Annual Report and
Financial Statements 2022
Helping everyone
eat better
Our focus on great value food and convenient shopping,
whether in-store or online is supported by our brands –
Argos, Habitat, Tu, Nectar and Sainsbury’s Bank.
Sainsbury’s has over 600 supermarkets and over 800
convenience stores. Argos is a leading digital retailer
and is the third most visited retail website in the UK,
with over 80 per cent of its sales starting online. Argos
is conveniently available for customers to collect from
hundreds of Sainsbury’s stores. Digital and technology
enables us to adapt as customers shop differently and our
profitable, fast-growing online channels offer customers
quick and convenient delivery and collection capability.
Our 171,000 colleagues are at the heart of serving and
helping our customers every day and are vital to our
success, now and in the future.
Performance highlights
3.4%
Retail sales growth (inc. fuel)
versus the 2020/21 financial year.
Excluding fuel sales declined 2.6%
£730m
1,2
Underlying profit before tax,
up 104 per cent versus the 2020/21
financial year and up 25% versus
the 2019/20 financial year
£854m
2
Statutory profit before tax versus
a loss of £164 million in the 2020/21
financial year and versus £278 million
in the 2019/20 financial year
36.9%
Retail operating profit growth versus
the 2020/21 financial year and 6.7%
versus the 2019/20 financial year
25.4p
1
Underlying basic earnings per share,
up 117% versus 11.7p underlying basic
earnings per share in the 2020/21
financial year
8.4%
1
Return on capital employed,
up 280bps versus the 2020/21
financial year and up 100bps
versus the 2019/20 financial year
£38.4m
Raised for good causes
20%
Reduction in absolute greenhouse gas
emissions within our own operations,
against our 2018/19 baseline
119%
Increase in food redistributed
to people this year
2.5m+
Meals donated
1 Refer to Alternative Performance Measures on pages 203 to 207 for definition and reconciliation to statutory measures.
2 The results for 2021 and 2020 have been restated – refer to note 2 of the financial statements on page 113.
Read more about our KPIs on page 30.
Strategic Report
01 Contents and Performance highlights
02 Chairman’s letter
05 Chief Executive’s Q&A
07 Business model
09 Our strategy
10 Our priorities
13 Plan for Better
24 Engaging with our stakeholders and
our Section 172 statement
30 New KPIs
31 Legacy KPIs
32 Financial Review
38 Principal risks and uncertainties
53 Non-financial information statement
Governance Report
54 Board of Directors
58 Operating Board
61 Board leadership and Company purpose
64 Division of responsibilities
65 Composition, succession and evaluation
68 Nomination Committee Report
71 Corporate Responsibility and Sustainability
Committee Report
73 Audit Committee Report
78 Annual Statement from the Remuneration
Committee Chair
84 Annual Report on Remuneration
96 Additional statutory information
Financial Statements
100 Statement of Directors’ responsibilities
101 Independent auditor’s report to the
members of J Sainsbury plc
108 Consolidated financial statements
113 Notes to the consolidated financial
statements
118 Income statement notes
132 Financial position notes
172 Cash flows notes
178 Employee remuneration notes
189 Additional disclosures
194 Company financial statements
196 Notes to the Company financial statements
200 Additional shareholder information
203 Alternative performance measures
208 Glossary
Find out more at
www.about.sainsburys.co.uk/ar2022
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This has been a year of delivering for all our stakeholders
and I am immensely proud of what our business has
achieved for our customers, colleagues, communities
and our shareholders.
Throughout our history Sainsbury’s has always tried to do the right
thing and our approach to supporting people in times of need has
been particularly evident throughout the pandemic. At the very
beginning we gave elderly and vulnerable customers priority
access to home delivery slots – the first supermarket to do so –
and throughout the crisis we have paid colleagues who needed to
stay at home. Together with our customers and colleagues, we
continue to support charities and worthy causes around the world.
As COVID-19 continues to impact the economy and the cost of fuel,
energy and raw materials continues to rise, we remain committed
to doing everything we can to support our colleagues and customers
through what may be challenging financial times ahead.
Despite the difficulties presented by COVID-19, our colleagues continue
to do a brilliant job for our customers and I would like to thank all of
them for their dedication and commitment. We are committed to
paying our colleagues fairly and have invested over £100 million in
retail colleague pay. All Sainsbury’s and Argos retail store colleagues
can now earn the Living Wage wherever they work in the UK.
Our Chief Executive Simon Roberts, and the Operating Board, have
done an excellent job delivering against the key metrics we set out
in November 2020. As a result of our strong profit performance
and retail free cash flow generation, we are pleased to propose to
shareholders the highest final and full-year dividend for seven years.
We have used our strong cash generation in recent years to reduce
debt and return around 50 per cent of underlying net earnings to
shareholders through ordinary dividends. With debt reduction ahead
of schedule, we are increasing our payout ratio to around 60 per cent.
In January we were deeply saddened by the death of our Life
President, Lord Sainsbury of Preston Candover. He played a vital
role in leading Sainsbury’s through a period of significant change
and making it the business it is today. His significant philanthropic
contributions include the foundation of the Linbury Trust with his
wife, Baroness Sainsbury of Preston Candover CBE, which supports
a wide range of charitable causes. His contribution and retailing
talent remains truly inspiring and we will continue to remember
him and the immeasurable impact he made.
Strategic progress
One year into our three-year plan to transform Sainsbury’s, Simon
and his team are making very good progress. They are adapting our
business at pace, simplifying operations and accelerating our cost
savings programmes so that we can invest in food quality, choice
and consistently lower prices for customers. Our portfolio brands –
Nectar, Argos, Habitat, Sainsbury’s Bank and Tu – support our core
food business, delivering for both customers and shareholders.
The focus on value, innovation and service is driving volume market
share performance ahead of our key competitors and, at a time of
inflationary pressures for customers, we are improving our price
position versus our key competitors
3
.
Argos is delivering stronger profitability and Sainsbury’s Bank achieved
an important milestone by declaring a dividend of £50 million back
to the Sainsbury’s Group.
You can read more about our progress to put food back at the heart
of Sainsbury’s on pages 10-11.
In June we launched our new sustainability strategy, Plan for Better,
a core part of our strategy. Across the Group we are embedding
climate considerations into our reporting and decision making,
implementing bold targets and incentives in order to achieve our goal.
This year we strengthened our commitment to tackle the climate
crisis, announcing the acceleration of our target to become Net Zero
across our operations by five years, from 2040 to 2035. We have also
committed to reducing our Scope 3 emissions by 30 per cent by 2030.
As signatories of the Task Force on Climate-related Financial Disclosures
(TCFD), we are committed to providing consistent information to our
stakeholders and our disclosure can be found on page 17.
1 Refer to Alternative Performance Measures on pages 203 to 207 for definition and reconciliation
to statutory measures.
2 The results for 2021 and 2020 have been restated – refer to note 2 of the financial statements
on page 113.
3 NielsenIQ Panel data (YoY and 2 year 52 weeks volume growth differential to P13 FY21/22)
of the year.
02 Strategic Report J Sainsbury plc Annual Report 2022
Chairman’s letter
Chairman Martin Scicluna reviews the
business activity in the year.
2021/22 highlights
9.9p
Proposed final dividend
13.1p
Proposed full-year dividend
per share
25.4p
1
Underlying basic earnings
per share, up 117% versus
11.7p underlying basic
earnings per share in the
2020/21 financial year
29.8p
2
Basic earnings per share,
versus 9.4p basic loss per
share in the 2020/21
financial year
Collaboration is key to tackling the climate crisis. To this end we were
proud to be the Principal Supermarket Partner of the United Nation’s
international climate change conference, COP26, which took place
in Glasgow in November. I was inspired by the encouraging steps so
many businesses, including Sainsbury’s, are taking to address the
challenges we face. We are now well into the next phase of delivering
against the commitments we have set out. We are aligned to the
UN Sustainable Development Goals and, through Plan for Better,
we can identify areas which matter most to our stakeholders, helping
us to make real and meaningful improvements.
Our commitment to Helping everyone eat better is progressing well
as we encourage customers to make food choices that are both
better for them and better for the planet. As part of our commitment
to measure healthy and sustainable diets, we reported against our
new target to achieve at least 83 per cent of ‘healthy’ and ‘better for
you’ sales by 2025, currently at 80 per cent. We also disclosed our
protein sales, with 72 per cent of protein sales being plant based and
meat-free products.
We report on our Plan for Better progress every six months and you can
read more about what we have delivered this year on pages 13 to 17.
Delivering for our customers
We know how important value is to customers and that the cost of
living crisis is putting pressure on household budgets. We are taking
bold steps to enhance the value we offer to customers and we are
keeping prices lower than our competitors. Through the year our
Price Lock promotion fixed the price of up to 2,000 items for at least
eight weeks and our Sainsbury’s Quality, Aldi Price Match campaign
matches the discounter’s prices on 240 popular items. This year
we have increased the number of entry price level lines, offering
customers lower prices on the products they buy most often,
including fresh produce, as well as offering choice across price points.
Offering customers new and innovative products is a key priority for
us and we hit our target of tripling our levels of product innovation
in the year, launching 1,950 new products. We are also working with
third parties such as Boparan Restaurant Group, Coco di Mama and
Starbucks to offer our customers more choice and great quality food
and drink to eat-in or takeaway.
We are making our customers’ lives easier through improving our
digital offer. We are developing SmartShop and we continue to invest
in our Groceries Online business, including rapid delivery through
Chop Chop, Uber Eats and Deliveroo.
Delivering for our colleagues
We are committed to paying our 151,000 retail colleagues fairly
and our wage bill is our biggest operating cost. Since 2017 we have
increased the pay of Sainsbury’s front line colleagues by 25 per cent
and we have increased Argos colleagues’ pay by 31 per cent over
the last five years and have removed age-related pay.
All Sainsbury’s and Argos store colleagues now receive an hourly
base rate of at least £10 per hour. This represents an increase of at
least 5.3 per cent. This new rate of pay is 50p above the government’s
National Living Wage and 10p above Living Wage Foundation’s Living
Wage. We also increased inner London pay from £10.10 to £11.05
in line with the London Living Wage.
We were pleased to announce in April that from 1st May 2022 the
outer London rate would also be moving to £11.05 from £10.50.
This means that all Sainsbury’s and Argos retail store colleagues
can earn the Living Wage wherever they work in the UK.
As we balance the needs of all our stakeholders we will continue to
discuss colleague pay on a regular basis. We commit to paying above
the National Minimum Wage and, when setting pay each year, will
consider the Living Wage, the National Living Wage, competitor pay
and the financial performance of the business. We are also committed
to maintaining a dialogue with all key stakeholders on the issue.
“ One year into our three-year plan to
transform Sainsbury’s, Simon and his team
are making very good progress. They are
adapting our business at pace, simplifying
operations and accelerating our cost
savings programmes so that we can invest
in food quality, choice and consistently
lower prices for customers.”
It is also important for us to be an inclusive retailer with diverse
representation across all levels, so I am pleased to see progress being
made in this area. Initiatives such as the adoption of the Halo Code
and our admission to the Black British Network are just some of the
achievements made this year and I am pleased our work has been
recognised, with the I AM ME Ethnically Diverse Colleague Network
featured in the Top 10 Network Groups in the UK at the Ethnicity
Awards. We are also featured for the first time in the FTSE 100 Top
Ten Best Performers list for Women in Leadership. We are proud to
have published our Gender and Ethnicity Pay Report for a second
year and have seen the pay differentials reduce during that time.
Delivering for our communities
We are committed to supporting our communities and fostering
our charitable partnerships. I was delighted that this year we raised
over £6 million for Comic Relief, in addition to the £2 million we
donated as a business to support the humanitarian crisis in Ukraine.
Through our Ukrainian Crisis Appeal, customers and colleagues have
also donated over £600,000 so far and we are matching donations
up to an additional £500,000.
Our partnership with Neighbourly helps to manage our back of
store food donation programme, helping to connect Sainsbury’s
stores with local partners who will redistribute food to those in need.
So far we have donated over 2.5 million meals, which is equivalent
to £4.8 million in savings for charities and community groups.
This partnership also supports our sustainability targets as we
have pledged to reduce our food waste by 50 per cent by 2030.
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Financial review
We delivered a strong performance this year. Underlying profit before
tax was £730 million, up 25 per cent versus the full-year 2019/20.
Last year’s performance reflected significant costs associated with
adapting our business to the COVID-19 pandemic.
Statutory revenue was up 2.9 per cent to £29,895 million and
statutory profit before tax was £854 million versus £278 million in
2019/20, reflecting lower restructuring and impairment costs and
exceptional income from settling legal disputes. We achieved strong
Retail Free Cash Flow of £503 million and average Free Cash Flow
delivery in the three years to March 2022 of £633 million. We are on
track to deliver at least £500 million retail free cash flow per year.
We also delivered non-lease Net Debt reduction of £1,381 million over
the three years to March 2022, ahead of the target of £950 million+
over the four years to March 2023. Underlying basic earnings per
share was 25.4p and basic earnings per share was 29.8p. We remain
committed to maintaining our strong value position, are on track
to deliver our 200 basis points cost reduction target and will invest
in making improvements to our customer offer.
In 2021 we completed a thorough review of the Financial Services
business and concluded that it was in the best interest of shareholders
to retain Sainsbury’s Bank.
More information on our financial performance can be found in the
Financial Review on pages 32 to 37.
Delivering for our shareholders
The Board proposes a final dividend of 9.9p per share, bringing the
full-year dividend to 13.1p per share. This will be the highest dividend
the business has paid for seven years. The shareholder dividend
is being paid on the full underlying profit number of £730 million,
an increase of 24 per cent on the dividend from last year.
Remuneration
The Committee has considered a number of factors when determining
incentive outcomes for the year, including the impact of COVID-19
on performance.
The Remuneration Committee reviews the underlying performance
of the business and this year determined that the COVID-19 driven
elevated grocery volumes caused an estimated net financial benefit
of £100 million, which is reported within our underlying profit before
tax of £730 million. For incentive purposes the Committee applied
downward discretion to remove this £100 million impact from both
the bonus outturn and the long-term incentive plan vesting level.
Simon’s remuneration for the year reflects the strong performance
of the business and the progress we have made against our strategy.
Under his strong leadership Sainsbury’s grocery market share has
increased and we have made significant strides with our value
proposition against our competitors. We have also exceeded our
cost savings target for the year. It should be noted that Simon waived
his entitlement to a bonus for the 2020/21 financial year.
Simon has demonstrated outstanding drive and energy to do the
right thing for our customers and colleagues throughout the
challenges faced and on behalf of the Board I would like to thank
him for all of his hard work and significant achievements.
For more information on this year’s remuneration awards please see
pages 84 to 95.
Board changes
In April we were pleased to announce that Jo Bertram will join
the Board as a Non-Executive Director and member of the CR&S
Committee following the AGM on 7 July 2022, subject to shareholder
approval. Jo Bertram is currently Managing Director, Business &
Wholesale, at Virgin Media O2. Prior to this, Jo held roles at Uber
and McKinsey. She is a highly talented strategic business leader
whose broad experience in technology-led sectors will bring fresh
perspective to the Board.
We also announced that Dame Susan Rice will step down at
Sainsbury’s AGM on 7 July after nine years’ service with us.
Throughout her time she has been steadfast in doing the right thing
for our customers and colleagues. As Chair of the Remuneration
Committee Susan has played a vital role in ensuring our approach
to pay reflects our culture and values at all levels of the organisation.
On behalf of all our colleagues I would like to thank Susan for her
commitment and dedication to Sainsbury’s.
Finally, I would like to thank all of my colleagues for their extraordinary
efforts, support and flexibility over the past year. Once again you
have all risen to the challenges faced and you have been unwavering
in your commitment to do the right thing for our customers.
Martin Scicluna
Chairman
04 Strategic Report J Sainsbury plc Annual Report 2022
1. How has your first full year as CEO of Sainsbury’s been?
It has been an unprecedented year in so many ways, for our customers,
our colleagues, our suppliers and the communities where we trade.
Throughout, we have been relentlessly focused on putting customers
and colleagues first and doing the right thing, while at the same time
working across our company to deliver our plan as we put food back
at the heart of Sainsbury’s. We said we would invest in value,
innovation and service and that is exactly what we are doing –
and our results are showing that as we become more competitive,
more and more customers are choosing to shop with us.
COVID-19 continued to impact our business as more people ate at
home and government restrictions affected our customers’ and
colleagues’ daily lives. With safety as our number one priority
throughout the pandemic, we constantly tried to stay as close as
possible to what mattered most to our customers and colleagues.
We encouraged face mask wearing even when it was not mandatory
and kept screens in the stores where customers wanted them.
We also supported all our colleagues by paying those who were
self-isolating or absent with COVID-19 related sickness, irrespective
of their vaccination status.
The effects of COVID-19 and the UK’s decision to leave the European
Union also caused disruption to the industry’s supply chains.
Shortages of key workers such as HGV drivers put pressure on our
ability to source and move products through the food supply chain
and the pandemic caused higher absence levels, both in stores and
for our suppliers. This meant that availability in our stores and online
was challenged. While the backdrop was difficult, particularly as we
approached Christmas, our teams worked exceptionally hard end
to end across our business to make sure we had food for everyone.
Our suppliers also did a great job under these challenging conditions,
and I thank them for all their support for our business.
As the cost of living puts pressure on household budgets, we have
made massive strides to improve our value offer. This is at the very
core of our strategy to be Food First and I am encouraged by the
progress we have made to become more competitive. We are
delivering the best value for money in at least six years and are
consistently inflating behind the market on the highest volume
products by investing ahead of competitors with a clear focus on
fresh food. The Sainsbury’s Quality, Aldi Price Match campaign is
really popular and we will continue to focus on being great value
for our customers on the fresh and high-volume lines that are most
important to them. Through the year our Price Lock promotion fixed
the price of up to 2,000 items for at least eight weeks. Customers can
be assured that prices will not rise on these products, helping them
to plan and budget and through Price Lock we are holding down the
prices of more products than our competitors.
This year we have seen such fantastic support and hard work from all
of our colleagues right across the business and above all else, I want
to thank every one of my colleagues for such an outstanding team
effort in what have been challenging circumstances. Over the last 18
months we have strengthened our Operating Board to help us drive
our company and our performance forward and I would like to thank
all my colleagues on the Board for their leadership, commitment
and support. I was delighted to promote Graham Biggart and appoint
him to the newly created role of Chief Transformation Officer.
Paula Nickolds joined the business last summer and, less than
a year in, she is already making a significant impact on our General
Merchandise & Clothing business.
2. What are you most proud of?
I am so proud of our colleagues and the entire Sainsbury’s team.
Every day across our company I see and hear about our colleagues
consistently going above and beyond in showing genuine care
and concern for our customers and doing their very best to help.
Our colleagues have done a brilliant job, to navigate the pandemic,
manage labour shortages, and more recently the impact of the
devastating war in Ukraine as well as the cost of living crisis, which
I know is a big concern for us all. Every one of our team has shown
extraordinary resilience, determination and commitment to working
as a team over the last year and I would like to say a heartfelt thank
you to each and every one of them.
In recognition of the role our retail colleagues play in delivering for
our customers and in all of our success, we were the first major
supermarket to pay colleagues the Living Wage wherever they are
in the UK.
1 Refer to Alternative Performance Measures on pages 203 to 207 for definition and reconciliation
to statutory measures.
2 The results for 2021 and 2020 have been restated – refer to note 2 of the financial statements
on page 113.
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Chief Executive’s Q&A
One year into Sainsbury’s three-year plan, Chief Executive of Sainsbury’s,
Simon Roberts explains how the business has been relentlessly focused
on putting customers and colleagues first and doing the right thing.
2021/22 highlights
£730m
1,2
Underlying profit before tax,
up 104% versus the 2020/21
financial year and up
25% versus the 2019/20
financial year
£854m
2
Statutory profit before tax
versus a loss of £164 million
in the 2020/21 financial year
and versus £278 million in
the 2019/20 financial year
3.4%
Retail sales growth
(inc. fuel)
£141m
1
Non-lease net debt
20%
Reduction in absolute greenhouse gas emissions within
our own operations, against our 2018/19 baseline
“ By putting our customers and colleagues
first and doing the right thing, I’m confident
we can build on the momentum we have
and continue to make good progress against
our plan.”
I am pleased with the momentum we have been building against our
plan. By putting our customers first and doing the right thing for our
colleagues, I’m confident we can build on this strong first year we have
had in food, supported by our Brands that Deliver and Save to Invest.
We have learnt a lot over the last year as a business about where
we can improve, move faster and work more effectively. We have
become more agile in anticipating the rapidly changing environment
around us and changes in how our customers are shopping. It will be
so important we continue to push forward and while, of course, it is
challenging to make the changes we are making, it has been really
positive to see what we have been capable of across our entire
business as we all learn to adapt and work smarter.
3. What have been the biggest shifts in the market?
The rapid shift to customers shopping groceries online has been
particularly stark. Whilst shopping patterns are beginning to return
to what we saw before the pandemic began, 17 per cent of the food
and groceries we sell is bought online, up from less than 9 per cent
two years’ ago. More than ever, customers want to be able to choose
how and when to shop, fuelling the rise of On Demand services,
particularly across grocery. We have responded by investing in
our online and digital channels and growing our On Demand offer.
Customers are now able to receive Sainsbury’s orders in as little
as 30 minutes through Chop Chop, our rapid delivery service, and
through our partnerships with Uber Eats and Deliveroo. This rapid
move online accelerated by the pandemic has continued in General
Merchandise as we have accelerated the transformation of Argos.
Last year 39 per cent of all our sales across the business were
completed online.
During the pandemic, cooking at home was central to the way
households came together and as finances are increasingly under
pressure, shoppers are looking for cost-effective ways to enjoy eating
and drinking together. We are really well positioned to help customers
with this, offering value across a great choice of food, at different
price points. We are also innovating in response to the shift towards
eating at home and cooking from scratch, developing over 200
products as part of our ‘Inspired to Cook’ range, which makes home
cooking simple and tasty for customers. We also see customers
trading up more and sales of Taste the Difference are up 15 per cent
on two years ago.
The pandemic has put supplier relationships under the spotlight and
those retailers like us with scale and strong networks have been able
to work with suppliers to minimise the impact of rising inflation as
much as possible. We have witnessed significant labour shortages
and like other retailers, we increased the recruitment of online
van and HGV drivers to ensure we were able to maximise delivery
availability and ensure the best possible availability for our customers.
4. What is the biggest challenge ahead?
We know everyone is feeling the impact of inflation which is why we
are so determined to deliver the best value for money we can for our
customers. As a result of being bold in our cost saving plans, we are
able to drive investment back into lower food prices and as a result,
we are consistently inflating behind competitors on the products
customers buy most often. We have real momentum in the business,
having outperformed key competitors on both a one and two-year
basis while also delivering strong underlying profit growth, improved
returns and consistent retail cash flow. This gives us a strong
foundation to keep building momentum in the year ahead and that
is what we are focused on ensuring we do. We have a clear strategy
and a clear plan and whilst the year ahead will be more challenging,
I believe we are well set to navigate these conditions as we drive our
strategy forward and continue to deliver the best value, innovation
and service we can for our customers.
5. What did you learn at COP26?
We know that the issues of climate change and protecting
biodiversity are very important to all our customers and to all our
colleagues. Tackling the climate crisis requires collaboration at all
levels and at COP26 it was inspiring to see what can be achieved
when we all pull together at the world level. COP26 was also
an opportunity to drive meaningful progress and represent and
campaign for real change on behalf of our industry.
Alongside four other major UK retailers, we were really pleased to
sign WWF’s Retailers’ Commitment for Nature, pledging to come
together in force to halve the environmental impact of the UK food
sector by 2030. And, we are also building on our commitments
to reduce carbon emissions, deforestation, food waste and the
packaging we produce.
Progress on the critical issue of climate change can only work if
countries, industries and organisations work systematically to
implement change across all their operations. At COP26 we announced
the acceleration of our target to become Net Zero across our own
operations by five years, from 2040 to 2035, in line with the UN’s goal
to limit global warming to 1.5 degrees. Last year we also set an
absolute target to reduce our Scope 3 emissions by 30 per cent by 2030,
and in delivering these targets we will also endeavour to help our
customers make more sustainable choices when they shop with us.
The key will be for everyone to act on the promises they made at
COP26 and to really focus on making the step change needed to
confront global warming. We all need to be bold and constantly
challenge ourselves to do better – I am really clear that we can only
make the scale of change needed by working together with all our
stakeholders to find new and innovative ways to adapt consumer
habits and implement practices that are better for the planet, better
for customers and better for everyone.
6. How do you feel about the next 12 months?
I feel really positive and energised by the momentum we have and
the brilliant teams we have working across our business. We are fully
committed to do everything we can to help our customers navigate
the increasing costs of living and keep prices as low as we can.
We start this year in a good position financially, with continued
operating momentum supporting our strong competitive position.
Our strong focus on delivering value, innovation and service for our
customers and driving through our cost savings programme puts
us in a good position relative to our competitors and we expect to
continue our strong grocery volume market share performance.
We have a clear focus on keeping prices low and we will remain
committed in our determination to help everyone eat better as
we deliver for our customers, our colleagues, and our shareholders
whatever the external environment may bring.
Simon Roberts
Chief Executive Officer
06 Strategic Report J Sainsbury plc Annual Report 2022
We are putting food back at the heart of Sainsbury’s.
We create value for stakeholders by building on the heritage
and scale of our food business and our strong assets.
Everything we do is underpinned by data and technology
innovation. And the single infrastructure that supports
our brands enables us to drive value and efficiency.
Building on our brand and strong assets
Sainsbury’s brand
and own brand heritage
Online scale
and capability
Our stores
Good catchments,
strength in convenience
Scale
Second largest food retailer
Strong
operating cash flow
Attractive
customer base
Reputation for
service
Nectar, investment
in digital and innovation
Underpinned by data, technology innovation and capability
Name Badge
Creating value for our stakeholders
Customers Colleagues Communities Suppliers Shareholders
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Business model
Driven by our passion for food, together we serve and
help every customer.
Our Plan for Better is integrated into everything we
do and is a key differentiator for us.
This year we accelerated our commitment to be Net Zero by 2035,
five years ahead of our original target.
The Sainsbury’s Difference
How we create value
Sainsbury’s brand
Sainsbury’s is a trusted, well-loved brand that has been bringing
high quality, great value food to customers for over 150 years.
Argos, Habitat, Tu, Nectar and Sainsbury’s Bank are complementary
and give customers more reasons to shop with us.
Scale
We offer customers a choice of quality products. We have scale
positions in both food and non-food purchasing and can profitably
deliver a wide range of products and services to customers.
Strong operating cash flows
Our scale, customer proposition and operational efficiency generate
strong operating cash flows to reinvest in our customer offer and adapt
to rapidly changing shopping habits, while also paying dividends and
strengthening the balance sheet.
Attractive customer base
Sainsbury’s is a trusted brand, loved by millions of customers
across the UK. We serve an attractive customer base and two thirds
of the UK population have shopped with Sainsbury’s over the
last year
1
with a bias to a more affluent sociodemographic than
key competitors.
For customers
We listen carefully to our customers and we invest in what matters
to them. Our focus is on offering a broad range of great value,
high quality products – we then focus on strong availability and
excellent customer service, all delivered through our attractive
stores and a range of convenient digital channels. And we reward
our customers for their loyalty. We want to help everyone eat better
and are helping our customers to improve diets while reducing their
impact on the environment, one plate at a time.
For more information about how we engage with our stakeholders,
see pages 24 to 29.
For colleagues
We invest in our colleagues and are committed to paying them
fairly for their efforts. By creating an engaged workforce that is
invested in the progress of the business and the role they play
in our success, we will achieve high retention rates and deliver
superior customer service. See page 25 for more detail.
For suppliers
We are proud of our strong supplier relationships and we work
collaboratively with them to grow our business and theirs.
By improving technology and simplifying processes we are making
it easier for our suppliers to do business with us. See page 27 for
more detail.
For shareholders
Our Chief Executive Simon Roberts, and the Operating Board, have
done a very good job delivering against the key metrics we set
out in November 2020. As a result of our strong profit performance
and free cash flow generation, we are pleased to propose to
shareholders the highest final and full-year dividend for seven
years. We have used our strong cash generation in recent years
to reduce debt and return around 50 per cent of underlying net
earnings to shareholders through ordinary dividends. With debt
reduction ahead of schedule, we are increasing our payout ratio
to around 60 per cent.
For communities
We play an active role in local communities. Our customer feedback
programme and customer surveys help shape our community
programmes and this year we raised £38.4 million for good causes.
See page 28 for more detail.
Stores
Our stores are well-placed, with a strong presence in the South and
in high footfall convenience locations. This helps us offer customers
complementary products, such as Tu, Argos and Habitat, as well as
complementary services such as financial services. Through our stores
we can also present the offers of carefully selected concession partners.
Service
Customers come to Sainsbury’s for our outstanding customer
service. Our 171,000 colleagues are integral to our long-term success.
Online scale
Our Groceries Online business is increasingly profitable and in
the 2020/21 financial year we became the second largest online
grocery retailer.
Argos is the UK’s third most visited online retailer and we are making
good progress to reduce the number of Argos standalone stores
we have and to offer more Argos stores inside Sainsbury’s stores.
We are improving the Argos distribution model, focusing on
high volume Local Fulfilment Centres (LFCs) to improve choice
and availability.
Nectar
Nectar provides a vital competitive advantage to our food business,
our brands and a wide range of partners. It has strong profit growth
prospects through data monetisation and growing coalitions.
It enables us to offer our customers personalised rewards for
their loyalty.
08 Strategic Report J Sainsbury plc Annual Report 2022
1 Nielsen IQ panel, Total FMCG (excl. Kiosk & Tobacco), 52 weeks ending P3 21/22.
We are simplifying operations at pace and accelerating
our cost saving programmes in order to invest in improving
food quality, increasing choice and innovation and
consistently delivering value to customers. Our portfolio
brands – Argos, Habitat, Tu, Nectar and Sainsbury’s Bank –
support our core food business, delivering for customers
and shareholders in their own right. We will continue to
pursue partnerships and to outsource where appropriate,
benefitting from third parties that can make a positive
impact for our customers.
Priorities
— Better value and innovation
— Underpinned by buying benefits
and lower cost to serve
— Customer and profit focus
— Supporting the core food business
— Structurally lower operating costs
to fuel investment in the core
— Cutting complexity and increasing
pace of execution
Our clear priority is to build on our
strong brand heritage and reputation
for quality, range and innovation while
lowering prices and offering more
consistent value. We will offer high
quality, great value food wherever
and however customers want to shop
with us. This is what putting food back
at the heart of Sainsbury’s means.
Collaborating and simplifying how we
work with suppliers will create buying
benefits and lower our cost to serve.
We are refocusing the role of our
portfolio brands to ensure that they
contribute positively in their own right.
Argos, Habitat, Tu, Nectar and
Sainsbury’s Bank are all delivering
for their customers and are on track
to drive sustainable, profitable growth
to support our core food business.
We will deliver a step change in
efficiency by transforming our
approach to costs, simplifying
our organisation and delivering a
structural reduction in our operating
cost base. We are on track with our
plan to reduce our retail operating
costs to sales ratio by at least 200
basis points, so we can reinvest in our
customer offer and deliver improved
financial returns.
Knowing and understanding our customers better than anyone
else is fundamental to our success. Nectar unlocks our ability
to connect with customers and drive that insight into our
business decision making and we now have over nine million
digital Nectar users. We listen to our customers and over
2.7 million respond to our customer satisfaction feedback
programmes a year.
As a responsible retailer, we want to help everyone eat better,
offering our products in a way that helps customers reduce
their impact on the environment one plate at a time. Our
commitment is to invest £1 billion over 20 years to become
Net Zero across our own operations by no later than 2035.
09Strategic Report J Sainsbury plc Annual Report 2022
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Our strategy
We are one year into our three-year plan to transform
Sainsbury’s and put food back at the heart of our business.
We have gained grocery volume market share from our key
supermarket competitors on both a one and two-year basis
1
and sales are up 7.6 per cent on a two-year basis.
Value
We are making good progress to improve the value of our food.
Weknow that the current cost of living situation is challenging for
everyone and we are relentlessly focused on delivering consistent
long-term value by offering customers great quality, tasty food at
low prices. As a result of being bold in our cost savings plan, we are
able to drive investment back into lower food prices and we are
consistently inflating behind competitors on the products customers
buy most often – including milk, eggs, potatoes, bread, vegetables,
fish and meat. As a result, our relative price position has remained
strong throughout the year – improving 310 basis points against
Aldi,year-on-year
2
, leading to more customers shopping with
us.Byfocusing on fresh and high-volume lines we are offering
customers better value, improving price perception and delivering
strong volume market performance.
Through the year our Price Lock promotion fixed the price of up to
2,000 items for a minimum of at least eight weeks. Customers can
beassured that prices will not rise on those products, helping them
to plan and budget. Through Price Lock we are holding down the
prices of more products than our competitors.
We have also increased the number of entry price point products
onoffer for customers, including Greengrocer fruit & vegetables,
J.James meat and poultry and Stamford Street ready meals offer
customers a wide choice of products.
Innovation
We have delivered our plan to triple the number of new lines we sell,
launching over 1,900 products across all our food brands. We developed
our ‘Inspired to Cook’ range in response to the shift towards eating at
home and cooking from scratch, launching a range of over 200 products
across Grocery and Fresh Foods which make home cooking simple and
tasty for customers. In March we launched 350 new branded World
Food products, our biggest investment into this category to date and
in the first six weeks sales are up significantly.
Our premium Taste the Difference range continues to perform well,
particularly at key seasonal and celebratory moments when people
want to trade up, such as Christmas and Easter. We have grown sales
by 15 per cent versus two years ago.
In March we began our food hall transformation programme. We have
rolled out our successful Beauty Hall format in more stores, improved
the layout of our fresh ranges to make it easier for customers to shop,
increased our popular World Foods ranges and improved our in-store
bakeries. We have also simplified some of our ranges and provided
agreater breadth of products across others, delivering more choice
forcustomers on the products they really want.
Service
We are committed to rewarding our colleagues and all Sainsbury’s
and Argos retail colleagues now receive a base rate of pay of £10 per
hour, above both the National Living Wage and the Living Wage.
In March we increased inner London pay from £10.10 to £11.05 in line
with the London Living Wage. We have announced that from 1 May
2022 the outer London rate will also be moving to £11.05, from £10.50.
This means that all Sainsbury’s and Argos retail colleagues earn the
Living Wage wherever they are in the UK. We were the first supermarket
among the big four to make this happen.
Alongside competitive pay we also offer a comprehensive benefits
package, including year-round colleague discount of 10 per cent,
increased to 15 per cent for five days around every pay day, pension
contributions and an improved family leave policy.
We improved customer service scores in supermarkets
3
and are
adapting our Sainsbury’s store estate to offer more new and
innovative products. This year we opened four new supermarkets
and as part of our drive to offer a broader range of distinctive food
tocustomers in-store, on the move and at home, we announced
boldnew plans to transform our eat-in, takeaway and home delivery
offer. Through a partnership with Boparan Restaurant Group we
havedeveloped “The Restaurant Hub” format, a food hall style
offerwith different brands which we will roll out across 30 stores
inthe next year, with more to come in the future. We will also
open30 Starbucks cafés in Sainsbury’s stores in the next year,
bringing the total number to 60. We took the decision to close
200underperforming cafés in the Spring.
Our Convenience business grew 9 per cent driven by more people
returning to the workplace, with sales now broadly back at pre-
pandemic levels. We opened 19 convenience stores and closed 23.
Weare making progress with our plan to open more Neighbourhood
Hub stores which give customers a larger, more convenient local store
with a wider produce range, more choice and better services.
39 per cent of our overall business now comes through digital channels,
versus 23 per cent in FY 2019/20. We are seeing a normalisation
of pre-COVID-19 shopping patterns as customers are returning to
shopping in stores and demand for Groceries Online, non-food home
delivery and Click & Collect has stabilised, although itremains more
than double pre-pandemic levels.
Our priorities
10 Strategic Report J Sainsbury plc Annual Report 2022
We are putting food back at the heart of Sainsbury’s. This means
we are focused on lowering prices, launching new products and
improving service.
Groceries Online accounted for 17 per cent of grocery sales with
an average of 690,000 orders per week. In FY 2021/22 we grew our
Groceries Online market share to become the second largest online
grocery retailer, up from fourth before the pandemic
4
. This scale gives
us advantage. We have improved profitability by enhancing picking
rates and van utilisation. We are exploring new ways to make
our delivery services better for customers and more efficient and
initiatives include one-hour saver slots and changes to our delivery
pass model. Customer satisfaction in Online is improving relative
tocompetitors
3
.
1 NielsenIQ Panel volume growth YoY and Yo2Y. Total FMCG (excluding Kiosk & Tobacco), 52 weeks
to March 2022. Market Universe: Total Outlets.
2 Edge by Ascential data, internal modelling.
3 Competitor Benchmarking survey, supermarket and online customer satisfaction.
4 NielsenIQ Panel online value share. Total FMCG (excluding Kiosk & Tobacco), 52 weeks to March 2022.
Market Universe: Total Outlets.
Argos sales were down 12.5 per cent year on year against last year’s
high sales during the pandemic. Sales were down three per cent over
two years and were impacted by availability issues caused by supply
chain disruptions and the strategic decisions we made to reduce
promotions and exit less profitable categories. Reflecting this focus,
household and home and furniture sales grew while sales of toys,
consumer electronics and technology categories declined. We have
grown our furniture market share over the past two years, driven by
Habitat, Sainsbury’s and Argos’s main home and furniture brand.
Following a relaunch in September, Habitat products are now available
in 600 Sainsbury’s stores and online via the Argos and Habitat websites.
We are growing our digital presence to ensure that we are well placed
to serve customers who increasingly want to buy online. 80 per cent
of Argos sales are now online, up from 63 per cent two years ago.
Nectar supports our ambitions in food by giving customers
personalised rewards for their loyalty. 9.3 million digital Nectar users
can benefit from personalised offers with us and with our Nectar
partners. This year we launched My Nectar Prices – an innovative
data-led tool which gives customers discounted prices that are
personal to them, delivering even more value for loyal customers.
Over one million customers are benefitting from lower prices and
wewill develop the proposition further. Nectar360, our marketing
services business, is making good progress and we are on track to
hitour 2026 plan on profit.
11Strategic Report J Sainsbury plc Annual Report 2022
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Sales growth – Food
Definition: Year-on-year growth of total sales, including VAT.
Sales growth – Food
Definition: Year-on-year growth of total online sales, including
VAT and delivery income.
Grocery (%)
2021/22
2020/21
2019/20
(0.2)
7. 8
0.4
Online (%)
2021/22
119.6
(4.7)
7.6
2020/21
2019/20
Sales growth
Definition: Year-on-year growth of total sales, including VAT,
excluding fuel.
LFL transactions growth
Definition: Year-on-year growth in transactions, excluding
fuel, excluding Financial Services, for stores that have been
open for more than one year.
Supermarket (%)
2021/22
(1.8)
(0.1)
2.5
2020/21
2019/20
LFL transactions growth (%)
2021/22
2020/21
2019/20
20.4
(29.5)
(0.6)
Sales growth
Definition: Year-on-year growth of total sales, including VAT,
excluding fuel.
Convenience (%)
2021/22
2020/21
2019/20
1.3
(9.4)
8.8
Our brands that deliver – Nectar, Argos, Habitat, Tu and Sainsbury’s Bank
– are delivering for our customers and our shareholders and supporting
investments in our wider customer offer.
Our retail operating costs to sales ratio has reduced by 83 basis
points versus FY 2019/20 and we continue to target reducing the ratio
by at least 200 basis points by the end of FY 2023/24, despite cost
inflation being significantly higher than was anticipated when this
target was set.
We are working at pace to integrate the Sainsbury’s, Argos and
Habitat supply chain and logistics networks, which will save at least
£250 million over the programme, improve overall efficiency and
deliver a better service to our customers. Our property rationalisation
programme is on track and this year we closed four underperforming
supermarkets and 23 convenience stores. We are also working to
improve the efficiency of Groceries Online, moving stores to a new,
more efficient routing system and improving pick rates, which will
save the business around £50 million overall. In addition, we are
investing to improve the checkout experience for customers and
colleagues which will drive around £50 million of cost efficiencies.
This includes trialling improvements to the layout of self-service
areas, making it easier for colleagues to help customers, reducing
queuing times and creating additional space for shoppers with
trolleys, increasing participation.
We are making good progress in Argos’s end-to-end transformation
programme, which will save £105 million over three years. We have
opened five Local Fulfilment Centres (LFCs) and as a result, our
customers are benefitting from improved availability, faster delivery
and more collection options; we plan to open nine more LFCs this
year. In line with improving availability and convenience for customers
whilst reducing costs, this year we opened 64 Argos stores inside
Sainsbury’s supermarkets plus 62 in-store collection points. We have
closed 73 standalone Argos stores this year. As of 5 March 2022, Argos
has 728 stores, of which 400 are inside Sainsbury’s supermarkets.
We partner with third parties and outsource where necessary to
deliver for our customers, whilst supporting our own cost saving
programme and our focus on food. The changes we are making to
our cafes, hot food counters and bakeries will create £125-150 million
of savings over three years and we will continue to explore ways to work
with partners to drive value and improve service for our customers.
We are proud of our strong relationships with suppliers and are
continuing to work closely with them to drive value and simplify
processes, enabling us to lower our cost to serve and buy better,
as well as minimising the impact of rising inflation as much as
possible for customers.
Tu clothing delivered sales growth of 12.7 per cent over one year and
3.1 per cent over two years and delivers over £1 billion in sales. We are
selling more clothing at full price – with full priced sales participation
now at 89 per cent compared with 65 per cent two years ago – and
running fewer promotions, which improves profitability and supports
increased investment in our core food business.
We continue to make good progress reshaping, strengthening and
simplifying our Financial Services business, with profits of £38 million
versus a loss of £21 million in FY 2020/21. This compares with £48
million in FY 2019/20. FY 2020/21 was impacted by COVID-19 where we
saw significantly reduced demand across consumer credit, combined
with increased bad debt provisions and less activity in our fee-based
products, particularly Travel Money. Reflecting the Bank’s progress,
following the year end, it has paid dividend to the Group for the first
time, of £50 million.
We have continued to improve our digital capability with the launch
of the Argos Monthly Payment Plan, which allows customers to
spread the cost of a purchase across fixed monthly repayments for
aperiod of their choice. We have transformed the Sainsbury’s Bank
loan application journey for single and joint applicants with a fully
digital onboarding experience that can transfer funds to accounts
injust minutes. We have also improved the application journey for
savings customers.
12 Strategic Report J Sainsbury plc Annual Report 2022
We are making good progress with our cost saving programme,
making bold decisions and prioritising what really matters to customers.
By reducing our retail operating costs, we are able to invest more into
our core food business, delivering better value, increasing our innovation
and improving customer service.
Sales growth
Definition: Year-on-year growth of total sales, including VAT.
General merchandise (including Argos) (%)
2021/22
(11.9)
(2.9)
8.3
2020/21
2019/20
Sales growth
Definition: Year-on-year growth of total sales, including VAT,
excluding fuel.
Clothing (including Argos) (%)
2021/22
2020/21
2019/20
12.7
1.2
(8.5)
Bank sales growth
Definition: Year-on-year growth of total sales, including VAT.
Bank (including Argos Financial Services) (%)
2021/22
(24.3)
5.0
2020/21
2019/20
0.2
Our Plan for Better
The environmental and social challenges that are facing the world
have never been greater. As a UK retailer with a food, general
merchandise and clothing business, we source from countries
all over the world, therefore the production, sourcing, packaging
and disposal of these products can have major consequences.
Our commitment to Helping everyone eat better means we are
playing a leading role in offering delicious, affordable food that
supports healthy and sustainable diets, helping customers reduce
their impact on the planet, one plate at a time.
In June 2021 we launched our Plan for Better, a key pillar of our
business strategy. Our Plan for Better covers our environmental
and social commitments and sets out our sustainability goals
across our whole business, outlining our priority areas of focus,
our key commitments and our progress. The plan consists of three
interlocking pillars; Better for you, Better for the planet and Better
for everyone, and we have committed to reporting twice a year to
transparently share our progress. Our standalone Plan for Better
reports can be found at www.about.sainsburys.co.uk.
2.5 million
meals donated via our partnership with Neighbourly
The development of our Plan for Better was informed by identifying
the areas that are most material to our stakeholders and ensuring
alignment to the UN Sustainable Development Goals. This year we
have undertaken another materiality exercise across our stakeholders
to understand the priority areas of focus across the different groups.
Using this insight we continue to evolve our strategy to ensure
it’s fit for purpose and addressing the areas where we can have
a significant impact.
The past year has seen us host our first ESG investor event and our
sponsorship of COP26. We have worked on improving transparency
and increasing disclosures in our reporting with our first SASB
disclosure and implementation of TCFD recommendations
(see page 17 for our TCFD disclosure). We have also rolled out
our food redistribution partnership with Neighbourly to all our
supermarkets. In the year ahead we are looking forward to
launching refreshed commitments and plans across our social
agenda, including human rights and community and partnerships.
We have over 171,000 colleagues who are critical to the long-term
success of our business. We are committed to being an inclusive
employer where everybody is treated fairly and with respect and
is encouraged to develop their skills and fulfil their potential. We are
passionate about playing an active role in our communities, and are
committed to championing human rights.
An inclusive place to work and shop
We want our colleagues to feel connected and engaged, and
measure this through our annual colleague engagement survey
and our regular ‘temperature check’ surveys. An essential part of
the survey process is sharing the results and making real and
tangible actions that make a difference to our colleagues’ experience.
This year we introduced new metrics into the survey; overall as a
company a score of 68 was achieved for colleagues stating how
happy they are at work, whilst 78 per cent of colleagues told us they
are able to be themselves at work. After each colleague engagement
survey, line managers explore their local survey results with their
teams and work together to plan and implement actions that will
help make Sainsbury’s a truly great place to work.
78%
of colleagues told us they are able to be
themselves at work
We continue to work on representation and transparency across
the business and have published our second integrated Gender and
Ethnicity Pay Report this year. We have reduced our mean gender
pay gap by 1.2 per cent to 8.5 per cent, while our median gender pay
gap has decreased by 0.3 per cent to 4.7 per cent. Our mean ethnicity
pay gap is negative at minus 0.9 per cent; this is a result of our hourly
paid store colleagues receiving the same hourly rate and just under
40 per cent of our ethnically diverse colleagues work in stores that
attract a location premium (i.e. inner and outer London), compared
to just under 6 per cent of our white colleagues.
To ensure sustained improvement, we continue to look at focused
initiatives, culture and accountability through targets. We have set
stretching targets to take us to 2024 which covers more of our
colleague population and also forms part of our long-term incentives
for management. Progress on diverse representation at senior
leadership and senior management positions can be seen in the
table on page 14. Across the entire business, female representation
is 52.7 per cent.
13Strategic Report J Sainsbury plc Annual Report 2022
Governance ReportStrategic Report Financial Statements
Environmental and social sustainability at our core.
We are active in our drive for inclusivity and the progression of our
diverse talent, for example:
— We’ve adopted The Halo Code, the UK’s first Black hair code
which protects colleagues who come to work with natural hair
and hairstyles associated with their racial, ethnic and cultural
identities. We want to ensure Black colleagues can be themselves
without fear of judgement or discrimination which is why we have
updated our dress code policies to embrace afro-textured hair
— We joined the Black British Network to help improve inclusivity
and representation across the business
— We refreshed our LGBT+ colleague policies and guidance, to ensure
we keep our colleagues educated with how language continues to
evolve and continue to be an inclusive workplace
— Our Ethnically Diverse colleague network ‘I AM ME’ was recognised
in the Top 10 Network Group in the UK at the Ethnicity Awards.
— We were recognised as one of the Top 10 in the UK as an
‘Inclusive Company’ at the British LGBT+ Awards
— We were recognised in the Financial Times Diversity leaders
in Europe List
— We were featured in The Times Top 50 Employers for Women
2022: Taking Action on Gender Equality, produced in partnership
with Business in the Community
— We continue to be a Disability Confident Leader – the highest
tier of accreditation in the government’s Disability Confident
Programme
— Over 8,800 colleagues shared with us that they had a disability or
long-term condition in 2021 through our confidential all colleague
survey, this was a significant increase from 2020
— We have committed £1 million in donations working with Black
charities and communities to support racism, education, social
mobility, Black businesses and food insecurity, areas which our
colleagues and customers identified as important
— We have evolved our Family Leave policy by increasing our paid
leave to 26 weeks for maternity, adoption, and surrogacy and
paternity from two to four weeks
— We launched our colleague and line manager menopause guide
and signed the Wellbeing of Women ‘Menopause Workplace Pledge’
— This year we proudly recognised Carers Week, the theme being
‘Make Caring Visible and Valued’, using the day to signpost
colleagues to our newly launched Little Book of Carers, which
shares colleague stories and gives guidance and advice
— After a successful trial we launched the colleague wellbeing app
Unmind, giving every colleague free access to various personalised
tools and learning series across a range of topics, enabling them
to measure and manage their mental health and wellbeing
— 63 per cent of our colleagues tell us that our Mental Health and
Wellbeing tools help them to live happier and healthier lives
— We invested more than £100 million to increase the base rate to
£10 per hour for Sainsbury’s and Argos colleagues and increased
our colleague discount from 10 per cent to 15 per cent for five days
around each pay day, supporting the financial wellbeing of our
colleagues
Being an inclusive organisation with diverse representation at all
levels of our business is important to us. We acknowledge we still
have a way to go, and we are committed to driving positive,
sustainable change to improve the lived experience and opportunities
for under-represented groups, be they colleagues or customers.
For more information please visit the Better for everyone section of
our corporate website or read our Gender and Ethnicity Pay Report at
www.about.sainsburys.co.uk.
14 Strategic Report J Sainsbury plc Annual Report 2022
Diversity and Inclusion targets Senior leadership positions (the top 230 leaders)
Senior management positions (the top 1,200 leaders
beneath the top 230 senior leadership positions)
Female Target 2024: 50% 2021/22: 40.1% 2020/21: 37.7% Target 2024: 43% 2021/22: 35.7% 2020/21: 35.5%
Ethnically diverse Target 2024: 12% 2021/22: 8.2% 2020/21: 8.1% Target 2024: 12% 2021/22: 8.7% 2020/21: 7.2%
Black Target 2024: 3% 2021/22: 2.4% 2020/21: 1.4% Target 2024: 3% 2021/22: 1% 2020/21: 0.7%
Female Male Undisclosed
Total colleagues
90,350
(52.7%)
171,598
81,219
(47.3%)
29 (0.02%)
Voluntary turnover Involuntary turnover Retention
Colleague turnover
72,333
(40.2%)
25,567 (14.2%)
171,598
73,698
(45.6%)
Health and safety
The health and safety of our colleagues and customers is a key part
of our strategy. We have seen a long-term decline in both colleague
and customer reportable injuries over the past five years; our colleague
reportable accidents have decreased by 2.8 per cent, whilst our
customer reportable accidents have decreased by 39.7 per cent. An
independent safety team supports our retail and logistics operations.
They provide a combination of coaching, expertise and challenge to
our line managers using our innovative risk mapping tool, utilising
data from a wide range of sources to identify the key areas requiring
support in any of our stores across the business. This helps us to
ensure that we have the right level of compliance in place around
key areas such as training, fire safety and adherence to procedures,
as well as reviewing culture in individual stores through the lens of
colleagues, regional management and safety teams.
Our governance processes ensures colleagues can feedback on
issues, regular engagement with our unions and Board oversight.
This includes our Great Place to Work groups, divisional level safety
steering groups, our Group Safety Committee which reports into
the Operating Board, as well as quarterly updates to the plc Board.
We have strong and well-established Primary Authority relationships
in place that cover all our risk areas across health and safety, food
safety, fire safety and petroleum safety. These relationships are built
on a foundation of trust and we openly share information with our
Primary Authority .
Community and partnerships
We play an active role in the communities we serve and this year
we have raised a total of £38.4 million for good causes. This year
we have developed our new community and partnerships strategy,
with a focus on food poverty. Our strategy is underpinned by two
key pillars – access to food and prevention, which will be delivered
through three key programmes to support Helping everyone eat
better: food donation, local activation and prevention.
£38.4 million
raised for good causes this year
A key priority for the last year has been around access to food and
to increase the redistribution of surplus food for human consumption.
In August 2021 we began our partnership with Neighbourly, which
has since been rolled out to all supermarkets. From August to
March we donated a total of 2,567,803 meals, which is equivalent
to a £4,878,826 million saving to charities and community groups
(based on £1.90 per meal).
To support our local communities impacted by food poverty, we ran
our Help Brighten a Million Christmases campaign again this year
from 1-24 December, generating £2.6 million for our partners. This
year we also launched our Helping everyone eat better Community
Grants for stores to nominate partner organisations tackling food
insecurity to apply for grants of £500. Through our partnership with
FareShare, with our customers, £1.7 million was donated allowing them
to support charities across the UK at the heart of our communities,
supporting those individuals impacted by food poverty.
We have continued our longstanding partnership with Comic Relief
and this year raised £6.2 million for the Red Nose Day campaign.
In March, we also worked with Comic Relief to support the humanitarian
crisis in Ukraine by launching a Ukrainian Crisis Appeal, donating
£2 million and an additional £600,000 donated by our customers
via Nectar Donate and donations at checkout.
Alongside our community investment, we make positive economic
contributions through our responsible approach to tax. We
contributed £2.3 billion in taxes borne and collected this year.
For more information on how we serve our communities visit
www.about.sainsburys.co.uk for our Plan for Better report.
Championing human rights
We want to treat people fairly throughout our business and supply
chains and we remain committed to respecting human rights. We
understand how intertwined environmental and social sustainability
are, and how the challenges in both areas are interconnected,
therefore as part of a just transition to Net Zero, we want to place the
people in our supply chains at the heart of our move to a low-carbon
world. This year we have undertaken an extensive review of the most
salient human rights risks facing the people in our supply chain and
are using this to inform the development of our new social sustainability
strategy, which we will be reporting progress on later this year.
We recognise the importance of supply chain transparency.
Having previously published our Tier 1 clothing sites, this year
we also published our Tier 1 food sites with information such as
addresses, number of workers, gender split and union membership.
We also acknowledge the need for further transparency, therefore
we will be publishing lists of our General Merchandise and Goods
Not for Resale sites in the year ahead, as well as working to achieve
greater visibility of the challenges faced further down the supply chain.
In 2017, we launched our Modern Slavery Risk Tool, giving us unique
insights into slavery risks across a complex global supply chain,
and we continue to embed the tool into the business by using its
results for internal risk assessments. In 2020 we increased the
scope of this risk to cover all human rights risks and this year have
continued the tools development by updating risk data to ensure
we have the most up-to-date data on the risks in our supply chain.
We identify vulnerable workers and do not tolerate any form of
slavery or servitude in our own operations. For more information
on our approach to social sustainability and to read our Human
Rights Policy and Modern Slavery Statement, please visit
www.about.sainsburys.co.uk.
Healthy and sustainable diets for all
We know that food that is better for us is also better for the planet.
This is why we have committed to develop and deliver healthy,
sustainable diets for all. This year we built on our mass colleague and
customer campaign, Helping everyone eat better, to raise awareness
and drive behaviour change. We want to encourage people to eat
more in line with the principles of the government’s Eatwell Guide
and to help make healthy eating choices more affordable, easy and
tasty. To support customers to incrementally improve their diets, we
have developed recipes which change up well-loved recipes such as
curries, lasagnes and casseroles, and offer hints such as encouraging
customers to mix half pulses with half meat.
This year we reported against our target to measure healthy and
sustainable diets. We aim to achieve at least 83.1 per cent of ‘healthy’
and ‘better for you’ sales by 2025, currently sitting at 80 per cent,
remaining flat year-on-year.
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We undertook an extensive piece of work to review the nutrition
criteria used to define ‘healthy’ and ‘better for you sales’. This
approach will help us identify better choices within categories for
both branded and own-brand products, along a spectrum from less
healthy to most healthy. We also disclosed our protein sales, with
72 per cent of protein sales tonnage being plant based and meat-free
products, of which 12 per cent is entirely plant based
1
.
We continue to utilise ‘test and learns’ to help nudge customer
behaviour by incentivising customers with value pricing or additional
Nectar points with initiatives such as our discounted 60p fruit and
vegetable campaign and The Great Big Fruit & Veg Challenge.
We also continued to support customers by topping up the Healthy
Start vouchers, provided by the government to low-income pregnant
women and families with children under the age of four. The
vouchers consisted of a £2 fruit and vegetable coupon, more than
any other retailer, to help families in need have access to nutritious
produce through the half-term and summer holidays. In the six
months the programme ran, we supported over 17,000 customers to
take home an additional 1.2 million portions of fruit and vegetables.
Principal Supermarket Partner of COP26
This year we were Principal Supermarket Partner of COP26, the
UN Climate Change Conference, which took place in Glasgow in
November 2021. Our aim was to demonstrate strong industry
leadership and inspire our colleagues, customers and other
businesses to rally together to protect and restore our planet for
the future. During the event we hosted multiple events, bringing
in experts from across our business to discuss industry challenges
as well as hosting an exhibition space to engage the public on how
we can all eat better by making small changes to our plates.
We also announced our commitment, alongside other retailers, to
work with the WWF to halve the environmental impact of UK baskets
by 2030. We recognise that solutions to the grand challenges that we
are facing cannot be solved in isolation, therefore we are committed
to working as an industry to identify the key issues that we face and
collaborate so that we can accelerate progress together.
Reducing carbon emissions
This year we announced the acceleration of our carbon emissions
target to become Net Zero in our own operations by 2035, five years
earlier than our original ambition. Overall, we have reduced our
absolute greenhouse gas (GHG) emissions within our operations to
762,119 tCO
2
e, a reduction of 7 per cent year-on-year and 20 per cent
from our 2018/19 baseline, keeping us on course for our new 2035
target. In 2021 we hit some key milestones with the rollout of LED
lighting to 100 per cent of our supermarket estate, reducing lighting
energy consumption by an average of 70 per cent, with a plan to
install 100 per cent LED across our entire estate by the end of 2022/23.
We also transitioned to 100 per cent renewable electricity across
the entire estate and have committed to the long-term purchasing
of renewable energy from new wind farms and solar projects,
significantly reducing reliance on fossil fuels.
We are proud to be recognised by CDP, an environmental impact
disclosure system, for our environmental transparency. We were
awarded an A rating for climate change for the eighth consecutive
year, the only UK retailer to have achieved this. We were also
recognised by CDP as a Supplier Engagement Leader for our work
engaging with our suppliers to tackle climate change.
As part of our commitment to reduce our value chain emissions,
this year we’ve written to 400 of our key suppliers, who constitute
a high proportion of our value chain emissions, requesting that they
disclose their carbon emissions through the CDP or Higg platform.
We currently have 87 per cent of our key food suppliers disclosing via
CDP. We have also set an expectation that our suppliers should
commit to their own Net Zero science-based targets, aligned to the
highest ambition of the Paris Climate Change Agreement. This builds
on our existing science-based target, defined with the Carbon Trust,
to reduce our Scope 3 emissions by 30 per cent by 2030, whereby
our baseline is 26,663,081 tCO
2
e (2018/19). This includes reducing
emissions from purchased goods, upstream transport and
distribution, services sold and our customers’ use and consumption
of the products we sell.
20%
reduction in absolute greenhouse gas emissions within
our own operations, against our 2018/19 baseline
Reducing food waste
We are committed to reducing food waste by 50 per cent across the
whole value chain by 2030; driven by the multi-faceted environmental
and social challenges created by food loss and waste.
This year we have reduced our operational food waste tonnage by
2.4 per cent year-on-year, a reduction of 13 per cent from our 2019/20
baseline. Where we can’t donate surplus food to charity, we send
surplus food to UK farms, via our partners, to be used in animal feed.
We’ve been sending surplus bread for use in animal feed since 2013
and this year we trialled diverting unsold fruit, vegetables and salad
as well. We’ve also been working with suppliers on specifications this
year in order to utilise more of the crop.
We increased our food redistribution to people by 119 per cent
year-on-year, to 4,072 tonnes, an increase of 161 per cent from
our 2019/20 baseline. A key driver of this increase has been our
partnership with Neighbourly which we rolled out to all supermarkets
this year with convenience store rollout planned for the year ahead.
Neighbourly helps us manage our back of store food donation
programme, connecting our stores to a network of over 17,000
charities, schools and community groups. This partnership ensures
both the social and environmental investments already made in food
production are not wasted and that any surplus food gets redirected
to people who need it most. Please see the Community and
partnerships section on page 15 for more information.
We continue to collaborate with industry on reducing food waste and
support the delivery of Courtauld 2025/Champions 12.3. We’ve been
members of UK Food Waste Reduction Roadmap since 2018 and are
pleased many of our Fresh suppliers are also signed up, covering
43 per cent of our total sales. We also continue to work with WRAP to
implement their guidance on upstream and downstream food waste,
including increasing behavioural tips on product labelling. This year
we also engaged suppliers on aligning with WRAP’s best practice on
redistributing own-label products within the supply chain, evolving
our guidelines so that suppliers can redistribute any Sainsbury’s
own-label products to our chosen food donation partners.
1 2020/21 data.
16 Strategic Report J Sainsbury plc Annual Report 2022
Reducing use of plastic packaging
We have seen an absolute reduction in plastic packaging of
2.2 per cent from our 2018 baseline and relative reduction (tonnes per
million units sold) of 4.7 per cent from our 2018 baseline. Year-on-
year the tonnage has decreased by 626 tonnes to 117,333 tonnes,
which puts us behind our target trajectory. We recognise that we
have a lot more to do to reduce our plastic packaging tonnage and
meet our target to reduce this by 50 per cent by 2025. We continue to
implement a number of strategies aiming to remove, reduce, replace
and recycle the amount of plastic packaging, including:
— Removing plastic and replacing with paper straws in our own-
brand range of lunchbox juice cartons, this equates to the removal
of 18.5 million plastic straws from circulation each year to reduce
plastic by 6.6 tonnes
— Removing film overwrap from own-brand tea boxes to reduce
plastic by over 15 tonnes
— Reducing by light-weighting our own-brand water bottles and
caps to reduce by over 300 tonnes
— Reducing by light-weighting our own-brand bleach bottle caps
to reduce plastic by 24 tonnes
— Replacing plastic with card trays for own-brand sausage rolls
and snacks to reduce plastic by over 65 tonnes
— Replacing plastic with pulp fibre trays for own-brand eggs,
to reduce plastic by over 230 tonnes
— Recycling opportunities for customers by rolling out front of store
collection points at all our large supermarket stores for customers
to bring back any flexible plastic packaging such as salad bags,
crisp packets and food pouches for recycling
Task Force on Climate-related
Financial Disclosures (TCFD)
Introduction
With the impacts of climate change being felt around the world,
we understand the important leadership role we can play to help
reduce the impact of the food system on the climate. We are proud
to have been chosen as the Principal Supermarket Partner of COP26.
We have committed to reduce GHG emissions within our own
operations to Net Zero by 2035. This is five years earlier than our
original ambition and aligns with the UN’s goal to limit global
warming to 1.5 degrees, the highest ambition of the Paris Climate
Change Agreement. We have a strong heritage in reducing our own
emissions and are collaborating closely with our suppliers to ensure
we are driving positive change across our supply chain too.
Tackling the climate emergency requires collaborative and
transformational thinking across industry and government, and
a willingness to work together and share learnings globally, so that
we can all take meaningful, immediate action. In November we
signed the World Wide Fund for Nature (WWF) retailers’ commitment
to halve the impact of UK baskets by 2030.
Whilst we are delivering on our commitments to reduce the impact
of our business on the climate, we are aware that climate change
is going to have an impact on our business, presenting risks and
opportunities over the short, medium and long term. We have been
a signatory of the TCFD since January 2020 and have complied with
the requirements of LR 9.8.6R by including climate-related financial
disclosures consistent with the TCFD recommendations to strengthen
our climate resilience, which we discuss below.
Governance
Governance a) Board’s oversight of climate-related risks
andopportunities
The Board
The Board is accountable for risk management, strategy and target
setting, including climate-related matters. The Board monitors
how we are responding to climate-related risks and opportunities,
identified through the risk management process and scenario
analysis. The Board also oversees our Plan for Better strategy, which
includes climate-related matters, and is one of our core strategic
business priorities. Finally, the Board sets and monitors progress
against our climate-related metrics, and this year approved
accelerating our Scope 1 and 2 Net Zero target by five years to 2035.
The Board continues to ensure that there is appropriate climate-
related expertise within the business and has undertaken training
by the Cambridge Institute for Sustainability Leadership. See page 54
for biographies of our Board members.
Board Committees
The Corporate Responsibility and Sustainability (CR&S) Committee
reviews the sustainability strategy and monitors the business
engagement with our key stakeholders, including climate-related
matters. For example, we have asked our suppliers to set their own
targets to reduce GHG emissions and understand our customers
are looking for more sustainable products as they seek to minimise
their personal carbon footprints.
The Remuneration Committee reviews remuneration for Executive
Directors against our Plan for Better strategy, including long-term
targets for Scope 1, 2 and 3 GHG emissions (see page 78 for more details).
The Audit Committee reviews risks and confidence on the climate-
related metrics that we disclose.
Governance b) Management’s role in assessing and managing
climate-related risks and opportunities
Operating Board
The Operating Board defines and monitors the business-wide strategy,
including climate-related matters, adapting to new regulatory
requirements and trends, and approving major investments such
as our commitment to spend £1 billion to become Net Zero. The
Operating Board is chaired by our CEO, who also sits on the Board
and CR&S Committee.
Plan for Better Steering Committee
The Plan for Better Steering Committee supports the Operating
Board and leads the operational execution of our Plan for Better,
by overseeing working group activity, and monitoring performance
against our climate-related metrics. The Plan for Better Steering
Committee is chaired by our Chief Marketing Officer (CMO) and has
cross-divisional representation at Director level.
Plan for Better working groups
The Plan for Better Steering Committee oversees three working groups:
Plan for Better; Environment; and Social. Our key climate-related
targets (Scope 1, 2 and 3, water and biodiversity) are managed by the
Environment working group.
See page 71 for our CR&S Committee Report, providing information
on our governance structure, Committee responsibilities, meeting
frequency and principal activities in the year.
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Strategy
Strategy a) Climate-related risks and opportunities identified over
the short, medium, and long term
Climate change is anticipated to impact our business over the short,
medium and long term. Physical risks may impact our operations
and supply chain through extreme weather events, such as flooding
or droughts. Transitional risks as a result of moving to a low-carbon
future may impact us through changing consumer preferences
or climate-related regulation. Climate change also presents
opportunities, such as higher sales of lower GHG emission products.
The table below captures the key climate risks and opportunities
impacting our business, identified through our risk management
and qualitative scenario analysis, as well as potential mitigations.
Financial impact ranges
We have used the below financial impact ranges, which are the
same as we use for our corporate risk management process
(described further in the risk management section on page 38).
Impact Financial range (revenue)
High Greater than £125 million
Medium £25 million to £125 million
Low Less than £25 million
Time horizons
We have used the below time horizons:
Time period Years Reason
Short 0 to 5 years Aligned to our financial planning cycle
Medium 5 to 15 years Nearer term to capture transition risks
and opportunities
Long 15 to 50 years Longer term to capture physical risks
and opportunities
Time horizon Risk type Classification Risk/opportunity description
1
Financial impact
(assuming actions are
taken to mitigate risks)
Potential mitigations that are
being considered as part of our
strategic planning
Short/Medium Transitional Reputation Climate conscious
consumers favouring lower
GHG emission products
Revenue opportunity Development & promotion
of lower GHG emission
products (see Meat, Fish &
Poultry example below on
page 20)
Short/Medium Transitional Policy & Legal Introduction of a carbon
price leading to an increase
in the cost of higher GHG
emission products
Low revenue loss Majority of cost assumed
to be passed on to
customers to encourage
purchase of lower GHG
emission products. We are
also working with our
suppliers to reduce the
GHG emissions of our
products (see Meat, Fish
& Poultry example below
on page 20)
Medium Transition Policy & Legal Ban on the sale of new
petrol and diesel cars from
2030 leading to a reduction
in fuel sales
High revenue loss Providing electric vehicle
charging for customers as
they shop at our stores
Short/Medium/
Long
Physical Acute Increased likelihood of
flooding and drought
leading to a reduction in
crop yields and increased
sourcing costs
Medium/high revenue loss Working with our suppliers
to create climate adaption
plans to secure supply of
crops (see Produce
example below on page 21)
Short/Medium/
Long
Physical Acute Increased likelihood of
flooding leading to water
damage and closure of
stores and depots
Low revenue loss/cost Flood warning system,
flood emergency plans
for at-risk stores and
investments in flood
defences (see Operations
example below on page 19)
1 There are independencies between the climate risks and opportunities identified, such as the introduction of a carbon price providing further incentive for climate conscious consumers to favour lower GHG
emission products.
18 Strategic Report J Sainsbury plc Annual Report 2022
Strategy b) Impact of climate-related risks and opportunities on
business, strategy and financial planning
Climate-related risks and opportunities are considered as part of our
Plan for Better, which is one of our core strategic business priorities.
The below table shows how our Plan for Better strategy supports
climate-related matters.
Plan for Better commitment How our Plan for Better strategy supports climate-related matters
Reduction in
carbon emissions
We have a strong track record over the last 15 years of reducing GHG emissions within our own operations, and have already
achieved a 20 per cent reduction against our 2018/19 baseline. This year we completed rollout of our LED lighting to 100 per cent
of our supermarket estate, reducing lighting energy consumption by an average of 70 per cent. We also transitioned to 100 per cent
renewable electricity across the entire estate (sourced directly from UK wind farms as well as certificate-backed renewable
electricity from the UK) and have committed to long-term purchasing of renewable energy from new wind farms and solar
projects, significantly reducing reliance on fossil fuels. We are working to remove hydrofluorocarbon in our refrigeration, replacing
these with natural alternatives. Our Scope 3 emissions make up 97 per cent of our overall GHG emissions, and we have committed
to a reduction of 30 per cent by 2030. We are working in collaboration with our suppliers, industry and the non-governmental
organisation (NGO) community to achieve this. See page 16 for more details on how we are reducing carbon emissions within our
own operations and supply chain.
Reduction in
wateruse
Climate change is expected to increase water stress in the UK. We have already reduced water usage in our own operations by
13 per cent against our 2018/19 baseline and are making significant progress in both reduction and recycling of water, having
achieved ‘A’ rating in the CDP water security disclosure for the last two years. We are signatories of the WRAP Water Roadmap
2030, working to improve water stewardship in our key sourcing locations. We are currently mapping our total water footprint
across the entirety of our operations and will be setting out our total organisation water stewardship approach in the coming year.
Healthy &
sustainablediets
The type of food in our diet has a big impact on GHG emissions. We are encouraging customers to eat more in line with the
principles of the government’s Eatwell Guide, through marketing campaigns, pricing and Nectar points, such as our Great Big Fruit
& Veg challenge. The Eatwell Guide is a healthy and balanced diet, and when compared against a standard UK diet, is lower in GHG
emissions, water usage and land use. See page 15 for more details on how we are encouraging healthy and sustainable diets.
Reduction in
foodwaste
Food waste contributes over eight per cent of total man-made GHG emissions, so actions we are taking to reduce food waste are also
reducing GHG emissions. This year we rolled out our back of store food donation partnership with Neighbourly to all supermarkets,
helping to connect to a network of over 17,000 charities, schools and community groups. We are following best practice disclosure
on our food waste and encouraging our suppliers to sign up to the WRAP Waste Reduction Roadmap to help drive industry action
on food waste prevention as well as redistribution. See page 16 for more details on how we are reducing food waste.
Biodiversity The environmental changes driven by climate change are putting pressure on species and have the potential to alter ecosystems
over time. We recognise our high dependency on nature and ecosystem services, and have committed to ensuring the impact of
our operations are net positive for biodiversity. We are currently assessing our nature-related risks and opportunities across our
business and supply chain. We have been working to build supply chain resilience for over 20 years, including working directly
with farmers and growers on areas such as soil health and integrated pest management, whilst increasing certification of high
climate risk materials such as palm oil, soy, timber and cotton. For more details on how we are protecting and enhancing
biodiversity, visit www.about.sainsburys.co.uk.
Climate-related matters are also considered within financial planning.
We have committed to spend £1 billion to become Net Zero by 2035
and this is built into our financial plan, approved by the Board.
We have also considered what impact the revenue losses identified
in our scenario analysis (on page 20) could have on the carrying value
of the Group’s store assets, by modelling the impact on cash flows
(the results do not have a material impact on the Group’s impairment
considerations, see page 139 for more details). Finally, Sainsbury’s
Bank considers climate-related risks as part of its Internal Capital
Adequacy Assessment process (ICAAP).
Strategy c) Resilience of strategy, taking into consideration different
climate-related scenarios, including a 2°C or lower scenario
To help shape our understanding of the potential implications of both
the physical and transition risks associated with climate change, we
have conducted both qualitative and quantitative scenario analysis,
with the support of an external specialist. Scenario analysis can act
as a ‘stress test’ for our current business operations and supply chain
and help to explore a range of different outcomes. This has allowed
us to evaluate the potential effects on our strategic and financial
position under each of the defined scenarios. We have then been able
to use the results to inform strategic thinking on how to manage the
identified risks and opportunities.
Our own operations – Qualitative scenario analysis
We have been actively managing flood risk across our property
estate for many years through our flood warning system, flood
emergency plans for at-risk stores and investments in flood defences.
Climate change is expected to increase the frequency and intensity
of flood events in the future, impacting directly through water damage
to our property estate and indirectly by hindering access for our
customers and suppliers. In 2020, we carried out some qualitative
scenario analysis using the World Resources Institute Aqueduct tool
to understand the impact of flood risk and water stress on our locations
in a 4.3°C scenario (high emission). Improving our understanding
of future water-related risks helps us assess the need for future
building adaptations, for example flood defences. It is also informing
our commitment to be water neutral by 2040, by identifying where
water conservation will have the biggest impact.
Our products and supply chain – Qualitative scenario analysis
During 2021, we undertook qualitative scenario analysis that
evaluated the impacts of a wide range of different climate change
risks on the product categories we sell, to identify the product
categories most exposed to climate-related risks and the most
material risks for each product category.
This analysis was conducted by considering the potential impact of
both physical and transitional risks. For physical risks, we considered
the geographical sourcing for each of our product categories and
assessed different physical risks under a high emissions scenario.
To evaluate transitional risks, we considered the GHG emissions of
our different product categories, as well as how changing market
dynamics and increased regulations could impact both production
costs and revenue.
Of the 27 climate-related risks considered through this process, the
four most material climate-related risks were drought, flooding,
carbon taxes and changes in consumer preferences. We identified
Produce, Clothing, Meat, Fish and Poultry (MFP), Dairy and Fuel as
the product categories most exposed to the climate-related risks.
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Type of risk Most material risks Most exposed categories
Acute physical risks — Drought
— Flooding
— Produce
— Clothing
Transition risks — Carbon taxes
— Changes in
consumer
preferences
— Meat, Fish & Poultry
— Dairy
— Fuel
The findings of the qualitative scenario analysis were reviewed and
considered, alongside the financial materiality of each product
category, by senior leadership and key stakeholders during a series
of workshops. We then selected MFP and Produce to undergo further
analysis through a quantitative scenario analysis approach, which
we will expand to additional categories next year. This approach was
approved by the Plan for Better Steering Committee with oversight
from the CR&S Committee.
Our products and supply chains – Quantitative
scenario analysis
To further build on these qualitative results, we adopted a quantitative
approach to determine the potential financial impacts associated
with the identified material climate risks for each exposed product
category. The scenarios are built using data from the Intergovernmental
Panel on Climate Change (IPCC) over two time horizons (2030 and
2050) and include a 2°C or lower scenario per the recommendations
of the TCFD. These time horizons align with our definition of medium
and long term. Greater detail is provided below:
— 1.5°C – A pathway that limits global warming to below 1.5°C
(low physical risk, high transition risk)
— 2.4°C – Described by the IPCC as an intermediate scenario
(medium physical and transition risk)
— 4.3°C – A high emissions worst case scenario pathway
(high physical risk, low transition risk)
Through our analysis we identified transition risks to be more
material leading up to 2030 as the global community strives to limit
global warming to below 1.5°C, whereas physical risks are expected
to manifest by 2050 if transition goals are not met. Furthermore,
extending transition risk analysis beyond 2030 also introduces a
significant amount of uncertainty to our analysis. Our analysis of
MFP extends to 2030 as the product category is most vulnerable to
transition risks, namely carbon taxes and changes in consumer
preferences. Our quantitative analysis for Produce extends to 2050
to capture the potential financial impacts associated with drought,
flooding and heat events.
Quantitative scenario analysis – Potential financial impact
of climate-related transition risks on MFP products in a low
emissions scenario in 2030
To assess the costs associated with carbon taxes and changes in
consumer preferences, we evaluated the production of MFP products
in the UK and the production of animal feed globally. Our analysis
considered the impacts of a carbon price on the cost of MFP products
by factoring in the emissions associated with production and in our
supply chain. The carbon prices applied in our scenario analysis align
with IPCC data. We considered how prices of MFP products could
subsequently increase and assumed that additional costs would
be passed on directly to the consumer, further reducing demand.
The analysis assumed that products associated with the highest
emissions would be most avoided by consumers.
The results illustrate a potential revenue loss when looking at the
MFP category in isolation in a 1.5°C (low emissions) world in which
physical risks associated with climate change are limited but high
transition risks are experienced as the world attempts to meet the
Paris Agreement. However, this looks at the MFP product category
in isolation and assumes no actions are taken to mitigate risks, so
does not capture the overall opportunity at Group level of developing
and promoting lower GHG animal protein and nutritionally positive
meat alternatives to capture switching calories from existing and
new customers.
Most material climate risks
impacting MFP
1
Annual revenue loss to MFP category in
isolation in 2030 in 1.5°C scenario, assuming
no actions are taken to mitigate risks
Annual revenue loss/opportunity at Group
level in 2030 in 1.5°C scenario, assuming
actions are taken to mitigate risks
Potential mitigations that are being considered as part
of our strategic planning
Changes in consumer
preferences away from
higher GHG emission
animal protein
£300m to £350m revenue loss to
MFP category in isolation
Overall opportunity for business — Differentiate: develop lower GHG emission
animal protein within existing product
(see integrated beef case study below)
— Shift customer behaviour: towards lower
GHG emission meat proteins and products
— Alternatives: promotion of nutritionally
positive meat alternatives to capture
switching calories from existing and new
customers
Implementation of
carbon taxes
£50m to £100m revenue loss to MFP
category in isolation
Overall opportunity for business — Reduce: work with suppliers to reduce GHG
emissions in our supply chains e.g. supplier
targets, animal health & welfare and feed
efficiency
— Offset: work with suppliers to sequester
carbon in our supply chains e.g. planting trees,
creating hedgerows, and protecting peat land
and mangroves
— Innovate: investment in innovation to further
reduce GHG emissions e.g. methane reducing
food additives
1 Risks should be considered in isolation as the complex interrelationship between multiple risks has not been considered.
20 Strategic Report J Sainsbury plc Annual Report 2022
Case study – Integrated beef scheme
Our market-leading integrated beef scheme uses selected
Aberdeen Angus genetics, resulting in a more sustainable,
highly consistent, and traceable beef product for our customers.
The scheme has been running since August 2019 and we are
working to fulfil our entire Taste the Difference tier. The
genetics used to improve the sustainability of our beef, is
estimated to deliver a 20 per cent reduction in overall GHG
emissions and a 40 per cent reduction in methane.
Quantitative scenario analysis – Potential financial impact
of climate-related physical risks on selected produce crops
in high and low emissions scenarios in 2050
To assess the costs associated with the increased likelihood of flooding,
drought and heat events, we evaluated the production of citrus fruits,
lettuce, berries and potatoes in Spain and the UK. These food items
are particularly vulnerable to climate change and likely to result in
crop failure. We considered two scenarios, one where global warming
reaches 4.3°C (high emission) as a result of no global action taken to
reduce emissions, leading to extreme physical risks manifesting in
the long term, and a 1.5°C (low emission) scenario where the Paris
Agreement is met but physical risks are still experienced, albeit more
mildly. Our physical risk modelling focused on Spain and the UK
where a significant proportion of our produce is grown. Our scenario
analysis considered the impacts of these acute physical risks and the
resulting diminished or lost crop yields that would result in increased
costs in our supply chain. We also assumed that these additional
costs are passed on directly to the consumer, reducing demand and
impacting our revenue. Revenue loss is based on 2021 produce sale
figures and assumes no actions are taken to mitigate risks.
Most material climate
risks impacting citrus
fruit, lettuce, berries &
potatoes in UK & Spain
1
Annual revenue loss to
crops in isolation in 2050
in 4.3°C scenario, assuming
no actions are taken to
mitigate risks
Annual revenue loss to
crops in isolation in 2050
in 1.5°C scenario, assuming
no actions are taken to
mitigate risks
Annual revenue loss/opportunity at
Group level in 2050 in 4.3°C & 1.5°C,
assuming actions are taken to
mitigate risks
Potential mitigations that are being considered
as part of our strategic planning
Flooding £0m to £5m revenue
loss to crops
£0m to £5m revenue
loss to crops
Further work required to
understand revenue impact
at Group level after actions
are taken to mitigate risks
— Engage: continue to work closely
with our suppliers to understand
their adaption plans
— Explore supply chain adaption
options: higher altitude locations,
lower flood risk areas, vertical
farming, glass growing structures,
reservoirs, drainage channels,
drought & temperature resistant
crop strains
Drought £25m to £30m revenue
loss to crops
£10m to £15m revenue
loss to crops
Heat events £35m to £40m revenue
loss to crops
£10m to £15m revenue
loss to crops
1 Risks should be considered in isolation as the complex interrelationship between multiple risks has not been considered.
Case study – UK grown Brassicas
One of the ways we mitigate flood risk is to have multiple
growing locations for a crop. For example, for UK grown
Brassicas we use three distinct areas – Cornwall, East Anglia
and Scotland. These areas have similar growing conditions but
are far enough apart to reduce the risk of all areas suffering
from a severe weather event.
Plans to expand scenario analysis in 2022/23
We understand that we must continue to expand our knowledge of
our climate-related risk and opportunities. Next financial year we are
going to expand our quantitative scenario analysis to look at our
Clothing category. Clothing is particularly exposed to physical risks
due to our sourcing and manufacturing locations in India, China,
Bangladesh and Turkey.
Risk management
Risk management a) Processes for identifying and assessing
climate-related risks
Climate-related risks (short, medium and long term) are identified
through quarterly bottom-up divisional and governance forum risk
assessments and then reviewed annually top-down in a dedicated
climate risk workshop to assess completeness. This considers our
ability to deliver our Plan for Better strategy, including our Scope 1,
2 and 3 targets, as well as physical and transition climate risks
impacting our operations and supply chain, including existing and
emerging regulatory requirements.
Climate risks are mapped against financial and reputational impact
(from insignificant <£10 million to severe >£125 million) and likelihood
of occurring (from remote to almost certain). To assess the effectiveness
of existing climate controls, each risk has three positions: gross risk
(before existing controls); net risk (after existing controls); and target
risk (management’s target position). Climate risks where the impact
is not yet well understood are captured separately on an emerging
risk map (plotted against likelihood of occurring and timeframe).
Risk management b) Processes for managing climate-related risks
Each climate risk is assigned a Director-level business owner who is
responsible for monitoring and mitigating the risk. Climate risks are
agreed once per year at the Plan for Better Steering Committee with
Board level oversight from the CR&S Committee. Climate risks and
mitigations are monitored throughout the year by the Plan for Better
working groups and Steering Committee. To increase ownership of
climate risks across the business, the Steering Committee has
cross-divisional representation at Director level.
Risk management c) Processes for identifying, assessing
andmanaging climate-related risks are integrated into
theorganisation’s overall risk management
The output from this climate risk process, in aggregate, is elevated
to the corporate risk map owned by the plc Board with support
from the Audit Committee, and informs the Environment and Social
Sustainability principal risk, shown on page 50. For more details on
our overall risk management framework and supporting processes,
see page 38.
21Strategic Report J Sainsbury plc Annual Report 2022
Governance ReportStrategic Report Financial Statements
Metrics and targets
Metrics and targets a) Metrics used to assess climate-related
risksandopportunities in line with its strategy and risk
management process
The below table shows the key metrics and methodology used to
measure climate strategy and risk management.
Plan for Better
Commitment Metric Methodology
Reduction in carbon
emissions
Absolute GHG emissions within our own
operations (tCO
2
e)
Absolute, market based, Scope 1 and 2 GHG emissions in the financial year
for Sainsbury’s Group and supported by third party CBRE and verified by
the Carbon Trust. Follows the GHG protocol.
Electricity which comes from renewable
sources (%)
The amount of renewable energy used by Sainsbury’s Group as a proportion
of the total electricity consumption in the financial year, supported by third
party CBRE. Combination of energy sourced directly from UK wind farms as
well as certificate-backed renewable electricity from the UK.
Absolute Scope 3 GHG emissions (tCO
2
e) Includes emissions from purchased goods, upstream transport and
distribution, services sold and our customers’ use and consumption of the
products we sell as calculated by the Carbon Trust. Follows the GHG protocol.
Key Sainsbury’s food suppliers disclosing
through CDP
Key food suppliers disclosing through CDP, which is an environmental impact
disclosure system. Key suppliers are our 211 most material carbon footprint
suppliers that we asked to disclose through CDP.
GM&C own-brand suppliers disclosing
through HIGG
GM&C own-brand suppliers disclosing through HIGG, which is an
environmental impact disclosure system.
Reduction in water use Absolute water usage within our own
operations (m
3
)
Absolute water usage in the financial year for both Sainsbury’s and Argos
as verified by third party WaterScan.
Healthy & sustainable
diets
Healthy and better for you sales tonnage
as a proportion of total sales tonnage (%)
Food sales tonnage of healthy, healthier choice and better for you products
as a percentage of total food sales tonnage in the financial year (exclusive
of beers, wines, spirits and baby food). Healthy, healthier choice and better
for you defined using a nutrition criteria tool, including criteria from the
Eatwell Guide which is lower in GHG emissions.
Reduction in food
waste
Food waste to anaerobic digestion (tonnes) Total food waste tonnage sent to anaerobic digestion in the financial year
calculated as total operational food surplus i.e. food that is not sold to
customers, less any food surplus redistributed to both humans and animals.
Biodiversity Soy sourced to an independent sustainability
standard (%)
Sustainably sourced soy tonnage as a percentage of total soy tonnage
footprint, as calculated by the third party 3Keel.
Palm sourced to an independent sustainability
standard (%)
Sustainably sourced palm oil tonnage as a percentage of total palm oil
tonnage footprint, as calculated by the third party 3Keel.
Timber sourced to an independent
sustainability standard (%)
Cubic metre volume of assessed sustainably sourced timber products sold
as a percentage of total cubic metre volume of all assessed timber products
sold during 2021 calendar year. Sustainability assessments were carried
out by third party Track Record Global Ltd.
Cotton sourced to an independent sustainability
standard (%)
Cotton tonnage sustainably sourced and certified by third party Better
Cotton Initiative (BCI) as a percentage of total cotton tonnage sourced
during 2021 calendar year.
Number of woodland trees planted (number) Total number of trees planted in the financial year through partnership
with the Woodland Trust.
22 Strategic Report J Sainsbury plc Annual Report 2022
Metrics and targets b) Scope 1, Scope 2, and Scope 3 GHG emissions,
and the related risks
Baseline Results
2018/19 2020/21 2021/22
Scope 1 and 2 GHG
emissions
949,744 tCO
2
e 817,420 tCO
2
e 762,119 tCO
2
e
Scope 3 GHG
emissions
26,663,081
tCO
2
e
N/A N/A
For a more detailed breakdown of our Scope 1 and 2 GHG emissions,
please see our streamlined energy and carbon reporting (SECR)
disclosure on page 97. We have a strong track record of delivering
GHG emissions reductions and a robust plan to Net Zero, however
there is some risk as our transition plan requires industry innovation,
such as a commercially viable alternative fuel solution for heavy
goods vehicles.
We have worked with the Carbon Trust to define our Scope 3 baseline,
which uses industry average carbon factors to calculate total GHG
emissions as there is currently no agreed methodology for companies
to calculate their own Scope 3 emissions. There is also no consistent
industry approach for requesting GHG emission data from suppliers,
although we do measure the number of our suppliers disclosing
through CDP and HIGG (environmental impact disclosure systems).
Whilst we cannot solve these challenges ourselves, we are committed
to work at industry level to find a solution, such as our commitment,
alongside other retailers, to work with the WWF to halve the
environmental impact of UK baskets by 2030.
Metrics and targets c) Targets used to manage climate-related risks
and opportunities and performance against targets
We understand the importance of setting GHG emission reduction
targets, and last year, the Science Based Targets initiative (SBTi)
approved our science-based targets for Scopes 1, 2 and 3. For Scope 1
and 2, these include the reduction of GHG emissions from our own
operations to Net Zero by 2035 in a bid to limit temperature increase
to 1.5°C. Our Scope 3 target, defined in collaboration with the Carbon
Trust, requires the reduction of GHG emissions by 30 per cent by 2030,
to align to a well below 2°C scenario. We have long-term remuneration
targets for Executive Directors on Scopes 1, 2 and 3 (see page 87 for
more details).
We also have targets and measure performance against other
climate-related metrics. See page 19 for more details on how these
metrics are supporting climate-related matters.
Plan for Better
commitment Metric Baseline
Results
Target2020/21 2021/22
Reduction in carbon
emissions
Absolute GHG emissions within
our own operations (tCO
2
e)
949,744 tCO
2
e
2018/19 FY
817,420 tCO
2
e 762,119 tCO
2
e Net Zero 2035/36 FY
Electricity which comes from
renewable sources (%)
17%
2019/20 FY
20% 41%
(100% from
January 2022)
N/A
Absolute Scope 3 GHG
emissions (tCO
2
e)
26,663,081 tCO
2
e
2018/19 FY
N/A N/A 18,664,157 tCO
2
e
2030/31 FY
Key Sainsbury’s food suppliers
disclosing through CDP
(number)
N/A N/A 183
(87% of key
food suppliers)
N/A
GM&C own-brand suppliers
disclosing through HIGG
(number)
N/A N/A 195
(49% of own-brand
GM&C suppliers)
N/A
Reduction in water use Absolute water usage within
our own operations (m
3
)
3,224,000 (m
3
)
2018/19 FY
2,776,288 (m
3
) 2,797,699 (m
3
) Water neutral
2040/41 FY
Healthy & sustainable
diets
Healthy and better for you
sales tonnage as a proportion
of total sales tonnage (%)
80.3%
2019/20 FY
79.7% 79.6% 83.1%
2025/26 FY
Reduction in food waste Food waste to anaerobic
digestion (tonnes)
31,615 tonnes
2019/20 FY
26,545 tonnes 25,483 tonnes 15,808 tonnes
2030/31 FY
Biodiversity Soy sourced to an independent
sustainability standard (%)
6%
2019 CY
42% N/A
1
100%
Palm sourced to an
independent sustainability
standard (%)
99.1%
2019 CY
99.3% 99.7% 100%
Timber sourced to an
independent sustainability
standard (%)
60%
2019 CY
65% 77% 100%
Cotton sourced to an
independent sustainability
standard (%)
76%
2019 CY
89% 94% 100%
Number of woodland trees
planted (number)
493,750 trees
2019/20 FY
325,000 398,333 N/A
1 Result unavailable at date of publication. Please read our Plan for Better Report on about.sainsburys.co.uk for progress against this metric and all of our other Plan for Better metrics.
23Strategic Report J Sainsbury plc Annual Report 2022
Governance ReportStrategic Report Financial Statements
Stakeholder considerations and our culture play an
important part in the Board’s discussions and decision
making in promoting the long-term success of the
Company, as outlined in this statement.
During the year ended 5 March 2022, the Board has acted in accordance
with Section 172(1) of the Companies Act 2006. Each Director has
acted in the way they consider, in good faith, would be most likely to
promote the success of the Company for the benefit of its members
as a whole and, in doing so, have regard to the interests of other
stakeholders, whilst maintaining high standards of business conduct.
The Board considers the potential consequences of its decisions on
stakeholders, recognising that decisions made will not necessarily
result in a positive outcome for every stakeholder group. Processes
are in place to ensure effective decision making, which balances
the needs of our stakeholders with the business’s strategic priorities,
purpose, culture and values.
An overview of our key stakeholders and stakeholder considerations
that influenced discussions and the outcomes of these discussions
is outlined below. Further examples of how the stakeholder voice has
been brought into the boardroom can be found in our Governance
section on page 62.
“ Engagement with our stakeholders remains a key priority
and we are committed to building positive relationships with
all of our stakeholders.”
Simon Roberts
Customers
Two-thirds of the UK population have shopped with
Sainsbury’s over the last year
1
and over one million digital
Nectar users regularly benefit from personalised offers
with us and with our Nectar partners. Within Argos, we
have 18.8 million active customers and the website is the
third most visited online retailer in the UK. In Financial
Services, we have 1.8 million active Sainsbury’s Bank
customers and 2.1 million Argos Financial Services
customers. Understanding the needs of our customers
allows us to provide relevant products and services.
Satisfied customers are key to our long-term success.
Key customer priorities
— Competitiveness and value
— Availability and range of products
— Convenience and location
— Speed of Groceries Online delivery
— Quality of products
— Sustainability
Engaging with our customers
We heard what mattered to our customers through:
— 2.7 million responses per year across our Sainsbury’s and Argos
customer feedback programmes (CSAT)
— Social media listening
— Market research
— Qualitative customer focus groups and quantitative surveys
— Nectar data, which helps us understand how customers are
shopping
— Brand tracking, which assesses the performance and perception
of our different brands
1 Nielsen IQ panel, Total FMCG (excl. Kiosk & Tobacco), 52 weeks ending P3 21/22.
Customer feedback and overall metrics on consumer sentiment
and trends were shared regularly with the Board and Operating
Board, steering our responses to the key issues impacting
customers, such as COVID-19, inflation and availability of products.
The Board receives regular updates from the Chief Marketing Officer,
which include feedback from our customer listening sessions.
The Board’s understanding of our customers continued to shape
our strategy and the Board has focused on delivering for customers
in line with our strategic priorities:
— Food First: putting food back at the heart of Sainsbury’s by
offering high quality, great value food to our customers
— Brands that Deliver: Argos, Habitat, Tu, Nectar and Sainsbury’s
Bank contributing positively to the customer experience
— Save to Invest: internal transformation enabling us to reinvest
in our customer offer
— Connected to Customers: knowing and understanding our
customers to enhance our thinking and decision making
— Plan for Better: supporting our customers to eat healthily and
sustainably, whilst delivering on our commitment to become
Net Zero by 2035
The Board also considered and supported the investment in our
contactless sales channels to improve access for customers.
We know that price remains an important consideration for our
customers; our Sainsbury’s Quality, Aldi Price Match and Price Lock
campaigns are two ways in which we have supported our customers
to shop more affordably.
The evolution of our Net Zero by 2040 plan to our Plan for Better
and our partnership with COP26 reflected our customers’ interest
in reducing their environmental impact through their everyday
activities. Decision makers, including our Corporate Responsibility
and Sustainability (CR&S) Committee, referred to customer insight
analysis to understand how customers view our progress around
sustainability and inform how related projects develop.
24 Strategic Report J Sainsbury plc Annual Report 2022
Engaging with our stakeholders
and our Section 172 statement
Colleagues
Our colleagues include everyone who is employed by the
business. Colleagues are at the heart of everything we
do and their commitment to our purpose and values is
critical to the business’s long-term success. Connected,
engaged colleagues, working in safe stores and depots
with better technology, lead to greater efficiency,
increased availability of products and improved
customer service.
Key colleague priorities
— Reward
— Career progression
— Colleague engagement
— Training and development
— Wellbeing
— Health and safety
— Inclusion
Engaging with our colleagues
The Board engaged directly with colleagues through the
National Great Place to Work Group, our Workforce Advisory Panel.
It received presentations on culture, colleague engagement,
talent retention and progression from our Group HR Director,
and regular summaries from the Chief Executive Officer on key
initiatives. Colleagues were updated on decisions made following
their feedback through regular internal communications from
the Chief Executive Officer and Operating Board members.
Our colleague engagement activities included:
— Non-Executive Director meetings with National Great Place
to Work Group members to directly understand the views of
colleagues from across the business via their elected peers
— Continual feedback through internal channels, including live
presentations, question and answer sessions and internal
social media discussions with the Operating Board
— Honest, confidential colleague feedback on what it is like to work
for the business through our annual colleague engagement
survey, ‘We’re Listening’, to inform improvements over the year
— Colleague feedback through topic-specific ‘temperature check’
surveys throughout the year, helping us to understand
colleagues’ views and sentiments, enabling the Board and
Operating Board to act swiftly
— Regular updates provided to the Board, Remuneration
and CR&S Committees on culture, engagement, diversity
and inclusion, and colleague pay
Colleague feedback has provided the Board with insight and
challenge. Through our colleague engagement activities, decision
makers received timely feedback, allowing colleague interests to
remain a priority when considering key concerns. Our response
to COVID-19 exemplifies this. Colleague feedback on internal
social networks and via ‘temperature check’ surveys enabled
senior management to better understand the colleague
experience of new safety guidance and returning to our offices.
The business has made a significant investment in colleague pay
and benefits. All our Sainsbury’s and Argos store colleagues now
receive a base rate of least £10 per hour, above the government’s
National Living Wage and the Living Wage Foundation’s Living
Wage. We have also increased London pay to £11.05, in line with
the London Living Wage. In response to feedback from colleagues,
we have implemented policy and guidance changes in relation to
family leave, menopause, wellbeing and carers.
It is vital that we have a diverse workforce, thriving in an inclusive
culture and reflecting the communities we serve. The Board
supported the additional commitments made by the Operating
Board in support of our Black colleagues, including joining the
Black British Network, to improve representation across the business
and agreeing stretching diversity targets. It also supported the
introduction of Inclusion Training for all line managers and
improving transparency by publishing our Gender and Ethnicity
Pay Report for a second year.
More information on our colleague engagement activities can
be found on pages 13 to 14 and our colleague engagement KPI
can be found on page 30.
25Strategic Report J Sainsbury plc Annual Report 2022
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Shareholders
We have over 103,000 shareholders, including
large institutional investors and smaller individual
shareholders.
Access to capital is vital to the long-term performance of
our business. We ensure that we provide fair, balanced and
understandable information to shareholders and equity
analysts and work to ensure they have a strong understanding
of our purpose, strategy, performance and culture.
Key shareholder priorities
During the course of the year, we heard from shareholders that
their main areas of focus included:
— Macro factors, such as inflation, cost pressures and availability
challenges
— Progress towards our cost base improvement targets
— Grocery market share performance in a competitive environment
— The impact of normalisation of demand post-pandemic,
including expectations for Groceries Online penetration
— Improving our price position versus competitors
— Improving our product innovation
— General Merchandise sales trends and the impact from
disposable income pressures and supply chain challenges
— Progress of the Argos transformation programme and
associated profit improvements
— Driving returns in the Financial Services business
— Providing confidence in profit, cash flow and dividend prospects
— How we will address capital allocation once our leverage targets
are achieved
— Progress against our Environmental, Social and Governance
(ESG) targets
Engaging with our shareholders
The Board regularly received reports and updates on shareholder
relations, summarising key feedback from our principal
shareholders derived from a programme that consisted of:
— One-on-one investor meetings with the Chairman,
Chief Executive Officer, Chief Financial Officer and Director
of Investor Relations
— Investor events, including our ESG event and Nectar Deep Dive
— Real-time feedback from investors after meetings and
presentations
— The Annual General Meeting
— Attendance at key investor conferences and tours
— Regular email and telephone contact with investors and analysts
— A shareholder event for retail investors, resulting in positive
feedback in relation to investing in the Company from attendee
retail investors
— Dialogue with shareholder groups
— Regular engagement with investors on ESG
The Board continually takes shareholders’ feedback into account
when reviewing levels of disclosure. To help shareholders
understand the on-going impacts of COVID-19 on the business
and the normalisation trends post-pandemic, the Board has
consistently disclosed key customer behaviour trends and
provided greater visibility of trading patterns.
The Board hosted our first ESG event in June 2021, launching our
Plan for Better strategy and enabling shareholders to gain a stronger
understanding of our ESG priorities. It also participated in a
University of Cambridge Institute for Sustainability Leadership
event on ESG, providing it with additional investor insights to
help shape our on-going engagement with investors in this area.
The Board supported our compliance with the Task Force on
Climate-related Financial Disclosures for this financial year,
enabling greater clarity for shareholders on this key topic.
Shareholders were keen to understand our remuneration decisions
and, through voting at the Annual General Meeting, were given
an opportunity to indicate their opinion on the 2021 Remuneration
Report. The Board and Remuneration Committee continued to
consult with shareholders, to understand their views on key
decisions, and we will continue this dialogue in future years.
For more information, please see the Remuneration Report on
page 78.
26 Strategic Report J Sainsbury plc Annual Report 2022
Suppliers
We have over 4,900 Goods For Resale (GFR) suppliers
that supply products for food, general merchandise and
clothing, and over 1,800 Goods Not For Resale (GNFR)
suppliers across the Group that support all functions,
including Logistics, Marketing, Technology and Retail.
Our suppliers range from large multi-national companies
to small independently-run businesses.
Our GFR suppliers are fundamental to the quality and variety of
products we sell and enable us to meet the high standards that
we set ourselves.
Our GNFR suppliers provide operational excellence and access
to the new technology and innovation that ensures we keep pace
with the evolving and changing needs of our customers.
Key supplier priorities
— Long-term relationships
— Cost-efficiency
— Responsible procurement, trust and ethics
— Technological advances
— Payment practices
Engaging with our suppliers
The Board is cognisant of the impact its decisions have on
suppliers and receives regular updates on supplier relationships.
Working collaboratively with our suppliers helps us deliver
innovation in food and we continue to build stronger relationships
with exclusive brands.
In order to maintain consistent communication with our suppliers,
they have access to online supplier portals, enabling the sharing
of news and development of new ways to work together.
Management actively engage with both the GFR and GNFR supply
chains to manage key risks, including the impacts of COVID-19,
global supply chain issues and inflation on stock levels and
logistics. This enabled us to manage our supply chain and
continuity of supply to customers. Additionally, key supplier
meetings with the Board are held to further enhance communication
with these stakeholders.
We take part in annual, independent surveys which benchmark us
against other retailers and highlight areas for improvement; these
include the Supplier Advantage survey and Groceries Supply Code
of Practice supplier survey. The CR&S Committee received updates
during the year on the outcomes of these surveys, which helped
shape supplier-related initiatives.
Our suppliers have been, and continue to be, a key element of
achieving our sustainability targets under Plan for Better. Through
our engagement with our suppliers, we have encouraged them to
disclose their Net Zero ambitions to us and to set their own targets.
We have also encouraged our GFR suppliers to report carbon
emissions through the CDP or Higg platform. Working with
these stakeholders has contributed to our accelerated Net Zero
by 2035 target.
Suppliers are key to protecting human rights throughout our
business activities and the CR&S Committee regularly discussed
relevant matters. We have clear modern slavery policies for both
GFR and GNFR suppliers, actively engaged with our suppliers to
prevent modern slavery and human trafficking in our business
operations and supply chains, and have reported this through
our Modern Slavery Statement. For more information, see page 15.
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Communities
We play an active role in our communities, supporting
them through charitable endeavours and generating
a positive impact on our communities worldwide.
Our business relies on resilient communities; we have a long
history of building strong partnerships and making a difference
in the communities we serve, both locally and internationally.
The Board supported the on-going pandemic priorities of keeping
our customers and colleagues safe, helping to feed the nation, and
supporting our communities and the most vulnerable in society,
but expanded the application of these beyond COVID-19. This
embedded focus enabled us to make decisions at pace and
allocate resources and investment for maximum impact on
our communities.
Key community priorities
— Local operational impact
— Tackling food poverty
— Supporting the most vulnerable
Engaging with our communities
Customer and colleague feedback provided the Board with
valuable information on how we can best support our customers
and local communities, particularly in relation to the pandemic
and household financial challenges. Partnering with Neighbourly,
an award-winning giving platform that helps businesses make
a positive impact in their communities by redistributing supermarket
store-level surplus food to people in need, is an example of one of
many initiatives we have put in place to support our communities.
Other examples of community activities undertaken during the
year include:
— Approval of our new community and partnerships strategy
to focus on food poverty
— Partnering with Neighbourly, resulting in the donation of
2.6 million meals
— The launch of the Helping everyone eat better local grants
— Our on-going partnership with FareShare in-store and online
— Continuation of our Help Brighten a Million Christmases
campaign
— Topping up the government’s Healthy Start vouchers
— Community and charity partnerships, which generated over
£38 million for good causes
Regular updates on our community strategy are provided to the
CR&S Committee and the Board.
For more information on our communities, please see page 15.
28 Strategic Report J Sainsbury plc Annual Report 2022
Government and regulators
The UK Government and devolved administrations in
Scotland, Wales and Northern Ireland set the regulatory
environment in which our business operates.
As a UK-based business and a major employer of over 171,000
colleagues, it is appropriate and responsible for a business of our scale
to engage in a transparent way with government and regulators.
Key government/regulator priorities
— Openness and transparency
— Compliance with regulation, including Groceries Supply Code
of Practice (GSCOP)
— Impact on environment
— Diversity and inclusion
Engaging with government and regulators
The Board and CR&S Committee received updates in relation
to our work with government and regulators through summaries
onactivities including:
— Engagement with government through Parliamentary and
party events
— Public responses to government consultations
— Direct meetings
— Trade association meetings
— Government organised roundtables
— Participation in government organised forums, such as the
Food and Drink Sector Council
— Liaison with regulators, including the Grocery Code Adjudicator
and HMRC
The business has continued to work closely with government this
year to support vulnerable customers and communities across
the UK. The Board and senior management have been in regular
dialogue with Ministers and officials, primarily to ensure the on-going
supply of and access to essential groceries, and to manage the safety
of customers and colleagues throughout the on-going pandemic.
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Operational Financial
Grocery market share
performance (%)
Definition: Sainsbury’s grocery
market share of total market
and of Big 4 Grocers measured
by Nielson Volume Market share
as at 5 March 2022
Colleague engagement
(score)
1
Definition: Percentage of our
colleagues who feel that we are
a great place to work. Colleague
engagement score out of 100 from
the internal, annual ‘We’re Listening’
survey. Target to maintain strong
engagement score
Retail free cash
flow (£m)
Definition: Net cash generated
from retail operations, after cash
capital expenditure and after
investments in joint ventures
and associates. Target at least
£500 million per annum on average
to 2024
Retail operating cost
to sales (bps)
Definition: Retail operating costs
as a percentage of retail sales
including VAT. Target to reduce by
at least 200bps by 2024 year-end
11.3%
in 2021/22
+2% £503m
in 2021/22
83bps
improvement since 2019/20
2
021/22
2
020/21
2
019/20
2
021/22
2
020/21
2
019/20
T
otal market share
Share of Big 4 Grocers
2
11.3
11.4
11.3
20.
8
20.5
20.4
2
021/22
Colleague engagement
+2%
2
021/22
2
020/21
2
019/20
2
021/22
2
020/21
2
019/20
R
etail free cash flow
3-year total
503
784
611
1,898
1,851
1,499
2
021/22
2
020/21
2
019/20
bps improvement v 19/20
(83)
(57)
Baseline
Diversity and inclusion
Definition: We have three internal
measures for diversity and inclusion,
which come together to form a colleague
representation target for 2024.
Slightly behind target
Customer satisfaction
(score)
Definition: The % of ‘highly
satisfied’ answers out of the total
sample in response to the following
question: Based on your most
recent visit or online order to this
Sainsbury’s, how satisfied were you
with your overall experience?
Plan for Better
commitment
Definition: Our Plan for Better sets
out our sustainability goals across
our whole business, outlining our
priority areas of focus, our key
commitments and our progress.
See below for status against targets
in the priority areas
Pre-tax return on capital
employed (%)
3
Definition: Underlying profit before
interest and tax, divided by average
net assets excluding pension deficit/
surplus, less net debt, calculated on
a 14 point basis. Target to increase
Underlying profit
before tax (£m)
Definition: Profit before tax
adjusted for certain items in note 5
which, by virtue of their size and/or
nature, do not reflect the Group’s
underlying performance. Target to
maintain growth
+230bps
since 2019/20
Carbon Scope 1 & 2
Ahead of target
Food waste
Ahead of target
Carbon Scope 3
Industry reporting challenge
Healthy & sustainable diets
Slightly behind target
Plastic
Behind target
+1.0%
since 2019/20
£730m
in 2021/22
2
021/22
2
020/21
2
019/20
Customer satisfaction bps
230
220
Baseline
2
021/22
2
020/21
2
019/20
Pr
e-tax ROCE (%)
8.4
5.6
7.4
2
021/22
2
020/21
2
019/20
Underlying PBT (£m)
730
357
586
30 Strategic Report J Sainsbury plc Annual Report 2022
New KPIs
In FY21 we announced eight key metrics to ensure we deliver for
customers and drive stronger financial results. These are the Group’s
key performance indicators (KPIs) as we deliver the new plan.
Group measures Retail Maintaining
balance sheet
strength
Underlying basic earnings
per share (pence)
3
Definition: Earnings per share using
underlying profit
Retail underlying
EBITDAR margin (%)
3
Definition: Underlying profit before
tax before underlying net finance
costs, underlying share of post-tax
results from joint ventures,
depreciation, amortisation and
rent, divided by sales excluding
VAT, including fuel, excluding
Financial Services
Like-for-like sales (%)
3
Definition: Year-on-year growth in
sales including VAT, excluding fuel,
excluding Financial Services, for
stores that have been open for more
than one year
Net debt/underlying
EBITDAR (%)
3
Definition: Net debt divided by
Group underlying EBITDAR
2021/22
2020/21
2019/20
2018/19
4
2017/18
25.4
11.7
20.7
20.4
19.8
2021/22
2020/21
2019/20
2018/19
4
2017/18
7.5 6
7.4 4
7.4 7
6.65
7. 2 1
2021/22
2020/21
2019/20
2018/19
2017/18
(2.3)
8.1
(0.6)
(0.2)
1.3
2021/22
2020/21
2019/20
2018/19
4
2017/18
3.1
3.2
3.3
3.6
3.4
Retail underlying
operating margin (%)
3
Definition: Underlying profit before
tax before underlying net finance
costs and underlying share of post-tax
results from joint ventures, divided by
retail sales excluding VAT, including
fuel, excluding Financial Services
Dividend per share (pence)
Definition: Total proposed
dividendper share in relation
tothefinancial year
Retail sales growth (%)
Definition: Year-on-year growth in
sales including VAT, excluding fuel,
excluding Financial Services
1 In the course of this financial year we have
moved to a new metric in our colleague
survey. The above improvement is based
on interim surveys through the course
of the year.
2 Big 4 Grocers consists of Sainsbury’s, Tesco,
Asda and Morrisons.
3 Refer to APMs on page 203.
4 2018/19 restated for IFRS 16.
5 Special dividend paid in lieu of final
dividend for 2019/20 following the deferral
of dividend decision.
IFRS 16 cut-off.
2021/22
2020/21
2019/20
2018/19
4
2017/18
2.24
3.4 0
2.55
3.30
3.4 5
2021/22
2020/21
5
2019/20
5
2018/19
2017/18
13.1
1 0.6
1 0.6
1 0.2
1 1.0
2021/22
2020/21
2019/20
2018/19
2017/18
(0.4)
(2.6)
7.3
9.8
0.4
Core retail capital
expenditure (£m)
Definition: Capital expenditure
excluding Financial Services, before
proceeds from disposal of property,
plant and equipment and before
strategic capital expenditure
Net debt excluding
lease liabilities
Definition: Group net debt excluding
Financial Services net debt balances.
Financial Services balances excluded
because they are part of the daily
operating cycle of the Bank rather
than for financing purposes. Excludes
lease liabilities under IFRS 16
Like-for-like transactions
growth (%)
Definition: Year-on-year growth
intransactions, excluding fuel,
excluding Financial Services,
forstores that have been open
formorethan one year
2021/22
2020/21
2019/20
2018/19
2017/18
645
568
599
508
542
2021/22
2020/21
2019/20
2018/19
2017/18
(141)
(640)
(1,179)
(1,522)
(1,678)
2021/22
2020/21
2019/20
2018/19
2017/18
(0.3)
(1.2)
(0.6)
20.4
(29.5)
31Strategic Report J Sainsbury plc Annual Report 2022
Governance ReportStrategic Report Financial Statements
Legacy KPIs
Last year we announced that we were moving to new metrics to track
ourselves against. Those have been outlined on the previous page with
the legacy measures listed for transparency here.
2021/22 was the first full year of delivering our Food First strategy, as we put
Food back at the heart of Sainsbury’s, increasing product innovation and
using the benefits of our Save to Invest programme to become more price
competitive for customers and drive a strong volume share performance.
Itwas a year in which our brands delivered, with the Argos transformation
continuing at pace, Nectar 360 launching a new Sainsbury’s Insight Platform
and the Bank returning to profit and declaring its first dividend. Given the
significant COVID-19 impacts in 2020/21, comparisons and commentary
compared to 2019/20 have been used where this helps highlighttrends.
COVID-19 costs were much lower than the previous year. However, sales
remained strong with a sustained shift of food consumption in home,
helping to support strong profit and cash flow delivery. We’ve declared our
highest dividend since 2015, up 24 per cent on last year, and have committed
to increasing the proportion of profits distributed to shareholders through
the ordinary dividend.
Strong sales performance
Group sales (including VAT) were up 3.3 per cent year on year. Grocery sales
were down slightly but strong compared to pre-pandemic levels, supported
by continued elevated in-home consumption and our investments in value
such as Sainsbury’s Quality, Aldi Price Match. General Merchandise sales fell
by 11.9 per cent, reflecting availability constraints and tough comparators.
However, Clothing recovered well from suppressed demand over the pandemic
with growth led by full price sales. Fuel sales grew strongly but remained
below 2019/20. As expected, Groceries Online sales decreased 4.7 per cent
as demand moderated after 119.6 per cent growth in the previous year. This
was partially offset by a recovery in convenience sales of 8.8 per cent as the
nation returned more to workplaces and other urban locations.
Delivering profit growth
This year we returned to profit, generating a statutory profit before tax of
£854 million (2020/21: loss before tax of £164 million) with non-underlying
profits of £124 million supported by significant legal settlements. Our
underlying profit before tax of £730 million was a strong improvement
from the £586 million in 2019/20.
Both the Retail and Financial Services businesses contributed to the
improvement, with Retail underlying operating profit up 37 per cent and
Financial Services returning to profit, with a £38 million underlying operating
profit. The Retail performance was driven by our Save to Invest programme
which generated an 83 basis points reduction in operating costs as a
percentage of sales compared to 2019/20, led by the continuing Argos
transformation programme as we closed 73 standalone Argos stores
and opened 64 Argos stores within Sainsbury’s, reducing operational and
occupancy costs. Savings from our Logistics Transformation programme
helped us to mitigate the impact of significant cost pressures through
theyear. Changes to our food service, counters and bakeries will save
£125-150 million annually and enable us to improve our eat-in and takeaway
customer offer.
Financial Services benefitted from a reduced bad debt charge after posting
COVID-19 provisions in the prior year, and an improved unemployment
outlook. Net interest margin improved as a result of management action
to reduce interest payable through savings rates. In line with our Brands
that Deliver strategy and enabled by a strong capital position, the Bank has
paid a £50 million dividend.
Non-underlying items benefitted from £167 million of income in relation
to two legal settlements made regarding overcharging of payment card
processing fees. We continued with our restructuring programme announced
in November 2020, incurring £92 million (2020/21: £548 million) of costs.
We expect to incur £900 million to £1 billion of one off costs, with most in
the period to March 2024. Of this, £640 million has been charged to date.
Group statutory profit after tax was £677 million (2020/21: loss after tax
of £201 million).
Basic earnings per share was 29.8 pence compared to a loss per share of
9.4 pence in 2020/21. Underlying basic earnings per share increased to
25.4 pence (2020/21: 11.7 pence) due to the strong profit delivery and a lower
tax rate.
Strong free cash flow; capital allocation framework
2021/22 was another year of strong cash generation and net debt reduction.
We reduced non-lease net debt by £499 million, taking our cumulative
reduction to £1,381 million since 2018/19. This includes £240 million of net
debt reduction resulting from the conversion of our perpetual convertible
bond in July 2021. This exceeds our four-year target to reduce non-lease net
debt by £950 million one year early, and contributes to our falling interest
cost expense. Lease net debt increased by £789 million, primarily reflecting
the impact of serving notice to purchase 21 stores from two investment
vehicles in which we hold a 49 per cent interest.
As guided, working capital grew this year following a significant working
capital reduction in the prior year due to COVID-19. This resulted in strong
retail free cash flow of £503 million (2020/21: £784 million). This is significantly
ahead of expectations, supported by the strong profit result, legal settlements
income and lower than expected capital expenditure at £645 million (2020/21:
£568 million). Dividends of £238 million were paid in the year, which were
covered 2.1 times by free cash flow (2020/21: 3.3 times). We have laid out an
updated capital allocation framework, signalling that we will prioritise the
right level of investment to support our strategy and an investment grade
balance sheet but that we expect to pay a higher proportion of underlying
net earnings to shareholders, in the first instance through an increase in the
dividend pay-out ratio to around 60 per cent from around 53 per cent.
Our balance sheet remains strong, and we delivered a pre-tax return on
capital employed of 8.4 per cent, up from 5.6 per cent in 2020/21. The
business had non lease net debt of £141 million and £1.4 billion of undrawn
facilities at the end of the year.
As at 5 March 2022 the net defined benefit pension surplus under IAS 19
for the Group was £2,283 million (excluding deferred tax). The £1,539 million
increase from 6 March 2021 was driven by both changes in financial and
demographic assumptions which lowered liabilities, as well as gains on
planassets.
Delivering through times of change
This was a year of strong delivery, making considerable progress on our
strategy, and we enter the year with good operating momentum and a
strong financial position. The year ahead presents considerable external
pressures and uncertainties with higher operating cost inflation and cost
ofliving pressures on customers. However, we will continue to focus on
delivering consistent improvements in grocery value, innovation and
customer service, funded by our Save to Invest programme. With the
ongoing drive of our colleagues to deliver for our customers and our track
record of successfully responding to the changes of recent years, we are
well placed to maintain a strong competitive position.
Kevin O’Byrne
Chief Financial Officer
32 Strategic Report J Sainsbury plc Annual Report 2022
Financial Review
Financial Review of the year results for the 52 weeks to 5 March 2022
In the 52 weeks to 5 March 2022, the Group generated profit before tax of £854 million (2020/21: loss before tax of £164 million; 2019/20: profit before tax of £278
million) and an underlying profit before tax of £730 million (2020/21: £357 million; 2019/20: £586 million). COVID-19 caused significant distortions to trading, operating
costs and timing of business rates costs in 2020/21. Therefore in some cases commentary has been provided versus the pre-COVID-19 2019/20 financial year.
A number of Alternative Performance Measures (‘APMs’) have been adopted by the Directors to provide additional information on the underlying performance of
the Group. These measures are intended to supplement, rather than replace the measures provided under IFRS. Please see pages 203 to 207 for further information.
Summary income statement
52 weeks to
5 March 2022
£m
52 weeks to
6 March 2021
1
£m
Change
%
Group sales (including VAT) 33,355 32,285 3.3
Retail sales (including VAT) 32,924 31,854 3.4
Retail sales (excluding fuel, including VAT)
28,095 28,837
(2.6)
Group sales (excluding VAT)
29,895 29,048
2.9
Retail sales (excluding VAT)
29,463 28,617
3.0
Underlying operating profit/(loss)
Retail
1,001 731
37
Financial Services
38 (21)
N/A
Total underlying operating profit
1,039 710
46
Underlying net finance costs
(309) (353)
12
Underlying profit before tax
730 357
104
Items excluded from underlying results
124 (521)
N/A
Profit/(Loss) before tax
854 (164)
N/A
Income tax expense
(177) (37)
378
Profit/(Loss) for the financial period
677 (201)
N/A
Underlying basic earnings per share
25.4p 11.7p
117
Basic earnings/(loss) per share
29.8p (9.4)p
N/A
Interim Dividend per share
3.2p 3.2p
–
Final Dividend per share
9.9p 7.4 p
34
Total Dividend per share 13.1p 10.6p 24
1 The prior year results have been restated to reflect the removal of business rates from onerous property contract provisions. Refer to note 2 of the accounts for further information.
Underlying profit before tax is up £373 million, and up £144 million compared to 2019/20, driven by continued elevated sales despite much lower COVID-19 costs,
falling finance costs, and the delivery of the Argos Transformation programme, offset by increased variable pay. We have made strong progress on our Save to
Invest plans, with an 83 basis points reduction in operating costs allowing for considerable investments to improve value for customers.
Group sales
Group sales (including VAT, including fuel) increased by 3.3 per cent year-on-year. Retail sales (including VAT, excluding fuel) decreased by 2.6 per cent,
as General Merchandise sales moderated, but remained ahead of 2019/20. Fuel sales increased by 60.0 per cent and Financial Services sales increased by
0.2 per cent.
Total sales performance by category
52 weeks to
5 March 2022
£bn
52 weeks to
6 March 2021
£bn
52 weeks to
7 March 2020
£bn
YoY
Change
%
Yo2Y
Change
%
Grocery 21.0 21.1 19.5 (0.2)% 7.6%
General Merchandise 6.1 6.9 6.4 (11.9)% (4.6)%
Clothing 1.0 0.9 1.0 12.7% 3.1%
Retail (exc. fuel) 28.1 28.8 26.9 (2.6)% 4.6%
Fuel sales 4.8 3.0 4.9 60.0% (2.6)%
Retail (inc. fuel) 32.9 31.9 31.8 3.4% 3.5%
Grocery sales remained significantly above pre-pandemic levels reflecting a sustained shift of consumption in-home. In line with the reduction of government
restrictions during the period, sales were stronger in the first half, and moderated in the second half, albeit at a level still higher than 2019/20. We delivered
a strong volume market share performance, supported by our value investments for customers. We inflated prices behind the market and key competitors
on high volume lines supported by our Sainsbury’s Quality, Aldi Price Match programme and other value initiatives.
General Merchandise sales declined, reflecting tough comparators and availability challenges driven by both product supply and freight availability.
Clothing recovered strongly from a year of suppressed demand with growth driven by full price sales and increased in-store sales.
33Strategic Report J Sainsbury plc Annual Report 2022
Governance ReportStrategic Report Financial Statements
Fuel sales increased by 60.0 per cent, driven by both increased demand as traffic volumes recovered and inflation in the market driven by higher oil prices,
but remained below pre COVID-19 levels.
Total sales performance by channel
52 weeks to
5 March 2022
52 weeks to
6 March 2021
Total Sales fulfilled by Supermarket stores (2.0)% 11.4%
Supermarkets (inc Argos stores in Sainsbury’s) (1.8)% 2.5%
Groceries Online (4.7)% 119.6%
Convenience 8.8% (9.4)%
Overall sales served from our Supermarkets fell by 2.0 per cent after rising 11.4 per cent in the prior year. Within this, Supermarket sales including Argos stores
in Sainsbury’s fell by 1.8 per cent. Groceries Online sales decreased by 4.7 per cent, as COVID-19 restrictions ended and demand moderated through the year
after rapid growth of almost 120 per cent in the previous year. Convenience sales grew by 8.8 per cent, driven by the recovery of sales in urban sites most
impacted by reduced footfall in the previous year.
Retail like-for-like sales performance
52 weeks to
5 March 2022
52 weeks to
6 March 2021
Like-for-like sales (exc. fuel) (2.3)% 8.1%
Like-for-like sales (inc. fuel) 3.6% 0.7%
Retail like-for-like (‘LFL’) sales, excluding fuel, decreased by 2.3 per cent (2020/21: 8.1 per cent increase), reflecting lower General Merchandise sales, but
showed strong growth versus 2019/20 led by Grocery sales. The impact of stores temporarily closed due to COVID-19 have been included within LFL sales,
with only permanently closed sites treated as not LFL.
Space
In 2021/22, Sainsbury’s opened four new supermarkets and closed four (2020/21: opened one new supermarket and closed 11). There were 19 new Convenience
stores opened in the year and 23 were closed (2020/21: 15 opened and nine stores closed).
During the period 64 new Argos stores in Sainsbury’s were opened and 73 standalone Argos stores were closed, in line with our Argos Transformation plan.
The number of Argos collection points in Sainsbury’s stores increased from 306 to 335. As at 5 March 2022, Argos had 728 stores including 400 stores in Sainsbury’s.
Store numbers and retailing space
As at
6 March
2021 New stores
Disposals/
closures
Extensions/
refurbishments/
downsizes
As at
5 March
2022
Supermarkets 598 4 (4) 65 598
Supermarkets area ’000 sq ft 20,822 134 (78) (75) 20,803
Convenience 813 19 (23) 1 809
Convenience area ’000 sq ft 1,929 42 (54) 1 1,918
Sainsbury's total store numbers 1,411 23 (27) 66 1,407
Argos stores 401 – (73) – 328
Argos stores in Sainsbury’s 336 64 – – 400
Argos in Homebase – – – – –
Argos total store numbers 737 64 (73) – 728
Argos collection points 306 62 (33) – 335
Habitat 3 – – – 3
In 2022/23, we expect to open one supermarket and around 20 new convenience stores, and to close around two supermarkets and five convenience stores.
In addition, we expect to open around 25 Argos stores inside Sainsbury’s, and close around 60 Argos standalone stores.
In the UK, the standalone Argos store estate will reduce to around 100 stores by March 2024, while we expect to have 430-460 Argos stores inside Sainsbury’s
supermarkets as well as 450-500 collection points.
Retail underlying operating profit
Retail underlying operating profit
52 weeks to
5 March
2022
52 weeks to
6 March
2021
1
52 weeks to
7 March
2020
1
YoY
Change
Yo2Y
Change
Retail underlying operating profit (£m)
2
1,001 731 938 36.9% 6.7%
Retail underlying operating margin (%)
3
3.40 2.55 3.30 85bps 10bps
Retail underlying EBITDA (£m)
4
2,145 1,910 2,135 12.3% 0.5%
Retail underlying EBITDA margin (%)
5
7.2 8 6.67 7.51 61bps (23)bps
1 The prior year results have been restated to reflect the removal of business rates from onerous property contract provisions. Refer to note 2 of the accounts for further information
2 Retail underlying earnings before interest, tax and Sainsbury’s underlying share of post-tax profit from joint ventures
3 Retail underlying operating profit divided by retail sales excluding VAT.
4 Retail underlying operating profit before underlying depreciation and amortisation of £1,144 million.
5 Retail underlying EBITDA divided by retail sales excluding VAT.
Retail underlying operating profit increased by 36.9 per cent to £1,001 million (2020/21: £731 million) and retail underlying operating margin increased by
85 basis points year-on-year to 3.40 per cent (2020/21: 2.55 per cent). COVID-19 costs reduced materially year on year to £82 million (2020/21: £485 million).
Retail underlying operating profit was up 6.7 per cent versus two years ago (2019/20: £938 million), reflecting sales growth and a retail underlying operating
margin improvement of 10 basis points. Our Save to Invest programme delivered an 83 basis points reduction in operating costs as a percentage of sales
versus 2019/20. We have invested much of this benefit, as well as benefits from fuel and more profitable clothing and general merchandise sales into lower
grocery prices, targeted at key products for customers, driving strong volume growth.
34 Strategic Report J Sainsbury plc Annual Report 2022
Savings were delivered across the business, with significant contributions from our retail operating model work, both for in Store and Online where annualisation
of rapid growth in the prior year allowed material efficiencies. Argos transformation continued to deliver savings as we integrate the two businesses and reduce
occupancy and store operational costs. Savings from our Logistics Transformation programme helped to mitigate the significant cost pressures felt.
In 2022/23, Sainsbury’s expects a retail underlying depreciation and amortisation charge of around £1.2 billion, including around £500 million right of use
asset depreciation.
Financial Services
Financial Services results
12 months to 28 February 2022 2022 2021 Change
Underlying revenue (£m) 432 431 0%
Interest and fees payable (£m) (57) (90) (37)%
Total income (£m) 375 341 10%
Underlying operating profit/(loss) (£m) 38 (21) N/A
Net interest margin (%)
1
4.5 3.5 100bps
Cost:income ratio (%) 74 74 –
Bad debt as a percentage of lending (%)
2
1.2 1.8 60bps
Active customers (m) – Bank 1.8 1.8 –
Active customers (m) – AFS 2.1 2.2 (4)%
Tier 1 capital ratio (%)
3
15.6 17.6 (200)bps
Total capital ratio (%)
4
18.1 20.2 (210)bps
Unsecured lending (£bn) 4.3 4.1 5%
Secured lending (£bn) 0.8 1.3 (38)%
Customer deposits (£bn) (4.2) (5.1) (18)%
1 Net interest receivable divided by average interest-bearing assets.
2 Bad debt expense divided by average net lending.
3 Common equity Tier 1 capital divided by risk-weighted assets. Reflects impact of dividend declared.
4 Total capital divided by risk-weighted assets.
Financial Services returned to profit with underlying operating profit of
£38 million (2020/21: loss of £21 million). This reflects both a reduction in
credit provisioning as the unemployment outlook improved, a release of
some COVID-19 related bad debt provisions made in 2020/21 and improvements
in net interest margin. Unsecured lending balances were lower on average
through the year, but recovered well in the second half and ended the year
up 5 per cent.
Financial Services total income of £375 million increased by 10 per cent
year-on-year (FY 2020/21: £341 million). Net interest margin recovery is
reflective of management action to reduce interest payable through savings
rates alongside improvements in unsecured asset margins and a lower mix
of secured lending (following our decision to cease new mortgage lending in
2019). Fee income has risen as activity post lockdown increased, with ATMs
and Card fees both recovering, whilst Travel Money remains subdued but is
higher than last year.
The Financial Services cost:income ratio is flat at 74.0 per cent (FY 2020/21:
74.0 per cent). Of the £27 million increase in costs, £17 million reflects
higher royalty payments to Argos, therefore the ratio is down on a group
contribution basis.
Bad debt expense as a percentage of lending decreased 60 basis points
year-on-year to 1.2 per cent (FY 2020/21: 1.8 per cent), driven by stable arrears
and the improving economic outlook. We released £12 million of our COVID
provision, reflecting the more positive economic outlook, particularly in
relation to forecast unemployment.
In line with the group strategic priority Brands that Deliver, and reflecting
theBank’s strong capital position, a £50 million dividend has been paid.
Thisis a key milestone as we start to deliver on our commitment that
Financial Services will be cash generative for the Group. The Bank remains
well capitalised with a CET1 ratio of 15.6 per cent, a decrease from 17.6 per cent
last year driven by this dividend payment.
We expect a further improvement in Financial Services underlying operating
profit in the year ahead.
Underlying net finance costs
Underlying net finance costs reduced by 12 per cent to £309 million (2020/21:
£353 million). These costs include £40 million of net non-lease interest
(2020/21: £60 million). The reduction of net non-lease interest is driven by
the repayment of the £200 million Green loan in August 2021 and redemption
of the perpetual convertible bonds in July 2021. The net interest costs on
lease liabilities have reduced to £269 million (202/21: £293 million), mainly
due to lower interest rates on new leases.
Sainsbury’s expects underlying net finance costs in 2022/23 of between
£315-325 million, including around £270-280 million lease interest.
Items excluded from underlying results
In order to provide shareholders with insight into the underlying performance
of the business, items recognised in reported profit or loss before tax which,
by virtue of their size and or nature, do not reflect the Group’s underlying
performance are excluded from the Group’s underlying results and shown
in the table below.
Items excluded from underlying results
52 weeks to
5 March 2022
£m
52 weeks to
6 March 2021
1
£m
Restructuring and integration programmes (103) (345)
Impairment charges – (220)
Restructuring, impairment and
integration
(103) (565)
Income recognised in relation to legal disputes 182 42
Software as a service accounting adjustment (21) –
IAS 19 pension income 11 6
Property, finance and acquisition adjustments 55 (4)
Items excluded from underlying results 124 (521)
1 The prior year results have been restated to reflect the removal of business rates from onerous property
contract provisions. Refer to note 2 of the accounts for further information.
— Restructuring, impairment and integration costs of £103 million (2020/21:
£565 million) include £92 million (2020/21: £548 million) relating to the
programme announced in November 2020 for the structural integration
of Sainsbury’s and Argos. We expect that we will incur one off costs
fromthese infrastructure, operating model and structure changes of
£900 million to £1 billion, with cash costs of around £300 million, with
themajority in the period to March 2024. In line with IFRIC 21 “Levies”,
business rates are now recognised as a periodic cost as incurred and as
such we expect approximately £40 million of business rates associated
with leased properties in the restructuring programme to be recognised
after the year ended March 2024. Refer to note 2 for further details.
Cash costs in the year were £114 million (2020/21: £39 million). To date
we have incurred costs of £640 million and cash costs of £153 million.
In 2022/23 we expect to incur cash costs of around £100 million in relation
to this programme.
35Strategic Report J Sainsbury plc Annual Report 2022
Governance ReportStrategic Report Financial Statements
— Income recognised in relation to legal disputes of £182 million (2020/21:
£42 million) primarily relates to two settlements for overcharges from
payment card processing fees. £75 million of cash was received in prior
financial years and held as deferred income, with £93 million of cash
received in the year net of legal fees. The prior year relates to ATM
business rates reimbursement, and £14 million of cash was received
in the year in relation to these.
— Software as a service accounting policy change resulted in a non-cash
cost of £21 million (2020/21: Nil) following the IFRS interpretations
committee clarification of how these costs should be treated. These costs
represent the prior year impacts of this change.
— IAS 19 Pension income of £11 million (2020/21: £6 million) comprises
pension finance income of £15 million and scheme expenses of £4 million.
— Other movements of £55 million income (2020/21: cost of £4 million)
relate to property profits, acquisition adjustments and non-underlying
financing costs. The positive movement year on year is driven by a gain
on energy derivatives of £76 million driven by higher energy prices.
The energy derivatives relate to long-term, fixed price power purchase
arrangements (PPAs) with independent producers. These are accounted
for as derivative financial instruments, however are not designated in
hedging relationships, therefore gains and losses are recognised in the
income statement. Increases in electricity forward prices in the year have
led to gains on the related derivative financial instruments. During the
year, the Group entered into an additional PPA, however have designated
this in a formal hedging relationship, with gains and losses being
recognised within other comprehensive income.
Taxation
The tax charge was £177 million (2020/21: £37 million). The underlying tax
rate (UTR) was 21.1 per cent (2020/21: 29.4 per cent) and the effective tax rate
(ETR) was 20.7 per cent (2020/21: (22.6) per cent).
The UTR is lower than the prior year, with the higher underlying profit
resulting in a smaller percentage impact from non-qualifying deprecation
and the impact of accounting for the rate change on the recognition of
deferred tax. Unlike previous periods, there is a positive impact on the UTR
of prior year adjustments for corporation tax, reflecting the release of
historic provisions held in respect of now agreed tax returns.
The ETR is significantly higher than the prior year, primarily due to the
accounting loss in FY21. The major impact on the ETR in the current year
relates to the non-deductibility of non-underlying costs and the impact
of prior year adjustments to non-underlying items.
Sainsbury’s expects an underlying tax rate in 2022/23 of around 25 per cent.
Earnings per share
Underlying basic earnings per share increased to 25.4 pence (2020/21:
11.7 pence) driven by the increase in underlying earnings, partially offset
by a higher share count. Basic earnings per share was 29.8 pence (2020/21:
(9.4) pence loss per share).
Dividends
The Board has recommended a final dividend of 9.9 pence per share
(2020/21: 7.4 pence). This will be paid on 15th July 2022 to shareholders on
the Register of Members at the close of business on 10th June 2022. In line
with the Group’s policy to keep the dividend covered 1.9 times by underlying
earnings, this will result in an increased full-year dividend of 13.1 pence
(2020/21: 10.6 pence), an increase of 24 per cent.
Sainsbury’s has a Dividend Reinvestment Plan (DRIP), which allows shareholders
to reinvest their cash dividends in our shares. The last date that shareholders
can elect for the DRIP is 24th June 2022.
We have laid out a capital allocation framework, signalling that we will
prioritise the right level of investment to support our strategy and an
investment grade balance sheet but that we expect to pay a higher
proportion of underlying net earnings to shareholders, in the first instance
through an increase in the dividend pay-out ratio to around 60 per cent
from around 53 per cent.
Net debt and retail cash flows
As at 5 March 2022, net debt was £6,759 million (6 March 2021: £6,469 million),
an increase of £290 million (2020/21: £478 million reduction). Excluding the
impact of lease liabilities on net debt, Sainsbury’s reduced net debt by £499
million in the year of which £240 million results from the conversion of the
perpetual convertible bond in July 2021. Non lease net debt is now £1,381
million lower than at 2018/19 year end, exceeding the four-year £950 million
non lease net debt reduction target we had communicated with a year
to spare, even excluding the impact of the perpetual convertible bond.
Sainsbury’s expects to generate retail free cashflow of at least £500 million
per annum on average for the next three years.
Group net debt includes the impact of capital injections into Sainsbury’s
Bank, less dividends received, but excludes Financial Services’ own net debt
balances. Financial Services balances are excluded because they are part of
the daily operating cycle of the Bank rather than for financing purposes.
Net debt includes lease liabilities under IFRS 16 of £6,618 million (2020/21:
£5,829 million). Lease liabilities increased by £789 million, primarily
reflecting the impact of exercising purchase options on 21 leased
supermarkets held by property investment pools in which the Group holds
an interest. Following the exercise of the options, the lease liabilities have
been remeasured based on the estimated purchase price of the stores.
Retail Retail
Summary cash flow statement
1
52 weeks to
5 March 2022
£m
52 weeks to
6 March 2021
£m
Retail underlying operating profit 1,001 731
Adjustments for:
Retail underlying depreciation and amortisation 1,144 1,179
Share based payments and other 54 26
Retail non underlying operating cash flows
(excluding pensions)
(3) (12)
Adjusted retail operating cash flow before
changes in working capital
2
2,196 1,924
(Increase)/decrease in working capital
3
(185) 452
Net interest paid
3
(323) (372)
Pension cash contributions (71) (101)
Corporation tax paid (23) (94)
Net cash generated from operating
activities
3
1,594 1,809
Cash capital expenditure
3
(645) (568)
Repayments of obligations under leases
3
(491) (499)
Initial direct costs on right-of-use assets (3) (7)
Proceeds from disposal of property, plant and
equipment
46 27
Dividends and distributions received
3
2 22
Retail free cash flow
3
503 784
Dividends paid on ordinary shares (238) (232)
Repayment of borrowings
3
(256) (539)
Other
3
(27) (13)
Net (decrease)/increase in cash and cash
equivalents
(18) 0
Decrease in Debt 747 1,038
Conversion of perpetual convertible bond
4
240 –
Other non-cash and net interest movements
5
(1,259) (560)
Movement in net debt (290) 478
Opening net debt (6,469) (6,947)
Closing net debt (6,759) (6,469)
of which:
Lease Liabilities (6,618) (5,829)
Net Debt Excluding Lease Liabilities (141) (640)
1 See note 7 for a reconciliation between Retail and Group cash flow.] The prior year results have been
restated to reflect the removal of business rates from onerous property contract provisions. Refer to
note 2 of the accounts for further information.
2 Excludes working capital and pension contributions.
3 Refer to the Alternative Performance Measures on pages 203 to 207 for reconciliation.
4 £242 million of the £250 million perpetual convertible bond converted. Given a carrying value
of £248 million this resulted in a £240 million reduction in net debt.
5 Other non-cash includes new leases and lease modifications and fair value movements on derivatives
used for hedging long term borrowings.
36 Strategic Report J Sainsbury plc Annual Report 2022
Adjusted retail operating cash flow before changes in working capital
increased by £272 million year-on-year to £2,196 million (2020/21: £1,924
million). Retail non-underlying operating cashflows of £3 million cost
(2020/21: £12 million cost) reflected legal disputes income offsetting
restructuring costs. Working capital increased by £185 million (2020/21:
£452 million decrease), in line with expectations as our working capital
position normalised compared to a prior year where both our stock and
payables positions were heavily impacted by COVID-19 trading patterns.
Corporation tax paid decreased to £23 million (2020/21: £94 million) reflecting
payments made in the prior year before the decision to forego business rates
relief which subsequently impacted taxable profits. Proceeds from disposals of
£46 million (2020/21: £27 million) resulted from disposals of non-trading sites.
Retail free cash flow decreased by £281 million year-on-year to £503 million
(2020/21: £784 million), driven by the working capital reduction in the prior
year with some of this reversing in the current year. Retail free cash flow was
used to fund dividends and reduce borrowings.
Dividends of £238 million were paid in the year, which were covered 2.1 times
by free cash flow (2020/21: 3.3 times).
The Group held undrawn committed credit facilities of £1,394 million and
undrawn uncommitted facilities of £245 million as at 5 March 2022.
Capital expenditure
Core retail cash capital expenditure was £645 million (2020/21: £568 million).
This was lower than expected due to a number of projects being delayed due
to COVID-19.
Sainsbury’s expects core retail cash capital expenditure (excluding Financial
Services) to be around £700-£750 million per annum over the next three
years, reflecting investment in high-returning supply chain, logistics and
infrastructure projects including the Argos transformation.
Financial Ratios
Key financial ratios
52 weeks to
5 March 2022
52 weeks to
6 March 2021
1
Return on capital employed (%)
2
8.4 5.6
Net debt to EBITDA
3
3.1 times 3.4 times
Fixed charge cover
4
2.8 times 2.2 times
1 The prior year results have been restated to reflect the removal of business rates from onerous property
contract provisions. Refer to note 2 of the accounts for further information.
2 ROCE: Return is defined as a 52 week rolling underlying profit before interest and tax. Capital employed
is defined as group net assets excluding the pension deficit/surplus less net debt (excluding perpetual
securities). This is calculated using the average of 14 datapoints – the prior year closing capital
employed, the current year closing capital employed and 12 intra-year periods as this more closely
aligns to the recognition of profit / loss.
3 Net debt of £6,759 million includes lease obligations under IFRS 16 and perpetual securities treated as
debt, divided by Group underlying EBITDA of £2,206 million.
4 Group underlying EBITDA divided by rent (both capital and interest) and net underlying finance costs,
where interest on perpetual securities is treated as an underlying finance cost.
All three metrics saw significant improvements due to the recovery of profit
and EBITDA following a prior year heavily impacted by COVID-19. Our net
debt to EBITDA metric showed a smaller improvement as net debt increased,
with the increase in lease liabilities more than offsetting significant non
lease net debt reduction.
Property value
As at 5 March 2022, Sainsbury’s estimated market value of properties, with
values based on a 25 year lease with RPI increases, including our share of
properties held within property joint ventures or investment vehicles, was
£10.9 billion (6 March 2021: £10.1 billion), with the increase primarily driven
by a reduction in property yields.
Defined benefit pensions
The Pension Scheme is valued on different bases for different purposes.
For the corporate annual accounts, the value of the retirement benefit is
calculated under IAS19 while the funding of the Scheme is determined
by the Trustee’s triennial valuation. The last triennial valuation, as at
30 September 2018, showed a deficit of £538 million. The Trustee is currently
carrying out the latest triennial valuation as at 30 September 2021.
At 5 March 2022, the net defined benefit surplus under IAS19 for the Group
was £2,283 million (excluding deferred tax). The £1,539 million increase from
6 March 2021 was driven by both changes in financial assumptions which
resulted in a net gain, an adjustment to mortality assumptions and updated
experience which lowered liabilities, in addition to gains on plan assets.
During the year, the Sainsbury’s section of the Scheme reached full funding
on the stronger, secondary funding target agreed as part of the 2018 triennial
valuation. This has resulted in one of the three streams of contributions
payable to the Scheme under the Asset Backed Contributions funding
framework switching off and another stream switching to the Argos section,
until that section is also fully funded. Total contributions to the Scheme will
therefore reduce by £15 million a year.
For 2022/23, total pension scheme cash contributions are expected to be
£62 million.
Retirement benefit
obligations
Sainsbury’s
as at
5 March
2022
£m
Argos
as at
5 March
2022
£m
Group
as at
5 March
2022
£m
Group
as at
6 March
2021
£m
Present value of funded
obligations
(8,060) (1,313) (9,373) (10,218)
Fair value of plan assets 10,158 1,535 11,693 11,000
Pension surplus 2,098 222 2,320 782
Present value of unfunded
obligations
(20) (17) (37) (38)
Retirement benefit surplus 2,078 205 2,283 744
Deferred income tax liability (562) (78) (640) (192)
Net retirement benefit
surplus
1,516 127 1,643 552
Kevin O’Byrne
Chief Financial Officer
37Strategic Report J Sainsbury plc Annual Report 2022
Governance ReportStrategic Report Financial Statements
Risk management is an inherent part of doing business; it balances
risk and reward, determined through a careful assessment of both
the potential outcomes and impact, as well as risk appetite.
Below and on the following pages, we set out an overview of our risk
management framework, the principal risks at year end, ongoing
mitigations and how these align to our strategy. The Operating
Board monitors these principal risks on an ongoing basis and flexes
mitigations where appropriate.
Our approach to risk management
Our risk management framework is designed to:
— identify key risks that are aligned to our strategy but that could
prevent us from achieving our strategic objectives
— assess the likelihood of these risks occurring, in combination with
both the reputational and financial impact they may introduce
— manage the risks through implementing appropriate mitigation
plans and controls, in line with our risk appetite
— monitor and report on our risks, associated mitigation plans
and changes to the internal/external environment to the relevant
governance fora
The following diagram provides an overview of the key risk
management activities undertaken by leadership that support this
risk framework and allow the Board to fulfil its obligations under
the UK Corporate Governance Code 2018. Please refer to page 61 for
the role and remit of these governance bodies.
Divisional leadership teams
Bottom-up risk identification
— Divisional risk maps reviewed
and challenged
— Divisional emerging risk map
reviewed
— Monitor risk mitigation plans
Governance fora
Risk identification and
monitoring
— Divisional risks relevant to fora
area of scope reviewed
— Governance forum risk maps
reviewed
Operating Board
Bi-annual Corporate risk updates
and deep dives
— Corporate risk map updated and
actions monitored
— Risk deep dives received
— Emerging risk map reviewed
Audit Committee
Corporate risk updates, deep dives
and approve risk framework
— Corporate and emerging risk maps
reviewed
— Risk deep dives received
— Risk policy and framework approved
— Internal audit reporting
plc Board
Review of risk process, corporate
risks and approval of risk disclosures
— Annual internal controls certification
by management
— Principal Risk and Uncertainty
disclosures
The plc Board has overall responsibility for risk management, the
system of internal control, and for reviewing the effectiveness of
these at least annually. As such, they have approved our principal
risks disclosure, as set out on pages 40 to 50. Certain responsibilities
have been delegated to the Audit Committee, as outlined on page 73.
COVID-19
The COVID-19 pandemic demonstrated that active risk and issue
management is an inherent part of doing business. Disruptions
to our business as a result of COVID-19 were actively managed
either through day-to-day ways of working or if needed, through
the Incident Response Team. Reflecting this, we do not have
a specific principal risk related to COVID-19, although its impact
on our principal risks continues to be assessed by the Board and
is set out where relevant, in individual risk disclosures.
Our risk management process
The Risk and Internal Audit team facilitate “bottom up” risk
workshops with divisional leadership teams to identify the key risks
which may prevent the achievement of their objectives. A risk map
is maintained for each division, setting out key risks and their gross,
net and target positions. A consolidated view of relevant risks –
and the effectiveness of mitigating activities – are also discussed
at relevant governance fora, covering safety, data governance and
operational resilience.
The Operating Board maintains the overall corporate risk map,
which captures the key risks to achieving our strategic objectives.
The Operating Board formally reviews the corporate risk map from
a “top down” perspective twice a year, to discuss and agree the
level of risk that the business is prepared to accept for each key risk.
They also review and challenge the output of the bottom up risk
process, considering new risks, movements in the position of risks
and key themes.
The target risk position for the corporate risks is also captured to
reflect management’s risk appetite, where this differs to the current
net position. This enables the Operating Board to agree and monitor
appropriate actions as required. A risk dashboard is maintained for
each corporate risk, setting out the risk, causes of the risk, key
mitigations and any actions to reach the target risk position.
Operating Board members also confirm annually that the corporate
risk map accurately reflects their view of key risk across the
organisation, that they are responsible for managing risks relevant
to their division and that internal controls exist to provide reasonable,
but not absolute, assurance that the risks in their areas of responsibility
are appropriately identified, evaluated and managed; this is also
reported to the Board.
The Risk and Internal Audit team provide the Audit Committee with
a risk management update at each meeting, which includes an
overview of changes to the corporate risk map and risk disclosures
agreed by the Operating Board for their review and comment.
38 Strategic Report J Sainsbury plc Annual Report 2022
Principal Risks
and Uncertainties
Risk and Internal Audit also provide independent assurance to
management and the Audit Committee over specific risk areas as
part of their annual audit plan; risk deep dives were also undertaken
with the Operating Board and/or Audit Committee for a selection
of principal risks, as set out over the following pages.
The Audit Committee Chair provides updates to the plc Board.
Emerging risks and opportunities
Emerging risks and opportunities are also formally reviewed
in the year as part of the bottom up divisional risk management
process. This allows emerging risks to be considered and
discussed by each division and then collated to perform
a business-wide assessment of how emerging risks and
opportunities may impact our business, considering their
potential timeframe and degree of certainty. The outcomes
are reported to the Operating Board and Audit Committee
and relevant actions are agreed.
Independent review of our risk management
framework
During the year, an independent review of our risk management
framework was carried out by a Big 4 firm; this review confirmed
that we are compliant with the Risk Management requirements of
the UK Corporate Governance Code. Actions to further enhance risk
management activities were agreed in line with management’s
appetite. In particular, work continues to define the risk appetite
for each corporate risk.
Changes to principal risk disclosures
As described above, the principal and emerging risks are discussed
and monitored throughout the year to identify and respond to
changes in the risk landscape.
The key change to the risks during the year relates to our previous
“Environment and sustainability” principal risk. The risk has been
expanded and broadened in line with the launch of our Plan for
Better strategic priority (see page 13), which includes our previous
Net Zero commitments, but has been broadened to include our
responsibilities towards putting our planet and people at the core
of our business. There are two key changes.
Firstly, the principal risk now also considers our social objectives, for
example, to leave a measurable positive impact on the communities
we serve and source from and to make Sainsbury’s an inclusive place
to work and shop.
Secondly, we consolidated all climate resilience risks – the impact
of changes to the environment on our business model – under this
principal risk, where previously climate resilience risks were assessed
within each of the relevant principal risks. This change also reflects
the related governance and oversight processes.
As a result, we are reporting this as a new risk, have renamed it
“Environment and social sustainability” and given its increased
scope, have reset the associated gross, net and target risk positions.
Further information on our ongoing implementation of the TCFD
recommendations can also be found on page 17.
The net position of all other corporate risks remain unchanged from
last year.
Our Principal Risks
The most significant principal risks identified by the Board and the
associated mitigations are set out below. This year, we have ordered
them to first show those that have been included in the risk modelling
undertaken as part of the preparation of the viability statement
(see page 51). This reflects that these have the potential to have
the largest impact on the business and is indicated with the
following symbol:
The other principal risks are then set out in no priority order.
We have also more clearly drawn out the link between each principal
risk and the group’s key performance indicators (see page 30)
and continue to highlight the link with the strategy of the business,
as follows:
Food First
Brands that Deliver
Save to Invest
Connected to Customers
Plan for Better
The net risk movement from the prior year for each principal risk and
uncertainty has been assessed and is presented as follows:
No
change
Increased net
risk exposure
Reduced net
risk exposure
NEW
New
risk
Mitigations in place, supporting the management of the risk to a net
risk position, are also described for each principal risk.
Ukraine
We continue to monitor the situation in Ukraine and the
associated impacts this may cause across our principal risks,
with regard to our customers, our colleagues and our
supply chain.
39Strategic Report J Sainsbury plc Annual Report 2022
Governance ReportStrategic Report Financial Statements
Business continuity, operational resilience and major incident response
Risk Mitigations
A major incident or catastrophic event could affect the business
or its individual brands’ ability to trade. Sainsbury’s exposure to
operational resilience and major incident risks may be greater
because of operational complexities and some ageing systems.
COVID-19 continued to impact the business throughout the year.
For example, increased costs of global supply chains, the availability
of colleagues both within Sainsbury’s and our suppliers and differing
responses across the devolved nations. These disruptions are actively
managed either through day-to-day ways of working or if needed,
through the Incident Response Team.
— The Group Operational Resilience Committee (GORC) meets
quarterly, chaired by the CFO, with support from the Company
Secretary and Chief Information Officer. The GORC sets the
operational resilience strategy for the business and monitors
progress against this
— The Operational Resilience Committee, which includes
representatives from functions across Sainsbury’s, including
the Bank, meets regularly to implement the operational
resilience policy and strategy
— Business-wide resilience exercises are undertaken to imitate real
life business continuity scenarios and test our ability to respond
effectively. This includes testing our emergency call cascade.
Actions in response to lessons learnt are agreed
— Key business processes are assessed for operational resilience
against a set of minimum standards and contingency measures
regularly tested. Remote working solutions have reduced the risk
of loss of a key site
Crisis management
— In the event of any unplanned or unforeseen events, the Incident
Response Team (IRT) is convened to manage the response and
any associated risk to the business
— The IRT Chair reports to the Operating Board, which provides
strategic direction and decision making across financial,
operational and regulatory matters, considering all stakeholders
— The IRT was convened at various times through the year including
to respond to the high demand for fuel, the impact of the Omicron
variant on business operations, Storm Eunice and to co-ordinate
contingency measures with supplier challenges
Direct oversight: Group Operational Resilience Committee
Link to strategy:
Link to key performance indicators: N/A
Movement:
40 Strategic Report J Sainsbury plc Annual Report 2022
Business strategy and change RISK DEEP DIVE
Risk Mitigations
The strategy requires significant, concurrent change activities to be
delivered in the right sequence and at pace to drive business value.
Key risks associated with this include an inability to prioritise
resources to deliver competing change activities and/or not having
the right skills, capabilities and culture in place to deliver and embed
the required changes/within required timescales.
— Our business strategy, as set out in this Strategic Report,
is focussed on the following priorities:
— Food First
— Brands that Deliver
— Save to Invest
— Connected to Customers
— Plan for Better
— We have created the new role of Chief Transformation Officer to
drive end to end transformation. This will mean we can bring
together all of the key elements of transformation across the
business and ensure that we deliver on our Save to Invest priority,
making the business simpler and more efficient, while reducing
costs to support our plans to Win in Food and create Brands
that Deliver
— The Operating Board has regular sessions to discuss strategy,
supported by a dedicated Strategy team. The Operating Board
engages with a wide range of stakeholders – including shareholders,
colleagues, customers and suppliers – to ensure our strategy
remains relevant. Reflecting this, one of our strategic priorities,
Net Zero 2040, was broadened this year to set out our sustainability
goals across three critical areas. See page 13 for more detail on
Plan for Better.
— To ensure focus is maintained on delivering the strategic priorities
of the business, new transformational change projects are
approved by the Business Performance Review (BPR) forum,
once they have been through robust challenge on expected costs
and benefits, proposed timeframes for achieving the benefits
and risks associated with their delivery. The BPR also monitors
and reviews the “in year” implementation of the plans to meet
budget targets
— This year, to further develop the culture required to deliver
our strategy, we launched our Valued Behaviours – Own It,
Make It Better and Be Human. These Valued Behaviours were
communicated widely across our business and they have been
embedded in all our development materials, performance
management and recruitment processes
Direct oversight: Business Performance Review, Operating Board
Link to strategy:
Link to key performance indicators: All metrics, associated with
our objective of delivering for customers and driving stronger
financial results
Movement:
41Strategic Report J Sainsbury plc Annual Report 2022
Governance ReportStrategic Report Financial Statements
Customer
Risk Mitigations
Our business includes Sainsbury’s, Argos, Habitat, Tu clothing, Nectar
and Sainsbury’s Bank. The business, across all brands, must continue
to evolve to meet customer needs and maintain customer loyalty.
A failure to align with, and respond to changes in customer sentiment,
behaviours, expectations and circumstances, exacerbated by changes
in customer behaviours as the COVID-19 pandemic continues to evolve,
will impact our ability to retain existing and attract new customers.
— The Customer, Commercial and Channels Forum, chaired by the
Chief Marketing Officer, is responsible for ensuring the customer
is at the heart of our decision making
— Customer trends, attitudes and behaviours are continually
monitored over time through their response to our propositions
and feedback, as well as reviewing future customer and macro
trends on a quarterly basis, to help set our future direction
— We continue to invest in digitising the Nectar Loyalty scheme
which provides us with a rich source of customer data and insight
that is reviewed and embedded right across our business
— We continued to focus on value, quality, and convenience,
reflecting both what our existing customers want and what will
attract new customers
— In terms of value and quality, we delivered the Sainsbury’s Quality,
Aldi Price Match campaign throughout the year, refreshing it
regularly to respond to customer feedback, launched 1,950 new
products and introduced Nectar Prices, providing personalised
pricing for customers
— In terms of convenience, we continue to monitor and flex our
ways of working to meet customer demand for how they want to
shop, particularly as the COVID-19 pandemic continues to evolve.
As well as our traditional channels, we have invested in our
contactless channels such as SmartShop, Click & Collect and
Groceries Online. In particular, SmartShop Mobile Pay has now
also been rolled out to nearly all convenience stores
— We continue to innovate and trialled our first SmartShop Pick
& Go store during the year to gain customer feedback
Direct oversight: Operating Board and Sainsbury’s Bank Management
Board; Customer, Commercial and Channels Forum
Link to strategy:
Link to key performance indicators: Customer satisfaction
Movement:
Data security RISK DEEP DIVE
Risk Mitigations
It is essential that the security of customer, colleague and company
confidential data be maintained. A major breach of information
security could have a significant negative financial and reputational
impact on the business. The risk landscape is increasingly challenging
with deliberate acts of cybercrime on the rise, targeting all markets
and heightening the risk exposure to broader business disruption as
well as to data breaches.
— A Data Governance Committee (DGC) is in place to oversee the
management of colleague, customer and commercial data,
information security and associated awareness and training.
Metrics to measure alignment to risk appetite are discussed in
each meeting of the DGC
— The Data Governance and Information Security function, with
the support of colleagues in the Technology division, continue to
develop information security strategies and to build the necessary
capability to respond to the increasing number and sophistication
of attacks, alongside focusing on improving how we handle data
and protect systems across the organisation
— A suite of information security policies are in place, which focus
on encryption, network security, access controls, system security,
data protection and information handling
— All colleagues are required to complete mandatory training on
how to keep our information safe. This is supplemented by regular
colleague awareness campaigns, focusing on specific aspects of
data and information security, for example e-mail phishing exercises,
with results reported to the DGC
— Reviews of key third parties who hold sensitive customer or
colleague data continue to take place and progress is monitored
by the DGC
— A risk based security testing approach across IT infrastructure
and systems is in place to identify and address vulnerabilities and
allow us to adapt and improve our defences
Direct oversight: Data Governance Committee
Link to strategy:
Link to key performance indicators: N/A
Movement:
42 Strategic Report J Sainsbury plc Annual Report 2022
Financial and treasury RISK DEEP DIVE
Risk Mitigations
The main financial risk relates to availability of short and long-term
funding to meet business needs and fluctuations in interest, commodity
and foreign currency rates.
— Treasury policies, approved by the plc Board, are in place to
address liquidity, refinancing, financial markets and counterparty
credit risks. In addition, the business funding strategy is approved
annually by the plc Board
— The Treasury function is responsible for managing liquid
resources, funding requirements, commodity, interest rate and
currency exposures as set out in line with the Treasury policy
and overseen by the Treasury Committee
— The Audit Committee reviews and approves the viability and
going concern statements on an annual and half-yearly basis
respectively
— The Treasury function has clear operating procedures and
adherence to these is regularly reviewed and audited
— A long-term funding plan is developed as part of the annual
corporate plan process, which includes an assessment of short
and long-term core funding requirements and contingent funding
requirements
— A short-term funding plan is formalised as part of the annual
budget process, which includes an assessment of the core and
contingent funding requirements for the following year and
the market conditions for each of the debt markets accessible
to the business
— There is a long-term funding framework in place for the pension
deficit and there is ongoing communication and engagement
with the Pension Trustees
— Detailed cashflow forecasts are produced by the Finance and
Treasury functions. Finance commercial reviews are also held
each period, chaired by the CFO, with relevant actions and
mitigations agreed
— Financial and Treasury risks in respect of Sainsbury’s Bank are
detailed separately
Direct oversight: The Board of J Sainsbury plc
Link to strategy:
Link to key performance indicators: Retail free cashflow: £500m+
pa average
Movement:
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Health and safety RISK DEEP DIVE
Risk Mitigations
Prevention of injury or loss of life for both colleagues and customers
is of utmost importance and is paramount to maintaining the
confidence our customers have in our business.
In the last year, the impact of COVID-19 has continued to affect the
health and safety of our customers and colleagues. This was and
continues to be actively managed, although many of our mitigations
are now part of day-to-day ways of working.
— The Group Safety Committee (GSC) met four times during the
year, receiving detailed reports on a wide range of topics including
COVID management and control, growth of online operations,
building fabric review and safety training. The GSC were also
supported by additional working groups to manage the ever-
changing risks associated with COVID-19
— In particular, the Customer Journey Team ensured COVID-19
mitigations throughout Sainsbury’s were proportionate and
aligned with legislation
— The Operating Board receives quarterly reports on safety, including
an annual deep dive facilitated by the Head of Group Safety, who
also provided an annual safety update to the plc Board
— Clear policies and procedures are in place detailing the controls
required to manage health and safety across the business, aligned
to Assured Primary Authority advice, to comply with all applicable
regulations. These cover the end-to-end operations, including the
auditing and vetting of construction contractors and the health
and safety processes in place in our depots, stores, offices and for
home working colleagues
— Process compliance is supported through oversight from our
Primary Authority, internal training programmes and management
monitoring, all which align to both health and safety laws and
our internal policies. We invested in technology solutions to direct
and monitor process completion, with oversight provided by field
teams in both Safety and Internal Audit
— The new Group Head of Health, Safety and Insurance was
appointed in June 2021 and completed a full review of the Safety
team and processes. As a result, new measures of success were
defined. Key areas include a renewed focus on reducing harm
and its associated costs by removing unnecessary complexity
and enhancing the use of data to prioritise the team’s work
Direct oversight: Group Safety Committee
Link to strategy:
Link to key performance indicators: N/A
Movement:
44 Strategic Report J Sainsbury plc Annual Report 2022
Political and regulatory environment
Risk Mitigations
There is a trend of increasing regulation, together with enforcement
action, across all areas of our business. This increases the risk of
non-compliance, adds additional cost as we respond to the
regulations and drives complexity into our business processes.
— We complete a bi-annual risk assessment to review key
regulatory risks, which functions are impacted and at a high level,
how they are managed
— Accountability and responsibilities for key regulatory risks are
confirmed as part of this. Our key regulatory risks include
Competition Law, GDPR, GSCOP and Anti-Bribery and Corruption.
A high-level of assessment of the key elements of a compliance
framework for each of these key risks is completed and the
results are shared with the Operating Board
— Mandatory training is in place for the key regulatory areas,
including data governance, anti-bribery and corruption,
competition law and GSCOP
— In terms of emerging regulatory risk, we liaise with external
parties and our internal stakeholders to monitor changes to
existing regulations that would impact the business, so that we
can respond appropriately. Areas of focus remain the same as
the previous year and include:
— the impact of complying with the post-Brexit regulatory
and enforcement regime, including what it means to be
trading under both UK and EU regulations in Ireland and the
implications of any changes to the NI Protocol
— responding to proposed new rules associated with high fat,
sugar and salt products, plastic, packaging and food waste
— anticipating and responding to emerging areas of regulatory
focus on environment and climate change, and associated
reporting requirements
— As a responsible business, we proactively engage with Government,
devolved administrations, regulators and industry bodies in the
areas in which we operate, on public policy issues impacting
our customers and colleagues. Our engagement is transparent,
and we allow our responses to government consultations to be
made public
Direct oversight: Operating Board
Link to strategy:
Link to key performance indicators: N/A
Movement:
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Product safety and sourcing
Risk Mitigations
Failure to manage safety and sourcing risks for both food and
non-food products leads to injury or loss of life, breach of regulation
and/or reputational damage.
— Clear policies and procedures are in place detailing the controls
required to manage product safety, product fraud and ethical
risks across the business and to comply with all applicable
regulations
— These cover the end-to-end operations, including safety processes
in place in our depots and stores and the quality management
controls in place to ensure product safety and integrity
— During the year, Food Safety policies were refreshed and
simplified to ensure they were clear to colleagues and suppliers
— In addition, established supplier audit and product testing
programmes are in place to support rigorous monitoring of
supplier sites, product safety, traceability, integrity and ethical
issues, including modern slavery. Where on-site visits are not
allowed due to COVID-19 restrictions, remote audit and assurance
programmes are in place
— Product recall escalation procedures are in place to quickly resolve
issues for food and non-food product incidents
— Supplier terms, conditions and product specifications set clear
standards for product/raw material safety and quality with which
suppliers are expected to comply
— The Group Safety Committee receive regular reports on product
safety from the Director of Technical, Food, Head of Technical
& Ethical, GM&C and from the Group Head of Health, Safety
and Insurance on operational food safety risks. In addition, the
Corporate Responsibility & Sustainability Committee discussed
matters related to product sourcing risk, including supply chain
transparency, modern slavery and human trafficking
Direct oversight: Group Safety Committee
Link to strategy:
Link to key performance indicators: N/A
Movement:
46 Strategic Report J Sainsbury plc Annual Report 2022
Sainsbury’s Bank
Risk Mitigations
Sainsbury’s Bank is exposed to a number of risks, including those
related to operational, regulatory, credit, capital, funding, liquidity
and market risks.
The COVID-19 pandemic means uncertainty around the economic
outlook will continue, particularly with regard to how the path of
inflation, interest rates and levels of unemployment will evolve.
This is actively managed through our normal economic scenario
modelling analyses and corresponding playbooks.
— The Bank is managed through defined governance structures that
include the Board of Sainsbury’s Bank plc, its Risk Committee and
Audit Committee. The Board of Sainsbury’s Bank plc is comprised
of Executive Directors, independent Non-Executive Directors and
a J Sainsbury plc Executive Director
— The Bank has a defined risk appetite aligned to delivery of
strategic objectives and has implemented a risk management
framework that is overseen by its Risk Committee. This
Committee monitors the effectiveness of risk management
activities against strategic, operational, compliance and financial
risks, and is updated on, and discusses, emerging risk areas.
In particular, the Risk Committee reviews the results of stress
testing including the internal Liquidity and Capital Adequacy
Assessments
— The actual management of risks is through an executive
governance structure, which manages the day-to-day operations
of the business. This includes the Sainsbury’s Bank Management
Board, an Executive Risk Committee and an Asset and Liability
Committee
— Oversight by J Sainsbury plc is provided through:
— Membership of the Board of Sainsbury’s Bank plc –
one J Sainsbury plc Operating Board member is on the
Board of Sainsbury’s Bank plc and provides updates to
the Board of J Sainsbury plc on Bank matters
— Updates on key matters arising from meetings of the
Risk Committee and Audit Committee are reported to
the J Sainsbury plc Audit Committee
— There are a number of reserved matters that require
Sainsbury’s Bank plc to obtain permission from J Sainsbury plc
Direct oversight: The Boards of J Sainsbury plc and Sainsbury’s
Bank plc
Link to strategy:
Link to key performance indicators: N/A
Movement:
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Trading environment and competitive landscape
Risk Mitigations
We operate in a highly competitive market during a time of
economic uncertainty, primarily driven by the COVID-19 pandemic.
Whilst the UK has now left the European Union, uncertainties
around the final trading relationship with Northern Ireland and
UK border checks create additional complexities for our business
and our suppliers.
With the outlook set to remain broadly the same for the immediate
future, we need to respond appropriately to external market
conditions while maintaining clear focus on delivering our strategic
objectives.
We also need to be mindful of the ongoing risk of supplier failure,
either through insolvency or through an inability to deliver products
due to global supply chain challenges.
— We have a wide, differentiated portfolio of brands, including
Sainsbury’s, Argos, Habitat, Tu clothing, Nectar and Sainsbury’s Bank,
which provides some inherent resilience to unforeseen changes
— We continually monitor current market trends and price points
across competitors, and respond through actively managing price
positions, developing sales propositions and adjusting promotional
and marketing activity
— We put the customer at the heart of our decision making to
ensure we retain existing and attract new customers – see the
“Customer” principal risk for further details
— We are in regular contact with the government and other external
bodies to understand decision making in relation to Northern
Ireland so we, and our suppliers, can adapt our ways of working
as needed
— In terms of supplier continuity specifically, we maintain regular,
open dialogue with key suppliers concerning their ability to trade
and collaborate with them on solutions where appropriate. This
year, we subsumed the operations of one key supplier into our
business, to ensure continuity of supply
— Reflecting the impact of COVID-19 on global supply chains, we
have continued to work collaboratively with all our suppliers this
year to maintain availability of products for the customer. Actions
taken include onboarding alternate suppliers, rationalising
products and providing logistics support
Direct oversight: Customer, Commercial and Channels Forum;
Operating Board
Link to strategy:
Link to key performance indicators: Grocery market share
performance
Movement:
48 Strategic Report J Sainsbury plc Annual Report 2022
Colleague engagement, retention and capability
Risk Mitigations
The business employs over 171,000 colleagues who are critical to the
success of our business. Attracting talented colleagues, investing
in training and development and rewarding colleagues fairly are
all essential to the sustainability of our operations. An inability to
attract, motivate and retain talent, specific skillsets and capability
impacts our ability to deliver our strategic objectives. The availability
of skills in specific areas is a key area of focus.
COVID-19 continues to affect our store, depot and office-based
colleagues. Many of our mitigations are now part of day-to-day ways
of working.
The challenging trading environment requires a focus on efficient
operations, which may include change initiatives that affect colleagues,
impacting trust or engagement.
— Employment policies and remuneration and benefits packages
are regularly reviewed and are designed to be fair, consistent
andcompetitive. Our base rate of pay for Sainsbury’s and Argos
store colleagues is £10 an hour nationally, ahead of the Living
Wage, and £11.05 an hour in London, in line with the London
Living Wage. Over the course of the year, we also made
exceptional payments for areas with specific skills shortages,
for example drivers
— We have processes in place to nurture talent and provide fulfilling
career opportunities. Formal processes are in place to discuss
performance and development, identify talent, actively manage
succession planning and enable colleagues to progress into
management roles
— We have invested in leadership immersion sessions focused on
our new valued behaviours, as well as ongoing behavioural and
leadership development, to build capability and support a positive
working culture
— We continue to take action to be an inclusive place to work.
We’ve set stretching gender, ethnically diverse and Black
representation targets for 2024, which form part of our leaders’
long-term incentives
— We continue to listen closely to colleagues to inform and adapt
our future plans and actions. Our annual colleague survey was
updated this year to ensure we are measuring the things that
matter most to our people and that support the culture we
seek to have
— In September 2021, we went live with our new hybrid ways of
working, giving colleagues greater flexibility to come together
in our offices, stores and depots for collaboration, coaching or
community purposes and work remotely the rest of the time
— We design and run specific programmes to target hard to recruit
areas, presenting a wide range of opportunities for colleagues
from across our business, as well as attracting new talent.
We have introduced a new HGV driver apprenticeship as well
as an HGV driver academy
— We have upweighted our recruitment teams, to support hiring
in difficult and competitive markets, and embraced new ways
of attracting talent
Direct oversight: Operating Board
Link to strategy:
Link to key performance indicators: Colleague engagement
Movement:
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Environment and social sustainability RISK DEEP DIVE
Risk Mitigations
Understanding and mitigating the impact of the climate on our
business operations, reducing our environmental impact as well
as using our size and scale as a business to have a positive impact
on society and our communities is a core part of our strategy.
During the year, the Plan for Better strategic priority was launched,
putting our responsibilities towards our planet and people at the core
of our business.
Reflecting this, this risk was broadened from focussing on our
Net Zero commitments, to include consideration of environmental
and social sustainability risks and the impact of climate change on
our business operations; the latter was previously considered within
each relevant Principal Risk. As a result, the gross, net and target
positions of this risk were reset.
— The Corporate Responsibility & Sustainability (CR&S) Committee
provides oversight of the Plan for Better strategy. The CR&S
Committee, Plan for Better Steering Committee and Audit
Committee review and approve our external reporting and
provide oversight of programme risks
— Our Plan for Better strategy, explained on page 13 of this report,
was launched this year and sets out our environmental and social
sustainability goals across our whole business, outlining our
priority areas of focus, our key commitments and our progress
against these. We have identified areas which matter most to our
stakeholders, have the greatest impact on our business and which
are aligned to the UN Sustainable Development Goals, so that we
can make the biggest difference
— Our Plan for Better strategy has three interlocking pillars:
Better for you, Better for the planet and Better for everyone
— The Plan for Better Steering Committee (Steering Committee)
met six times during the year and provided regular updates
to the CR&S Committee and to the Operating Board as required.
This Steering Committee oversees delivery of the Plan for Better
programme, supported by three working groups responsible
for driving and executing the strategy
— One of our key metrics to measure and report on Plan for Better
performance is our progress towards becoming Net Zero across
our own operations by 2035 and supply chain by 2050. We will
continue to monitor our progress in achieving our targets, flexing
our approach as needed. We also publicly report on progress
towards achieving our Net Zero targets, as well as our other targets
within Plan for Better twice a year, to ensure transparency
— See page 17 for more information on our ongoing implementation
of the TCFD recommendations
Direct oversight: CR&S Committee, Plan for Better Steering
Committee
Link to strategy:
Link to key performance indicators: Plan for Better commitment
Movement:
NEW
50 Strategic Report J Sainsbury plc Annual Report 2022
Statement of Viability
1 How Sainsbury’s assesses its prospects
The Group’s business activities and strategy are central to assessing
its future prospects. These, together with factors likely to affect its
future development, performance and position are set out in the
Strategic Report on pages 1 to 53. The financial position of the Group,
its cash flows and liquidity are highlighted in the Financial Review
on pages 32 to 37.
The Group manages its financing by diversifying funding sources,
structuring core borrowings with long-term maturities and maintaining
sufficient levels of committed funding via the Revolving Credit
Facility. Maintaining a suitable level of undrawn additional funding
capacity minimises liquidity risk.
The Group’s prospects are assessed primarily through its corporate
planning process. This includes an annual review which considers
profitability, the Group’s cash flows, committed funding and
forecasted future funding requirements over three years, with a
further two years of indicative movements. As part of the strategic
planning process, the Directors make a number of assumptions
about business performance and the availability and effectiveness
of mitigating actions available to the Group. In particular, cashflow
forecasting gives visibility of the Group’s headroom, comparing net
debt to the level of committed facilities over the planning period.
The most recent corporate plan was signed off in October 2021, and
refreshed in March 2022, as part of the normal budgeting process.
This is reviewed by the Operating Board and ultimately by the PLC
Board with involvement throughout from both the CFO and CEO.
Part of the Board’s role is to consider the appropriateness of any
key assumptions, taking into account the external environment,
business strategy and model.
In its assessment of the Group’s prospects, the Board has taken
into account:
— The Group’s Food First strategy. This strategy is putting
food back at the heart of Sainsbury’s and offering customers
great value andhigh quality products. The strategy aims to
deliver profitable volume growth while reshaping our business.
— Inflationary pressures. As we emerge out of the COVID-19
pandemic, the Group is now seeing high levels of inflation with
external forecasts indicating this could continue and limit
discretionary spend.
— Climate change considerations. The Group’s most recent
corporate planning and budgeting processes includes assumed
cashflows toaddress climate change risks, including costs
associated with initiatives in place as part of the Plan for Better
commitment which include reducing environmental impacts
and meeting customer expectations in this area, notably through
reducing packaging and reducing energy usage across the estate.
— The Group’s financial position. The Group has materially
reduced net debt and improved its net asset position over the past
year. Furthermore, the Revolving Credit Facility, which enables the
Group to maintain sufficient levels of contingent funding, has two
Facilities; a £300 million Facility (A) and a £1,094 million Facility
(B). Facility A has a final maturity of April 2025 and Facility B has
a final maturity of October 2024. As at 5 March 2022, the Revolving
Credit Facility was undrawn.
2 The assessment period
The Directors have determined that the three years to March 2025
is an appropriate period over which to provide its viability statement.
This was considered the appropriate timeframe by the Directors
because:
— This period is consistent to that used for the Group’s corporate
planning process as detailed above, and reflects the Directors’
best estimate of the future prospects of the business.
— The Group does not earn revenue through long-term contracts.
Therefore, changes to the Group’s Corporate Plan are predominantly
impacted by sales and cost assumptions. These are more difficult
to predict beyond a three-year time-horizon. Both have been
stress-tested as part of the viability assessment.
3 Assessment of viability
To make the assessment of viability the following has been performed:
— Scenarios have been modelled over and above those in the
corporate plan, based upon a number of the Group’s principal risks
and uncertainties (as documented on pages 38 – 50). The scenarios
were overlaid into the corporate plan to assess the potential
impact on net debt of one or more of these crystallising over
the assessment period, and have been tested in isolation and
in combination with one another. The impact of the movements
in net debt on the Group’s funding headroom were then assessed.
Where required, available mitigating actions to maintain funding
headroom were considered as part of the assessment. These
include reducing any non-essential capital expenditure and
operating expenditure on projects, bonuses and dividend payments.
— Reverse stress-testing was performed to determine the extent to
which cash flows would need to deteriorate before fully-utilising
the Group’s funding headroom, and after taking into account any
mitigating actions as detailed above.
Whilst each of the risks on pages 38 – 50 has a potential impact and
have been considered as part of the assessment, only those that
represent severe but plausible scenarios were selected for modelling
through the corporate plan.
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All scenarios modelled and their link to the Group’s Principal Risks and Uncertainties are detailed below:
Scenario modelled Link to Principal Risk
Scenario 1 – Cost of Living scenario
Despite the Group’s positive performance in the past 2 years in light of the COVID-19 pandemic, the Group is now
seeing high levels of inflation with external forecasts indicating this could continue and limit discretionary spend,
particularly impacting General Merchandise & Clothing (GM&C).
Assumptions:
— Sales – volume losses in Argos, Sainsbury’s GM&C and Fuel sales in line with the 2008 recession phasing have
been applied to forecast sales
Failure to align with and respond
to changes in customer sentiment,
expectations and circumstances
exacerbated by uncertainties around
post COVID-19 customer behaviour
Inability to recover from catastrophic
incidents and respond effectively to
major incidents
Scenario 2 – Food inflation impacts on margin
Whilst Food inflation is unlikely to lead to lower sales given large elements are an essential purchase, it may cause
increased competitive pressure and so lower margins generated on those sales.
Assumptions:
— Margin – this scenario models the competing away of margins in grocery sales to attract customers during
this inflationary period
Trading environment and
competitive landscape
Scenario 3 – Data and legal breaches
The impact of any regulatory fines has been considered. The largest considered are the General Data Protection
Regulation (“GDPR”) fine for data breaches, and fines levied by the Groceries Supply Code of Practice (“GSCOP”).
Assumptions:
— Costs – amount paid for regulatory fines
Data security
Health and safety, people and
product
Political and regulatory environment
Scenario 4 – Sainsbury’s Bank capital and liquidity requirements
We have considered the strength of the Bank’s capital and liquidity positions to withstand extreme-but
plausible stress scenarios such as a pandemic, or political instability leading to high unemployment and
very low interest rates.
Assumptions:
— Sales – reflecting another severe COVID-19 stress as per the Annual Concurrent Stress testing release by
the Bank of England
Sainsbury’s Bank
Scenario 5 –Failure to deliver sustainable cost savings
Delays in delivering the Save to Invest programme, which would have an impact of circa. £150 million in each year
of the assessment period, were considered.
Assumptions:
— Costs – additional costs of c. £150m per annum as result of failure to deliver cost savings
Business strategy & change
Reverse stress test
In addition to modelling regulatory fines and price investments as above, the level of forecast sales decline
required before the Group fully utilises its available funding and mitigations was considered. The required
reduction was considered extreme and implausible.
In performing the above analysis, the Directors have made certain
assumptions around the availability and effectiveness of the
mitigating actions available to the Group.
The scenarios above are hypothetical and severe for the purpose
of creating outcomes that have the ability to threaten the viability of
the Group; however, multiple control measures are in place to prevent
and mitigate any such occurrences from taking place.
In year one, the modelling has shown that the business is able to
withstand a combination of all of the scenarios and still maintain
funding headroom. For years two and three, none of the scenarios
modelled individually fully utilised the funding headroom. However,
all of the scenarios modelled together would fully utilise the funding
headroom at three individual and isolated periods. Management does,
however, have controllable mitigating actions available as detailed
above with which to respond that ensure the Group remains viable.
Taking into account the Group’s current prospects and principal risks
and uncertainties, the Directors confirm that they have a reasonable
expectation that the Group will be able to continue in operation and
meet its liabilities as they fall due over the three years to March 2025.
Consideration was also given to the conflict in Ukraine which has
continued to develop subsequent to the Group’s balance sheet date.
Inflationary pressures which may be caused by the conflict have
already been embedded in Scenarios 1 and 2 documented above.
Thus it was concluded that the impact of the conflict in Ukraine does
not impact the conclusions reached over going concern and viability.
4 Going concern
As a consequence of the work performed to support the viability
statement above, the Directors also considered it appropriate to
adopt the going concern basis in preparing the financial statements
which are shown on pages 99 to 199.
52 Strategic Report J Sainsbury plc Annual Report 2022
The following aligns to the non-financial reporting requirements
contained in sections 414CA and 414CB of the Companies Act 2006
and reflects our commitment to and management of the environment,
colleagues, social matters, human rights and anti-bribery and
anti-corruption.
Environment
The food we eat and how that food is produced, sourced, packaged,
and disposed of has major consequences on the environment.
We want to help everyone eat better and, through our sustainability
agenda, we are helping to drive lasting, positive change in the UK
and internationally. We are committed to playing a leading role in
offering affordable food that supports healthy and sustainable diets
and helps customers reduce their impact on the planet, one plate at
a time. This year we launched Plan for Better, our new sustainability
plan covering our environmental and social commitments, which is
integrated into our business strategy. Our Plan for Better sets out our
sustainability goals across the whole business, priority areas of focus,
key commitments and our progress. We have identified areas which
matter most to our stakeholders and are aligned to the UN Sustainable
Development Goals, so that we can make the biggest difference.
We announced the acceleration of our carbon emissions target to
become Net Zero in our own operations by 2035, five years earlier
than our original ambition. You can read more on our Net Zero plan
on page 16. We also announced our commitment, alongside other
retailers, to work with the WWF to halve the environmental impact
of UK supermarket baskets by 2030.
This year we were the Principal Supermarket Partner of COP26,
the UN Climate Change Conference, which took place in Glasgow
in November 2021. You can read more about our Plan for Better,
which includes our participation at COP26, on pages 13 to 17, in our
Non-financial KPIs on page 30, in our Principal risks and uncertainties
on page 50 and in our CR&S Committee Report on pages 71 to 72.
Our policies support our approach to the environment and help our
suppliers meet our sustainability goals. They include our Sustainable
Sourcing Policy Goods for Resale, which helps support suppliers to
effectively carry out their ethical trading responsibilities and meet
Sainsbury’s ethical commitments. It also outlines how suppliers
should implement our Code of Conduct for Ethical Trade, including
protection of the environment. The policy can be found on our
website https://www.about.sainsburys.co.uk/sustainability.
Colleagues
We want to be a place where people love to work and shop. This
means being an inclusive employer where colleagues are treated
fairly and with respect, where they are encouraged to develop their
skills and fulfil their potential. Rewarding our colleagues has been
a real focus for the business over the last two years. Read more
on our colleagues in our Plan for Better section on pages 13 to 14,
Engaging with our stakeholders and our Section 172 statement on
page 25, our Non-financial KPIs on page 30, and in the Board diversity
policy in our Nomination Committee Report on page 69.
Social matters
We have a long history of building partnerships and delivering great
impact in our communities, locally and internationally. We are
committed to supporting social cohesion, economic prosperity and
inclusive growth and we aim to positively impact those in need through
fundraising, volunteering, donations and by raising awareness.
Read more about our communities in our Plan for Better section on
pages 13 to 17, and the CR&S Committee Report on pages 71 to 72.
Human rights
Our customers want to be confident that the people who make,
grow or sell our products are not being exploited or exposed to
infringements on their human rights. Although the primary duty
to protect human rights sits with national governments, we fully
recognise our responsibility as a company to respect human rights
throughout all our operations. Our commitment covers all aspects
of our business, our colleagues, customers and suppliers and is
supported by our Human Rights Policy. We do not tolerate any
form of human rights abuse within our business or supply chains.
Through our due diligence processes, we seek to identify, prevent and
mitigate adverse human rights risks that are linked to our operations,
products or services and deal with any adverse impacts caused.
You can read more about human rights in our Plan for Better section
on pages 13 to 17. Our Modern Slavery Statement can be found at
www.about.sainsburys.co.uk.
Anti-corruption and anti-bribery
Our values form the framework which guides the behaviours of all
colleagues across the business. We expect all our colleagues and
contractors to act with honesty and integrity and never to engage in
any activity which could be considered as accepting a bribe or giving
a bribe. Our Anti-Bribery and Corruption Policy provides guidance
and expectations on our colleagues’ responsibilities and behaviour,
and our expectations to prevent bribery and fraud. We have a
Disciplinary and Appeals Policy to help encourage everyone to
achieve and maintain our rules and standard of conduct, attendance,
capability and performance. Our Whistleblowing Policy covers how
to report wrongdoing when honesty and integrity are compromised.
More information on whistleblowing can be found on page 75.
Other information
Other information to support this statement can be found as follows:
— Description of our business model on page 7
— Task Force on Climate-related Financial Disclosures (TCFD)
on pages 17 to 23
— Non-financial KPIs on page 30
— Principal risks and uncertainties on pages 38 to 50
— Statement of Viability on page 51
— Audit Committee Report on pages 73 to 77
— All of our public policies, reports, codes and standards are
available at www.about.sainsburys.co.uk
The Strategic Report was approved by the Board of Directors and
signed on its behalf by:
Kevin O’Byrne
27 April 2022
53Strategic Report J Sainsbury plc Annual Report 2022
Governance ReportStrategic Report Financial Statements
Non-financial
information statement
Martin Scicluna
Chairman
C
N
Appointment to the Board: 1 November 2018.
Martin joined the Board as Chairman Designate
and Non-Executive Director on 1 November 2018.
He was appointed Chairman of the Board on
10 March 2019.
Skills and experience: Martin brings a wealth
of experience from over 25 years’ service as an
executive and non-executive board director at
a wide range of companies.
Career experience: Previous roles include
Chairman of RSA Insurance Group plc, Chairman
of Great Portland Estates plc, Senior Independent
Director and Chair of the Audit Committee of
Worldpay Inc., and Non-Executive Director and
Chair of the Audit Committee of Lloyds Banking
Group plc. He was a partner at Deloitte LLP for
26 years, serving as Chairman from 1995 to 2007,
where his clients included Dixons, WH Smith,
Alliance Unichem and Cadbury.
External appointments: None.
Specific contributions to the Company:
Martin has extensive experience as a Chair.
He brings valuable knowledge and skills in
developing strategy and evaluating business
opportunities, along with understanding of the
financial services sector and how it operates.
Martin also led a robust selection process,
culminating in the appointment of Simon Roberts
as Sainsbury’s Chief Executive Officer.
Independent: Upon appointment.
Simon Roberts
Chief Executive Officer
C
Appointment to the Board: 1 June 2020.
Simon was appointed as Chief Executive Officer
on 1 June 2020, having joined Sainsbury’s and
the Operating Board in July 2017 as Retail &
Operations Director, with responsibility for Stores,
Central Operations and Logistics.
Skills and experience: Simon brings a wide
range of experience and leadership skills to the
Board from previous executive and non-executive
roles. He has over 30 years’ experience leading
major UK retail brands, having spent 15 years at
Marks and Spencer and 13 years at Boots.
Career experience: Prior to joining Sainsbury’s,
Simon was Executive Vice President of Walgreens
Boots Alliance and President of Boots UK and
Ireland. During his tenure, Simon led Boots to
achieve growth in sales and transactions, increased
retail gross margin and doubled sales online.
Before Boots, Simon was at Marks and Spencer
Group plc, where he started his career in stores.
External appointments: Non-Executive
Chairman of the Institute of Customer Service.
Specific contributions to the Company:
Simon is leading Sainsbury’s new plan to put food
back at the heart of the business and making
good progress. One year into the plan we offer
improved value, have achieved our target to
triple the number of new products on our shelves
and our colleagues are delivering great service
in our stores and online. In recognition of their
extraordinary efforts, in January this year we
announced an investment of over £100 million
in colleague pay and all Sainsbury’s and Argos
store colleagues are paid at least £10 per hour.
Our plan is underpinned by our portfolio of
Brands that Deliver – Argos, Habitat, Tu, Nectar
and Sainsbury’s Bank and our Save to Invest
priority. Under Simon’s stewardship, Sainsbury’s
has also launched our sustainability Plan for
Better, which is integrated into our strategy and
includes a bold commitment to become Net Zero
across our own operations by 2035. Simon is a
dedicated, determined and enthusiastic champion
of customers and colleagues. He is the Operating
Board Sponsor of diversity and inclusion within
Sainsbury’s.
Independent: No.
Kevin O’Byrne
Chief Financial Officer
Appointment to the Board: 9 January 2017.
Skills and experience: Kevin brings a wealth
of international retail and finance experience
to the Board from his previous Chief Executive
and Chief Financial Officer roles. His skills and
experience in leading finance and driving
performance improvement provide the business
with valuable expertise in pursuing its strategy.
Career experience: Kevin was previously
Chief Executive Officer of Poundland Group PLC
until December 2016 and held executive roles
at Kingfisher plc from 2008 to 2015, including
Divisional Director UK, China and Turkey,
Chief Executive Officer of B&Q UK & Ireland
and Group Finance Director. Prior to this, he was
Group Finance Director of Dixons Retail plc and
European Finance Director of Quaker Oats. He was
a Non-Executive Director of Land Securities Group
PLC from 2008 to September 2017, where he was
Chairman of the Audit Committee and Senior
Independent Director.
External appointments: Non-Executive
Director and Chairman of the Audit Committee
of Centrica plc. Kevin will be appointed as Senior
Independent Director of Centrica plc with effect
from 1 June 2022.
Specific contributions to the Company:
Kevin is a skilled Chief Financial Officer, with
extensive international retail and finance
experience gained during previous and current
executive and non-executive positions. He has
applied this knowledge to the Finance, Internal
Audit, Investor Relations, Property, Procurement
and Strategy functions at Sainsbury’s, driving
the performance of the business. Kevin is the
Operating Board Sponsor for the LGBT+ inclusion
stream within Sainsbury’s.
Independent: No.
Brian Cassin
Non-Executive Director
A N
Appointment to the Board: 1 April 2016.
Skills and experience: Brian brings relevant
experience of running a FTSE 100 group with
knowledge of big data and analytics, both areas
of key importance to Sainsbury’s. As Chief
Executive Officer of Experian plc, Brian brings
strong leadership experience and a substantial
background in operating within a regulated
environment.
Career experience: Brian joined Experian plc as
Chief Financial Officer in April 2012, a post he held
until his appointment as Chief Executive Officer
in July 2014. Prior to this, Brian spent his career
in investment banking at Greenhill & Co, where
he was Managing Director and Partner. Brian
has also held various roles at Baring Brothers
International and at the London Stock Exchange.
External appointments: Chief Executive
Officer of Experian plc.
Specific contributions to the Company:
Brian’s experience as a current chief executive
and his work in the financial and technology
sectors provide valuable industry insight.
Independent: Yes.
Jo Harlow
Non-Executive Director
C
N R
Appointment to the Board: 11 September 2017.
Skills and experience: Jo brings a wealth of
experience in consumer-facing businesses and
the telecoms and technology industries, both in
the UK and internationally.
Career experience: Jo was Corporate Vice
President of the Phones Business Unit at
Microsoft Corporation and before that was
Executive Vice President of Smart Devices at
Nokia Corporation, following a number of senior
management roles at Nokia from 2003. Prior to
that, she held marketing, sales and management
roles at Reebok International Limited from 1992
to 2003 and at Procter & Gamble Company from
1984 to 1992.
External appointments: Non-Executive
Director and Chair of the Remuneration
Committee of InterContinental Hotels Group plc,
Non-Executive Director andChair of the
Remuneration Committee ofHalma plc and
Director of Chapter Zero.
Specific contributions to the Company:
Jo has broad experience from executive and
non-executive roles and as Chair of the Corporate
Responsibility and Sustainability Committee, she
has helped the business deliver and evolve its
sustainability strategy. She also brings current
external Remuneration Committee experience.
Independent: Yes.
Adrian Hennah
Non-Executive Director
A
N
Appointment to the Board: 1 April 2021.
Skills and experience: Adrian has significant
financial and strategic expertise leading the
performance and strategy of many large
companies.
Career experience: Adrian started his career
working in audit and consultancy with PwC and
Stadtsparkasse Köln, the German regional bank.
Adrian spent 18 years in Chief Financial Officer
roles at three FTSE 100 companies. He was Chief
Financial Officer at Reckitt Benckiser (RB) for
seven years and held the same position at Smith
& Nephew and Invensys. Prior to this he spent
18 years at GlaxoSmithKline working in both
finance and operations. He was also previously
Non-Executive Director and Chair of the Audit
Committee at RELX.
External appointments: Non-Executive
Director of Oxford Nanopore Technologies plc,
a Non-Executive Director of Unilever plc,
an external member (NED) of the Finance
Committee (Board) of Oxford University Press
and a Trustee of Our Future Health.
Specific contributions to the Company:
Adrian brings extensive financial and leadership
experience to Sainsbury’s gained from Chief
Financial Officer positions held in some of the
UK’s largest companies, notably at RB, which
produces leading hygiene, health and nutritional
brands.
Independent: Yes.
54 Governance J Sainsbury plc Annual Report 2022
J Sainsbury plc
Board of Directors
Key to Committee members
A Audit Committee
C Corporate Responsibility and
Sustainability Committee
N Nomination Committee
R Remuneration Committee
A
C
N
R
Denotes Chair of Committee
Retirements in 2021/22
David Keens retired from the Board on 9 July 2021.
Martin Scicluna
Chairman
C
N
Appointment to the Board: 1 November 2018.
Martin joined the Board as Chairman Designate
and Non-Executive Director on 1 November 2018.
He was appointed Chairman of the Board on
10 March 2019.
Skills and experience: Martin brings a wealth
of experience from over 25 years’ service as an
executive and non-executive board director at
a wide range of companies.
Career experience: Previous roles include
Chairman of RSA Insurance Group plc, Chairman
of Great Portland Estates plc, Senior Independent
Director and Chair of the Audit Committee of
Worldpay Inc., and Non-Executive Director and
Chair of the Audit Committee of Lloyds Banking
Group plc. He was a partner at Deloitte LLP for
26 years, serving as Chairman from 1995 to 2007,
where his clients included Dixons, WH Smith,
Alliance Unichem and Cadbury.
External appointments: None.
Specific contributions to the Company:
Martin has extensive experience as a Chair.
He brings valuable knowledge and skills in
developing strategy and evaluating business
opportunities, along with understanding of the
financial services sector and how it operates.
Martin also led a robust selection process,
culminating in the appointment of Simon Roberts
as Sainsbury’s Chief Executive Officer.
Independent: Upon appointment.
Simon Roberts
Chief Executive Officer
C
Appointment to the Board: 1 June 2020.
Simon was appointed as Chief Executive Officer
on 1 June 2020, having joined Sainsbury’s and
the Operating Board in July 2017 as Retail &
Operations Director, with responsibility for Stores,
Central Operations and Logistics.
Skills and experience: Simon brings a wide
range of experience and leadership skills to the
Board from previous executive and non-executive
roles. He has over 30 years’ experience leading
major UK retail brands, having spent 15 years at
Marks and Spencer and 13 years at Boots.
Career experience: Prior to joining Sainsbury’s,
Simon was Executive Vice President of Walgreens
Boots Alliance and President of Boots UK and
Ireland. During his tenure, Simon led Boots to
achieve growth in sales and transactions, increased
retail gross margin and doubled sales online.
Before Boots, Simon was at Marks and Spencer
Group plc, where he started his career in stores.
External appointments: Non-Executive
Chairman of the Institute of Customer Service.
Specific contributions to the Company:
Simon is leading Sainsbury’s new plan to put food
back at the heart of the business and making
good progress. One year into the plan we offer
improved value, have achieved our target to
triple the number of new products on our shelves
and our colleagues are delivering great service
in our stores and online. In recognition of their
extraordinary efforts, in January this year we
announced an investment of over £100 million
in colleague pay and all Sainsbury’s and Argos
store colleagues are paid at least £10 per hour.
Our plan is underpinned by our portfolio of
Brands that Deliver – Argos, Habitat, Tu, Nectar
and Sainsbury’s Bank and our Save to Invest
priority. Under Simon’s stewardship, Sainsbury’s
has also launched our sustainability Plan for
Better, which is integrated into our strategy and
includes a bold commitment to become Net Zero
across our own operations by 2035. Simon is a
dedicated, determined and enthusiastic champion
of customers and colleagues. He is the Operating
Board Sponsor of diversity and inclusion within
Sainsbury’s.
Independent: No.
Kevin O’Byrne
Chief Financial Officer
Appointment to the Board: 9 January 2017.
Skills and experience: Kevin brings a wealth
of international retail and finance experience
to the Board from his previous Chief Executive
and Chief Financial Officer roles. His skills and
experience in leading finance and driving
performance improvement provide the business
with valuable expertise in pursuing its strategy.
Career experience: Kevin was previously
Chief Executive Officer of Poundland Group PLC
until December 2016 and held executive roles
at Kingfisher plc from 2008 to 2015, including
Divisional Director UK, China and Turkey,
Chief Executive Officer of B&Q UK & Ireland
and Group Finance Director. Prior to this, he was
Group Finance Director of Dixons Retail plc and
European Finance Director of Quaker Oats. He was
a Non-Executive Director of Land Securities Group
PLC from 2008 to September 2017, where he was
Chairman of the Audit Committee and Senior
Independent Director.
External appointments: Non-Executive
Director and Chairman of the Audit Committee
of Centrica plc. Kevin will be appointed as Senior
Independent Director of Centrica plc with effect
from 1 June 2022.
Specific contributions to the Company:
Kevin is a skilled Chief Financial Officer, with
extensive international retail and finance
experience gained during previous and current
executive and non-executive positions. He has
applied this knowledge to the Finance, Internal
Audit, Investor Relations, Property, Procurement
and Strategy functions at Sainsbury’s, driving
the performance of the business. Kevin is the
Operating Board Sponsor for the LGBT+ inclusion
stream within Sainsbury’s.
Independent: No.
Brian Cassin
Non-Executive Director
A N
Appointment to the Board: 1 April 2016.
Skills and experience: Brian brings relevant
experience of running a FTSE 100 group with
knowledge of big data and analytics, both areas
of key importance to Sainsbury’s. As Chief
Executive Officer of Experian plc, Brian brings
strong leadership experience and a substantial
background in operating within a regulated
environment.
Career experience: Brian joined Experian plc as
Chief Financial Officer in April 2012, a post he held
until his appointment as Chief Executive Officer
in July 2014. Prior to this, Brian spent his career
in investment banking at Greenhill & Co, where
he was Managing Director and Partner. Brian
has also held various roles at Baring Brothers
International and at the London Stock Exchange.
External appointments: Chief Executive
Officer of Experian plc.
Specific contributions to the Company:
Brian’s experience as a current chief executive
and his work in the financial and technology
sectors provide valuable industry insight.
Independent: Yes.
Jo Harlow
Non-Executive Director
C
N R
Appointment to the Board: 11 September 2017.
Skills and experience: Jo brings a wealth of
experience in consumer-facing businesses and
the telecoms and technology industries, both in
the UK and internationally.
Career experience: Jo was Corporate Vice
President of the Phones Business Unit at
Microsoft Corporation and before that was
Executive Vice President of Smart Devices at
Nokia Corporation, following a number of senior
management roles at Nokia from 2003. Prior to
that, she held marketing, sales and management
roles at Reebok International Limited from 1992
to 2003 and at Procter & Gamble Company from
1984 to 1992.
External appointments: Non-Executive
Director and Chair of the Remuneration
Committee of InterContinental Hotels Group plc,
Non-Executive Director andChair of the
Remuneration Committee ofHalma plc and
Director of Chapter Zero.
Specific contributions to the Company:
Jo has broad experience from executive and
non-executive roles and as Chair of the Corporate
Responsibility and Sustainability Committee, she
has helped the business deliver and evolve its
sustainability strategy. She also brings current
external Remuneration Committee experience.
Independent: Yes.
Adrian Hennah
Non-Executive Director
A
N
Appointment to the Board: 1 April 2021.
Skills and experience: Adrian has significant
financial and strategic expertise leading the
performance and strategy of many large
companies.
Career experience: Adrian started his career
working in audit and consultancy with PwC and
Stadtsparkasse Köln, the German regional bank.
Adrian spent 18 years in Chief Financial Officer
roles at three FTSE 100 companies. He was Chief
Financial Officer at Reckitt Benckiser (RB) for
seven years and held the same position at Smith
& Nephew and Invensys. Prior to this he spent
18 years at GlaxoSmithKline working in both
finance and operations. He was also previously
Non-Executive Director and Chair of the Audit
Committee at RELX.
External appointments: Non-Executive
Director of Oxford Nanopore Technologies plc,
a Non-Executive Director of Unilever plc,
an external member (NED) of the Finance
Committee (Board) of Oxford University Press
and a Trustee of Our Future Health.
Specific contributions to the Company:
Adrian brings extensive financial and leadership
experience to Sainsbury’s gained from Chief
Financial Officer positions held in some of the
UK’s largest companies, notably at RB, which
produces leading hygiene, health and nutritional
brands.
Independent: Yes.
55Governance J Sainsbury plc Annual Report 2022
Governance ReportStrategic Report Financial Statements
Key to Committee members
A Audit Committee
C Corporate Responsibility and
Sustainability Committee
N Nomination Committee
R Remuneration Committee
A
C
N
R
Denotes Chair of Committee
Tanuj Kapilashrami
Non-Executive Director
N R
Appointment to the Board: 1 July 2020.
Skills and experience: Tanuj is a highly
experienced HR professional with significant
experience in talent and change management
both in the UK and internationally.
Career experience: Tanuj joined Standard
Chartered Bank in 2017 and is currently the Group
Head of HR. Prior to this, she spent 17 years in
key global and regional HR leadership roles
within HSBC.
External appointments: Group Head of HR
at Standard Chartered Bank, Trustee of Asia
House and a Director of Financial Services Skills
Commission Limited.
Specific contributions to the Company:
Tanuj is a valuable member of the Board as the
business continues to adapt and support its
colleagues in a rapidly changing marketplace.
Independent: Yes.
Dame Susan Rice
Non-Executive Director
N
R
Appointment to the Board: 1 June 2013.
Susan has been the Senior Independent Director
since 6 July 2016. Susan will step down from the
Board after the AGM on 7 July 2022.
Skills and experience: Susan has extensive
experience as a non-executive director, as well
as in retail banking, financial services, leadership
and sustainability.
Career experience: Susan has been a member
of the Scottish First Minister’s Council of Economic
Advisors, a Managing Director of Lloyds Banking
Group Scotland and Chief Executive, then
Chairman, of Lloyds TSB Scotland plc. She has
also held a range of non-executive directorships,
including at the Bank of England and SSE plc.
External appointments: Chair of Scottish
Water and Scottish Water Business Stream
Limited, Chair of the Financial Services Culture
Board, Chair of the Scottish Fiscal Commission
and Senior Independent Director of The North
American Income Trust plc.
Specific contributions to the Company:
Susan provides insight to the Board from her
extensive experience gained as chair, senior
independent director and non-executive
director of various businesses. As Chair of the
Remuneration Committee, she has played a key
role in revising the current Remuneration Policy
and strategy. Her expertise in financial services is
invaluable to the Board as part of its oversight of
Sainsbury’s Bank and Argos Financial Services.
Independent: Yes.
Keith Weed CBE
Non-Executive Director
A C N
Appointment to the Board: 1 July 2020.
Skills and experience: Keith is an exceptionally
capable marketing and digital leader. He has
championed new ways of integrating sustainability
into business and building brands with purpose.
Career experience: Keith has a strong business
background, having spent 36 years at Unilever,
most recently as Chief Marketing and
Communications Officer, which included leading
the company’s ground-breaking sustainability
programme globally. Whilst at Unilever, Keith led
different parts of the business, during which time
he worked closely with Sainsbury’s and other
retailers. He has strong international experience
and knowledge, having run international
businesses both in the UK and overseas.
External appointments: Non-Executive
Director of WPP PLC, Trustee Director of Business
in the Community, Trustee Director of Leverhulme
Trust and President of the Royal Horticultural
Society. He is also a trustee of Grange Park Opera.
Keith was awarded a CBE for services to the
advertising and marketing industry in the 2021
New Year Honours List.
Specific contributions to the Company:
Keith plays an important role in Sainsbury’s
strategic focus on putting food back at the heart
of the business and delivering the Plan for Better.
He has an excellent understanding of both
sustainability and digital, and the ways that
technology is transforming businesses.
Independent: Yes.
Jo Bertram
Non-Executive Director
N C
Appointment to the Board: To be appointed
on 7 July 2022.
Skills and experience: Jo is a highly talented
strategic business leader with significant
experience leading transformation and change.
Career experience: Prior to becoming
Managing Director, Business & Wholesale,
Virgin Media O2, Jo held senior Director and
Strategy roles at O2. Between 2013 and 2017
she held the position of Regional General
Manager, Northern Europe at Uber. Jo has
previously worked at McKinsey and Accenture
and holds an MBA from INSEAD.
External appointments: Managing Director,
Business & Wholesale, at Virgin Media O2.
Specific contributions to the Company:
Jo has worked in growing hi-tech sectors which
will benefit our customers as we explore new
ways to use digital solutions to make shopping
easy and convenient.
Independent: Yes.
Board changes
Subject to shareholder approval, Jo Bertram
will be appointed as a Non-Executive
Director with effect from 7 July 2022.
After nine years’ service as a Non-
Executive Director, Dame Susan Rice
will step down from the Board at the
conclusion of the AGM on 7 July 2022.
Following Susan’s retirement from the
Board, Brian Cassin will be appointed as
Senior Independent Director, Jo Harlow
will become Chair of the Remuneration
Committee and Keith Weed will be
appointed as Chair of the CR&S Committee.
56 Governance J Sainsbury plc Annual Report 2022
Key to Committee members
A Audit Committee
C Corporate Responsibility and
Sustainability Committee
N Nomination Committee
R Remuneration Committee
A
C
N
R
Denotes Chair of Committee
J Sainsbury plc
Board of Directors continued
Tanuj Kapilashrami
Non-Executive Director
N R
Appointment to the Board: 1 July 2020.
Skills and experience: Tanuj is a highly
experienced HR professional with significant
experience in talent and change management
both in the UK and internationally.
Career experience: Tanuj joined Standard
Chartered Bank in 2017 and is currently the Group
Head of HR. Prior to this, she spent 17 years in
key global and regional HR leadership roles
within HSBC.
External appointments: Group Head of HR
at Standard Chartered Bank, Trustee of Asia
House and a Director of Financial Services Skills
Commission Limited.
Specific contributions to the Company:
Tanuj is a valuable member of the Board as the
business continues to adapt and support its
colleagues in a rapidly changing marketplace.
Independent: Yes.
Dame Susan Rice
Non-Executive Director
N
R
Appointment to the Board: 1 June 2013.
Susan has been the Senior Independent Director
since 6 July 2016. Susan will step down from the
Board after the AGM on 7 July 2022.
Skills and experience: Susan has extensive
experience as a non-executive director, as well
as in retail banking, financial services, leadership
and sustainability.
Career experience: Susan has been a member
of the Scottish First Minister’s Council of Economic
Advisors, a Managing Director of Lloyds Banking
Group Scotland and Chief Executive, then
Chairman, of Lloyds TSB Scotland plc. She has
also held a range of non-executive directorships,
including at the Bank of England and SSE plc.
External appointments: Chair of Scottish
Water and Scottish Water Business Stream
Limited, Chair of the Financial Services Culture
Board, Chair of the Scottish Fiscal Commission
and Senior Independent Director of The North
American Income Trust plc.
Specific contributions to the Company:
Susan provides insight to the Board from her
extensive experience gained as chair, senior
independent director and non-executive
director of various businesses. As Chair of the
Remuneration Committee, she has played a key
role in revising the current Remuneration Policy
and strategy. Her expertise in financial services is
invaluable to the Board as part of its oversight of
Sainsbury’s Bank and Argos Financial Services.
Independent: Yes.
Keith Weed CBE
Non-Executive Director
A C N
Appointment to the Board: 1 July 2020.
Skills and experience: Keith is an exceptionally
capable marketing and digital leader. He has
championed new ways of integrating sustainability
into business and building brands with purpose.
Career experience: Keith has a strong business
background, having spent 36 years at Unilever,
most recently as Chief Marketing and
Communications Officer, which included leading
the company’s ground-breaking sustainability
programme globally. Whilst at Unilever, Keith led
different parts of the business, during which time
he worked closely with Sainsbury’s and other
retailers. He has strong international experience
and knowledge, having run international
businesses both in the UK and overseas.
External appointments: Non-Executive
Director of WPP PLC, Trustee Director of Business
in the Community, Trustee Director of Leverhulme
Trust and President of the Royal Horticultural
Society. He is also a trustee of Grange Park Opera.
Keith was awarded a CBE for services to the
advertising and marketing industry in the 2021
New Year Honours List.
Specific contributions to the Company:
Keith plays an important role in Sainsbury’s
strategic focus on putting food back at the heart
of the business and delivering the Plan for Better.
He has an excellent understanding of both
sustainability and digital, and the ways that
technology is transforming businesses.
Independent: Yes.
Jo Bertram
Non-Executive Director
N C
Appointment to the Board: To be appointed
on 7 July 2022.
Skills and experience: Jo is a highly talented
strategic business leader with significant
experience leading transformation and change.
Career experience: Prior to becoming
Managing Director, Business & Wholesale,
Virgin Media O2, Jo held senior Director and
Strategy roles at O2. Between 2013 and 2017
she held the position of Regional General
Manager, Northern Europe at Uber. Jo has
previously worked at McKinsey and Accenture
and holds an MBA from INSEAD.
External appointments: Managing Director,
Business & Wholesale, at Virgin Media O2.
Specific contributions to the Company:
Jo has worked in growing hi-tech sectors which
will benefit our customers as we explore new
ways to use digital solutions to make shopping
easy and convenient.
Independent: Yes.
Board changes
Subject to shareholder approval, Jo Bertram
will be appointed as a Non-Executive
Director with effect from 7 July 2022.
After nine years’ service as a Non-
Executive Director, Dame Susan Rice
will step down from the Board at the
conclusion of the AGM on 7 July 2022.
Following Susan’s retirement from the
Board, Brian Cassin will be appointed as
Senior Independent Director, Jo Harlow
will become Chair of the Remuneration
Committee and Keith Weed will be
appointed as Chair of the CR&S Committee.
57Governance J Sainsbury plc Annual Report 2022
Governance ReportStrategic Report Financial Statements
Key to Committee members
A Audit Committee
C Corporate Responsibility and
Sustainability Committee
N Nomination Committee
R Remuneration Committee
A
C
N
R
Denotes Chair of Committee
Simon Roberts
Chief Executive Officer
See page 54.
Kevin O’Byrne
Chief Financial Officer
See page 54.
Rhian Bartlett
Food Commercial Director
Date of appointment: November 2020.
Skills and experience: Rhian joined the
Operating Board in November 2020, having
returned to Sainsbury’s in 2019 as Director of
Fresh Food. Rhian is responsible for delivering the
commercial performance of Sainsbury’s food
business and brands. She has over 20 years’
experience in the retail industry and has held
a variety of senior commercial roles, including
Customer and Digital Director at Screwfix and
Director of UK Trading at eBay. Rhian’s previous
roles at Sainsbury’s include Business Unit
Director Non-Food Grocery and Head of Online
Merchandising. Rhian is a Non-Executive Director
at Speedy Hire Plc and is a Trustee of GroceryAid.
Graham Biggart
Chief Transformation Officer
Date of appointment: March 2022.
Skills and experience: As Chief Transformation
Officer, Graham is responsible for our end-to-end
change programmes across Sainsbury’s, Argos,
Habitat and Tu, to deliver our strategy and future
operating model; he is also accountable for our
Supply Chain, Logistics & Transport Operations,
and Central Business Services. Graham joined
Sainsbury’s in 2015 and has led a number of
different areas of the business in that time, across
commercial, operations and channels, including
Fresh Food & Foodservices, Sainsbury’s Local, and
Argos Republic of Ireland. Prior to Sainsbury’s,
Graham worked at McKinsey & Company,
primarily on strategy and transformation topics,
and before that at Brunswick Group, focused on
media, investor and government communications.
Graham is a Non-Executive Director and member
of the Risk & Audit Committee of GS1 UK.
Jim Brown
Chief Executive Officer, Sainsbury’s Bank
Date of appointment: June 2019.
Skills and experience: Jim joined Sainsbury’s
Bank in June 2019. He has held several senior
international financial services roles, most recently
at RBS in the UK as Chief Executive Officer of
Williams & Glyn. Prior to that, Jim was Chief
Executive Officer of Ulster Bank in Northern Ireland
and the Republic of Ireland. Before moving to
Ireland, Jim was based in Hong Kong and was
Chief Executive Officer of Retail and Commercial
Banking, Asia and the Middle East for RBS and
ABN AMRO. He has also been a member of the RBS
Group Management Committee, ABN AMRO Top
Executive Group, ABN AMRO Global Consumer
Leadership Team and the RBS/Bank of China Joint
Steering Committee. Earlier in his career, he held
senior executive roles for Citibank in Asia, Australia
and New Zealand. Jim has also held board positions
at Ulster Bank, Saudi Hollandi Bank, The Royal Bank
of Scotland (China) Co. Ltd and RBS (Pakistan) Ltd.
He is also a past President of the Institute of
Banking in Ireland. He is currently an advisor to
Circit Limited and a Certified Bank Director.
Tim Fallowfield OBE
Company Secretary and Corporate
Services Director
Date of appointment: September 2004.
Skills and experience: Tim joined Sainsbury’s
in 2001 as Company Secretary, having previously
held the position of Company Secretary and
General Counsel at Exel plc, the global logistics
company, now part of DHL. Tim is a qualified
solicitor and began his career at the international
law firm, Clifford Chance. He joined Sainsbury’s
Operating Board in September 2004 and in addition
to his role as Company Secretary and Corporate
Services Director, he is responsible for the
Corporate Services Division, comprising Legal
Services, Data Governance and Information
Security, Safety and Insurance, and Shareholder
Services. He also chairs the Group Safety
Committee and the Data Governance Committee.
Tim is Chairman of the Disability Confident
Business Leaders Group, which works with
government in shaping the disability employment
agenda and in raising awareness of the benefits
of employing disabled people. He was awarded
an OBE for services to disability awareness in the
2020 New Year Honours List.
58 Governance J Sainsbury plc Annual Report 2022
J Sainsbury plc
Operating Board
Mark Given
Chief Marketing Officer
Date of appointment: June 2020.
Skills and experience: Mark joined the
Operating Board in June 2020. He has significant
experience in customer insight, brand
communication and digital marketing. Mark
joined Sainsbury’s in 2012, becoming Marketing
Director in 2017. He was appointed Chief
Marketing Officer in August 2019 and has
responsibility for marketing across the Sainsbury’s,
Argos, Tu clothing and Habitat brands. Mark has
also been responsible for the Nectar Loyalty
coalition and Nectar360 since the business was
acquired by Sainsbury’s in 2018. Prior to joining
Sainsbury’s, Mark built his digital skills leading
the Priority programme at O2 where he was Head
of Sponsorship. Before this, Mark worked with
key brands at Heineken UK where he was Brand
Director. He began his career at Procter & Gamble
UK and worked across Europe on a variety of
brands. Mark is currently a Council Member of the
Incorporated Society of British Advertisers (ISBA)
and a Fellow of the Marketing Society.
Phil Jordan
Chief Information Officer
Date of appointment: January 2018.
Skills and experience: Phil joined the Board
in January 2018 and has brought a fresh, global
perspective on technology to the Operating
Board, in addition to a wealth of experience in
digital, data and business transformation. Prior to
joining Sainsbury’s, Phil had a long and successful
track record in telecommunications. Most
recently, he was Global Chief Information Officer
at Telefónica, overseeing Digital Transformation
and Information Technology and prior to that,
was Chief Information Officer for Vodafone UK/
Ireland. Phil has worked as a Non-Executive
Director and Advisor on Technology in the
Telecommunications, Investment & Retail
Banking sector. He is Chair-Elect at Digital 9
Infrastructure PLC.
Clodagh Moriarty
Retail and Digital Director
Date of appointment: June 2018.
Skills and experience: Clodagh was appointed
Retail and Digital Director in June 2020, having
served as Chief Digital Officer since June 2018,
when she joined the Operating Board. Clodagh
is responsible for all stores and their operations,
as well as Sainsbury’s digital offer and strategy,
ensuring customers experience an integrated and
seamless shopping experience across Sainsbury’s,
Argos, Tu, Sainsbury’s Bank and Nectar. She is also
a member of the Sainsbury’s Bank Board and sits
on its Nomination and Remuneration Committees.
Clodagh has previously been Director of Online,
Head of Online Trading, Merchandising & Content
and Category Manager for Meal Solutions at
Sainsbury’s. She joined Sainsbury’s as Head of
Strategy, following nine years at Bain & Company.
Paula Nickolds
General Merchandise & Clothing
Commercial Director
Date of appointment: June 2021.
Skills and experience: Paula joined Sainsbury’s
and the Operating Board in June 2021. She is
responsible for delivering performance across
general merchandise and clothing brands at
Sainsbury’s. Paula has 25 years’ experience in
retail, gained at the John Lewis Partnership, which
she joined as a graduate trainee before holding
a variety of senior roles in product, buying and
marketing. Most recently, she was Buying and
Brand Director and then Commercial Director,
before becoming Managing Director in 2017. Paula
is an Ambassador for the UK charity Smart Works
and Chair of the Advisory Board of Near Street.
Angie Risley
Group HR Director
Date of appointment: January 2013.
Skills and experience: Angie was appointed
Group HR Director and became a member of the
Operating Board with responsibility for human
resources in January 2013. Before joining
Sainsbury’s, Angie was the Group HR Director for
Lloyds Banking Group and an Executive Director
of Whitbread PLC with responsibility for HR and
Corporate Social Responsibility. She was previously
a Non-Executive Director and Chair of the
Remuneration Committee of Serco plc. Angie is
currently a Non-Executive Director, member of the
Compliance & Culture Committee and Chair of the
Remuneration Committee at Smith & Nephew plc.
59Governance J Sainsbury plc Annual Report 2022
Governance ReportStrategic Report Financial Statements
Dear Shareholder
In what has been another exceptional year for retail, the
Board has maintained its focus on the implementation
of the strategy we outlined in November 2020 and we
are pleased with the progress made in the first year
ofour three-year plan. Our strong performance has
enabled us to balance returns to all stakeholders with
an improved value proposition for customers, enhanced
reward for our outstanding colleagues and increased
dividends for shareholders.
The Board has ensured that our strategy remains aligned with our purpose,
culture and values. We receive regular reports on key performance measures
across each of our five strategic pillars at Board meetings. The engagement
between the Board and Operating Board is strong.
Colleague wellbeing and engagement remains a key item on the Board’s
agenda, with particular focus on colleague pay and benefits. We have
invested over £100 million investment in retail colleague pay, which increased
the base rate of pay to at least £10 per hour, and the other aspects of our
improved colleague offer, is a recognition of the extraordinary work they
do for our customers.
Our sustainability strategy is a key priority for the Board and the CR&S
Committee, whose report is set out on pages 71 to 72. The evolution of our
Net Zero by 2040 plan, to our Plan for Better, underpins our progress in this
area, including the acceleration of our Net Zero target to no later than 2035.
Plan for Better is a central part of our strategy and Board agenda and we
recognise that, whilst we have made good progress over the last year, we
have more ambitious targets in the year ahead as we embed the key
initiatives into business as usual. We increased our focus on Environmental,
Social and Governance (ESG) and the Board participated in a University of
Cambridge Institute for Sustainability Leadership event and we hosted our
first ESG event in June 2021, launching our Plan for Better strategy and
enabling shareholders to gain a stronger understanding of our ESG priorities.
Our sponsorship of COP26, an event attended by several members of the
Board, underlines our commitment in this area and we look forward to
working with the WWF to develop industry-wide practice in relation to
Scope 3 emissions.
The business has continued to make progress against its diversity and
inclusion strategy and I am pleased to report that Sainsbury’s has featured
for the first time in the FTSE 100 Top Ten Best Performers list for Women in
Leadership, demonstrating our commitment to be the most inclusive retailer.
Actions to support the progression and representation of our ethnically
diverse colleagues are an important part of our strategy and we supported
the additional commitments made, including joining the Black British
Network. We have published our integrated Gender and Ethnicity Pay Report
for a second year and are pleased to have seen the pay differentials reduce
during that time.
The Board was deeply saddened by the news that Lord Sainsbury of Preston
Candover passed away earlier this year and fully supports the tribute made
on page 2. We will continue to build on his unique legacy and challenge
ourselves to demonstrate the pioneering leadership that he showed in
building the business. Our clear vision and strategy for the business builds
on this ambition.
We are proud of the leadership shown by Simon during the year and the
outstanding contribution of the management team. Our most recent
evaluation of the Board’s effectiveness showed significant progress against
previous actions as well as areas of future focus.
I would like to thank all of my Board colleagues for their commitment,
support and flexibility over the past year. Whilst we welcome a return to
face-to-face meetings, a number of our Board meetings were conducted
in a virtual environment by necessity. This new hybrid way of working has
enabled us to maintain strong governance and robust decision-making,
delivering against our strategy. I will again express my thanks to Susan Rice
for her many years of service and her significant contribution to the Board,
particularly as Senior Independent Director and Chair of our Remuneration
Committee. Following a robust recruitment process, we welcome Jo Bertram
to the Board and look forward to the part that she will play in Sainsbury’s
future. Following Susan’s retirement from the Board, I am delighted to
announce that Brian Cassin will be appointed as Senior Independent
Director, Jo Harlow will become Chair of the Remuneration Committee
and Keith Weed will be appointed as Chair of the CR&S Committee.
Martin Scicluna
Chairman
60 Governance J Sainsbury plc Annual Report 2022
Governance Report
UK Corporate Governance Code
The Board considers that the Company has complied in full with the
Principles and Provisions of the UK Corporate Governance Code 2018
(Code) with the exception of the provision below. Further details on
how we comply with the Code are available in the Strategic and
Governance Reports, as outlined below.
Provision 38 of the Code requires that pension contribution rates,
or payments in lieu, for executive directors are aligned with those
available to the workforce. As disclosed in our 2020 Annual Report
and Accounts, Kevin O’Byrne’s contractual cash pension supplement
is not yet aligned with the pension contribution rates available to the
workforce, but a clear incremental reduction plan to address this has
been in place since 2019/20. The original plan, resulting in alignment
in 2024, was approved by 98.87 per cent when put to shareholders as
part of the Directors’ Remuneration Report within the 2020 Annual
Report. Subsequently, the alignment has been accelerated and full
compliance will be achieved by the end of the 2022 calendar year.
Further detail can be found in the 2021 Annual Report/2022 Directors’
Remuneration Report on page 71.
Compliance with the Code
Board leadership and Company purpose
More information can be found on pages 61 to 63.
Division of responsibilities
More information can be found on page 64.
Composition, succession and evaluation
More information can be found on pages 65 to 67.
Audit, risk and internal control
More information can be found on pages 73 to 77.
Remuneration
More information can be found on pages 78 to 95.
Role of the Board
The Board is the principal decision-making body in the Company. It is
collectively responsible for promoting the long-term success of the business
for the benefit of its members, achieving this through the creation and
delivery of sustainable shareholder value. The Board also carefully considers
its wider stakeholders, including customers, colleagues and suppliers, when
making decisions and more information can be found on pages 24 to 29.
The Board is responsible for setting the strategy of the business and
overseeing its implementation by management. The Board is committed
to delivering on each of our strategic priorities across Food First, Brands
that Deliver, Save to Invest, Connected to Customers and Plan for Better.
It ensures effective corporate governance, succession planning and
stakeholder engagement. The Board is also responsible for ensuring that
effective internal controls and risk management systems are in place;
further information can be found on pages 73 and 77. The Matters Reserved
for the Board can be found on our website at
www.about.sainsburys.co.uk.
The Board has formally delegated certain governance responsibilities to its
Board Committees and the Operating Board, as outlined below.
Operating Board
Matters not specifically reserved for the Board have been delegated to
the Operating Board, chaired by Simon Roberts. The Operating Board is
responsible for the day-to-day operation of the business and the execution
of our strategy, ensuring this is done in an ethical and sustainable manner.
During the year, the Operating Board delivered progress against our strategic,
cultural and sustainability objectives, including the implementation of our
diversity and inclusion agenda. Each Operating Board Director has a range
of responsibilities, as detailed in their biographies on pages 58 and 59.
Sainsbury’s Bank Board
Sainsbury’s Bank plc Board membership comprises an independent Chair,
five Non-Executive Directors, four of whom are independent, together with
the Bank’s Chief Executive Officer and Chief Financial Officer. The Bank’s
Chief Executive Officer is supported by the Sainsbury’s Bank Executive
Committee and is responsible for the day-to-day management of the
business and executing its strategy. The Bank’s Chief Executive Officer
is a member of the Operating Board, bringing the Bank’s priorities and
perspective to the wider business.
61Governance J Sainsbury plc Annual Report 2022
Governance ReportStrategic Report Financial Statements
Board leadership and Company purpose
Board Committees
The Board Committees support the Board in specific areas of its responsibilities,
as outlined below. The Committee Chairs provide regular updates to the Board on
Committee meetings and activities.
Audit Committee
— Reviews and monitors integrity of financial information prior to publication,
ensuring that the Annual Report as a whole is fair, balanced and understandable
— Oversees systems of internal control and risk management
— Approves internal and external audit processes
— Maintains relationship with auditors
— Carries out in-depth reviews of specific risks, ensuring that risks are appropriately
identified, managed and mitigated
More information on page 73.
Corporate Responsibility and Sustainability Committee
— Reviews the sustainability strategy, ensuring it is aligned with the Company’s
purpose, strategy, culture, vision and values
— Monitors business engagement on sustainability and corporate responsibility
matters with colleagues, customers, suppliers, the community and shareholders
More information on page 71.
Nomination Committee
— Reviews the Board’s size, structure and composition, including the
recommendation of new appointments to the Board
— Monitors balance of skills, knowledge, experience, independence and diversity
of the Board and its Committees to ensure that they remain appropriate
— Oversight of succession planning and development plans of the Board and
senior management
More information on page 68.
Remuneration Committee
— Recommends and reviews the Remuneration Policy, ensuring that it promotes
the delivery of our strategy and the long-term sustainable success of the business
— Approves remuneration and benefits for the Chairman, Executive Directors and
Operating Board Directors
— Approves remuneration principles throughout the business
More information on page 79.
Operating Board Committees
The Operating Board Committees support the work of the Operating Board through
delegated powers, as outlined below. Members of senior management provide
regular updates from these Committee meetings to the Operating Board.
Business Performance Review
— Monitors and reviews implementation of the Group’s plans to meet budget
targets, as set out by the Operating Board
— Approves ‘in-year’ capital expenditure
— Monitors business performance with regards to customers, the market,
product proposition and perceptions of our brand
— Monitors and reviews colleague engagement
Group Data Governance Committee
— Oversees programmes that deliver compliance with Data Protection, Data
Security and Payment Card Industry data security standards
— Oversees effective information security throughout the business
Group Safety Committee
— Reviews the safety culture and the robustness of safety management systems
through audit and safety teams, and the action plan in light of any issues
— Oversees standards for management and monitoring of colleague and
customer safety
— Provides assurance, with the Head of Safety and Insurance, to the Operating
Board, Audit Committee and Board
Group Operational Resilience Committee
— Sets operational resilience strategy
— Monitors implementation of business continuity and disaster recovery
arrangements
Plan for Better Steering Committee
— Leads operational execution of our Plan for Better strategy
— Oversees Plan for Better working groups’ activities in relation to this strategy
to ensure delivery
Customer, Commercial and Channels Forum
— Governs the development and execution of our customer, commercial and
channel plans against our strategy
— Manages the in-year operating performance of the retail business
The Terms of Reference for these Committees can be found on our website at
www.about.sainsburys.co.uk.
Each of these Committees has approved Terms of Reference setting out its areas
of responsibility.
Key areas of focus for the Board
Our Board and Committee meetings were held both in person and remotely during the year, in line with on-going COVID-19 safety guidance. Members of the
Operating Board, management teams and other colleagues attended meetings to enable improved Board dialogue, review performance, discuss progress
and agree key priorities for the short and medium term.
The key areas of focus for the Board during the year are shown below.
Strategy
— Increased focus on strategic priorities at each Board meeting through
a revised meeting agenda structure
— Ensured that the Food First and Plan for Better strategies were key to
discussions and decision-making via regular updates from management
— Completed deep-dives into specific areas of our strategy and upcoming
strategic challenges to review proposals made by management,
providing constructive feedback and direction
— Monitored the impact of COVID-19 on our customers and colleagues
— Reviewed the Operating Board’s plans to simplify the operating model
and progress sustainable cost saving programmes
— Discussed and created relevant actions plan for long-term strategic
challenges, responding to key trends in grocery to 2030
— Considered feedback from customers, colleagues, investors, suppliers
and other stakeholders on our strategy
— Involved in decision-making in relation to the expressions of interest
received for Sainsbury’s Bank, ultimately deciding that retaining the Bank
and continuing the focus on strengthening and simplifying the Financial
Services business would be in the best interests of stakeholders
— Reviewed plans to enhance our brand through our Helping everyone eat
better campaign
More information on pages 9 to 23.
Purpose
— Ensured that our renewed focus on strategy remained aligned with our
purpose throughout discussions and decision-making
— Ensured that business decisions were aligned with our purpose,
establishing a clear and cohesive approach for colleagues in all areas
More information on page 7.
Colleagues, values and culture
— Committed to over £100 million investment in pay for our retail
colleagues and other enhancements to colleague benefits
— Maintained focus on culture as a critical enabler of our success
— Encouraged an improved performance management culture across
the business, emphasising communication and regular feedback
for colleagues
— Supported the Operating Board in the development of our new Valued
Behaviours to further embed a positive, forward-thinking culture aligned
to our purpose and priorities
— Discussed COVID-19 measures for in-store colleagues, with a safety-first
approach taken and reflected on feedback received from both customers
and colleagues on our approach
— Received regular updates on colleague engagement, reviewing colleague
feedback from listening groups and the We’re Listening survey
More information on pages 13 to 14, and 25.
Plan for Better
— Launched our Plan for Better strategy including revised targets
— Approved the plan to accelerate our commitment to be Net Zero no later
than 2035, five years earlier than previously stated
— Hosted Sainsbury’s first Environmental, Social and Governance (ESG)
event, launching our Plan for Better strategy and allowing stakeholders
to gain a deeper understanding of our ESG priorities
— Supported our partnership with and attendance at COP26, furthering our
commitment to protecting the planet
— Attended an event hosted by the University of Cambridge Institute for
Sustainability Leadership, which enhanced understanding of ESG matters
and highlighted the role that our leadership will play in tackling the
social, environmental and climate challenges facing the business
More information on pages 13 to 23.
Governance and risk
— Maintained responsibility for the identification and management of risks
to ensure the successful operation of the business
— Identified and monitored principal and emerging risks, including COVID-19,
supply chain security, talent availability and inflationary pressures
— Reviewed Audit Committee discussions and decisions to monitor internal
controls, stress testing and risk mitigation across the business
— Considered the key aspects of safety, including those in relation to
COVID-19, in order to keep colleagues and customers safe in rapidly-
changing circumstances
— Ensured continued compliance with the UK Corporate Governance Code
2018, as outlined on page 60
— Approved governance improvements including the move to a hybrid-
format Annual General Meeting and climate-related governance initiatives
— Undertook an internal Board evaluation to review the effectiveness of the
Board and its Committees, which included discussing the progress made
from the previous year’s evaluation and agreeing actions for the next
financial year
— Established a forward agenda and deep dives programme to ensure
regular reviews of key areas of focus
More information on pages 38 to 50, and 60 to 77.
62 Governance J Sainsbury plc Annual Report 2022
Succession and leadership
— Focused on succession planning across pivotal roles within the business
— Managed the retirement of David Keens and appointment of Non-
Executive Director Adrian Hennah and his transition as Chair of the
Audit Committee
— Led the appointment of Jo Bertram as Non-Executive Director with effect
from 7 July 2022
More information on pages 65 to 70.
Finance
— Reviewed business performance, including underlying profit forecasts,
cash and net debt positions, trading updates and market response to
announcements
— Discussed the impact of COVID-19 on the financial position of the
Company and discontinuation of LIBOR on financial facilities
— Scrutinised and approved the Company’s Preliminary results, Interim
results and Annual Report and Accounts
More information on pages 32 to 37.
Stakeholders
— Ensured stakeholder considerations were embedded in discussions
and decision-making, as outlined in our Section 172 statement on
pages 24 to 29
— Met key suppliers to enhance communication and understand their
views of our supplier relationships
— Shared responsibility for workforce engagement amongst Non-Executive
Directors, attending our Great Place to Work National Group, our
Workforce Advisory Panel, on a rolling schedule
— Benefited from open and honest colleague feedback on topics including
communication around product availability, colleague morale, job
security, colleague reward and Executive pay, which helped decision-
making in these areas
More information on pages 24 to 29.
Effective decision-making
Having an effective and diverse Board with a culture of engagement
and openness has enabled high quality discussions ahead of
executing several critical decisions during the year.
Net Zero by 2035
In a critical year for tackling the climate crisis, the business took the
decision to accelerate its commitment to Net Zero by no later than
2035, five years earlier than previously stated. The Board was fully
supportive of this decision having carefully reviewed the plans and
actions required to effectively deliver this level of commitment.
Sainsbury’s Bank
During the year, Sainsbury’s had received expressions of interest in
Sainsbury’s Bank. The Board was provided with regular updates from
management and advisers during the process. Whilst the Board
believed that it was in the best interests of shareholders to explore
these expressions of interest, it ultimately concluded that these did
not offer better value for shareholders than would be realised through
retaining Sainsbury’s Bank. The Board took the decision to remain
focused on strengthening and simplifying our Financial Services
business in line with our strategy.
Colleagues
The rapidly-changing nature of COVID-19 also highlighted an
opportunity for the business to implement frameworks and
encourage a culture of demonstrating pace and agility when making
decisions at all levels. The Board played a key role in this and led by
example during the year with several important decisions in relation
to our colleagues.
The Board reviewed the proposal to close our stores on Boxing Day
in2021, taking into consideration the impact on our customers and
the response from colleagues. The Board supported this action,
recognising the contribution of our colleagues throughout the year.
Following the announcement, Martin Scicluna and Tanuj Kapilashrami
discussed this matter with colleagues, enabling them to receive
first-hand feedback that will inform future decisions.
The Board also reviewed the proposal to increase store colleague base
pay above the Living Wage. The impact on various stakeholders was
taken into consideration, including colleagues and investors.
63Governance J Sainsbury plc Annual Report 2022
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How the Board operates
The Board and its Committees have a forward programme of meetings to
ensure that sufficient time is allocated to each key area and the Board’s
time is used effectively. There is sufficient flexibility for items to be added
to the agenda, which enables the Board to focus on key matters relating to
the business at the right time.
Our Board comprises the Chairman, two Executive Directors and six
independent Non-Executive Directors. Adrian Hennah joined the Board as
Non-Executive Director on 1 April 2021 and became Audit Committee Chair in
July 2021, succeeding David Keens who retired from the Board on 9 July 2021.
Susan Rice has confirmed her intention to step down from the Board at
the conclusion of the AGM in July 2022 and Jo Bertram will join the Board
as a Non-Executive Director on 7 July 2022. Each of their responsibilities
is listed below and more information on their specific contributions can
be found in their biographies on pages 54 to 57.
Chairman
Martin Scicluna
— Leading the Board and ensuring its effectiveness in
all aspects of its role
— Promoting high standards of corporate governance
— Ensuring that the Board is aware of the views of
shareholders and other stakeholders
— Promoting a culture of openness and debate in the
boardroom and constructive relations between
Executive and Non-Executive Directors
Chief Executive
Officer
Simon Roberts
— Leading the day-to-day management of the
business and executing the strategy agreed
by the Board
— Proposing strategies, business plans and policies to
the Board
— Ensuring effective implementation of the Board’s
decisions
— Leading, motivating and monitoring performance
of the Company’s senior management
— Creating a framework of strategy, values, culture,
performance management and objectives to ensure
the successful delivery of results for the business
— Maintaining an effective framework of internal
controls and risk management
Chief Financial
Officer
Kevin O’Byrne
— Supporting the Chief Executive Officer in developing
and implementing strategy
— Overseeing the day-to-day financial activities and
the financial performance of the business
— Together with the Chief Executive Officer, ensuring
that financial policies and practices set by the Board
are adopted at all levels of the business
Senior Independent
Director
Susan Rice (stepping
down from the Board
on 7 July 2022)
Brian Cassin (with
effect from 7 July 2022)
— Acting as a sounding board for the Chairman and
as a trusted intermediary for the other Directors
when necessary
— Meeting with shareholders and representative
bodies when requested, discussing matters with
them where it would be inappropriate for those
discussions to take place with either the Chairman
or the Chief Executive Officer
— Leading the annual appraisal and review of the
performance of the Chairman
Independent
Non-Executive
Directors
Brian Cassin
Jo Harlow
Adrian Hennah
Tanuj Kapilashrami
Keith Weed
Jo Bertram (with effect
from 7 July 2022)
— Bringing an external perspective, independent
judgement and objectivity to the Board’s
deliberations and decision-making
— Supporting and constructively challenging the
Executive Directors and senior management,
holding them to account and offering specialist
advice using their wide and varied experience
— Monitoring delivery of the agreed strategy within
the risk management framework set by the Board
Company Secretary
and Corporate
Services Director
Tim Fallowfield
— Advising and assisting the Board and the Chairman,
particularly in relation to governance, Board
evaluations, induction, training and formulating the
agenda for Board meetings
— Ensuring that Board procedures and the governance
framework are effective
— Ensuring the Board receives accurate, timely and
clear information and is consulted on all matters
important to it
During the year, the Chairman and Non-Executive Directors met without the
Executive Directors being present. The Chairman holds regular and informal calls
between Board meetings with the Non-Executive Directors, to consider their
views and to enable thorough preparation for Board discussions. In addition, the
Senior Independent Director held discussions with the Non-Executive Directors
without the Executive Directors or the Chairman being present.
Directors were kept informed of the key discussions and decisions made at
each of the four principal Committees – Audit, Nomination, Remuneration,
and Corporate Responsibility and Sustainability. The Chair of each Committee
provided a detailed summary at the Board meeting following the relevant
Committee meeting.
In the rare event that a Director is unable to attend a Board meeting, the
Chairman will meet with the relevant Director in advance, so that their
comments and inputs can be considered. Following the meeting, the Chairman
will provide an update to them on the outcomes of the discussions.
The following table shows the attendance of Directors at scheduled Board
meetings. The Board held eight scheduled meetings during the year, together
with several unscheduled meetings which were well attended by all Directors.
Martin Scicluna 8(8) David Keens
2
3(3)
Brian Cassin 8(8) Kevin O’Byrne 8(8)
Jo Harlow 8(8) Susan Rice 8(8)
Adrian Hennah
1
8(8) Simon Roberts 8(8)
Tanuj Kapilashrami 8(8) Keith Weed 8(8)
The maximum number of scheduled meetings held during the year that each Director could attend is
shown in brackets.
1. Adrian Hennah joined the Board on 1 April 2021.
2. David Keens stepped down from the Board on 9 July 2021.
Time commitment and conflicts of interest
Prior to appointment, each prospective Non-Executive Director confirms
that they will have sufficient time available to be able to discharge their
responsibilities effectively and that they have no conflicts of interest. This is
discussed by the Board before any appointment is made. In addition, the
Board reviews and approves in advance requests by Directors wishing to
undertake new external responsibilities or directorships and considers both
the time commitments involved and any potential conflicts. The conflicts of
interest register is reviewed annually to ensure it is up to date and that there
are no new conflicts to consider. No changes were recorded during the year
that would impact the independence of any of the Directors.
The Board supports Executive Directors having a non-executive directorship role
as part of their continuing development, provided that they have sufficient time
to balance their commitments to the business with any external role. Subject to
Board approval, each Executive Director may hold one non-executive director
position. Whilst recognising the benefits of Non-Executive Directors having
varied and broad experiences, the Board keeps in mind investor guidance and
reviews the commitments of each Director annually.
Throughout the year, all Directors have demonstrated high levels of
availability and responsiveness for additional meetings and discussions
where these have been required. The Board remains confident that individual
members continue to devote sufficient time to undertake their
responsibilities effectively.
64 Governance J Sainsbury plc Annual Report 2022
Division of responsibilities
Director development
Induction
We have a comprehensive and tailored induction programme in place for
Directors when they join the Board to ensure their smooth transition and
enable them to gain an understanding of all major aspects of the business,
including our purpose, vision, strategy, culture, values, governance
framework, sustainability strategy and the opportunities and challenges
facing the sector.
When joining the Board, a new Non-Executive Director typically meets
individually with each Board and Operating Board member, and also with
senior management from key areas of the business to gain an insight into
their respective areas of responsibility. The Company Secretary and
Corporate Services Director briefs them on policies, Board and Committee
procedures, and core governance practice, which includes Directors’ duties
and Market Abuse Regulations. They also receive induction materials including
recent Board and Committee papers and minutes, strategy papers, investor
presentations, Matters Reserved for the Board and the Board Committees’
Terms of Reference. They visit stores, depots and other business locations
and meet key advisers. Director inductions are ongoing processes over a
number of years during which they will cover the areas in the table below.
Adrian Hennah joined the Board as a Non-Executive Director on 1 April 2021
and succeeded David Keens as Audit Committee Chair following David’s
retirement from the Board at the Annual General Meeting on 9 July 2021.
Adrian received a tailored induction on joining the Audit Committee. This
followed the usual programme for Directors’ induction as outlined below but
was specifically designed to support his transition to Audit Committee Chair.
This included attending the April Audit Committee meeting as an observer
and working closely with David Keens to ensure an orderly transfer of
responsibilities.
Adrian also met a number of colleagues and stakeholders pertinent to his
role on the Audit Committee. This included introductory meetings with EY,
the external auditors and Mark White, the Groceries Supplier Code Adjudicator.
He also met individually with each of the Chief Financial Officer’s direct
reports and their respective teams which included Internal Audit, Treasury,
Property, Pensions, IT and various finance teams. In addition to this, Adrian
visited Sainsbury’s Bank’s offices in Edinburgh and met with the Sainsbury’s
Bank’s Chair, the Chief Financial Officer and the Chairs of the Bank’s Risk and
Audit Committees.
Adrian also visited the Sainsbury’s Newbury store with Simon Roberts and
the Waltham Point depot with the Director of Logistics and Supply Chain.
This gave Adrian the opportunity to see first-hand the operations of a store
and depot, and to meet colleagues working within these locations. He has
also participated in Board sessions with employee representatives to hear
their views and experiences.
The Directors’ induction process
Understanding the
business
Understanding the sector
and environment
Meet the Sainsbury’s internal
team and advisers
Visit Group
operations
— Business strategy, purpose
and vision
— Overview of each business area
and its opportunities
— Operating plans, current KPIs
and targets
— Key business relationships
— Board and governance
procedures
— Board effectiveness reviews
and actions
— Matters relevant to the Board
Committees they join
— Recent Board and Committee
papers and minutes
— Key people and succession
plans
— Remuneration and reward
across the business
— Finance, treasury and tax
overviews
— Risk profile and approach
— Internal audit, risk and internal
controls
— The market and competitors
— Customer trends
— Consumer and regulatory
environment
— Brand perception and
reputation
— Analyst and investor
perspectives
— Key stakeholders’ views
— Directors
— Committee Chairs
— Company Secretary and
Corporate Services Director
— Members of the Operating
Board
— Senior management across
the business
— Members of the external
audit team
— Remuneration consultants
— Brokers
— Store visits
— Distribution centres
— Store support centres
65Governance J Sainsbury plc Annual Report 2022
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Composition, succession and evaluation
Continuing development
Non-Executive Directors continue to learn about the business by meeting
with management, colleagues, suppliers and other stakeholders as described
on the previous page. All of the Non-Executive Directors continue to engage
with different aspects of the business to support their ongoing development.
Further information on the continuing development of two of our Non-
Executive Directors, Jo Harlow and Tanuj Kapilashrami, is described below.
During the year, Jo Harlow, in her capacity as Chair of the Corporate
Responsibility and Sustainability Committee, hosted regular Climate
Dialogues for Sustainability Chairs with support from Chapter Zero. These
covered areas such as external resources, employment engagement,
biodiversity issues, COP26, and linking sustainability goals and remuneration.
She also became a Board member of Chapter Zero, a network of company
Chairs, Committee Chairs and Non-Executive Directors who are committed
to developing their knowledge of the implications of climate change for
UK businesses. Jo met with several Sainsbury’s store managers and had
discussions with the Chairman, Audit Committee Chair and Company
Secretary and Corporate Services Director on sustainability governance.
Jo participated in COP26 and attended a number of Sainsbury’s events
including the inaugural Environmental, Social and Governance (ESG) day,
the Farming Conference and a leadership event. In addition to this, Jo has
regularly attended and spoken at professional webinars, such as those
hosted by Legal & General Investment Management, Willis Towers Watson,
Deloitte, Fidelio and the Local Authority Pension Fund Forum. Jo’s
engagement with colleagues and regular development activities have
enabled her to make an effective contribution as a Non-Executive Director,
particularly in relation to sustainability and climate change issues.
In addition to regular discussions with members of the Operating Board,
Tanuj Kapilashrami regularly attends Sainsbury’s Great Place to Work
colleague listening sessions with the Group HR Director, the Chairman and
other Non-Executive Directors. Tanuj’s participation in these sessions
provided her with the opportunity to engage directly with colleagues and
hear their views on various topics during the year including our strategy,
values and culture, product availability, colleague pay and the decision
to close our stores on Boxing Day. These sessions enabled Tanuj to develop
a greater understanding of the business and bring employee insights into
Board discussions. As part of her external executive role, Tanuj is engaged
with professional bodies, industry forums and global peers and her external
perspective is valuable particularly in discussions involving colleagues and
culture at Sainsbury’s.
Professional development and training
To ensure the Board updates and refreshes its skills and knowledge, we have
a programme to support Directors’ training and development requirements
in relation to governance, investor expectations and regulatory impacts.
This includes regular presentations from management on relevant
governance matters.
The Board was upskilled on social, environment and climate change issues
and developments in a sustainability event led by the Cambridge Institute
for Sustainability Leadership in June 2021. The Board also received external
strategic updates from leading industry analysts in the food retail sector
at a Board dinner in September and at the Strategy Conference in October.
Suppliers also attended a Board dinner in March to enable the Board to hear
feedback directly from suppliers.
Both the Audit and Remuneration Committees received updates on relevant
accounting and remuneration developments, trends and changing disclosure
requirements from external advisers and management. The CR&S Committee
received stakeholder and regulatory updates on ESG matters from
management. More information can be found on pages 71, 73 and 78.
The Board and Committees were updated on compliance with the Modern
Slavery Act, Task Force on Climate-related Financial Disclosures, the 2018 UK
Corporate Governance Code and Directors’ responsibilities under Section 172
of the Companies Act. The Board was also provided with MAR training
from the Company Secretariat this year. The Directors have access to
advice from the Company Secretary and independent professional advice
is available at the Company’s expense, if necessary, in fulfilling their duties
and responsibilities.
Board evaluation
In line with best practice, we review the Board’s effectiveness on an annual
basis through a formal performance evaluation, including an assessment of
the Board and its Committees. An external evaluator conducts the review
every third year, and in the two intervening years this is carried out by the
Company Secretary and Corporate Services Director, to ensure continuity
over the three-year cycle. The last external evaluation was carried out by
Clare Chalmers, an experienced independent provider of board effectiveness
reviews, from November 2019 to February 2020.
This year’s internal evaluation was conducted from December 2021 to March
2022 and led by the Company Secretary and Corporate Services Director. The
review explored the key areas of focus set out below and themes that arose
for action in the 2020/21 internal evaluation. Board members completed an
online questionnaire, based on previous years to maintain continuity, which
also incorporated last year’s key feedback topics and recent developments
in the business, its strategy and governance.
The key areas of focus included: the effectiveness, role and priorities of the
Board and its Committees; the Board’s composition, skills, succession and
culture; the alignment of purpose, strategy and values; leadership of the
Board and the business; ways of working and broader risk management; and
engagement with stakeholders. Each Director was given the opportunity to
raise their own additional points. The results of the internal questionnaire
were discussed with each of the Directors in individual discussions with the
Company Secretary and Corporate Services Director.
Following the individual discussions, the Company Secretary and Corporate
Services Director discussed the conclusions (including any feedback with
individual Directors) with the Chairman and then presented a written report to
the Board. A separate meeting with the Board was held to discuss the findings
and the Board agreed the key actions. The Company Secretary and Corporate
Services Director also met with the Senior Independent Director to discuss
feedback for the Chairman, which was subsequently shared with him as part of
his review meeting. Each of the Committee Chairs received specific feedback on
the effectiveness of the relevant Committee for their consideration.
Findings of the 2021/22 review
The report identified a number of strengths of the Board including:
— The Board continues to operate effectively, with enhanced focus on
performance and the key strategic issues facing the business this year
— The Board has open discussions before major decisions are taken, and
the pace and progress of decision-making has been appropriate with
robust iteration between meetings to maintain momentum
— The Board has responded well to issues in an uncertain trading environment
— The external strategic input received at the sustainability event, Board
dinners and the Strategy Conference during the year were well received
by the Board
— The Chairman is a highly effective leader and has developed strong
relationships and trust with the NEDs
— The Executive Directors keep the Board well informed of key issues
arising, provide strong leadership and management’s handling of the
pandemic was outstanding
— The recent NED appointees are making strong contributions to the Board
— The NEDs are highly engaged and provide a good level of challenge and
support to management
The report also identified development areas for the Board in the year ahead
which are detailed on page 67.
Board Committees
As described above, the evaluation process also assessed the effectiveness
of the Board Committees. A theme identified from the process was a desire
for further cross functionality between the Committees where there was an
overlap of discussions, which is being implemented. The findings ultimately
concluded that each of the Committees continued to operate effectively,
was well led and was efficient in dealing with current issues.
Any specific findings and action points are overseen by each Committee
Chair, with consideration of the overall Board findings which are deemed
relevant to the Committee’s work.
66 Governance J Sainsbury plc Annual Report 2022
Key areas of focus from 2020/21 review Progress and actions implemented during 2021/22
Board development
Ensuring the Board continues to evolve in key strategic areas such as digital
and technology change, sustainability and climate change issues
A sustainability event held by the Cambridge Institute for Sustainability
Leadership was arranged for the Board in June. Leading retail industry
analysts attended a Board dinner in September and the Strategy Conference
in October to provide external strategic perspectives
Customer insights
Continued focus on meaningful customer insight and behaviour data to
further drive our strategy
During the year, the Chief Marketing Officer provided updates on customer
insight data at several Board meetings. This will continue to be an area of
focus for the Board and a plan is being developed to further strengthen the
Board’s understanding of customers
Supplier engagement
Supporting further engagement with Sainsbury’s key suppliers
The Board received supplier-facing, strategic-related updates from the Food
Commercial Director at Board meetings during the year. This focused on our
relationship with suppliers and the activities that the business has undertaken
to support them, particularly in challenging trading environments. In addition
to this, suppliers attended a Board dinner in March, enabling the Board to
hear directly from suppliers
Wider stakeholder engagement
Additional consideration to wider societal issues, including community,
government, non-governmental organisations and key society topics
Regular feedback and updates were provided at Board meetings following
discussions with our stakeholders on key regulatory, societal and
operational issues
Ways of working
Effective and appropriate transitioning plan, including face-to-face
meetings of the Board, management and key stakeholders, once the
COVID-19 restrictions have eased
A clear plan was developed which enabled the Board to transition safely and
effectively to face-to-face meetings of the Board and to meet with Operating
Board members and other key stakeholders within the business
Agreed actions and areas for development for 2022/23
— Allocate additional time at Board meetings for certain strategic topics to enable fuller discussions and reflection by the Board
— Incorporate a broader perspective into the planned customer insight sessions for the Board to strengthen its understanding of customers and support
strategic decision-making across the business
— Review colleague engagement activities planned for the Board and identify additional opportunities for the Board to build on the level of engagement
with colleagues
— Continue to build appropriate relationships with the Bank Board and monitor the Board’s progress in delivering its strategy
— Invite non-Audit Committee members to attend all or part of future Audit Committee meetings when key risks are being discussed to enhance their
understanding of the Company’s significant risks and progress on their mitigation
A combination of
Board evaluation
and Director
appraisal
Progress and
actions
implemented
during 2021/22
Agreed actions
for 2022/23
Board evaluation cycle
Year 2
Review focused
on Year 1 findings
raised and any new
findings arising
Year 1
Independent
and externally
facilitated review
Year 3
Year 2 progress
reviewed and
areas of focus
identified
67Governance J Sainsbury plc Annual Report 2022
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Nomination Committee
Report
Dear Shareholder
We continue to strengthen our Board and ensure it
is well balanced with the right skills and experience
to effectively deliver our strategy.
The Nomination Committee plays a key role in supporting the Board within
the governance framework in reviewing the composition of the Board and its
Committees. This includes an assessment of whether the balance of skills,
experience, knowledge and independence is appropriate to enable it to
operate in a highly effective manner and to promote the long-term success
of the Company. The Committee also assists the Board in its consideration of
conflicts of interest and independence issues throughout the year. No conflicts
of interest or independence issues were identified as a result of this activity.
The Committee also reviewed the Board’s short, medium and long-term
succession planning at the executive and non-executive level and is satisfied
that the Company is well positioned to move forward with continuity and is
led by a strong leadership team.
The Board supports the recommendations of the Hampton-Alexander
Review on gender diversity and the Parker Review on ethnic diversity. The
Board has made good progress against its diversity and inclusion strategy,
and the Company will feature for the first time in the FTSE 100 Top Ten Best
Performers list for women in leadership. Three of the Board of Directors are
women (33 per cent) and 47.8 per cent of our Operating Board members
and their direct reports are women. One member of the Board of Directors
identifies as ethnically diverse.
Inclusivity throughout the business is highly important to us and we
continue to focus on this and the development of our diverse talent pipeline.
We are highly supportive of the diversity and inclusion initiatives in place
which are detailed on pages 69 to 70.
Following a robust recruitment process, Jo Bertram will join the Board on
7 July 2022 and I look forward to the part that she will play in Sainsbury’s
future. After nine years of outstanding contribution and commitment,
Susan Rice will step down from the Board after the AGM in July 2022.
Following Susan’s retirement from the Board, I am delighted to announce
that Brian Cassin will be appointed as Senior Independent Director, Jo Harlow
will become Chair of the Remuneration Committee and Keith Weed will be
appointed as Chair of the CR&S Committee. During the year, David Keens
stepped down from the Board in July 2021, and Adrian Hennah joined the
Board in April 2021, succeeding David as Audit Committee Chair in July 2021.
The Committee recommended the appointment of Adrian Hennah and
Jo Bertram to the Board following rigorous search processes. The search
processes incorporated the extensive work completed last year to identify
the skills and experience required to deliver our strategy.
Martin Scicluna
Chairman
Principal role and responsibilities
The Nomination Committee is responsible for reviewing the structure,
size and composition of the Board and its Committees; taking into
account skills, knowledge, experience and diversity, and making
recommendations to the Board for any changes. It is responsible for
formulating plans for succession at Board and senior management
levels, taking into account the challenges and opportunities facing the
business, and the skills and expertise needed to ensure the long-term
success of the Company.
The Committee’s Terms of Reference are available on the Company’s
website www.about.sainsburys.co.uk.
The Committee held three scheduled meetings in the year, together with
several unscheduled meetings relating to recruitment and succession planning.
Attendance at the scheduled Nomination Committee meetings:
Martin Scicluna 3(3) Tanuj Kapilashrami 3(3)
Brian Cassin 3(3) David Keens
1
1(1)
Jo Harlow 3(3) Susan Rice 3(3)
Adrian Hennah 2(2) Keith Weed 3(3)
The number of meetings held during the year is shown in brackets.
1 David Keens stepped down from the Board on 9 July 2021.
Committee membership
The Committee consists of the Chairman of the Board and six Non-Executive
Directors, all of whom are independent. The Chairman of the Board is also
the Chair of the Committee, and the Company Secretary and Corporate
Services Director or his nominee acts as the Secretary of the Committee.
The Chief Executive Officer and Chief Financial Officer attend meetings
by invitation.
Succession planning
Talent development
We recognise the importance of developing our people and, as such, the
talent pipeline within our business remains a key focus for the Committee.
Our senior leadership population is a source of future Operating Board talent,
with five members of our Operating Board, Rhian Bartlett, Graham Biggart,
Tim Fallowfield, Mark Given and Clodagh Moriarty, progressing through this
route. Our Leading Together and Leading Steps Up programmes are key
investments we are making into developing senior leadership over the next
two to three years.
Appointments to the Board
The Nomination Committee has a formal, rigorous and transparent procedure
for the appointment of new Directors to the Board. When the need to appoint
a Director is identified, for instance when a Director is approaching the end of
their ninth year on the Board, the Committee reviews the experience, skills
and knowledge required, taking into account the Board’s skills matrix,
existing composition and the relevant experience and understanding of
our stakeholder groups. We engage executive search consultants and
consider the gender, nationality, educational and professional background
of candidates, as well as individual characteristics to see if they will be a
good fit against the desired specification. Suitable candidates are then
interviewed by Committee members. The process is led by the Chairman
who receives support from the Company Secretary and Corporate Services
Director as appropriate.
Careful consideration is given to ensure that proposed appointees have
enough time available to devote to the role and that the balance of skills,
knowledge and experience on the Board with regard to experience and
understanding of our stakeholder groups is maintained.
When the Nomination Committee has identified a suitable candidate, it then
makes a recommendation to the Board with the Board making the final
decision. During the year, the Committee followed the above procedure
during the search for the new Non-Executive Directors, Adrian Hennah and
Jo Bertram. MWM Consulting were engaged by the Committee as external
executive search consultants. MWM Consulting are one of the small number
of firms accredited by the Hampton-Alexander Committee for their leading
68 Governance J Sainsbury plc Annual Report 2022
work in promoting gender diversity. They had no connection with the
Company prior to appointment as recruitment consultants and had no
relevant connections with individual Directors. The Committee briefed the
search consultant on our specification, and we considered and interviewed
a wide and diverse range of candidates for each role. The Board was
unanimous in its decision to appoint Adrian Hennah and Jo Bertram as
Non-Executive Directors.
Identify
The Committee discussed the overall skill sets of
the Board and agreed a detailed job specification,
skill sets and preferred attributes for the appointees.
A thorough review of potential candidates was
undertaken. MWM Consulting presented a diverse
long list of external candidates from a broad range
of backgrounds. The Committee shortlisted a
number of candidates.
Interview
The Chairman and several of the Directors met
with the shortlisted candidates who confirmed
their interest in the role. Following the interviews,
the Nomination Committee members met to
discuss feedback.
Select
The Committee was unanimous in its final
selection of candidates. It recommended to the
Board that Adrian Hennah and Jo Bertram be
appointed as Non-Executive Directors. Their
specific contribution to the Company can be found
in their biographies on pages 55 and 57.
Appoint
Adrian Hennah’s appointment as Non-Executive
Director was announced on 12 March 2021 and
took effect on 1 April 2021. Jo Bertram’s appointment
as Non-Executive Director was announced on 14 April
2022 and she will join the Board on 7 July 2022.
Diversity and inclusion
The Board and Committee continue to drive the agenda of diversity and
inclusion across the business and are proud of the progress we have made
so far. We are committed to being a truly inclusive retailer where every single
one of our colleagues can fulfil their potential and where all our customers
feel welcome when they shop with us. We embrace and actively promote
diversity, inclusion and equity and aim to reflect the diverse communities we
serve. Simon Roberts and the Operating Board provide clear and committed
leadership and accountability of our inclusion agenda, with members of the
Operating Board acting as sponsors across wellbeing, diversity and inclusion,
and our Colleague Networks. To ensure continued progress in this space,
the governance of diversity and inclusion is a regular part of the Operating
Board agenda.
To ensure sustained improvement, we continue to look at focused initiatives,
culture and accountability through aspirational targets. In 2021, we set new,
stretching targets to take us to 2024 which covers more of our talent pipeline
and covers Black representation specifically. We have set a target of 50 per
cent female, 12 per cent ethnically diverse and 3 per cent Black representation
at senior management level
1
. Importantly, these targets will form part of
our long-term incentives for management. We are publicly reporting on
our progress against these targets twice a year with further information
available on our website https://www.about.sainsburys.co.uk/
sustainability/better-for-everyone/diversity-and-inclusion.
Actions to support the progression and representation of our ethnically
diverse colleagues are an important part of our strategy. We continue to
build on our commitments in support of our Black colleagues, all of whom
are part of our focus on changing the conversation around race. Further
information on the strategies we have in place to support our drive for
inclusivity and the progression of our diverse talent can be found on page 14.
The Board receives regular updates on our inclusion initiatives and the Board,
CR&S Committee and Nomination Committee receive detailed presentations
throughout the year on our inclusion priorities and the progress we are
making. The Remuneration Committee also reviewed and approved the
Ethnicity and Gender Pay Report which can be found on our website
https://www.about.sainsburys.co.uk/making-a-difference/
gender-pay-gap.
Board diversity policy
We promote diversity on our Board and we believe there is good balance
amongst our Non-Executive Directors, with extensive and wide-ranging
experience of retail and other consumer-facing businesses and varying
length of service. Our Non-Executive Directors have other highly relevant
skills derived from serving in a range of major executive and non-executive
positions throughout their careers and a blend of cognitive, personal
strengths and backgrounds.
We are keen to ensure that Board membership reflects diversity in its
broadest sense, our colleague base and the communities in which we serve.
The Board’s approach to its own diversity is as follows:
Aim to maintain a level of at least 33 per cent female Directors
and at least one Director who identifies as ethnically diverse on
the Board.
Three of our nine Board Directors are women (33 per cent) and one identifies
as ethnically diverse. In making its recommendations to the Board, the
Committee has due regard to the UK Corporate Governance Code 2018 and
other best practice and will consider the balance of skills, experience,
independence and knowledge of the Board, its diversity in the broadest
sense, including gender and ethnicity, how the Board works together as
a team and other factors relevant to its effectiveness.
The Board continues to review the development of the pipeline of both
ethnically diverse and female senior management within the business.
Of the ten members of our Operating Board during the year, four were
women (40 per cent). More information on diversity and inclusion can be
found on pages 13 to 14.
Consider candidates for appointment as Non-Executive Directors
from a wide pool.
During the year, the Nomination Committee discussed Non-Executive Director
appointments and succession. It worked closely with MWM Consulting in
compiling long and short lists of diverse candidates from various backgrounds
and sectors. Candidates were identified, interviewed and measured against
a detailed job specification, skill sets and preferred attributes.
Assist the development of a pipeline of high-potential
colleagues by encouraging key members of senior management
within the business to take on additional roles to gain valuable
Board experience.
The Board supports and encourages initiatives that strengthen the pipeline
of talent in the Company including:
— A comprehensive talent management review is presented and discussed
by the Board
— Highly personalised plans and initiatives for high-potential colleagues to
broaden their skill sets and experience to prepare them for future senior
roles; for example, through boardroom exposure, and non-executive and
trustee roles outside the business
— Senior management mentoring schemes sponsored by Board and
Operating Board members
1 The definition of ‘senior management’ in the UK Corporate Governance Code should be the Executive
Committee or the first layer of management below Board level, including the Company Secretary.
However, with such a large workforce, we believe including our top 230 senior management in the scope
of our targets ensures that we are focused on improving diversity in all of our most significant leadership
positions and developing our pipeline of talent. Our top 230 lead large teams and are critical role models
in the organisation, playing a vital role in shaping the inclusive culture that we are working hard to
create. We want all of our colleagues to see visible and diverse leaders in every part of the business.
69Governance J Sainsbury plc Annual Report 2022
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70 Governance J Sainsbury plc Annual Report 2022
0-3 years
4-6 years
7-9 years
Board tenure
(Non-Executive Directors and Chairman)
3
3
1
Men
Women
Board gender diversity
6
3
White
Ethnically diverse
Board ethnic diversity
8
1
Non-Executive Directors
Executive Directors
Board balance
2
7
Corporate transactions
Risk Management/Audit
Finance/Accounting/Audit
F
inancial Services
Sustainability
Operations/General
Retailing experience
Consumer/Customer Service
E-commerce/Technology
Brand/Marketing
Digital/Online
HR/People
Remuneration
Current or recent
CEO experience
Strategy development/
Implementation
Board skills matrix
6
6
6
6
5
5
9
9
10
10
10
7
8
7
Jo Bertram will join the Board on 7 July 2022, after year end, and therefore
is not included in the above charts.