Coats

Our Sustainability strategy

We have developed an ambitious new strategy for Coats which we are proud to launch. Our strategy ‘Pioneering a sustainable future’ focuses on five priority areas where we can accelerate progress, through the targeted investment of capital and resources.

SUSTAINABILITY STRATEGY

Water

Water is a precious resource and is coming under increasing pressure globally. Textile manufacturing uses a lot of water, especially for dyeing processes. To ensure that sufficient water is available for everyone and the natural world, we have to ensure that we use no more than is necessary and use it as efficiently as possible. Not prioritising this would entail risks for business continuity and rising costs.

By 2022 we will reduce the amount of water used per kg of thread produced by 40%

By 2020 we have achieved a 6% reduction

22% of the total water used during 2020 was water recycled and reused within our plants

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Our long term vision is to be able to dye without using water either as a dyeing medium or for heating purposes. In 2018 Coats invested $5m Twine, an Israeli start-up that has been developing digital dyeing of yarns and threads. This technology doesn’t use water at all.

SUSTAINABILITY STRATEGY

Energy

Climate change is a significant risk issue for our business and we need to reduce our energy demand where possible and decarbonise the energy that we do continue to use.

By 2022 we will reduce the energy use within manufacturing by 7%

By 2020 we have achieved a 3% reduction in energy

We have committed to set Science Based targets at 1.5C in line with the Paris Agreement, and to reach Net-Zero emissions by 2050

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Of our total energy usage about 50% is provided in the form of fossil fuels which we burn, while the other 50% is in the form of electricity that we purchase from external providers. Our goal for this is to continue to shift to certified renewable electricity. More than 30% of our total energy used in 2020.

SUSTAINABILITY STRATEGY

Effluent Emissions

While we continue to use water in our processes we will generate effluent. It is essential that any water we return to the environment is properly treated to ensure that there is no damage to the water sources that we and our communities rely on.

By 2022 we will build on Coats global standards by complying with the Zero Discharge of Hazardous Chemicals (ZDHC) effluent standards

By 2020 74% of our effluent is compliant

We have been members of the ZDHC programme since 2016

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Over the past 5 years we have spent over $13m on effluent treatment plants and related infrastructure. We continue to invest substantially in upgrading and modernising our effluent treatment plants, and from 2019 all units with in-country test facilities are being regularly tested for effluent and sludge against the Zero Discharge of Hazardous Chemicals (ZDHC) standards.

SUSTAINABILITY STRATEGY

Living Sustainably

We have significantly expanded our Coats EcoVerde range of 100% recycled polyester threads and sales are growing rapidly account for 13% of our premium sales. We now have transparency on all types of waste across our units, helping us to see the benefit in reduction of waste generation and increased reuse or recycling of waste. We have initiated pilot projects working downstream with our customers to find ways to minimise packaging.

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By 2022 we will achieve a 25% reduction in waste

By 2020 we reduced our waste by 8%

We are supportive of the Better Cotton Initiative

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Currently less than 1% of textile materials are recycled into new textiles (Ellen MacArthur Foundation). Coats is committed to taking stpes to play our part in the complex circular supply chians of the future. We are designing products to facilitate a circular future through innovation and collaboration.

Our Material Issues

We have developed a robust approach to ‘materiality assessment’ in order to focus on what’s important to our business. We use this to identify relevant priorities under each of these themes and to inform our annual CR programme and action plans.

Material issues 

In 2019, we updated our global materiality assessment as we do every two years, and a new update will take place early in 2021. In 2019 we also updated our human rights risk assessment to identify the areas of highest risk, both in our own business operations and in those of our supply chain. We have mapped our operations and those of our supply chain to identify particular industry / sectoral risks as well as risks from their geographical location. In 2021 we are focussing on improving the risk assessment in our supply chain.

To identify particular country risks, we take account of a number of external benchmarks and indices in our risk assessment process, including the UN Human Development Index, ITUC Global Rights Index, Freedom House Freedom in the World Civil Liberties, UNICEF % of children aged 5-14 years engaged in child labour, Minderoo Foundation’s Global Slavery Index and Transparency International’s Corruption Perceptions Index.

Our assessment framework measures the relative importance of particular CR issues both to our business and to our stakeholders, and the chart below illustrates those areas identified as important.

Stakeholder engagement

We take account of stakeholder opinions when we develop our business strategy and our approach to Sustainability…

How we create value for our stakeholders

Responsible business practice is at the core of everything we do. For over two centuries our purpose has remained the provision of good service and the creation of long-term value for all our stakeholders. In order to create this value, it is important to first identify who our stakeholders are and understand what matters to them.

Shareholders

The Board maintains and values regular dialogue with shareholders throughout the year.

The Chairs of the Board Committees engage with shareholders as and when appropriate and in 2020 the Chair of the Remuneration Committee liaised with investors in relation to the Remuneration Policy. You can read more about this in the Remuneration Committee Report on page 79. The traditional face-to-face methods of interacting with our shareholders were quickly made obsolete in 2020 as the Covid pandemic led to blanket limitations on travel. We quickly embraced virtual formats for all investor interactions, which included results roadshows, investor conferences as well as ad hoc group calls on specific topics (e.g. broker arranged ‘fireside chats’). Whilst we do not expect the virtual format to ever fully replace face-to-face interactions, the quantum of investors we have been able to reach around the globe has increased as a result of us fully embracing the virtual format. In addition, we have been able to facilitate wider shareholder access to our Board / management through this virtual forum.

Regular communication with our shareholders and prospective shareholders is even more important during turbulent times like those experienced in 2020. We released regular market updates during the peak of the pandemic and proactively engaged with our key shareholders to keep them updated on the developments in the business.

As the world begins to normalise post-Covid, and as physical travel begins to return to normal levels, we will look to return to a balance of physical meetings, whilst embracing the new virtual formats that became the norm during 2020. This will allow us to leverage the benefits from both physical interaction and the efficiency benefits of virtual interactions.

Other key focus areas for 2021 will be to 1) introduce our new CFO (Jackie Callaway) and Chairman (David Gosnell) to our investor base, and 2) to continue to engage on key industry / investment case focus areas, such as ESG.

Customers

We have been helping to connect and form the fabric of daily life on our planet for over 250 years, and our global footprint provides unrivalled access to markets and customers.

The Board does not routinely interact directly with our customers. Our primary method of understanding our customer needs is through feedback from management and the Board receives regular reporting on customer outcomes and customer related strategic initiatives throughout the year. Feedback from customers is generally obtained through our Innovation Hubs, trade shows, and customer visits. However, in response to Covid, management teams adapted communications to include a range of digital initiatives to continue to meet customer and market demands using a series of educational and informative webcasts and satisfaction surveys. The feedback from these sessions was positive.

During the pandemic many of our customers switched to manufacturing PPE, which we were able to support through our participation in the PPE Gerber taskforce. Looking ahead, the challenge for our customers is predicting the future of retail, including the continuing rise of e-commerce, and how supply chains post-Covid can be de-risked. We also learnt that speed and agility are key in times of uncertainty and the ability to adapt and offer solutions to support customers is a critical industry differentiator. The ‘road to normal’ will take some time to travel and our customers will need agile solutions to help them navigate through the storm.

We intend to continue our focus on areas of improvement that have been identified through improved education programmes and smarter use of technology.

Suppliers

We believe it is important that our suppliers are not only price competitive but also have a strong compliance, quality, service, sustainability and innovation ethos.

Our long-term supplier partnerships are an important part of being able to innovate and offer trusted value to our customers. The Board maintains oversight of the management of our most important suppliers and our operating subsidiary boards regularly review and report on their performance. The Board and the operating subsidiary boards review the actions we have taken to prevent modern slavery and associated practices in any part of our supply chain and approve our Modern Slavery Statement each year. One of the key pillars supporting this statement is our Supplier Code. We continue to engage with suppliers about our Supplier Code, and in particular with those identified as requiring improvement. During the pandemic we liaised continuously with suppliers to ensure that our payments were aligned to their requirements.

We have found that a focus on compliance-related issues is generally welcomed by our suppliers who do not see that this is an imposition, but regard it as helpful to ensure that their business is resilient. Training on our Supplier Code ensures standard processes are being followed and the refresher workshops we offer to suppliers are valued. Sustainability is an important part of any business strategy and suppliers are keen to work with us on this.

We will continue our engagement with our suppliers, providing support and guidance to ensure adherence with our Supplier Code, including running new workshops. The supplier portal will allow suppliers to measure their performance through a KPI scorecard and through our Innovation Hubs we will continue to drive supplier-led innovation. Our work on Scope 3 emissions will also extend the scope of our engagement with our suppliers.

Workforce

Our 17,000 strong workforce is at the heart of making our business a success and we recognise that listening to and engaging with our employees is essential to our continued success.

Workforce engagement has always been a key priority for the Board and Fran Philip, Non-Executive Director, has been the Board representative for workforce engagement since March 2019. Site visits were not possible during 2020 but Fran attended our two Diversity and Inclusion Network calls, had four virtual meetings with our Cluster Managing Directors, as well as with representative groups from each of our Clusters. She presented her findings to the Board.

In 2020, to close the feedback loop, we published a film internally in which Monica McKee, Chief HR Officer, interviewed Fran about her work in 2019 and plans for 2020. Feedback from employees is also heard via our pulse survey results which are shared with the Board bi-annually.

The themes from Fran’s meetings with employees showed that they felt well taken care of during Covid because the company acted quickly and early to protect people and the business. It has been stressful for our employees to understand the new world but they are staying connected virtually both professionally and socially and want this to continue.

Fran will continue with her virtual meeting programme, with the aim of resuming face-to-face meetings in H2 if circumstances and safety allow. She will feed back to the Board in July and December.

Communities

We operate in 50 countries across six continents and seek to understand and respect the needs of the communities in which we operate and to work together with them to our mutual benefit.

Coats needs to work in partnership with the communities in which it operates. Our employees often come from those communities and we share the environment around ourselves and the resources it contains. The Board recognises the importance of working with communities, but does not have a lot of direct interaction with them, relying instead on information and feedback from management.

Normally within Coats there are a large number of community engagement projects that happen within our businesses, but the need to restrict social interactions because of Covid has obviously severely limited these activities in 2020. After an initial focus on ensuring our employee health, safety and wellbeing, we extended our activities to our communities, providing information about the pandemic and how to combat it and also provided safety equipment and other donations to support communities. The Board discussed and was supportive of these actions.

Coats has longstanding and fruitful relationships with many communities in the countries where it has operations. During Covid these links have been strengthened through our supporting activities. We have seen the ability of the Company to act very rapidly to meet urgent needs – this was shown through the pandemic, but also in response to Hurricane Ida flooding in Honduras.

Having had plans, pre-pandemic, to engage with a global partner to enhance our ability to deliver and measure high impact community interventions we are reviewing if this is still the most appropriate route forward for the company.

As we emerge from the pandemic we will be seeking to identify the most appropriate form of community engagement activities for the Company given that the situation facing communities around the world and consequently their needs might have been heavily impacted by the pandemic. Our strong commitment to engage proactively with communities continues. More detail on community activities can be found in our Sustainability Report and online (refer to coats.com/sustainability).

Environment

Coats is working proactively with customers and suppliers to help them to improve the sustainability of their products, and to minimise the environmental impact of our industry.

The increasing risk from climate change and the work done to assess this risk has led to a significant increase in the Board’s engagement with the environment during 2020. In addition, the Board continued to engage in decisions around effluent controls and also supported the development of innovative new products designed to facilitate circular processing within the textile industry, where we have been working closely with key customers. The combined individual experiences and contacts of each Board member, outside their direct Board commitments, has also helped to inform such decisions, ensuring that the increasing interest in environmental issues from all other stakeholders is fully represented in Board discussions and in the Company strategy. We published our second Sustainability Report which detailed the progress towards our ambitious targets for 2022 and 2024 and included our first Communication on Progress (COP) as Participants of the United Nations Global Compact, and identified the environmentallyfocused Sustainable Development Goals that Coats aspires to contribute to. At the start of 2021, Coats signed up to the Science Based Targets initiative under the more challenging Business Ambition for 1.5°C target and is committed to developing emissions targets that align to a low carbon future. Work already started with suppliers in 2020 to map our Scope 3 raw materials emissions and this will continue in 2021.

Our approach to protecting the environment is much more than just doing the right thing in the communities in which we operate. It is about enhancing our business and creating new opportunities to be more efficient and to innovate, developing better products and building stronger relationships with our customers, investors and stakeholders. We have to have long-term strategies in this area and, increasingly, look at the full life cycle impacts of our products.

The key areas of work this year will be around the development of Science Based Targets for emissions, ensuring that our use of chemicals and effluent treatment processes are delivering on our targets and ensuring that we are moving to product types that have a reduced environmental impact. A lot of these activities have to be done in concert with other organisations and we will support management to work collaboratively with external bodies. More details on the activities fully supported by the Board can be found in our Sustainability Report (refer to coats.com/sustainability).