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1、Serving our customers,communities and planet a little better every day.Annual Report and Financial Statements 2023.Contents2023 highlightsStrategic report2023 highlights.IFCIntroduction.1Tesco at a glance.2Supporting stakeholders through the cost-of-living crisis.4 Purpose and values.6Chairmans stat
2、ement.7Group Chief Executives review.8Our market context.11Our strategic priorities .12Key performance indicators.14Our business model.15Our colleagues.16Climate.18Task Force on Climate-related Financial Disclosures.20Section 172 statement.25Stakeholder engagement.26Non-financial information stateme
3、nt.28Financial review.30Principal risks and uncertainties.38Longer term viability statement.46Corporate governanceGovernance introduction.48Governance at a glance.50Board of Directors.51Executive Committee.55Corporate governance,purpose and culture.56Board effectiveness.61Board leadership in action.
4、62Board activity.64Nominations and Governance Committee.66Corporate Responsibility Committee.69Audit Committee.71Directors remuneration report.77Directors report.102Financial statementsIndependent auditors report.107Group income statement.120Group statement of comprehensive income/(loss).121Group ba
5、lance sheet.122Group statement of changes in equity.123Group cash flow statement.124Notes to the Group financial statements.125Tesco PLC Parent Company balance sheet.191Tesco PLC Parent Company statement of changes in equity.192Notes to the Parent Company financial statements.193Related undertakings
6、 of the Tesco Group.199Other informationSupplementary information(unaudited).204Glossary Alternative performance measures.207Five-year record.213Shareholder information.214Performance highlightsStatutory measuresGroup sales(a)57.7bn5.3%(2022:54.8bn)Statutory revenue65.8bn7.2%(2022:61.3bn)Dividend pe
7、r share10.90pUnchanged(2022:10.90p)Alternative performance measures(APMs)All measures apart from Net debt are shown on a continuing operations basis unless otherwise stated,with growth stated at actual exchange rates.The Group has defined and outlined the purpose of its APMs in the Glossary starting
8、 on page 207.(a)Group sales exclude VAT and fuel.(b)Adjusted operating profit and Adjusted diluted EPS exclude the impact of adjusting items.(c)Net debt and Retail free cash flow exclude the impact of Tesco Bank.(d)UK market share based on Kantar Grocers Total Till Roll on a 12-week basis ending 19
9、February 2023.(e)Basis Tesco Global Brand tracker on a three-month rolling basis.2022 NPS was reported on a 12-month rolling basis at 18pts.Retail free cash flow(c)2,133m(6.3)%(2022:2,277m)Statutory diluted EPS 10.08p(48.7)%(2022:19.64p)UK market share (sales value)(d)27.3%(39)bps(2022:27.7%)Adjuste
10、d diluted EPS(b)21.85p(0.0)%(2022:21.86p)Operating profit1,525m(40.4)%(2022:2,560m)Net debt(c)(10,493)m(0.2)%(2022:(10,516)m)Adjusted operating profit(b)2,630m(6.9)%(2022:2,825m)Statutory profit before tax1,000m(50.8)%(2022:2,033m)Group net promoter score(e)15pts(5)pts(2022:20pts)Tesco was built to
11、be a champion for customers,serving them every day with affordable,healthy and sustainable food.Our commitment to our customers extends beyond our stores,and into every local community we serve in the UK,Republic of Ireland(ROI),Slovakia,the Czech Republic and Hungary.We provide extra support to tho
12、se that need it,through food banks,donation schemes and community grants.This year,we have been laser-focused on keeping the cost of the weekly shop affordable for our customers.At the same time,we have invested in our colleagues and worked in partnership with our suppliers,providing additional supp
13、ort where needed.At the heart of Tesco is our fantastic team of more than 330,000 colleagues,who go above and beyond to make a difference.We work hard to be an inclusive workplace,where all colleagues can be at their best and build the skills to grow their careers.In challenging times,our purpose ha
14、s guided every part of the Group,from Booker and One Stop to Tesco Bank,Tesco Mobile and dunnhumby.Serving our customers,communities and planet a little better every day is what we do.Hello.1Tesco PLC Annual Report and Financial Statements 2023Tesco at a glanceThe Tesco Group.Tesco is a British groc
15、ery retailer,with its headquarters in the United Kingdom.We serve millions of customers every week,in stores and online and provide additional services across the Tesco family.Founded in 1919,Tesco began as a market stall in the East End of London.Today we operate 4,859*stores in five markets:the UK
16、,the ROI,the Czech Republic,Slovakia and Hungary.The Tesco Group also includes:Tesco Bank;Tesco Mobile;a network of One Stop convenience stores;Booker,the UKs leading wholesale business;and our data-science business,dunnhumby.Key facts57.7bnGroup sales2022:54.8bn2,630mAdjusted operating profit2022:2
17、,825m2,133mRetail free cash flow2022:2,277m3,712stores in the United Kingdom166stores in the Republic of Ireland187stores in the Czech Republic157stores in Slovakia197stores in HungaryTo read more about our financial performance go to page 30Our businesses*including franchises2Tesco PLC Annual Repor
18、t and Financial Statements 2023Tesco is a leading multinational grocery retailer,which aims to serve customers affordable,healthy and sustainable Our businessesBooker is the UKs leading food and drink wholesaler,serving caterers,independent retailers and other businesses.Booker also owns symbol bran
19、ds including Budgens,Londis and Premier.www.booker.co.ukOne Stop is a retail convenience business with more than 1,000 shops and a focus on being the best store for customers in every neighbourhood.www.onestop.co.ukTesco Mobile is a mobile operator serving more than five million UK customers.Establi
20、shed in 2003 as a joint venture between Tesco and O2,Tesco Mobile has grown into an award-winning network with more than 500 phone dunnhumby is a global leader in customer data science.It works with brands,grocery retail,retail pharmacy and retail financial services to provide technology,software an
21、d consultancy Tesco Bank offers a range of personal banking and insurance products with the aim of making financial products easier and better value for its customers.The Bank helps more than five million customers manage their money every Strategic report3Tesco PLC Annual Report and Financial State
22、ments 2023Helping customers spend less.We understand the pressures that our customers have faced this year,and have been doing everything we can to support them.We work relentlessly to keep the weekly shop as affordable as possible,offering great value in more places than anyone else from grocery to
23、 mobile to banking.Our priorities throughout this period have been clear:to help our customers spend less;to continue investing in our colleagues;and to deliver a positive difference in the communities we serve.We have worked closely with our supplier partners to support them through these challengi
24、ng market conditions.Supporting stakeholders through the cost-of-living crisisOur value proposition8,000value lines in the UKCustomers|Lowering the price of the weekly shop through our powerful combination of Aldi Price Match,Low Everyday Prices and Clubcard Prices.8%increase in UK hourly colleague
25、pay in 2022Colleagues|Substantial investment in colleague base pay,on top of other benefits.UK&ROICentral EuropeAldi Price Match and Price Guarantee:price matching on the most important products means customers can be confident they dont need to shop elsewhere for great value.Low Everyday Prices:con
26、sistent low prices on products customers buy regularly,so they can confidently plan and manage their spend.Clubcard Prices:rewarding customers for their loyalty with exclusive deals/discounts.4Tesco PLC Annual Report and Financial Statements 2023We leveraged our scale and capabilities across the Gro
27、up to help customers spend less during the year and provide help where they wanted it most.Unwavering support for customers.Our research with customers told us they wanted help with four key things:More than52 millionmeals donated this yearCommunities|We have given more than 52 million meals to food
28、 banks and charity partners across the Group during the past year.BankBookerCE27.5msupport packageSuppliers|We have invested 27.5m in the UK egg sector in the past year.Affordable food and clothing1Healthy,affordable choices2Fuel and travel costs3Occasional treats4MobileUKROIStrategic report5Tesco P
29、LC Annual Report and Financial Statements 2023Purpose and valuesServing our customers,communities and planet a little better every day.Our values.Our three values underpin our purpose,setting out how we work together as a team and guiding the decisions and choices we make across the Group.No one tri
30、es harder for customers.We listen to our customers,our communities and each other,and use the feedback provided to make better decisions as a business.With the expertise and knowledge of our colleagues,we change,innovate and adapt to meet customer needs.We treat people how they want to be treated.Pe
31、ople will always be at the heart of Tesco a place where everyone is welcome.An inclusive,supportive workplace for our colleagues,where they feel recognised and rewarded for the work they do and have opportunities to get on.A business where we build strong,long-term relationships with our suppliers a
32、nd other external partners.Respect,trust and understanding is in our culture.Every little help makes a big difference.Help comes in all shapes and sizes.From supporting local food banks and community projects via our Community Grants programme,to delivering great service,our colleagues continue to c
33、hange things for the better.When we add up the many things we do at a local level,together we make a big difference.Purpose and values.A clear purpose unites the Tesco Group and supports the ambitions and commitments of our business strategy.This year,we lived our purpose through the many different
34、ways we served customers,stepped up for local communities and progressed against our environmental commitments.6Tesco PLC Annual Report and Financial Statements 2023For more information about how we have helped our stakeholders see pages 4 to 5,8 to 13 and 16.Chairmans statementBy delivering value f
35、or customers,we create sustainable value for shareholders too.This has been another significant year for Tesco,once again shaped by circumstances outside our control.The business has demonstrated incredible resilience,as we stepped up to support customers,colleagues,suppliers and communities through
36、 the impact of rising cost pressures.At the same time,we have made further progress towards achieving our strategic priorities and,in turn,we have seen strong sales growth across the Group.I want to say a big thank you to our colleagues for their hard work and dedication throughout the year.Every te
37、am and colleague had their own challenges to face,and have risen collectively to meet those challenges incredibly well.Balancing the needs of all our stakeholdersYou will see throughout this report what we have done during the year to support our customers,colleagues,suppliers and communities.It has
38、 been a year when the Board and the executive team have taken great care to ensure we strike the right balance in everything we do.In short,that we do the right thing by all our stakeholders.We have invested in our value offer so we can help our customers save money whether they are buying groceries
39、 or banking with us.Our strong customer focus has meant we are the only full-line grocer to grow UK market share in the past three years and our brand NPS score is the highest of the full-line grocers.It has also been important to invest in our colleagues throughout these challenging times,improving
40、 reward packages delivered across the Group.This recognises that our colleagues are at the heart of Tesco,playing a vital role in ensuring we remain a strong business and continue to deliver for customers.It was also important to continue recognising the essential role we play in the communities we
41、serve,in particular how we stepped up for them when they needed it most.By getting this balance right,we have been able to deliver top-line growth,profit and cash and this approach is delivering for all our stakeholders.Continued growthThis year,we have delivered strong sales performance in all segm
42、ents,with Group sales increasing 5.3%at constant rates and Retail like-for-like sales up 5.1%.Retail adjusted operating profit decreased by(6.3)%to 2.5 billion.This reflects our continued investment in great value and great quality for our customers,at the same time as looking after our colleagues.B
43、oard changes In June 2022,we said goodbye to Steve Golsby and Simon Patterson who retired from the Board.We thank them for their valuable contribution to Tesco over several years.Alison Platt succeeded Steve Golsby as Chair of the Remuneration Committee.Last October,we welcomed Caroline Silver to th
44、e Board as an independent Non-executive Director and member of the Audit Committee.Caroline has a wealth of experience across a number of commercial,financial and governance roles and has brought valuable knowledge and perspective to the Board.In September 2023,Dame Carolyn Fairbairn will be joining
45、 the Board as an independent Non-executive Director.Dame Carolyn will also be appointed as a member of the Remuneration Committee and Corporate Responsibility Committee.Lindsey Pownall will be retiring from the Board at the conclusion of the 2023 AGM.Lindseys retirement from the Board will mean that
46、 she also steps down from her role as Chair of the Corporate Responsibility Committee,where she will be succeeded by Stewart Gilliland.I am pleased that we continue to make progress on gender equality on the Board,reaching 42%female representation in line with our target.We remain committed to equal
47、ity across our business and continue to work towards that goal.Looking aheadIn the coming months,we will continue to manage the impact of cost-of-living pressures and focus relentlessly on delivering value for our customers.Significant uncertainty in the economic environment remains,but Tesco is a s
48、trong business,with more than 330,000 exceptional colleagues guided by the one purpose of serving our customers,communities and planet a little better every day.Whatever the circumstances,I am confident our colleagues will go above and beyond to support our customers and that by working together we
49、can continue to deliver against our strategy and create sustainable long-term value.John Allan CBENon-executive Chair 12 April 2023Strategic report7Tesco PLC Annual Report and Financial Statements 2023Guided by our purpose,we are building a stronger business.Group Chief Executives reviewLast year we
50、 set out our new strategic priorities,and I am pleased to say that we have made strong progress against them this year as set out on pages 12 and 13.We have continued to support our customers and delivered a strong performance,responding with speed and agility to the new and ongoing challenges we fa
51、ced during the year.It is testament to our resilience as a business,our careful planning,and our flexibility that we have been able to do so with such success.It is also testament to the brilliant work of the Tesco team,and I want to thank each and every colleague for all they have done.Individually
52、 and collectively,we have been guided by our purpose to serve our customers,communities and planet a little better every day.This united effort,as well as our collaborative and supportive culture,is one of our biggest advantages in tough times.Supporting our customers with a relentless focus on valu
53、eInflation is a pressing reality for everyone customers,colleagues,suppliers,and every member of our communities.At Tesco,we know it is our job to listen,to understand and then to act to help customers through these challenges.We also know customers are looking for value but do not want to compromis
54、e on the other aspects of their shop that are important to them.This is why we are focused on keeping the weekly shop not just reliably affordable,but also healthy and sustainable,while delivering great quality and convenience.When it comes to value,we know that customers are looking for it wherever
55、,whenever and however they choose to shop with us.This is why we have doubled down on value across the whole Group,see page 4.We have price-matched more than 600 every day items to Aldi in the UK,and locked our Low Everyday Prices on hundreds of everyday staples until Easter in the UK and ROI.Weve a
56、lso fully rolled out Clubcard Prices to every market,and launched new initiatives via Tesco Bank and Tesco Mobile.And,following the launch of our cost-of-living hub through Tesco Bank,we can offer guidance and advice to help people manage their finances.Booker has also been a champion of value,suppo
57、rting customers with a price freeze on 450 key catering lines.For further details on all these initiatives and more,see pages 4-5.Recognising our colleaguesOur colleagues are at the heart of everything we do.We recognised that with household costs rising in the UK,the ROI and Central Europe,we neede
58、d to reflect their value in our reward package.Colleagues in every market have therefore received substantial investments in their base pay.In the UK,this included a nearly 8%increase for hourly-paid colleagues in 2022.Working in partnership with suppliersOur partnerships with suppliers have been es
59、sential this year as we all worked hard to keep the weekly shop as affordable as possible for customers.We recognise the inflationary pressures that suppliers are facing and have therefore been committed to working collaboratively to manage all associated impacts.Weve always been clear that where th
60、ere are pressures,we will play our part in providing support.For example,weve announced additional support for a number of agricultural sectors including a 27.5m investment in the British egg industry and a 10%increase in contract pricing for the 2022 potato harvest.As a result,suppliers have voted
61、us the number 1 retailer in the independently run Advantage survey for seven years running,reflecting our commitment to strong partnerships and collaboration.Supporting our local communitiesHaving a positive impact on the communities we serve is central to our purpose,and it was essential that we st
62、epped up for them when they most needed our support.We did this through our 1m Golden Grant programme,offering a 10,000 grant to 100 local charities chosen by customers.We also introduced Kids Eat Free at Tesco Cafs during school holidays,giving away nearly 440,000 meals to children.8Tesco PLC Annua
63、l Report and Financial Statements 2023But its the meals we provide to food charities and food banks that deliver the greatest positive impact.Tesco is the biggest supplier of food distributed by FareShare,and alongside our customers we are also the largest single source of food donations for food ba
64、nks for The Trussell Trust.I have been bowled over this year by the continued generosity of Tesco colleagues and customers in all our markets.Looking after the planetWhile we focused on the rising cost of living during the year,we were acutely aware that we could not put the environment on hold.We n
65、eeded to press ahead with urgency on reducing our impact on the planet and we did just that.The relentless efforts of our teams towards our net zero commitment have helped us achieve a 55%reduction in emissions in our own operations since our 2015 baseline.We also became the first UK retailer to ban
66、 plastic wet wipes and,in addition,we have removed two billion pieces of plastic from the UK business to date.In the UK,by summer 2023,all Tesco tea bags will be compostable that amounts to more than one billion bags a year.We are working closely with our farmers and suppliers to promote biodiversit
67、y in farming practices.We were particularly pleased this year to launch a large-scale commercial field trial with five major fresh produce suppliers to identify the most planet-friendly and cost-effective alternatives to conventional fertilisers.This trial will help reduce reliance on chemical ferti
68、lisers as well as reducing greenhouse gas(GHG)emissions in the supply chain.We continue to roll out electric vans for customer deliveries,and our fleet has now grown to include nearly 300 vans.We also now provide 2,500 customer electric vehicle(EV)charging points across 600 stores,as we seek to mini
69、mise our own emissions while working towards our overarching goal of net zero by 2050.This remains an ongoing journey,and one where we need to work closely with our suppliers and the industry.Progress on our strategic prioritiesI am delighted with the progress we have made since launching our strate
70、gic priorities and performance framework last year.As we have responded to the various challenges involved,our priorities have only become more relevant as we build on our unique strengths and focus on doing the basics brilliantly.We dig into the details of our strategic priorities on pages 12 and 1
71、3,but I do want to say a few words on Clubcard.Since launching Clubcard Prices in all our markets,we have had a great response from customers.The number of active Clubcard holders we have in Central Europe has trebled this year,with sales penetration reaching 83%.Penetration in the ROI has risen to
72、nearly 77%this year,while we are at nearly 79%in the UK.We are on a journey to make Clubcard more personalised,and have rolled out individualised digital coupons to four million customers in the UK alone.Our data science business,dunnhumby,is helping us to access new revenue streams from Clubcard.Si
73、nce launching the Tesco Media and Insight platform with dunnhumby last year,we have helped 450 leading brands increase the effectiveness of their campaigns,build more interactive,two-way relationships with customers,and grow loyalty for Tesco and our suppliers.Reduced in price.Just as nice.To help o
74、ur customers find bargains more easily and support our commitment to providing customers with great value,we launched our Reduced in price.Just as nice.areas in over 100 stores.These reduced-to-clear sections feature a wide range of products at lower prices,including fresh produce like salads,meat,b
75、read and sweet treats that are close to their expiry date.They not only help customers find something tasty for dinner,or to pop in the freezer,at a lower price-they also contribute to our goal of halving food waste by 2025.Visit for shareholdersFor shareholders,we have delivered another year of str
76、ong growth.Regardless of the external challenges,we have remained focused on our strategic priorities and have been guided by our purpose at all times.While there is significant uncertainty in the year ahead,we have confidence in our ability to continue to generate cash in the coming years,and we ar
77、e committed to a progressive dividend policy,this year announcing a full-year dividend of 10.90p per share.We are building good momentum and have strong plans in place that will make the most of our unique strengths.Above all,we have a fantastic team of colleagues helping to build a stronger busines
78、s.Ken MurphyGroup Chief Executive 12 April 2023Strategic report9Tesco PLC Annual Report and Financial Statements 2023Group Chief Executives review continuedQ&A with Ken.What is your highlight from this year?My highlight is the time I have spent in stores,when Im able to talk to colleagues and custom
79、ers and see some of the teams great work come to life.Its also a chance to get some honest feedback about what is working and what isnt.Retail is a fast-moving industry,and you learn so much from being on the shop floor.Theres never a better time to be in stores than at Christmas.I travelled around
80、various stores in the Christmas week and the atmosphere was fantastic I loved every minute.How has Tesco responded to the cost-of-living challenges faced by colleagues this year?It has been really important to recognise that colleagues have faced rising household bills just as much as customers.Of c
81、ourse,we have invested in pay,see page 16 for details.But weve also made a number of smaller changes that colleagues say have made a huge difference.These range from doubling our Colleague Clubcard discount over Christmas,to ensuring colleagues have plenty of good food available for free in colleagu
82、e rooms not to mention introducing a pay advance for any colleague who might be facing an unexpected bill.How have you balanced the needs of all stakeholders?This has been a year when all our stakeholders have faced their own challenges and balancing those needs has been a delicate task.We always st
83、rive to make sure were doing the right thing and that were aligned to our purpose of serving our customers,communities and planet a little better every day.All that work helps give stakeholders confidence in our business,which in turn can create significant value for our shareholders.How has Tesco m
84、anaged some of the years broader macroeconomic and political instability?In the same way that weve managed the various challenges over the last three years.We have focused on what we can control.Where there was expected disruption,we had excellent plans in place to mitigate that.Where we needed to r
85、espond quickly,we demonstrated just how flexible we can be.In my view,that mixture of resilience and flexibility is a great strength of Tesco.Has Tesco had to press pause on any sustainability initiatives as it focused on serving customers through the cost-of-living pressures?No,and thats been reall
86、y important.While the external focus may have been on value and prices,it was essential that we didnt drop the ball on sustainability.In fact,we took our plans even further.Now is a critical time to take action on climate change,and were doing that by driving improvements and innovation at every poi
87、nt in our value chain.Thats first in our own operations,then in our supply chain and for our customers.Our plan on climate action focuses on the areas where we can make the biggest difference energy,transport,waste,food production and diets.You have talked previously about food security.Is this stil
88、l a concern?I believe that people havent talked about food security enough until now.If you look at the droughts in China,the floods in Pakistan,the crop failures in Canada and the US last year,you have to assume that were going to see an even greater increase in food insecurity.After energy,the foo
89、d system has the greatest impact on the environment.We continue to work closely with our suppliers to improve food systems around the world and support them in making more sustainable choices.We have invested significantly in UK agricultural supply chains as they face challenging market conditions,a
90、iming to ensure theyre sustainable in the long term.We continue to work on tackling deforestation in Brazil.During COP27,we joined forces with 40 UK food companies and soy suppliers in announcing a landmark set of actions to ensure all soy used in animal feed in the UK is deforestation-free.These co
91、mmitments will help us to deliver against the aims of the UK Soy Manifesto,which was agreed by the industry at COP26 in Glasgow.What progress have you made towards your health targets?Eating a well-balanced,healthy,sustainable diet is one of the best ways we can look after our health and the health
92、of the planet and we want to make it easier than ever for our customers to do this.We launched our Better Baskets campaign to help to make Tesco the easiest place to shop for affordable,healthy,sustainable food.This year weve driven an improvement in our health scores,from 58%to 60%in the UK&ROI and
93、 maintained the baseline position of 49%in Central Europe.Weve removed more than 71 billion calories since 2018 through reformulation.We continue to look for ways to support customers and remove barriers to healthier eating,such as the Kids Eat Free offer in our cafs that helps children access a nut
94、ritionally balanced meal outside term time.What are the key priorities for the year ahead?Im excited about the momentum we are building.We have a formula thats working and that we can build on and accelerate.For me,its about really making progress against those key strategic priorities.Theres plenty
95、 of exciting innovation in the pipeline in product development,channels and customer experience.What is your outlook for the year ahead?As we build on our momentum over the coming year,we believe that its as important as ever to remain focused on investing in our customers and delivering them the gr
96、eat value and quality they expect when shopping.10Tesco PLC Annual Report and Financial Statements 2023Our market contextMarket driversHow we are respondingConcerns over cost of livingThe rise in household costs means that more than ever before,customers are looking for affordable solutions while ma
97、intaining their standard of living.Customers are more selective and deliberate on what they spend their money on,looking for ways to make their food budget go further.For us,that makes it essential to deliver the best quality at the best price.Our value proposition of Low Everyday Prices combined wi
98、th exceptional value offered by Clubcard Prices and Aldi Price Match means we are at the most competitive position we have been in for many years.As customers look for the best value,we offer that right across the store from the volume-driven success of our Price Lock campaign through to the growth
99、of our Finest range.For some customers,it is trading down from national brands to great value Tesco products.For others,it is seeking out Tesco from one of the higher-priced,premium-focused retailers,or using our great range of ready meals instead of a takeaway or restaurant meal.Planet protectionWi
100、th the effects of climate change becoming more pronounced and happening more frequently across the globe,customers want to take action to reduce their impact on the environment.They expect responsible businesses to do the same.As a result,many customers are seeking responsibly sourced,less resource-
101、intensive goods that safeguard the planet.The efforts of our teams towards our net zero commitment have helped us achieve a 55%reduction in emissions in our own operations against a 2015/16 baseline,see more on pages 18 and 19.We became the first UK retailer to ban plastic wet wipes and,in addition,
102、we have removed 2 billion pieces of plastic from the UK business to date.We are also taking action to reduce emissions across our supply chains,trialling agricultural innovations such as low-carbon fertilisers,alternative animal feeds and vertical farming techniques.Recognising diversityAs society i
103、s projected to become more diverse,the need for representation and recognition is growing.Customers are increasingly looking to brands that take pride in and champion differences.As one of the largest employers in the UK,we recognise the importance of representing the communities we serve.Central to
104、 achieving this goal is our diversity and inclusion strategy,and the support we give to our colleagues on their individual career journeys.During the year we launched our Black Action Plan and were named among The Times Top 50 Employers for Women for the second year running.For more information,see
105、our Everyones Welcome report at continue to look for ways to promote inclusivity and increase representation for our customers.These include;the launch of a basics range with skin tone colours,introducing products specifically designed for Black hair,and reflecting the diversity of our customers in
106、our advertising.Digital retailRecent years have seen a significant increase in the number of businesses focusing on online,quick,and checkout-free commerce.Customers have access to shopping whenever,wherever and however they want it.And they continue to expect better,faster,integrated digital retail
107、 to make shopping easier.One of our strategic priorities is to be Easily the most convenient for our customers.Our extensive store footprint reached a milestone with the opening of our 2,000th UK Tesco Express store in Cambridge in March.That,combined with more than 1,000 One Stop stores and more th
108、an 7,000 Booker fascias,means we have the largest network of convenience stores across the UK.This is complemented by the UKs biggest online grocery service and exciting new initiatives such as our Whoosh rapid-delivery service and our frictionless GetGo stores.Local community respect The effects of
109、 the pandemic led to many people spending more time in their local areas.The continued prevalence of homeworking has continued this,with a knock-on effect being increased care for and prioritisation of local environments.Having a positive impact on the communities we serve is central to our purpose.
110、We stepped up for them in the past year through our 1m Golden Grant programme,offering a 10,000 grant to 100 local charities chosen by customers.We also introduced Kids Eat Free at Tesco Cafs during school holidays,giving away nearly 440,000 meals to children.Meeting market needs.Strategic report11T
111、esco PLC Annual Report and Financial Statements 2023Our strategic prioritiesProgress against our strategic priorities.Why it is important Demonstrating the importance of value underpinned by price,quality and sustainability Removing price as a reason to shop elsewhere Making healthy,sustainable food
112、 affordable for everyone Working with suppliers to develop sustainably sourced products of the highest quality Continuing to make a positive contribution to the communities in which we operateProgress during the year Continued to strengthen our value proposition with thousands of products now availa
113、ble through Aldi Price Match,Low Everyday Prices and Clubcard Prices in the UK&ROI,and Low Price Guarantee and Clubcard Prices in Central Europe Launched two price locks in the UK&ROI on thousands of everyday products,giving customers great value on their weekly shop Launched 998 new products over t
114、he year,including 349 Finest products.Drove 6.8%growth in Finest sales Continued to make progress on minimising our impact on the planet including accelerating plans to halve food waste;launching a zero-emission electric lorry;and investing in a new facility to protect the Brazilian rainforest again
115、st deforestation from soy cultivation Launched our Better Baskets campaign to help customers make healthier,more sustainable shopping choicesWhy it is important Creating a personalised shopping experience for customers by leveraging unique insights offered by one of the UKs leading digital retail pl
116、atforms Developing incremental revenue opportunities with suppliers to help them offer customers tailored and relevant productsProgress during the year Clubcard penetration reached 79%in the UK,77%in the ROI and 83%in Central Europe 21 million active Clubcard households 11.7 million Clubcard app use
117、rs in the UK,2 million in Central Europe and 0.7 million in the ROI Doubled the number of UK customers receiving in-app personalised coupons to 4 million Celebrated the first anniversary of our Media and Insight platform and new-product suite now working with more than 450 consumer goods brandsMagne
118、tic value for customersRedefining value to become the customers favourite I love my Tesco ClubcardIncrease loyalty and access new sources of revenue Taken together,these strategic priorities enable us to continue delivering great value,increasing customer loyalty,and staying competitive while ensuri
119、ng we remain agile and efficient as a business.These four priorities help us maintain our focus on doing the basics brilliantly and leveraging our unique strengths to accelerate growth.12Tesco PLC Annual Report and Financial Statements 2023Why it is important Serving customers wherever,whenever and
120、however they want to be served.Supporting growth of our core online business.Continuing strong growth of convenience through capital-light opportunities to maximise return.Continuing evolution of large stores as the backbone of online grocery business as we maximise our existing assets.Continuing to
121、 test and learn from trials of new on-demand services to develop the right offer focused on convenience stores that complements our existing online business.Progress during the year Opened three more GetGo stores with new hybrid format.Whoosh now available in 1,000 stores,with up to 10,000 products
122、available to customers.Opened our fifth and sixth urban fulfilment centres.Opened our 2,000th UK Express store in March.More than 70%of UK households are now within 25 minutes of a Click&Collect site.Celebrated 4,000th Premier opening,bringing the total number of fascias across Premier,Londis and Bu
123、dgens to more than 7,000.Completed the conversion of nine Joyces stores to Tesco stores in ROI.Easily the most convenientIncremental capital-light growth Why it is important Aiming to simplify,be more productive and reduce costs.Focus on offsetting inflation in the medium term and creating headroom
124、to fund investments.Committed to spending money only where it adds value for customers and makes a real difference.Progress during the year Strong track record of savings delivery across four streams:goods&services not for resale;property;operations;and central overheads.Delivered accelerated saving
125、s in excess of 550m.On track to deliver original three-year plan 12 months early with at least 1bn cumulative savings by February 2024.Save to investA cost-efficient retailer Performance frameworkThe framework we will use to guide our actions and track our progress over the coming years.Drive top-li
126、ne growth,underpinned by Increasing customer satisfaction relative to the market.Growing or at least maintaining our core UK market share.Grow absolute profits while maintaining sector-leading margins Leverage assets efficiently across all channels.Access new revenue streams across our digital platf
127、orm.Target productivity initiatives that at least offset inflation in the medium term.In doing so,generate between 1.4bn and 1.8bn Retail free cash flow per yearStrategic report13Tesco PLC Annual Report and Financial Statements 2023Key performance indicatorsOur Big 6 KPIs.Grow salesWhy it is importa
128、ntSustainable growth in sales is important to our business model.What we measureGroup sales is a measure of revenue excluding sales made at petrol filling stations.It demonstrates the Groups performance in the retail and financial services businesses by removing volatilities associated with the move
129、ment in fuel prices that are outside the control of management.How we performedGroup sales rose 5.3%at constant rates,driven by strong growth across all segments.Group sales57.7bn 5.3%(a)(2022:54.8bn)Improve operating cash flowWhy it is importantStrong cash generation is important to our underlying
130、philosophy with which we manage our business.What we measureRetail operating cash flow is the cash generated from continuing operations.It is a measure of the cash generation and working capital efficiency of the retail business,excluding the effects of Tesco Banks cash flows.This is because Tesco B
131、ank is run and regulated independently of our retail operations.How we performedWe saw strong operating cash generation,with a high working capital inflow,driven largely by inflation.Retail operating cash flow(c)4.5bn 1.1%(2022:4.5bn)Customers recommend us and come back time and againWhy it is impor
132、tantCustomers are at the heart of everything we do,and customer satisfaction is an important driver of loyalty.What we measureOur score reflects the percentage of Fans minus Critics answering the question How likely is it that you would recommend Tesco to a friend or colleague?How we performedCost-o
133、f-living pressures have resulted in a slight decline in our Group NPS score but we remain resilient versus the market.Group NPSThree-month rolling15pts(5)pts(d)(2022:20pts)Deliver profitWhy it is importantDelivering profitable growth is essential as we aim to create long-term value for all stakehold
134、ers.What we measureAdjusted operating profit is the headline measure of the Groups performance.How we performedAdjusted operating profit was down(7.1)%at constant rates to 2.6bn,reflecting the significant investment we have made in our customers and colleagues this year.Adjusted operating profit2.6b
135、n(7.1)%(b)(2022:2.8bn)Colleagues recommend us as a great place to work and shopWhy it is importantWhen we get things right for our more than 330,000 colleagues,we make it even easier for them to do what they do best serving our customers,communities and planet a little better every day.What we measu
136、reOur Great Place to Work measure is the percentage of colleagues who agree or strongly agree with the statement I would recommend Tesco as a great place to work.Great Place to Shop is an NPS measure,answering the question I would recommend Tesco as a place to shop.How we performedAlthough there has
137、 been a small decline in colleagues recommending Tesco as a Great Place to Shop,our Great Place to Work score remains high at 82%.Recommend as a place to shop 40pts(1)pts(2022:41pts)Great Place to Work82%+2pts(2022:80%)Climate-reduce Scope 1 and 2 emissions by 60%by 2025Why it is importantThis year,
138、we have added a new measure reducing our carbon emissions reflecting the importance we are placing on minimising our impact on the planet.What we measureBased on our commitment to reduce Scope 1 and 2 carbon emissions by 60%by 2025,we measure the reduction in tonnes of CO2 equivalent(tCO2e)vs our 20
139、15/16 baseline.How we performedWe have achieved a reduction in carbon emissions by switching to renewable electricity,maintaining a consistent focus on driving energy efficiencies and making significant inroads to decarbonising our remaining key hotspots.Improving our energy efficiency delivered a f
140、urther 3%pts saving versus our baseline to a cumulative reduction of 55%.Carbon emissions1.0m(2022:1.1m)7%(e)vs last year 3%pts55%cumulative vs baseline Alternative performance measures(APMs).Measures with the symbol are defined in the Glossary section on pages 207 to 212.(a)Group sales exclude VAT
141、and fuel.Growth is at constant exchange rates on a comparable days basis.(b)Growth is at constant exchange rates.(c)Retail operating cash flow is the same as the statutory measure Retail cash generated from operations.Growth is at actual exchange rates.(d)Basis Tesco Global Brand tracker on a three-
142、month rolling basis.2022 NPS was reported on a 12-month rolling basis at 18pts.(e)Carbon emissions are based on total Scope 1 and 2(market-based)footprint and stated as tonnes of CO2 equivalent(tCO2e),refer to the Climate section on pages 18 and 19 for further detail.14Tesco PLC Annual Report and Fi
143、nancial Statements 2023Our business modelBusiness modelOur business model.Unique combination of strengthsTo create value for allProductsWe partner with our suppliers to source the best possible products that meet and anticipate customers evolving needs.ChannelsWe work through a range of channels fro
144、m small shops to large stores,and online.Booker gives us access to further channels,including business centres and delivered wholesale.Reinvest We focus on making Tesco the best it can be.The better we do our job for customers,the more we can reinvest.Customers Tesco exists to serve customersCustome
145、rsOur business model allows us to bring our customers the best products at the best possible prices,no matter how they choose to shop with us.Understanding customersWe use our expertise to understand and meet our customers needs better than anybody else.Voted Britains Favourite Supermarket*by custom
146、ers for8 yrsColleaguesThe expertise of our colleagues drives every part of our business model from our store teams to new product development.Our colleaguesWe have more than 330,000 colleagues who share our purpose and live by our values.Colleagues who feel able to be themselves without fear of judg
147、ement85%SuppliersOur conversations with suppliers focus on delivering great value,great quality products for our customers.When we get it right,our business grows.Scale and reachOur unparalleled reach allows us to bring great quality products to more customers.Record level of Group supplier satisfac
148、tion 86.6%CommunitiesOur commitment to our customers goes beyond stores and into every community we serve.Own Brand productsWe source quality products,with expert teams and close supplier partnerships.Number of meals donated across the Groupmore than52mPlanetAt this critical time for our planet,we a
149、re working to reduce our impact and help suppliers and customers to do the same.ServicesServices,such as mobile and banking,focus on the needs of Tesco shoppers and allow us to earn and retain their loyalty.Reduction in Scope 1 and 2 GHG emissions vs 2015/16 baseline 55%ShareholdersWe work to mainta
150、in a strong and efficient balance sheet,invest for growth and deliver improved returns for our shareholders.InnovationWe encourage a culture of innovation so that our business remains at the cutting edge of new trends and demand.Full-year dividend 10.90p*Grocer Gold AwardsStrategic report15Tesco PLC
151、 Annual Report and Financial Statements 2023Our dedicated and hardworking colleagues are at the heart of our success.We are committed to ensuring everyone feels welcome and has the support they need to be at their best.Building a culture of trust is a key part of this aim and has been recognised in
152、our annual colleague engagement survey,Every Voice Matters,where 82%of colleagues recommended us as a great place to work.Investing in colleaguesOur more than 330,000 colleagues are at the heart of our business and how we win together plays a vital role in delivering our core purpose and enabling us
153、 to deliver for our customers,communities and planet.Winning together means helping to develop the next generation of talent as well as equipping our colleagues with the skills they need to thrive.Recognising the vital role store colleagues play in serving our customers,in 2022 we increased pay for
154、our hourly-paid colleagues in the UK by nearly 8%.This new deal recognises the contribution our colleagues make to our business at a time when household budgets are under pressure.In other markets our Central Europe(CE)colleagues have seen an increase of up to 12%in 2022,while Republic of Ireland(RO
155、I)colleagues will have received a 10%cumulative increase to their pay by April 2023.In November 2022,Booker and One Stop colleagues received an increase of between 2.5%and 3.9%to their basic hourly rate.All colleagues enjoy a competitive and comprehensive benefits package,which provides access to sh
156、are schemes,pensions and wellbeing benefit.This includes our Colleague Clubcard,which offers a 10%discount,increasing to 15%for four days each pay day for UK colleagues.Over the peak of Christmas week last year,we increased discounts by up to 20%for UK,ROI and CE colleagues.In the UK,we delivered on
157、 our commitment to always offer any vacant hours in stores to colleagues working fewer than 16 hours a week before recruiting externally.All new contracts are based on a minimum of 16 hours per week,with the exception of our smallest Convenience stores.To provide further support to our UK store coll
158、eagues we launched My Tesco App,which instantly retrieves available hours to match colleagues skills and incentivises them to build more capabilities in other areas.In 2024 we will continue its rollout to UK distribution and customer fulfilment centres,followed by CE and the ROI.In 2022/23 we launch
159、ed three new products to support managers during the rollout of our Group-wide Your Contribution proposition to manage performance:create a winning performance culture;master feedback;and set strategic objectives.We also continued to roll out our manager development programme.More than 7,000 colleag
160、ues Group-wide attended courses on being an inclusive manager,adaptable thinking and mastering conversations.In CE,more than 300 store managers and deputy managers participated in our manager capability training.For the third year running,in Bengaluru we have partnered with the Great Manager Institu
161、te to deliver the Great Manager Programme,which aims to build the skills and capabilities of our managers with bespoke certified training.Since launching the programme,close to 300 colleagues have been certified.Jobs,skills and training for young people We support both existing colleagues and young
162、people starting their careers with a variety of apprenticeship programmes.So far,more than 3,500 apprentices have benefited.Our CE business provided more than 2,700 apprentices with in-store work experience,and in the ROI apprentices were given a range of work experience opportunities.In 2021,we ann
163、ounced the extension of our three-year partnership with the Princes Trust for a further five years,with an ambition to reach 200,000 more young people in secondary school,helping to build their employability skills and confidence.Alongside our delivery partners IGD,Speakers Schools and The Careers a
164、nd Enterprise Company,we are tracking ahead of our ambition to help 45,000 young people through Achieve Clubs,with a continued focus in areas that are vital for young people,such as mental health and wellbeing.Our final cohort of Kickstart colleagues finished their placements in April 2022,with 94%s
165、atisfied with their experience of the programme.52%of young people who completed the programme gained employment with Tesco.Through our cross-sector collaboration with Movement to Work,we have trialled a new approach to short work placements for young people aged 16 to 30,with and without a disabili
166、ty,and not in education,employment or training.Health,safety and wellbeing The physical and mental health,safety,and wellbeing of our colleagues is central to our ways of working.Based on our latest Every Voice Matters results,86%of Group colleagues agreed that Safety at my workplace is taken seriou
167、sly.Recognising the challenges our store colleagues continue to face,we supported USDAWs campaign to protect retail workers from abuse,threats and violence.The Police,Crime,Sentencing and Courts Bill(PCSC)received Royal Assent in May 2022 and will bring the same protections for our colleagues as tho
168、se given to emergency service workers.We continued to offer free annual heath checks for our colleagues in Bengaluru.For colleagues in CE,we provide access to food packages consisting of fruit and vegetables to help improve diets.At Tesco Bank,we have rolled out Be well building blocks to all collea
169、gues to help drive healthier working practices and healthier living.Following a pilot involving more than 6,000 UK colleagues,in November 2022 we launched Pay Advance,an initiative which enables colleagues to access up to 25%of the money they have earned ahead of pay day to help deal with any unexpe
170、cted costs.Safeguards on the service help to protect colleague pay and future income.After becoming a signatory of the Menopause Workplace Pledge,a commitment to ensuring colleagues going through menopause are supported,we updated our sickness and absence policy so that absence due to menopause-rela
171、ted symptoms is not counted as part of sickness absence calculation.We also introduced a range of resources including menopause-friendly uniforms,a colleague guide on menopause and a Talking Menopause Colleague Caf to build a support network.A great place to work.Our colleagues16Tesco PLC Annual Rep
172、ort and Financial Statements 2023Diversity and inclusion Creating a diverse and inclusive workplace that represents the communities we serve is vital to building an inclusive culture,where everyone feels welcome.It is embedded in our values we treat people how they want to be treated and is an integ
173、ral part of our success at Tesco.We strive to make progress year on year and are proud that 85%of colleagues feel they can be themselves without fear of judgement,while 86%say their manager makes everyone in their team feel welcome.Across Tesco Group,we champion diversity and inclusion,from how we a
174、ttract,recruit and develop our colleagues to retaining diverse talent.In 2022,we made further strides in strengthening our commitment to equitable representation.This year,examples include:Continuing to require diverse shortlists for senior vacancies and making positive changes to hiring practices,r
175、esulting in 36%of external senior appointments being female and 40%ethnically diverse this year.Following the success in 2021 of our diverse talent communities for high potential colleagues,we have expanded our reach across more parts of the Tesco Group and to more under-represented groups,welcoming
176、 more than 210 colleagues who identify as Black,ethnically diverse,LGBTQ+and/or disabled.The community helps us nurture talent,accelerate individual development and address barriers to progression.In line with our commitment to operating in a responsible and sustainable way,in 2021 we linked executi
177、ve Performance Share Plan to our 2025 global leaders target.In 2022 we took a step further by linking refinancing of Tescos revolving credit facility to this 2025 diversity target.Since the start of 2023,we have made good progress towards achieving Disability Confident Leader Status in the UK.Progre
178、ss made includes:improved attraction and selection processes for disabled candidates;improved candidate communication;and partnering with disability-focused job boards.This year we were the first retailer to achieve the RNIB Visibly Better Employer status.Our colleague networks play a vital role in
179、underpinning our strategy by amplifying the unique challenges diverse groups at Tesco face and play an ever-increasing role as strategic business advisors.Alongside our colleague networks,we continue listening to and elevating diverse voices,utilising the results from our Group-wide colleague engage
180、ment survey,Every Voice Matters,and feedback from executive-led colleague listening sessions,to understand where we can do more.To better understand the diversity of our workforce we have continued to request diversity data through our internal survey,This is Me.Completion is currently more than 60%
181、.This year we have launched in Booker and Tesco Pensions Investment.As one of the UKs largest private sector employers,we know that collecting this data will take time,our aim is to achieve a full completion rate in the near future.Diversity data from our colleagues will enable us to:identify additi
182、onal areas of improvement;make more inclusive decisions;and support our ambition to participate in voluntary reporting,such as the ethnicity pay gap and Workforce Disclosure Initiative(WDI).We launched our Black action plan in the UK in May 2022 to help us understand the challenges faced by the Blac
183、k community and deliver lasting change across Tesco.Driven by our colleagues,predominantly those in our Black advisory group and colleague network,we aspire to achieve fair and equitable representation across four key areas:community,talent,commercial and brand.We have already seen progress since im
184、plementing the plan,including introducing new Black-owned brands to our offer and launching a specific cohort(and Black learning offer)as part of the diverse talent community to help us better accelerate the careers of Black talent.Our work has been strengthened by partnerships with organisations in
185、cluding The Black British Network and Making of Black Britain.We continue to work towards our global leadership representation targets.We have made progress against our voluntary commitment to the external FTSE Women Leaders target of 40%female representation at Board executive level and their direc
186、t reports by 2025.As a business we have achieved 34%female representation this year,an increase from 29%last year.MaleFemaleEthnically diverseBoard(a)758%542%217%Executive Committee(a)(c)969%431%217%Top global leaders(b)(c)19071%7929%3715%All colleagues156,90747%175,90853%Not reported(a)Our CEO and
187、CFO are members of the Board and Executive Committee and are included within both groups in the above table.(b)Our top global leaders relates to directors and business leaders across the Group,including Executive Committee members.(c)One Executive Committee member and a number of global leaders decl
188、ined to provide ethnicity information and were therefore not included in the percentage calculations.Deloitte LLP was engaged to provide independent limited assurance over the selected diversity data highlighted in this report with a using the assurance standard ISAE 3000.Deloitte has issued an unqu
189、alified opinion over the selected data.Deloittes full assurance statement is available at: talent communitiesVisit part of Tescos diverse talent community(DTC)has increased my confidence in bringing my full authentic self to work.The DTC is vitally important for Black colleagues and other under-repr
190、esented groups at Tesco,including members of the LGBTQ+community or people with disabilities.Its a step towards true talent equity at Tesco by ensuring that everyone has access to the same opportunities.”Jahnae Gumbs,Business GraduateOur diverse talent communities support our emerging talent colleag
191、ues from under-represented groups through career planning,guidance and increased visibility.In 2022/23 we launched a dedicated Black colleague cohort as part of the DTC initiative.Our aim is to address the barriers and challenges faced by many Black colleagues in the workplace.Strategic report17Tesc
192、o PLC Annual Report and Financial Statements 2023Commitment Climate change remains the biggest and most complex challenge facing the world,with its impacts felt across our supply chain,operations and the communities we serve.The food sector is responsible for more than a third of greenhouse gas(GHG)
193、emissions.We are committed to playing a leading role in helping to tackle these emissions and avoid the most severe consequences of climate change.We strengthened our commitment to being carbon neutral across our Group operations by 2035 and hitting net zero by 2050 across our full value chain,align
194、ed to 1.5C.These targets act as the overarching goal,recognising that bringing nature and climate together into one holistic environmental strategy is critical,alongside packaging and food waste,healthy,sustainable diets,sustainable agriculture,and protecting forests.With these agendas orientated to
195、wards our overarching net zero target,it allows us to explore new opportunities through their interconnectivity and ultimately nurture entire ecosystems that are truly sustainable end to end.Our goal to reach net zero needs transformational change in how we grow,produce and consume food.To achieve t
196、his,we are developing detailed,timebound plans to decarbonise key areas of our emissions footprint,particularly the production of our most material agricultural products.Recognising that we cannot achieve our climate ambitions alone,we continue to promote cross-industry action and advocate to align
197、public policy with net zero across our markets.We do this through our flagship partnership with WWF,as well as our membership with forums such as the Aldersgate Group and the Climate Group,and involvement in leading industry initiatives such as the WRAP Courtauld Commitment 2030 and the British Reta
198、il Consortiums Climate Action Roadmap.We have also made commitments to RE100 and EV100,pledging to reach 100%renewable electricity and 100%electric van fleets respectively.IntegrationIn 2022 we relaunched our purpose,placing sustainability at its core.We also added climate emissions to our Big 6 KPI
199、s and introduced ESG metrics into our executive remuneration policy.The Performance Share Plan includes three ESG targets,including our near-term emissions reduction milestone,each with an equal weighting of 8.33%(25%in total).In 2021 climate became a standalone principal business risk,recognising t
200、he critical impact climate change has on our business.See page 14 for details on our Big 6 KPIs.To underpin our new purpose and substantiate our public commitments,we have established Group-wide,interdepartmental governance with accountability across the leadership team.Our governance groups maintai
201、n oversight of progress made against our interim decarbonisation milestones and have accountability for ensuring the business delivers on climate commitments.As a result of integrating climate change action throughout our business,we have been able to make further progress on engagement and investme
202、nt in decarbonisation.Working toward decarbonisationThe majority of our GHG emissions come from producing the things we sell,and customers using what they buy from us,mainly from fuel and energy.We are more able to influence the way things are produced than how they are used,so our strategy focuses
203、largely on decarbonising the upstream supply chain.While transport,running our stores and waste are relatively smaller contributors,they are still significant and lie almost fully within our control and therefore have a prominent role in our decarbonisation strategy.Our TCFD report starting on page
204、20 provides more detail on our emissions footprint.Scopes 1 and 2:running our stores and logisticsTo date,we have achieved a 55%absolute emissions reduction in our own operations vs a 2015/16 baseline.This has largely been driven by switching to renewable electricity;however,we have maintained consi
205、stent focus on driving energy efficiencies while making significant inroads into decarbonising our remaining key hotspots.Our Group Scope 1 emissions now account for around one million tonnes of CO2 equivalent(tCO2e),split roughly a third each across heating,refrigeration and transport.Refrigeration
206、 we are switching the refrigerant gases in our store fridges to reduce emissions quickly and replacing depreciated systems with recovered CO2 systems to minimise emissions.Heating we have installed heat pumps in 13 stores in the UK and are trialling 100%heat pump heated stores in Czech Republic and
207、Slovakia.Transport as signatories of EV100,we are committed to having a fully electric home delivery fleet by 2030 and installing EV charging for customers and colleagues.Further information on the steps we have taken to drive energy efficiency are contained within the Streamlined Energy and Carbon
208、Reporting disclosure on page 105.We have already met our 2030 ambition to switch to 100%renewable electricity in our own operations across the Group.Our strategy is designed to ensure we increasingly source our electricity directly,going beyond renewable energy certificates and supporting the develo
209、pment of new renewable assets,helping bridge the gap in investment and infrastructure needed to hit the UKs net zero target.Our target is to source 60%of our electricity by 2030 from power purchase agreements(PPAs)and onsite power generation.Underpinning this work to transition to zero carbon energy
210、 sources,it is imperative that we continually work to minimise our overall energy demand,by investing in efficiencies across our logistics and store operations.This is a critical enabler to ensure we have sufficient capacity to electrify the elements of our operations that continue to rely on fossil
211、 fuels.Scope 3Our 2019/20 end to end footprint showed that more than 90%of our GHG emissions sit in our value chain(Scope 3).Building a comprehensive supplier engagement programme,encouraging carbon reporting and reduction and finding active opportunities to decarbonise our Own Brand product range a
212、re critical steps in our net zero journey.These programmes will feed into our upcoming transition plan in accordance with UK regulatory requirements and the latest guidance from the Transition Plan Task Force.Climate.Climate18Tesco PLC Annual Report and Financial Statements 2023In 2022,we successful
213、ly mapped close to two-thirds of our UK grocery suppliers operational footprint.As a result of our engagement with suppliers,more than half of our top suppliers have already announced their ambition of setting a net zero plan and of validating their net zero targets with Science Based Targets initia
214、tive(SBTi).We are successfully tracking carbon and energy data from more than 87%of our clothing supply chain factories and close to 91%of our mills via the Sustainable Apparel Coalitions Higg tool,giving us enough primary data to design targeted decarbonisation projects moving forward.For our Home
215、supply chain,we will collaborate with Amfori in deploying their Business Environmental Performance Initiative tool to ensure similar coverage by the end of 2023.To gather carbon and other sustainability metrics from our suppliers with a simplified and harmonised methodology,in 2023 we made a commitm
216、ent to Manufacture 2030 with an ambition to scale up our carbon data coverage.The transition will enable us to reach more than 80%of our grocery supply chain in the UK,Czech Republic,Hungary,Slovakia and ROI,as well as subsidiaries,Booker and One Stop.Engaging suppliers is an important element of ou
217、r decarbonisation roadmap and we need to go further.Close to 25%of our footprint can be traced back to just 30 agricultural products where Tesco frequently holds a significant share in terms of total volume.Therefore,we will set specific decarbonisation work programmes in these emission hotspots,pri
218、marily working through our Tesco sustainable farming groups as well as our agriculture forum.Some of the recent initiatives we have launched from early 2023 include the UKs first commercial trial of low-carbon fertilisers with our five largest field vegetable suppliers in the UK.The roll out of the
219、LEAF Marque Standard certification by 2025 for all domestic and international fresh produce suppliers,and on-farm carbon data tracking in our main meat,fish,poultry and eggs,and dairy supply chains.In preparation for our transition plan disclosure,our plan is to design tailored decarbonisation roadm
220、aps for these agricultural products with the aim of driving down emission intensity.As a food retailer,almost 40%of our emissions sit downstream with our customers.Understanding the importance of helping customers to make more sustainable choices,in 2022 we launched our Better Baskets campaign.This
221、campaign aims to signpost our customers to options which can be lower in environmental footprint,healthier and affordable at the same time,gradually leading the transition towards lower-carbon purchasing decisions.More detail on how we are pushing forward with renewable energy sources and progressin
222、g our decarbonisation strategy can be found in our TCFD update on pages 20 to 24.Greenhouse gas emissions and energy consumption*2022/232021/222020/21Base year 2015/16Scope 1(tonnes of CO2e)1,039,3461,110,0981,053,1311,240,871Scope 2(a)Market-based method(tonnes of CO2e)7,79616,10713,6311,095,671Loc
223、ation-based method(tonnes of CO2e)575,462642,337718,2221,657,316Total Scope 1 and 2 market-based(tonnes of CO2e)1,047,1421,126,2051,066,7622,336,542Scope 1 and 2 carbon intensity(kg CO2e/sq.ft.of stores and DCs)11.9112.1611.6326.29Selected Scope 3(b)(tonnes of CO2e)567,191593,405471,195684,079Total
224、gross emissions(tonnes of CO2e)1,614,3331,719,6101,537,9573,020,621CO2e from renewable energy exported to the National Grid(tonnes of CO2e)281279350Total net emissions(tonnes of CO2e)1,614,0531,719,3311,537,6073,020,621Overall net carbon intensity(c)(total net emissions kg CO2e/sq.ft.of stores and D
225、Cs)18.4318.5616.7633.88Total annual energy consumption(GWh)6,0006,2636,0896,823UK only total Scope 1 and 2 market-based(tonnes of CO2e)888,676936,257880,0391,751,572UK only Scope 1 and 2 carbon intensity(kg CO2e/per sq.ft.of stores and DCs)13.8813.6712.9926.29UK only annual energy consumption(GWh)5,
226、0375,2035,0375,502*For both energy and emissions data,we have included all major subsidiaries within Group measures and have included all UK-based subsidiaries in our consolidated UK disclosures.We engaged Deloitte LLP to provide independent limited assurance over the GHG emissions data highlighted
227、in the above table with a using the assurance standards ISAE(UK)3000 and 3410.Deloitte has issued an unqualified opinion over the selected data.Deloittes full assurance statement is available at: method statement can be accessed at use the market-based method for calculating Scope 2 emissions for ou
228、r total emissions to account for our efforts in generating and purchasing low-carbon energy.The location-based method is provided for disclosure only and all intensity,net and gross emissions shown are calculated using the Scope 2 market-based method.(b)Under Scope 3 emissions we report business tra
229、vel and emissions from distribution arranged by Tesco but provided by third parties(including secondary distribution globally and emissions from primary distribution in the UK).Scope 3 emissions also include transmission and distribution impacts of electricity and heat supply and well-to-tank embodi
230、ed impacts of fuel.Further information on our carbon calculations is available at intensity calculations for 2020/21 were previously revised to reflect changes in the sq.ft.of our business to include all subsidiaries.Strategic report19Tesco PLC Annual Report and Financial Statements 2023TCFD.Task Fo
231、rce on Climate-related Financial DisclosuresClimate-related financial disclosuresIn addition to this TCFD report,we provide further information on climate change in the principal risks and uncertainties section,on page 41.You can also find details on our greenhouse gas emissions on page 19.We contin
232、ue to consider the potential financial impacts of climate change in the cash flow scenario modelling within our viability statement on page 47 and impairment note on page 148 to 151.GovernanceWe implemented an enhanced climate governance framework last year encompassing the Board,its associated comm
233、ittees and the Executive Committee.This year,we broadened the scope of this governance framework to include all major elements of our plans,reflecting our holistic approach to the delivery of our sustainability ambitions.In addition to climate,the governance framework now encompasses elements includ
234、ing food waste,sustainable agriculture,biodiversity,healthy diets,and packaging.As a result of this wider governance scope,we have made minor changes to the membership and titles of the committees involved,which are described in more detail below.The Board is responsible for the long-term success of
235、 the Group and has ultimate responsibility for climate-related risks and opportunities.The Boards most recent discussion was in February 2023.The Corporate Responsibility Committee oversees the Groups social and environmental obligations,including climate-related matters,and is responsible for monit
236、oring progress towards our commitments.The Corporate Responsibility Committee reviews progress to date and forward projections against our stated commitments through formal papers presented by and discussed with the relevant delivery teams.The Committee meets four times each year and has discussed c
237、limate on every occasion during 2022/23,with similar plans to discuss at all 2023/24 meetings.Further information about the activities discussed at the Corporate Responsibility Committee meetings can be found on pages 69 and 70.The Audit Committee monitors climate-related risk management,internal co
238、ntrols and reporting.The Executive Committee reviewed our progress against our climate targets twice this year,in June and December 2022.In December,the Committee discussed and approved our broadened governance framework described above and our climate-related plans for the 2023/24 financial year.Th
239、ese discussions were led by the Chief Product Officer,as executive sponsor of our net zero climate commitment.The Executive Committee reviewed and approved the capital investments required to achieve our net zero objectives.These investments are fully integrated into our three-year strategic plan an
240、d our annual budget.The strategic plan and the budget are both reviewed and formally approved by the Board with reference to the capital and associated operating cost investments required to deliver our carbon reduction commitments.In 2023/24,the Board will oversee progress against the climate targe
241、ts twice a year.Reflecting the broader scope of our new planet-related plans,the Group climate committee has been renamed to become the Group planet committee.The change was endorsed by the Executive Committee in December 2022 and is designed to facilitate delivery of our purpose.The Committee provi
242、des strategic oversight and is responsible for ensuring the delivery of all our sustainability targets.These include interim decarbonisation and food waste reduction goals,climate risk management and our climate-related disclosures.The Group planet committee met twice in the past 12 months,in June 2
243、022 and March 2023.The committee continues to be chaired by the Chief Product Officer and comprises representatives from significant business functions,which materially influence our ability to achieve our planet related commitments and regulatory obligations.Three steering groups continue to underp
244、in the implementation and compliance component of our planet governance structure.They are responsible for delivering initiatives to meet operational climate targets(Group operational decarbonisation steering group)and interim milestones,propel decarbonisation in our supply chain(planet steering gro
245、up)and enable the business to report our progress(ESG reporting&disclosure group).These steering groups are chaired by senior leaders;our Chief Property Officer leads operational decarbonisation(Scope 1 and Scope 2),our Group Quality Director leads product sustainability,which encompasses our Scope
246、3 value chain decarbonisation,and our Group Finance team leads reporting and disclosure.The steering committees are more broadly supported by a number of cooperative workstreams that each focus on carbon reduction within material emissions hotspots across the business.Audit CommitteeGroup operationa
247、l decarbonisation steering group Planet steering groupESG reporting&disclosure groupExecutive CommitteeGroup planet committeeCorporate Responsibility CommitteeBoard-level strategic oversightManagement-level implementation&compliance20Tesco PLC Annual Report and Financial Statements 2023Risk manageme
248、ntFollowing the establishment of climate change as a standalone principal risk in 2020/21,reviews have been conducted at various levels including the Executive Committee and the Board.These include the identification and documentation of climate-related risks and the review and consideration of appr
249、opriate risk responses.This consolidated view provides an input to our review of the Group risk profile.The most recent principal risk review was presented to the Board and Executive Committee in February 2023.Our sustainability efforts focus on our ability to create and preserve long-term value for
250、 our customers,colleagues,the planet and the communities we serve.To address the effect of climate change,Tesco has set sustainability targets,aligned to a 1.5C pathway,and has committed to achieving net zero across Scopes 1,2 and 3 by 2050.These sustainability targets are underpinned by plans and f
251、ormal oversight through dedicated forums,which continue to provide support for delivering against our long-term targets.Further information about our principal risks and uncertainties can be found on pages 38 to 45.We have reviewed and refreshed our approach to further embed the management of climat
252、e-related risks and opportunities into our enterprise risk management processes.Climate and sustainability task forces have been created for our Republic of Ireland,Central Europe and Booker businesses,and for categories including non-food and Tesco Mobile.We continue to track emerging climate regul
253、ations including any requirements for the reporting and disclosure of climate risks.Metrics&targetsWe underpin our net zero strategy with three key commitments:1.reduce Scope 1 and 2 market-based emissions by 60%by 2025;2.be carbon neutral across our own operations by 2035;and 3.achieve net zero acr
254、oss our value chain(Scope 3)by 2050.In the 2022/23 financial year,we reduced our Scope 1 and 2 emissions by a further 3%pts,taking our cumulative reduction against a 2015/16 baseline to 55%.During the year,we invested more than 60m into decarbonising our refrigeration systems,aligned to our ongoing
255、store refresh programme,and the electrification of our online delivery fleet.In recognition of how critical sustainability is to our business success,our 2023 Performance Share Plan(PSP)continues to incorporate several sustainability metrics,following their inclusion for the first time last year.The
256、se include those for Scope 1 and 2 emission reduction;food waste reduction;and diversity and inclusion targets for our leadership teams.For more information on the sustainability metrics included within our PSP,see page 83.You can find detailed GHG emissions data,including disclosure across Scopes 1
257、,2 and selected Scope 3 disclosure on page 19,we have reviewed the Groups physical and transition risks and opportunities,the financial values at risk are quantified in the strategy section below and in the Principal risks section.We continue to review our targets and metrics and focus on disclosing
258、 recognised cross-industry metrics where these align to the risk and opportunities we identify.StrategyDuring the year,we continued to build on our internal climate-related risk scenario modelling capabilities.In partnership with Risilience,part of the Centre for Risk Studies at the University of Ca
259、mbridge,this involved creating a digital twin of our business.The digital twin maps the key areas of our value chain and allows us to stress test our business under five warming scenarios,for both physical and transition risks.The output provides a range of financial value at risk impacts across sev
260、eral risk categories over the short to medium term,which are described in more detail below.Each risk type was assessed based on materiality and likelihood within the five-year time frame on which the quantitative modelling is based.We can also leverage the outputs from this model to estimate the lo
261、nger-term exposure to each risk category.Our enhanced scenario modelling capabilities allow us to better understand the exposure of the business to the effects of climate change,build effective mitigation plans,stress test our organisational resilience and improve the execution of our net zero strat
262、egy.The tables overleaf summarise the financial value at risk associated with three of the modelled risk categories(policy,consumer and technology)over the short to medium term(five years)and a qualitative assessment of how these risks could evolve over the longer term(10 to 20 years).The modelled i
263、mpacts refer to transition risks and are quoted based on a 1.5C pathway aligned to the Paris Ambition and Tescos stated targets,and a 3C pathway aligned to the current warming pathway.We have quoted the financial value at risk below as a range,reflecting the uncertain and heavily assumption-based na
264、ture of climate-related modelling.We assess that our business has a high degree of resilience to the climate-related risks detailed below across a spectrum of warming scenarios,including one where warming is limited to 1.5C.This assessment is based on a variety of factors,which include:a broad,compr
265、ehensive range of grocery products and core capabilities in adapting our existing ranges while launching new products to meet emerging consumer demands;an extensive plant-based meat alternative range,which we continue to innovate;and a geographically diversified sourcing base characterised by strong
266、 and established strategic relationships with suppliers across the globe,which gives us a natural hedge against weather extremities.We modelled three further transition risks in relation to:the risk of climate-related litigation,the risk of a negative shift in consumer sentiment;and negative investo
267、r sentiment due to a perceived lack of action to address climate change.We believe that stakeholders recognise our sustainability commitments and the progress we have made to date.This includes our significant investment in the decarbonisation of our property estate and transport fleet,our market-le
268、ading sustainable product ranges,and the provision of the largest electric vehicle(EV)charging network of any UK supermarket.We also considered the potential financial impacts the Group could face as a result of physical risks,largely driven by the potential for weather extremes and related to raw m
269、aterial supply,key facility risks,and market disruption.The geographically diverse nature of our supply base as well as our store and distribution network provides a degree of structural resilience.Our enhanced modelling capabilities allow us to understand the potential physical climate risks at a s
270、ite level.This enables our property teams to ensure we have robust plans in place in high-risk flood zones to mitigate potential flood risks in the years ahead.The financial value at risk is not material either individually or in aggregate,and we have therefore not disclosed these separately.Our foc
271、us for the 2023/24 financial year will be on further exploring each risk identified as part of this modelling and working with relevant business teams to develop our risk management and mitigation plans.Strategic report21Tesco PLC Annual Report and Financial Statements 2023Task Force on Climate-rela
272、ted Financial Disclosures continuedPolicy riskPathwayMitigated annual impact five-year outlook10-year outlook20-year outlook3CNot materialCarbon prices remain at current levels or rise marginally,with an inconsistent global approach,which leads to minimal financial impact to our business 1.5C0-50mCa
273、rbon prices increase by 20-fold between the current year and 2030,with rapid adoption across developed economiesCarbon prices begin to plateau beyond 2030(by an additional threefold)and are sustained at this level,with further adoption across the developed and developing economiesThe policy risk mod
274、els an increase in future carbon pricing.For our 3C pathway,we have used$20($/tCO2e)and for 1.5C we have used$80.We are actively working to reduce carbon emissions across our value chain in line with our 2035 net zero commitment across Scope 1 and 2,and our 2050 commitment including Scope 3.This act
275、ivity will naturally contribute to reducing our exposure to increases in carbon pricing.We have assumed that together with shifts in consumer behaviour and general market pricing we are able to mitigate the majority of this risk.Our expectation for the 1.5C pathway over the medium and longer term wo
276、uld be for carbon pricing to continue to increase and eventually plateau,while for the 3C pathway we would expect current global carbon prices to remain stable with an inconsistent global implementation and therefore an immaterial financial impact.Consumer market riskPathwayUnmitigated annual impact
277、 five-year outlook10-year outlook20-year outlook3C0-50mConventional shopping preferences continue,with existing levels of uptake for sustainable options continuing,resulting in only a minor impact to our current business1.5C50-100mA greater proportion of our customers switch rapidly from less sustai
278、nable products to more sustainable optionsDemand for sustainable products and services becomes mainstream in the market,the purchasing behaviours and associated financial risk seen in the 10-year horizon stabilise over a longer time period rather than increasing in a linear fashionThis risk models t
279、he impact of customers sustainable purchasing decisions,for example,switching from animal to plant-based protein.Meat and egg-based protein constituted 82%of all our protein sales for UK food and soft drink product categories in 2022/23.The 1.5C pathway assumes a fast adoption and a significant redu
280、ction in demand for less-sustainable and carbon intensive products,whereas the 3C pathway assumes a limited reduction in current demand.Our expectation over the medium term is that for the 1.5C pathway,consumers will increasingly move away from non-sustainable products.In the longer term more sustai
281、nable products will become the mainstream option in the 3C pathway.Less-sustainable products would continue to dominate the market with only minimal decline in demand.The short-term risk value presented assumes no mitigation;however our broad plant-based product ranges provide an opportunity for us
282、to attract new customers and continue to grow in this category as customer behaviour evolves.Our modelling of consumer preference changes allows our product development and buying teams to work with our supplier partners to evolve our product ranges to remain at the forefront of emerging customer be
283、haviours and demands.Technology riskPathwayUnmitigated annual impact five-year outlook10-year outlook20-year outlook3C0-50mGreen technology grows in certain sectors;however,fossil fuel assets remain in widespread use and therefore write-off costs are at a low level with minimal financial risk to the
284、 businessGreen technology uptake grows at a continued slow rate;we continue to see impairment of fossil fuel assets,but this also remains at a low level1.5C25-75mGreen technology grows in all sectors,and fossil fuels and associated technology are phased out resulting in a write off of existing asset
285、 valuesGreen technology is established and dominates the energy mix,as the remaining carbon-intensive assets get phased out the initial incremental cost of write-offs fall away longer termThis risk relates to the write off of existing assets due to increasing levels of low carbon-based investment.Th
286、e 1.5C pathway assumes a fast-paced transition to green technology whereas as our 3C pathway assumes a much slower transition.Risk levels for both pathways remain low even with no mitigation activity considered.Our mitigation plan for this risk is to continue to maintain both short and long-term inv
287、estment plans with a clear connection between these plans and our sustainability targets and commitments.Over the medium term in our 1.5C pathway,we would expect green technology uptake to continue to grow and in the long term all non-green technology to have been phased out,whereas in our 3C scenar
288、io green technology uptake will continue to grow,but carbon-based technologies remain in use.22Tesco PLC Annual Report and Financial Statements 2023The Groups three-year strategic plan integrates the delivery of our sustainability ambitions,of which the decarbonisation of our own operations is the m
289、ost material in the short term.The strategic plan is reviewed and approved by the Board annually,including a review of the key decarbonisation initiatives and associated costs and capital investments.Our review process for proposed capital investments ensures we understand how different projects wil
290、l impact our emissions levels.This enables us to balance the best carbon return for our investment,considering the maturity of emerging technologies and supply capacity.Beyond our three-year strategic plan,we have also created a capital investment profile and associated decarbonisation impact to 203
291、5 to align to our own operations decarbonisation target.We understand that our best strategy to mitigate our main physical and transition climate risks is to become a net zero business across the whole Group,entailing fast,large-scale,and effective decarbonisation of our operations and our supply ch
292、ain.Therefore,in 2021 we announced a renewed commitment to be net zero across the whole Group and all GHG emission scopes by 2050,while maintaining our own operational(Scope 1 and 2)target of being net zero by 2035.As a company with a sizeable footprint in the agricultural sector(roughly 25%of our G
293、roup GHG emissions can be traced back to just 30 agricultural products),we are the first retailer in the UK to join the design and validation pilot of a decarbonisation target in the forest,land and agriculture(FLAG)sectors.The chart below shows the disaggregation of our footprint according to Scope
294、 1,2 and 3 GHG Protocol categories.Scope 1 and 2 have been updated with our 2022/23 emissions data and Scope 3 emissions are as of 2019/20.Our priority will be to focus on finding the most scalable and effective solutions to accelerate our decarbonisation across all scopes.Our strategy will concentr
295、ate primarily on three main components:1.continuing to reduce our operational footprint,with a focus on increasing energy efficiency,generating and directly procuring renewable electricity,reducing our dependency on fossil fuels across transport and our property estate and switching the refrigerants
296、 we use in our fresh network and stores;2.enhancing supplier engagement across all business units,geographies and subsidiaries to ensure our supply chain is adequately disclosing footprint data and setting targets to reduce it;and3.working directly with producers in our agricultural supply chains to
297、 identify opportunities to reduce and sequester land-based emissions associated with our own label product range.We are committed to reaching net zero Scope 1 and 2 operations by 2035,on a 1.5C aligned pathway.Since our baseline in 2015/16,we have reduced our Scope 1 and 2 Group footprint by 55%.Whi
298、le this has largely been driven by switching to renewable electricity,we have maintained consistent focus on driving energy efficiencies while making significant inroads to decarbonise our remaining key hotspots:transport;refrigeration;and heating.We led early on electricity;in 2020 we reached our R
299、E100 commitment to 100%renewable electricity 10 years ahead of our 2030 target.We designed our strategy to ensure we increasingly source our electricity directly via power purchase agreements,going beyond renewable energy certificates to help boost domestic UK renewable capacity.We have also install
300、ed wind turbines at our depots and solar panels on our store roofs,supporting our energy security.In total,onsite and offsite direct power deals will supply around a quarter of our electricity demand.It is critical that we de-risk our business from stranded assets,write-off costs and potential futur
301、e carbon legislation.We will do this by innovating early to scale up decarbonised operations in line with our pathway towards net zero.We are switching away from our depreciated HFC refrigerant systems to recovered CO2 systems.To replace gas boilers,we are trialling air source heat pumps and heat re
302、claim systems across the UK and Central Europe.We have several large fleets of vehicles to decarbonise.To date we have deployed 293 electric home delivery vans and are on track to be 100%electric by 2030 as we continue to replace fully depreciated diesel vehicles.This prepares us for the UKs phase o
303、ut of vehicles powered by internal combustion engine.We continue to trial various models across the UK and Central Europe as well as electrical refrigeration units in our chilled network.Our transition to zero carbon energy sources is underpinned by a focus on continually reducing our overall energy
304、 demand,through investing in efficiencies across our logistics and store operations.This is a critical enabler to bolster our energy security,manage energy costs and secure sufficient capacity as we continue to electrify our operations.1.4%0.01%50.2%3.1%3.0%39.1%1.5%0.39%1.3%Scope 3:category 12:end-
305、of-life treatment of sold productsScope 3:category 15:investmentsScope 3:category 3,5,6,7:fuel and energy-related activities,waste generated in operations,business travel and employee commuting76.6m tCO2e/yearOur total emissions footprintScope 1:refrigerants,HVAC,transport(logistics)Scope 2:purchase
306、d electricityScope 3:category 1:purchased goods and services(including deforestation)Scope 3:category 4:upstream transportation and distributionScope 3:category 9:downstream transportation and distributionScope 3:category 11:use of sold productsWe report on the categories that are material to Tesco
307、based on their contribution to our end-to-end footprint.Our 2019 estimation of our capital goods(category 2)footprint shows a very small contribution compared to our purchased goods and services(category 1);however,as a result of recent methodological updates in the goods and services not for resale
308、 sector,we will run new calculations this year ahead of our FY23/24 reporting cycle.Upstream leased assets(category 8)are not singled out as a separate category as any emissions coming from leased buildings are already incorporated into our operational footprint.All other categories not included,suc
309、h as:processing of goods sold(category 10);downstream leased assets(category 13);and franchises(category 14),are irrelevant for our sector and the scope of our business.Strategic report23Tesco PLC Annual Report and Financial Statements 2023Alongside our operational decarbonisation roadmap,we are set
310、ting a comprehensive Group-wide strategy to decarbonise our value chain.This is both upstream,with our suppliers,and downstream to support a sustainable transition in our customers purchasing behaviour.This helps both to mitigate the risk of consumers shifting to our competitors because of sustainab
311、ility preferences and to insulate us against rising future carbon prices.Our Scope 3 emissions constitute more than 90%of our total emissions footprint.Upstream activities account for 50%of this,while 30%is driven by emissions from rearing,growing and transporting agricultural products,mainly within
312、 the animal protein categories.The remaining 20%is linked to the manufacture of our product ranges,including packaging and production of the fuel that we sell.Downstream activities represent 40%of our footprint including primarily emissions resulting from customers using our products.This includes c
313、ooking at home,preparational processes including washing and drying products,and the emissions associated with the fuel that customers buy from our petrol filling stations.Our two main strategic priorities for our upstream emissions are strengthening our supplier engagement programme around carbon r
314、eporting and climate targets and working directly with farmers to scale up decarbonisation on farms.We have asked all of our direct suppliers to report their GHG emissions and set science-based targets,which should aim for net zero across all emission scopes and attain validation by the SBTi by the
315、end of 2025.At January 2023,close to two-thirds of our UK suppliers by value of total cost of goods sold(COGs)report their operational footprint.They do this either through CDP or directly to Tesco by filling in a questionnaire that we circulate via the Tesco supplier network.Suppliers complying wit
316、h our climate requirements are also eligible to join the UK retail sectors first sustainability-linked supply chain finance programme.We launched this in 2021 in partnership with Santander,offering preferential invoice payment rates to climate-compliant suppliers.In 2023,we will build on the success
317、 of our supplier engagement programme by joining Manufacture 2030,a global cross-industry software platform on which suppliers can submit their carbon data and other sustainability metrics to Tesco and our competitors.This will enable us to increase coverage of our suppliers climate compliance to go
318、 beyond UK suppliers and include an equivalent coverage of around 80%of all suppliers(in terms of COGs)across the Tesco Group.We will also continue our supply chain finance programme with Santander with a focus on supporting smaller suppliers who might require additional resources to be able to comp
319、ly with the climate requirements.Decarbonising our agriculture and animal protein supply chains is a priority to mitigate our transition risk.Our model has also mapped the physical risk associated with sourcing these products to understand where our exposure to at-risk commodities is greatest.Our ma
320、in focus will be to decarbonise the three commercial categories with the highest dependency on these products.These collectively represent close to 40%of production emissions of which 75%is linked to our own label range:(i)meat,fish,poultry and eggs;(ii)bakery and dairy;and(iii)produce.Within these
321、three categories,we have identified the main emission sources we must tackle.For example,in our ruminant supply chains,such as cattle and sheep,the focus will be on improving feed and protein efficiency while reducing methane resulting from enteric fermentation.In monogastric animal supply chains,su
322、ch as pork,poultry and aquaculture,the focus will be on ensuring that all feed comes from 100%deforestation and conversion-free sources,a target we have committed to implement by 2025.When it comes to fresh produce,we are working on reducing our dependency on fossil-fuel fertilisers.In early 2023,we
323、 launched our first commercial trial of low-carbon fertiliser options with our main field vegetable suppliers in the UK.Moving forward,we will continue to pilot decarbonisation interventions through our Tesco sustainable farming groups(TSFGs),integrated by producers in the animal protein and produce
324、 sectors.We will also explore new ways to use supply chain finance to support our farmers in their green transition.When it comes to our downstream emissions,we launched our Better Baskets campaign in 2022,which helps our customers make informed decisions on the sustainability of their shopping bask
325、et.Our Better Baskets on-shelf communication is available at all Tesco Extra stores and signposts consumers to a product range with enhanced sustainability credentials beyond carbon footprint alone.Our commitment is to ensure 65%healthy sales by 2025 in the UK&ROI,and 53%by the end of 2027 in Centra
326、l Europe,which will require scaling up the sustainability performance of our product range.To that end,we will develop new product-level data collection platforms,such as Mondra.This UK-based sustainability data start-up aims to estimate the environmental footprint of our own-label product range by
327、understanding their composition and the sourcing areas of their ingredients.We also continue to ask our TSFGs to provide sustainability information from their farms,so our commercial teams are better informed about the sustainability performance of our sourcing partners.To support the wider electrif
328、ication of our customers vehicles,we have scaled up the network of pod points to more than 2,500 charging bays across 600 stores across the UK.We are also committed to cutting food waste across the supply chain by 50%by 2030.This is aligned with the WRAP Courtauld 2030 framework,which will also enta
329、il working in customer-led campaigns to reduce the waste of our products in customers households.In line with UK Treasury regulatory requirements following COP26,Tesco will present our Group transition plan in accordance with UK regulatory requirements and guidance from the Transition Plan Task Forc
330、e.This plan will give our stakeholders insight into our sector and product-specific decarbonisation plans as well as details of our supplier engagement programme and more information on our climate risk mapping and financial planning.To ensure alignment with the guidelines and recommendations of the
331、 Transition Plan Task Force,Tesco is part of a cohort of companies participating actively in the consultation phase for the documents implementation guidance.Tesco also co-chairs,together with WWF,the working group tasked with developing the Sectorial Guidance for Food and Agriculture,with a first d
332、raft expected to enter consultation phase in August.Next stepsOur priorities in 2023/24 will include further developing our internal capabilities in climate-related scenario modelling through our partnership with Risilience.We are contributing closely to the Transition Plan Task Force in preparation
333、 of our upcoming transition plan.We will also be updating our end to end footprint in this context,considering all available improvements in methodology and emission factors,as well as inclusion of primary data collected from our supplier base via Manufacture 2030.Listing Rule 9.8.6R Compliance StatementTesco PLC has complied with all of the requirements of LR 9.8.6R by including climate-related f