What we do
ESG
Operating sustainably is a key part of the Group’s culture and is reflected within our Purpose, Mission and Strategy; where we have made sustainability a central pillar of the Group’s success.
ESG – emissions
Carbon Neutral
operations in 2021
ESG – low carbon sales
25%
of revenue for low-carbon
products in 2021
ESG – employee satisfaction1
90.5%
2020: 86.1%
1. Percentage of UK employees fairly or very satisfied with their employer
Sustainability
2021 has been a further year of progression of our sustainability programme, even against a challenging backdrop resulting from COVID-19 and supply chain constraints. Our product portfolio, combined with our business model and experience, puts us in a strong position to capture future ESG opportunities; however, we recognise there is more to do and we look forward to continuing to progress our sustainability agenda moving forwards.
Leveraging our business model
The nature of the Group’s Business Model means we are able to consider and minimise our impact on the environment right through from initial product designs, to how those designs are made, through to how our orders are fulfilled.
Design
Our efficient product designs not only help manage our costs but further enable our customers to enjoy our products knowing they have chosen a more sustainable option.
- As far as possible, we use recycled materials for packaging our products and we are further enhancing our products with increased use of recycled materials, particularly recycled plastics
- Our designers intensely focus on driving down the power consumption of our products using the most efficient designs and technologies
Make
The way we produce our products is a key component in our environmental considerations and will be a significant area of focus as we progress our environmental agenda.
- Emissions arising from production are controlled at source through lean and efficient manufacturing processes which minimise inefficient rework or quality issues
- We ensure wherever possible that the energy used to power our sites is sourced renewably
- We employ a solar PV array at our China manufacturing facility, which delivers 8% of our total electricity consumption
- We obtain high quality carbon offsets, to mitigate emissions we have not yet been able to completely mitigate
Market
The way we build relationships and understanding with our customers means we are not only well positioned to adapt to their changing needs, but also to advise them on their individual requirements.
- Our electric vehicle charging range is expanding and we are excited about the benefits this will have on our customers and society as a whole
- Our experienced project sales team work with the customer to bring ideas they may not have considered, such as absence detection, bringing an end to lights being left on when not required
Fulfil
It has been a challenging year for our teams focused on managing the delivery of our products given current global supply chain constraints, but we are proud to have progressed our environmental agenda even against this backdrop.
- We have invested in a new Warehouse Management System at our Telford site, designed to increase levels of automation as well as minimise waste and inefficiency. Better planning of stock availability has resulted in a significant reduction in the number of deliveries required to fulfil each customer order, lowering associated emissions
- We are reviewing the packaging dimension of all our product ranges not only to reduce packaging, but also to ensure maximum efficiency when shipping
- We continue to focus on Free on Board sales, which significantly reduce the miles over which our products travel to customers
Sustainability policies
Our approach to managing the Group’s environmental responsibilities is set out in our Code of Conduct and more detail can be found in the Ethical business section on page 53 of the annual report 2021.
Our Code requires us to seek to protect the environment, by preventing or minimising the environmental impact of our activities and products through appropriate design, manufacturing, distribution and disposal practices.
The Group also has a Supplier Code of Conduct. This requires suppliers to:
- Comply with all applicable legal environmental requirements
- Continuously monitor, and disclose to us, their energy and natural resource usage, emissions, discharges, carbon footprint and disposal of waste
- Take a progressive approach to minimising their impact on the environment
- Reduce our environmental impact
Climate change
As one of the biggest challenges that the world currently faces, climate change represents both a significant risk and opportunity for our business. We have seen a growing mandate from our stakeholders demanding meaningful action to tackle our greenhouse gas emissions. Recognising this, climate change is now included as a principal business risk. The Group is well positioned to make an increasing contribution to society’s climate objectives, which presents new business opportunities during the transition towards net zero.
The Group has been working with external consultants throughout 2021 to better understand our impact on climate change and develop a robust carbon management strategy. Our aim is to reduce our greenhouse gas emissions in line with the Paris Agreement and establish a science-based emission reduction target.
Strategy
Climate change has the potential to impact our business across the short, medium and long term. Our business strategy and financial planning processes provide mitigation against the risks and position us well to capitalise on the opportunities.
Time horizons
When considering climate-related risks and opportunities, the following time horizons are used:
- Short-term: 0 to 1 year
- Medium-term: 1 to 3 years
- Long-term: 3 to 5+ years
Given the long-term nature of climate-related impacts, particularly relating to physical risk, a ten-year horizon was used when assessing these risk categories. As the physical impacts of climate change also vary by geographic location, our assessments have been initially focused on strategic locations for Group operations including Telford, UK and Jiaxing, China.
Adaptation and mitigation
There could be a long-term risk to our operations as a result of more extreme and frequent weather events. We will continue to monitor this risk and maintain a range of mitigation measures to limit any potential disruptions to our operations.
Financial planning
Climate-related matters influence various elements of our financial planning process. One significant area of both direct and indirect costs relates to the price of copper. The price of copper is in part driven by the electrification of energy and transportation. To protect against price volatility, the Group has increased forward purchases and hedging and started to opt for shorter-term fixed price agreements.
In 2021, we generated revenue of £56m from low carbon products. Our target is to increase this to £100m by 2025 as we leverage our position as the UK’s leading provider of domestic electrical devices to seize opportunities presented by the electrification of residential energy and private transportation.
When evaluating risks and opportunities, the potential financial impact is also evaluated as part of the assessment process to understand the scale of the impact.
Carbon pricing mechanisms (“CPMs”) are not currently used by the Group. The use of a CPM was considered to be burdensome at this stage, given the heavy involvement of the finance team in the management of climate-related matters.
Climate-related scenario analysis
The Group recognises the important role scenario analysis plays in assessing the resilience of our business strategy into the future given the long-term nature of climate change-related issues.
Our first year of aligning with the TCFD recommendations has been focused on:
- Establishing a strong climate‑related governance structure
- Embedding climate change into our overall business risk assessment process
- Quantifying our emissions to establish a baseline and more effectively track our progress
As we look to continually improve our management of climate-related matters, we plan to undertake scenario analysis during 2022 to test our business strategy across a range of timeframes and emission scenarios.
Products & Services
Our low carbon product ranges (LED lighting, EV chargers and smart standby products) help customers lower their GHG emissions and transition towards a low carbon future. We strive to develop more efficient products and better controls to improve energy efficiency.
Supply Chain
One of our strengths is the strong relationships we have with our suppliers. We recognise that we must work together to make more sustainable choices across product design, material choices and the manufacturing processes.
Research & Development
Our business is well placed to take advantage of the inevitable electrification of energy as we transition towards a low carbon economy. Opportunities for expansion into electric vehicle charging and other low carbon solutions.
Operations
One of our first priorities is to reduce the emissions from our operations. By improving the efficiency of our operations, we can reduce energy use, raw material use, waste and water use to limit our GHG emissions.
- Estimated to have avoided 477,077 tCO2e from LED lighting products sold during 2021
- 10x increase in revenue from EV charging products
- Acquisition of DW Windsor to expand low carbon product offering
- Launch of next generation high power EV charging products in H1 2022
- Launch of next generation USB sockets with lower standby power in 2022
- Quantification of scope 3 emissions
- Piloting engagement with suppliers on GHG emissions with LED suppliers
- Investigating nearshore manufacturing options
- R&D critical to competitive advantage and growth
- Specialist R&D function in China and the UK
- 2021 R&D expenditure of £3.0m
- Improvement in lumens per watt of next generation LED products
- Redesign of products to reduce packaging requirements
- Sourced renewable electricity for UK and China-based operations
- Offset Scope 1 and remaining Scope 2 emissions
- Investment in efficiency improvements to the manufacturing facility in China
- Greater consolidation of deliveries to reduce logistics emissions
Products & Services
Our low carbon product ranges (LED lighting, EV chargers and smart standby products) help customers lower their GHG emissions and transition towards a low carbon future. We strive to develop more efficient products and better controls to improve energy efficiency.
- Estimated to have avoided 477,077 tCO2e from LED lighting products sold during 2021
- 10x increase in revenue from EV charging products
- Acquisition of DW Windsor to expand low carbon product offering
- Launch of next generation high power EV charging products in H1 2022
- Launch of next generation USB sockets with lower standby power in 2022
Supply Chain
One of our strengths is the strong relationships we have with our suppliers. We recognise that we must work together to make more sustainable choices across product design, material choices and the manufacturing processes.
- Quantification of scope 3 emissions
- Piloting engagement with suppliers on GHG emissions with LED suppliers
- Investigating nearshore manufacturing options
Research & Development
Our business is well placed to take advantage of the inevitable electrification of energy as we transition towards a low carbon economy. Opportunities for expansion into electric vehicle charging and other low carbon solutions.
- R&D critical to competitive advantage and growth
- Specialist R&D function in China and the UK
- 2021 R&D expenditure of £3.0m
- Improvement in lumens per watt of next generation LED products
- Redesign of products to reduce packaging requirements
Operations
One of our first priorities is to reduce the emissions from our operations. By improving the efficiency of our operations, we can reduce energy use, raw material use, waste and water use to limit our GHG emissions.
- Sourced renewable electricity for UK and China-based operations
- Offset Scope 1 and remaining Scope 2 emissions
- Investment in efficiency improvements to the manufacturing facility in China
- Greater consolidation of deliveries to reduce logistics emissions
ESG Objectives
At the start of the year, the Board agreed the following ESG objectives for 2021:
- Achieve operational carbon neutrality via the elimination or offset of Scope 1 and 2 GHG emissions by year end
- Quantify Scope 3 GHG emissions
- Commence participation in the Carbon Disclosure Project
- Launch a comprehensive ESG strategy
- Commit to set science-based emission reduction target
Elimination and offset of Scope 1 and 2 GHG
We are proud to report that we achieved operational carbon neutrality in 2021.
This means we have been successful in eliminating or offsetting the Scope 1 and 2 GHG emissions produced by our global operations, as planned.
This was achieved as follows.
Electricity is our largest emissions source where we have direct control. Renewable Energy Attribute Certificates1 have been sourced to cover the electricity consumption of our distribution centre in Telford, Kingfisher Lighting, our London office and our manufacturing facility in China for 2021, accounting for 86% of our total energy consumption. There is also a solar PV array at our manufacturing facility in China, which represents 8% of our total electricity consumption. Overall, 94% of our total energy consumption during 2021 was from renewable and zero carbon sources.
For our smaller sales offices where energy usage is minimal, we have not been able to obtain renewable energy certificates due to small volume or limited control over the electricity supply arrangements. In 2022, we will look to expand our coverage to include the newly acquired DW Windsor in full.
The second approach was to obtain high quality Voluntary Emission Reduction (“VER”) certificates to tackle our Scope 1 and residual Scope 2 emissions. The certificates have been sourced from the Weyerhaeuser Afforestation Project in Uruguay. The project covers over 18,800 hectares of degraded land which is expected to continue to degrade in the absence of this afforestation project. The certificates have been awarded by the Rainforest Alliance in accordance with the Verified Carbon Standard. A total of 1,104 certificates have been retired for 2021, resulting in us achieving operational carbon neutrality overall.
Scope 3 screening assessment
In addition to the mandatory Scope 1 and 2 emissions, we have quantified our Scope 3 emissions for the first time in 2021. A high-level screening assessment of our Scope 3 emissions has been conducted to identify key emission “hot spots” where we can focus our efforts. Our estimated Scope 3 emissions for 2021 are 360,291 tCO2e.
Our key Scope 3 emission sources relate to the use of our sold products (211,016 tCO2e, 58%) and purchased goods and services (125,106 tCO2e, 35%). All other applicable Scope 3 emission sources account for 24,169 tCO2e and 7% of our 2021 emissions.
Grid electricity
The use of sold products is our largest emission source, accounting for 58% of our greenhouse gas inventory. The main driver of these emissions is the carbon intensity of the electricity grids where our products are used. Whilst this is beyond our direct control, many countries have made commitments to decarbonise their electricity grids – for example, the UK Government has committed to delivering a net zero electricity grid by 2035. In conjunction with our efforts to innovate and improve the energy efficiency and control of our products, we forecast there will be significant emissions reductions in this area over the coming years.
Carbon Disclosure Project
We responded to the climate change module of the Carbon Disclosure Project (“CDP”) for the first time in 2021. Our climate change submission contains further information on our climate governance and risk management processes, climate-related risks and opportunities, GHG emissions and business strategy.
We received an awareness level score (C) and look forward to updating the CDP on our efforts to integrate the management of climate-related matters further into our day-to-day operations.
ESG strategy
We have been working with external consultants to develop a comprehensive strategy and implement the TCFD recommendations.
Science-based target
We are committed to establishing a science-based emission reduction target and will seek validation through the Science Based Targets Initiative (“SBTi”). This will set us on an emissions reduction pathway that is aligned with the Paris Agreement and will aim to avoid the worst impacts of climate change. We aim to have our target validated during 2022.
Next steps and plan for 2022
Our ESG objectives for 2022 are as follows:
- Make significant progress towards delivering £100m of revenue from low carbon products in 2025
- Commit to the Science Based Target Initiative (“SBTi”) and seek the validation of associated emission reduction targets
- Ensure all products sold in the year use recyclable plastic packaging
- Ensure 30% of plastic packaging used in the year is recycled
People
We aim to recruit and retain people who are passionate about innovation and customer service, and to recognise and reward outstanding performance.
People policies
The Group’s primary people-related policy is its Equality and Diversity Policy. This policy reflects our commitment to:
- Developing an ethos which respects and values all individuals equally
- Eliminating all forms of discrimination
- Ensuring there are no barriers based upon colour, culture, ethnicity, race, religion, disability, gender, sexuality or age which limit or discourage access to promotion, recruitment or training
- Ensuring that all aspects of employment avoid stereotyping based upon colour, culture, ethnicity, race, religion, disability, gender, sexuality or age
- Promoting good understanding of cultural, racial, ethnic and religious diversity, good race relations, disability, gender and age equality
- Taking positive action to encourage the development of a more diverse workforce
Gender diversity
We have taken a number of steps in recent years to promote the retention of female talent, including improving maternity benefits and improving flexible working. In 2021, we introduced a stand-alone Flexible Working Policy and employees have a right to make an application from day one of their employment. We also endorsed hybrid working by introducing our very first Homeworking Policy and, where circumstances allow, there is a minimum requirement of 20% office attendance with the remaining 80% being home working.
Our latest Gender Pay Gap Report can be downloaded here
Employee engagement
An Employee Opinion Survey was undertaken in 2021. Employee satisfaction increased in 2021 compared with 2020, with 90.5% of UK employees in 2021 reporting they were either “fairly satisfied” or “very satisfied” with Luceco as an employer, up from 86.1% in 2020. In addition, 80.4% of employees said they would recommend Luceco as an employer to their friends and family, up from 75.3%.
We make sure that we listen to our employees and act upon their feedback. In recent years, our employees reported that they felt they received insufficient information regarding Group performance and strategy, so we implemented monthly team meetings, monthly CEO emails and relaunched our employee newsletter.
Greater sharing of information has made our employees feel more valued and part of a team, consequently increasing employee engagement.
In 2021, the most improved area in the survey was in Learning and Development, reflecting our investment here and the new platform described below. Our employees also reported increased satisfaction with their working environment, including working from home. However, as time progresses, we are aware that working from home can lower people’s connection to employers. Greater communication and learning and development, as we have described, will ensure our employees remain connected. In addition, we are promoting hybrid working, helping our employees to collaborate, balanced with home working too.
Learning and Development
In 2021, Luceco invested heavily in learning and development (“L&D”) and we introduced our first L&D platform.
We partnered with Hays Thrive/Go 1 in order to provide the business with this exciting platform which is available to all employees.
Since its introduction in April 2021, 5,280 learning modules have been completed by our employees, some of which has been compulsory learning such as “Anti-money Laundering” but the rest has been related more to personal development.
The L&D platform also covers learning regarding mental health and general wellbeing, which is something that we have sign-posted to our employees especially in light of the pandemic. Our employees’ health, happiness and wellbeing is paramount to us and we are pleased that the introduction of this platform provides further support.
