Corporate social responsibility report

Environment

Ocado aims to provide a greener, more sustainable alternative to store-based supermarkets.

A traditional supermarket requires deliveries first to be made to a regional distribution centre and then to the supermarket itself. Customers will often drive to the supermarket in order to shop, and the supermarkets themselves require energy to be lit and heated and tend to have open fridges and freezers in an otherwise ambient environment. Ocado delivers from the CFC (sometimes via a Spoke) to a customer's home, which eliminates much of the carbon emissions generated by traditional supermarkets and their stores, and also reduces the number of cars on the road. Each Ocado delivery van replaces a significant number of car journeys every day.

The Grocer Gold Awards 2009 - WinnerThis sustainable alternative has been reflected in awards made to Ocado in recent years. Ocado was voted Green Retailer of the Year 2009 in The Grocer Gold Awards, Large Retailer of the Year 2008 in the Online Green Awards and won Ethical/Green Practice 2009 at the IMRG E-Commerce Awards for Excellence.

Environmental management

Ocado's management is conscious that the Company's operations have an impact on the environment and will regularly consider new measures and innovations to make the business more environmentally friendly.

In early 2008, the Company established a green team comprising over 40 staff members from across the business. This team has introduced new initiatives to reduce the impact of the business on the environment and raised awareness within Ocado of environmental issues.

Carbon Reduction

Ocado is seeking to minimise the environmental impact and carbon footprint associated with its operations.

Ocado has had its operations independently audited to measure the extent of its carbon footprint. Ocado's total emissions for the period from July 2009 to June 2010 were 37,532 tCO2e. In this period, the Group's normalised emissions (normalised by the total value of the Group's sales) decreased from 84.9tCO2e (per million of sales in pounds) in September 2009 to 71.5tCO2e (per million of sales in pounds) in June 2010. So while the Group's absolute energy emissions have increased as its sales have increased, the actual carbon emissions attributable to each order has decreased with the greater efficiency of the Group's operations. Part of the improved efficiency is due to the opening of a new Spoke which resulted in some shorter van routes as well as continuing improvements in the Group's delivery routing software which optimises the delivery route for each van journey. A breakdown of the source of the Group's carbon footprint is set out in the diagram below.

Carbon footprint constituents

The Directors believe that the carbon footprint of the Group's operations have been considerably lower carbon intensity than that of many of its competitors (taking into account the relative size of each operation) because the Group's business model is more efficient than that of the traditional store-based model.

To continue to reduce its carbon footprint, the Group is implementing measures such as van monitoring devices which help identify areas for reducing fuel use in delivery vans (for example, as a result of vans sitting idle).

The Group has taken a number of other steps in response to new carbon reduction legislation and to address the lessening of its carbon footprint, as set out below.

Climate Change Agreement: Ocado has signed up to the Climate Change Agreement (with the Carbon Trust), which places certain obligations on the Group to monitor and lower carbon usage.

10:10 campaign: In 2010, the Company signed up to the 10:10 campaign, which is a campaign run by an independent UK charity, the 10:10 Trust, aimed at reducing carbon emissions by 10% in a year. The Company has not had its carbon emissions audited for the period since signing up to the 10:10 campaign, so cannot yet measure whether it has met this target. However, as noted above, Ocado has shown it has been reducing its carbon emissions against previous periods when measured as a percentage of sales.

Electric vans: Ocado has co-developed two prototype electric powered vans, which are currently being trialled in central London as part of Ocado's delivery fleet.

Green van deliveries: Customers can choose a 'green van slot' when booking a delivery time (that is, when a delivery van is already booked in that customer's area) which helps minimise the carbon impact of that customer's delivery.

Energy efficiency project: Ocado invested about £200,000 in 2010 on a project aimed at making the Group's operations more energy efficient. The investment included the purchase of energy saving equipment and facilities for the CFC, such as the modernisation of the lighting systems, installation of more energy efficient chilling equipment and improved door seals and automated controls. Ocado makes it a standard requirement for new sites and new fit-outs of existing buildings that they use energy efficient lighting, motion detectors and daylight controls as part of its energy saving commitments.

Environmental initiatives undertaken

The Group has taken a number of measures to reduce its environmental impact, as set out below.

Responsible bag recycling: The business has a closed-loop grocery bag recycling system, whereby when making a delivery, CSTMs offer to collect used bags (both Ocado bags and any other company's plastic bags) from customers which are then recycled within the UK to make new Ocado grocery bags.

Reducing food wastage: The Group's food waste as a percentage of gross sales (0.61% for the period) is significantly less than any of its competitors. Food wastage is an important key performance indicator measured by the business, as noted in the Chief Financial Officer's review. Ocado also helps customers to reduce their food waste, by being the first online food retailer to show guaranteed product life on the website and by including 'use-by' dates on each order receipt which assists customers to plan meals and reduce their waste. Food that is beyond the guaranteed product life but within the use-by date is often donated to various charities including Vineyard in Southend, YMCA in Watford, and New Hope in Watford. Any food that isn't fit for Ocado's company shop or charities, but is suitable for animals, is sent to Paradise Wildlife Park in Broxbourne.

Anaerobic digestion: Ocado recently completed a trial of a process called "anaerobic digestion". That is a process whereby any food supplied that is no longer edible is mixed with bacteria and burnt to produce electricity. Ocado expects to implement this means of food waste disposal as part of its operations.

Meat Free Monday: The Company supports the "Meat Free Monday" campaign which raises awareness of the climate-changing impact of meat production and consumption. The Meat Free Monday campaign encourages people to reduce their greenhouse gas emissions by having at least one meat-free day every week.

Recycled office furniture: Ocado fitted out much of its new head office space in January 2010 with used office furniture. The benefits of this for the environment were that Ocado helped divert a large amount of used furniture from being disposed of in landfill sites and that there was no environmental impact related to the production and delivery of new furniture for Ocado.

Suppliers and products

Product range: The Ocado own-label product range has been introduced to broaden the choice for our customers and offers good quality at competitive prices. One of the key criteria when developing the Ocado own-label range is that it be responsibly sourced. The Company supports British and EU farming and, where possible, sources relevant Ocado own-label products from the British Isles when in season and available. Ocado fish is responsibly caught, Ocado fresh meat and poultry is raised to British, EU or New Zealand welfare standards, Ocado boxed eggs are free-range and all of the Ocado own-label bread is made using British wheat.

Waitrose Foundation: Through its supply agreement with Waitrose, Ocado supports the Waitrose Foundation. The Waitrose Foundation is a supply chain partnership that returns a percentage of profits from the sale of produce, flowers and prepared fruit to fund projects chosen by the farm workers and smallholders who grew or produced it. Since its beginnings in South Africa in 2005, the Waitrose Foundation has raised nearly £3 million and launched over 170 projects. Ocado has already contributed over £115,000 to the Waitrose Foundation. These projects are diverse and reflect the individual needs of the communities, ranging from supporting crèches to adult literacy programmes, and from supporting sports teams to provision of equipment for medical clinics.

Duchy Originals products: Ocado makes a significant charitable donation to the Prince's Charities Foundation, a group of 20 non-profit organisations, through its sales of Duchy Originals branded products.

Fair trade: Ocado aims to trade fairly with its suppliers and supports established schemes such as Fairtrade and Traidcraft, which contribute to the sustainable development of the communities where farmers and workers live. Ocado has one of the largest Fairtrade range of products of all UK grocers.

Organic farming: Ocado has a large selection of organic groceries. Organic farming helps promote biodiversity by using crop rotation and clover to build soil fertility. With organic farming there are strict rules around animal welfare and how food is produced.

People

Ocado's employees are key to its business and are the most visible part of the business to its customers. Management is committed to high standards of employment practice and to providing equality of opportunity, training and development and a safe workplace, in addition to developing initiatives which encourage innovation.

Ocado aims to be an exceptional employer; one that recognises talent and develops people to the best of their abilities. We ask our people to share our determination to succeed. We deliver superior customer service and business success through our people which is why it is important for us to appropriately reward, engage, listen to and develop our employees

Rewarding our people

Since its commencement as a privately owned business, Ocado's policy has been to issue share options to its employees. The rationale is that we want to give all of our employees the opportunity to own a part of the business. We continue to grant share options in the Company to each new employee as part of their employee benefits package.

To continue our philosophy of employee share ownership we established the Group's 'Sharesave Scheme' after the Company's Admission. A large number of our employees have chosen to participate in Ocado's Sharesave Scheme, which is the savings-related share option plan where each participating employee is granted options over shares in the Company in proportion to the amount saved by that employee.

We expect that in future, Ocado will introduce additional share schemes to both reward employees and to offer employees further opportunities to become shareholders in the Company.

In addition to share schemes, we provide a range of employee benefits including a staff discount on orders (with free deliveries on certain days), discount shopping membership, pension, life assurance, healthcare and an employee assistance programme.

Engaging our people

Engaged staff help us to continue to be successful and grow. We have this year launched our first formal employee survey across the whole business. This will measure current levels of employee engagement and identify the areas where we can become a better employer.

We continue to hold regular events to connect with our people, such as our annual family fun day, inter-Spoke football tournament, charity golf day, Woodland Trust tree plant team days, business results briefings and our Christmas parties. These reinforce our informal, relaxed culture and promote our family and community focus.

Our unique and informal culture means that many of our people have direct access to our senior leaders, but as we continue to grow we know this will be more challenging. We hold weekly board lunches with employees from across the whole business to increase dialogue between staff and business leaders. Ocado's employees are kept well informed of the performance of the Group and key events concerning the business through regular staff briefings done by management and through communications via the internet, email and video and audio recordings (which are particularly helpful for communicating with our large number of CSTMs).

Giving our people a voice

In order to better facilitate employee involvement and feedback in our rapidly growing business we have introduced the 'Ocado Council', which is a representative forum for dialogue between Ocado employees and leaders of the business. The Ocado Council was formed in January 2010 when elections were held to select 47 council representatives from across the business. The Council's achievements over its first year of existence include involvement in changes to terms and conditions of employment, pay and bonus awards, performance reviews, organisational changes and physical working environment improvements.

Developing our people

Every employee plays a part in the Company's success and we are focused on developing our people to the best of their abilities. When joining the business employees undertake a thorough induction which includes training on how to do their new job and orientation around different areas of the business.

Ocado's people have a range of backgrounds and we work hard to provide opportunities to move around the business where appropriate and provide training to develop skills for current and future roles. Our excellent in-house training team deliver customer focused training that prioritises the health and safety of our people and meets individual needs.

Attracting talent

We rely on talented people with drive and dedication to deliver excellent customer service. This is why we are careful to recruit the right people for the right roles. Our graduate programme plays an important part in developing talented people for our future, and our newly launched careers website allows timely recruitment of talented people for business growth.

Ocado creating new jobs

During the period the Group created an additional 883 jobs. The average number of employees employed by the Group for the period was 4,252 (2009: 3,494).

The Group purchased a 35.2 acre site in Dordon, Warwickshire on which the second CFC will be built. When this second CFC is at full operational capacity, Ocado expects that it will have created in excess of 2,000 jobs in the region.

Diversity of our people

We are committed to equal opportunities for all of our people, regardless of disability or background, from recruitment and selection, through training and development and promotion.

It is the policy of the Group that applications for employment by disabled persons are always fully considered, bearing in mind the respective aptitudes and abilities of the applicant concerned. In the event of employees becoming disabled all reasonable effort is made to ensure that their employment within the Group continues. It is the policy of the Group that the training, career development and promotion of a disabled person should, as far as possible, be identical to that of an able bodied person.

Social and Community Issues

Making a positive difference in the community: Ocado supports a number of community projects. One of these is the Woodland Trust, which is aimed at restoring and protecting ancient woods and native trees.

Charitable and political donations: Ocado has a charity committee made up of a number of employees, with the aim of encouraging support of certain charitable organisations by Ocado employees through the organisation of various fundraising initiatives. During the period Ocado employees raised more than £15,000 for a number of charities, the details of which are set out below:

British Heart Foundation £6,190
NSPCC £4,143
MacMillan Cancer Relief £2,493
Cancer Research UK £990
The Harry Christie Surgery Fund £820
Paul Dix Appeal (Princess Alexandra Hospital) £650
Kent Air Ambulance £361
Sick Children's Fund Coventry £117

Ocado made charitable donations during the period of over £14,000 (2009: £2,000). Included in the amount for the current period is a donation of £10,000 to the 10:10 Trust, which as noted above, is a charity committed to reducing carbon emissions by 10% a year.

No political donations were made during the period by the Group (2009: £nil).

The Group also donates money to the Waitrose Foundation and the Prince's Charities Foundation, as noted above.