landfill 150 0 -100%Total Waste 749 758 1%

Horticulture Recycled 9,349 8,502 -9%Reused 6,893 1,986 -71%Recovered 22,639 24,266 7%Landfill 503 431 -14%Total Waste 39,383 35,185 -11%

Fresh Produce Recycled 2,982 1,948 -35%Reused 0 104 100%Recovered 287 326 14%Landfill 0 0 0%Total 3,268 2,377 -27%

Flowers Europe Recycled 4,968 5,223 5%Reused 0 0 0%Recovered 746 130 -83%Landfill 0 0 0%Total 5,713 5,353 -6%

Horticulture Africa Recycled 1,377 1,332 -3%Reused 6,893 1,882 -73%Recovered 21,405 23,810 11%Landfill 503 430 -14%Total 30,178 27,455 -9%

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50 Finlays Sustainability Report 2014

2013 2014 y-oy +/- %

Finlays Group Scope 1 48,122 45,252 -6%

Scope 2 27,508 27,250 -1%

Scope 3 171,410 177,061 3%

Tea Estates Scope 1 5,164 5,565 8%

Scope 2 5,162 5,638 9%

Scope 3 3,034 3,728 23%

TESL Scope 1 1,379 1,338 -3%

Scope 2 2,581 2,538 -2%

Scope 3 307 346 13%

JFK Scope 1 3,784 4,227 12%

Scope 2 2,581 3,100 20%

Scope 3 2,727 3,382 24%

Beverages Scope 1 661 596 -10%

Scope 2 2,076 1,899 -9%

Scope 3 3,900 3,304 -15%

Colombo Scope 1 5,705 4,710 -17%

Scope 2 1,778 1,970 11%

Scope 3 261 306 17%

Extracts & Ingredients Scope 1 2,310 1,637 -29%

Scope 2 2,753 2,882 5%

Scope 3 8,339 7,477 -10%

Horticulture Scope 1 34,283 32,744 -4%

Scope 2 15,739 14,862 -6%

Scope 3 155,876 162,249 4%

Fresh Produce Scope 1 820 279 -66%

Scope 2 1,329 1,483 12%

Scope 3 89,127 91,459 3%

Flowers Europe Scope 1 2,560 1,421 -44%

Scope 2 3,442 2,768 -20%

Scope 3 65,451 70,699 8%

Horticulture Africa Scope 1 30,791 31,044 1%

Scope 2 10,436 10,611 2%

Scope 3 86 91 5%

Head Office Scope 1 0 0 0

Scope 2 0 0 0

Scope 3 0 0 0

Carbon Footprint (Tonnes CO2e)

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Finlays is committed to creating a sustainable future.

It’s the only future we have.

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