Environmental disclosures, reference to progress on TCFD, SASB metrics, SECR report, retail

NEXT plc – Annual report – 30 January 2021

Industry: retail

CORPORATE RESPONSIBILITY (extract)

ENVIRONMENT

We are committed to minimising our environmental impacts by reducing both the carbon intensity of our activities and the natural resources we use.

When setting our approach to identify climate-related risks and opportunities, we took into account the Financial Stability Board’s Task Force on Climate-related Financial Disclosures (TCFD) and the eleven recommended climate-related disclosures across four competency areas: Governance, Strategy, Risk Management and Metrics and Targets. The table below summarises our progress this year and focus areas for the year ahead across these TCFD competency areas:

During 2020 we undertook a climate-related risk and opportunity assessment using the TCFD framework. The aim of this was to develop a deeper understanding of the key risks and opportunities posed to NEXT by climate change and how they may impact our business in the future. The TCFD recommendations group risks into two categories: physical (e.g. crop failure in cotton supply chain); and transition (e.g. increased regulation) risks. We collaborated across functions to examine the physical and transition risks relevant to our business, including their financial implications. Climate-related risks were identified and assessed using a range of sources, evaluating the likelihood of occurrence and the estimated magnitude of the resulting financial impacts over short term (current annual reporting cycle), medium term (1-3 year) and long term (3-10 year) horizons. The risk assessment considered our operations, supply chain, stakeholder expectations and regulation. Over the coming months, we will be undertaking analysis to review the resilience of our business model, taking into consideration various climate-related scenarios. Any mitigating actions will be undertaken after consideration of this analysis.

Our initial assessment of these climate risks concluded that whilst undesirable, no single event would have a material adverse financial impact on the business. The key climate-related risk is currently around regulation and the speed with which it is implemented, together with stakeholder pressure on the rate at which the business may need to cut carbon emissions.

We expect to report full disclosure against each TCFD recommendation in the 2021/22 annual report.

The directors confirm that they have considered the relevance of material climate-related matters, including the risks of climate change and transition risks associated with the goals of the Paris Agreement, when preparing and signing off the Company’s accounts. At this time, they do not consider there to be any material impact on the financial statements.

Direct operations and carbon reduction targets

NEXT is working to reduce the direct impact of our business operations on the environment. To help us understand our impact, we measure our global carbon footprint produced from the operational activities over which we have direct control.

Electricity consumption targets

During 2020 we measured our total Scope 3 emissions across our entire value chain and set a new target to reduce Scope 3 carbon emissions by 40% by 2030 per £1m sales against a 2019/20 baseline.

The majority of our emissions is embedded within the products we purchase and within our supply chain. To help support our work on reducing the emissions associated with the products we sell, we are joining the Sustainable Apparel Coalition. This will give us access to a suite of tools to support the standardised measurement of sustainability from our supply chain, including the Higg Index. We will report our progress in future reports.

In 2020, we became a signatory to the British Retail Consortium’s Climate Action Roadmap, a framework to guide the retail industry to net zero by 2040. Through the Roadmap we commit to working with other retailers, suppliers, government and other stakeholders, and to support customers to collectively deliver to the industry’s net-zero ambition.

Sustainability Accounting Standards Board

During the year, we carried out a full gap analysis against the SASB metrics for the Apparel, Accessories and Footwear industry (Apparel). Two things became clear as part of this review. The first is that we have a number of policies, procedures and controls in place to support our goal to be a sustainable retailer working to reduce our environmental and social impact. We also have some improvements to make. We have identified areas where we think we can improve, whether from a compliance perspective or from the quality of our disclosures. The following sets out how we comply with the SASB metrics together with the gaps we have found and our remediation plan. More information can be found on our website at nextplc.co.uk/corporate-responsibility.

We are on a journey towards compliance with the SASB Apparel reporting requirements. The Apparel metrics cover four broad areas:

  • The Management of Chemicals in Products (Chemicals).
  • Environmental Impacts in the Supply Chain (Environment).
  • Labour Conditions in the Supply Chain (Labour).
  • Raw Materials Sourcing (Raw Materials).

Our initial gap analysis has shown that in the areas of Chemicals, Labour and Raw Materials we are well on our way to full compliance with around 80% of the compliance metrics met. With regard to Chemicals, our key actions are to benchmark all of our suppliers against the standards within the Zero Discharge of Hazardous Chemicals initiative, update our Chemical policies and share them in the public domain.

For Labour and Raw Materials, our main efforts will be around improving our existing policies and internal metrics to align more closely to the SASB requirements. While our compliance in these areas is good, we have more to do on disclosure. We have a plan in place to improve the accessibility of our policies and procedures to bridge this gap between compliance and disclosure, in order that we can improve our level of disclosure by January 2022.

With regard to Environmental matters, the level of disclosure required by SASB is extremely detailed and specific to waste water discharge where the main impact is at Tier 3 in our supply chain. We do not yet capture the level of data required. This is primarily driven by the fact that we are not yet a member of the Sustainable Apparel Coalition although we are in the process of gaining membership. Once we become a member, this will significantly improve our compliance metrics and enable us to learn the best in class standards for compliance and disclosure. By next year end we expect our compliance and disclosure in this area to start to match that in other areas.

The table below reflects our progress towards compliance with SASB and sets out details of where to find further information.

Greenhouse gas emissions – Streamlined Energy and Carbon Reporting (SECR)

In accordance with the disclosure requirements for listed companies under the Companies Act 2006, the table below shows the Group’s SECR disclosure across Scope 1 and 2 together with an appropriate intensity metric and our total energy use of gas, electricity and other fuels during the financial year.

Energy consumption data is captured through monthly bills showing actual or estimated consumption. We continue to work to improve operational efficiency across our property portfolio. We actively track and review energy performance via a central data collection facility to ensure our properties are operating efficiently. During the year we have continued to roll out LED lighting installations in retail stores saving 3,910 MWh (3,910,048 kWh). In addition, due to COVID, our stores have been closed for part of the year which has allowed increased monitoring of electricity consumption leading to identification and resolution of any usage anomalies.

Renewable energy

NEXT is a signatory to the RE100 initiative and has committed to using 100% renewable energy by 2030. Our UK and Eire operations have been run using 100% renewable energy since April 2017, and we continue to work towards achieving this target in our direct operations overseas.

Waste, packaging and recycling

NEXT operates an ongoing programme of reduction, reuse and recycling. We exceeded our target of diverting more than 95% of operational waste from landfill by 2020 for reuse or recycling, achieving 97% in 2020/21.

We continue to identify ways to reduce the amount of packaging and eliminate avoidable plastics in product packaging such as PVC, polystyrene and acetate. All our packaging is recyclable, although not all local authorities recycle all materials. In 2019 we introduced 100% recycled content carrier bags in our retail stores.