SUSTAINABLE SUPPLY

2023 PROGRESS

By building long-term, trusted relationships with our suppliers, we can help them grow their businesses and ensure traceable and resilient supply chains. This, in turn, means we can mitigate our social and environmental impacts and reduce supply chain risk for our customers.

Launched a Supplier Relationship Management (SRM) program across all Finlays businesses
100% of our made leaf tea continues to be traceable to the tea factory or garden where it was produced
94% of our green bean coffee is traceable to the processing mill and/or producer group
72% of our soluble coffee is traceable to the green coffee supplier
59% of tea and coffee was sourced from fully approved suppliers under the SRM program
31% reduction in carbon emissions on supplier coffee farms in Colombia
Supported female tea suppliers in Argentina
Promoted regenerative agriculture in Brazil
Onboarded suppliers onto a new data management platform

PROGRESS IN 2023

OUR SUPPLY CHAIN

Due to Finlays’ position within the value chain as a supplier to brands and retailers, we are one step closer to the origin of the products we make. We have worked with many of our tea and coffee suppliers for years and look to build close relationships wherever possible.

TEA SOURCING: We source green leaf from our own tea farm and local suppliers in Argentina, tea estates and farming cooperatives in Kenya, and through smallholders in Sri Lanka. We source made tea from our own tea farm in Argentina, private contracts with third-party suppliers, and through auctions.

COFFEE SOURCING: We source our green bean coffee through private contracts with farmers, farming cooperatives, and brokers. We buy soluble coffee direct from third-party manufacturers.

To date, our focus has been on the key raw materials that go into our products, i.e., tea and coffee. This is because they are both high-risk commodities in terms of human rights, and because we purchase significant volumes globally and therefore have a significant potential impact. However, we recognize there are risks in our other supply chains. In 2024, we are therefore widening the scope of our approach to map these out at a Group level for Finlays’ wider goods and services.

OUR SUPPLY CHAIN
Tea

Country of origin	% volume	No. of factories
Argentina	10.36%	24
Brazil	0.03%	1
Burundi	0.19%	6
China	0.81%	22
Congo	0.01%	1
India	1.35%	81
Indonesia	0.43%	4
Kenya	51.11%	160
Malawi	8.57%	18
Mozambique	0.01%	1
Rwanda	6.07%	18
South Africa	0.08%	1
Sri Lanka	8.08%	594
Tanzania	3.08%	15
Uganda	8.54%	42
Vietnam	0.77%	10
Zimbabwe	0.48%	6
Total	100%	1,004

OUR SUPPLY CHAIN
Green bean coffee

Country of origin	% volume	No. of mills¹
Brazil	42.00%	16
Colombia	28.82%	18
Costa Rica	0.43%	2
DRC	0.12%	1
Ethiopia	0.86%	3
Guatemala	2.50%	2
Honduras	2.79%	7
India	0.23%	1
Indonesia	2.48%	7
Kenya	1.29%	2
Laos	0.47%	1
Mexico	4.37%	4
Nicaragua	0.06%
Papua New Guinea	0.30%	1
Peru	2.31%	5
Vietnam	10.97%	3
Total	100%	73

¹Where traceable to mill

OUR SUPPLY CHAIN
Soluble Coffee

Country	% volume	No. of manufacturers¹
Brazil	26%	3
Colombia	8%	2
India	10%	1
Mexico	39%	2
Vietnam	17%	1
Total	100%	9

^{1 Due to challenges in traceability of the soluble supply chain, we trace back (at a minimum) to the green coffee supplier of the final manufacturer. We focus our due diligence efforts on the manufacturers, so we report number of manufacturers rather than coffee mills.}

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ASSESSING RISK IN OUR SUPPLY CHAIN

Finlays has developed country-level risk ratings that cover both inherent risks and sector-specific risks in each sourcing country. These are reviewed and updated annually, using a number of sources including:

Sedex radar tool
Rainforest Alliance risk maps
Modern Slavery Index
International Trade Union Confederation (ITUC) global rights index
Global Gender Gap report
Yale Environmental Performance Index
Climate change: Notre Dame Global Adaptation Initiative, Global Climate Risk Index
Publicly available human rights impact assessments (HRIAs)
Other relevant reports, publications, and media

The country-level risk is combined with further information about the supplier, such as whether they have third-party sustainability certifications and signed Finlays’ Sustainable Sourcing Policy, to provide a risk rating per supplier.

In early 2024 we commenced a project to undertake a human rights risk assessment to further develop our work on identifying our most salient human rights risks. We plan to share more on our salient risks later in the year.

In 2023, we launched a more formalized approach to Supplier Relationship Management (SRM) across Finlays Group. Our new SRM program covers all activities to qualify, audit, contract, prioritize, review, and manage the relationships and performance of Finlays’ suppliers, with an initial focus on tea and coffee. The approach is cross-functional, covering Sourcing, Quality and Food Safety, and Sustainability, and we are continuing to embed it across the business and provide relevant training. The SRM program consists of four key steps that align with our Sustainable Supply objectives:

Qualification: Suppliers must be assessed and qualified to meet Finlays’ requirements, either through a desktop or physical audit. An annual risk assessment is undertaken to determine the order in which supplier audits should be conducted.
Segmentation: On an annual basis, we categorize our suppliers into four tiers based on spend and criticality, and assign a risk priority. ‘Tier 1’ describes our most critical and strategic suppliers. This segmentation determines the governance framework applied to each supplier, thus ensuring we focus our efforts where they have the most impact and benefit.
Performance management: Initially focused on our ‘Tier 1’ (strategic) suppliers, this includes a number of tools such as a supplier scorecard, a supplier strategy, supplier reviews, management of risks, and a ‘voice of the supplier’ survey.
Continuous improvement: We help move suppliers up the Finlays maturity matrix by working collaboratively on continuous improvement initiatives and identifying synergies and opportunities for growth.

SUPPLIER RELATIONSHIP MANAGEMENT (SRM)

CASE STUDY:
Implementing our Supplier Relationship Management program in our Extracts business

As part of our drive to embed our Supplier Relationship Management (SRM) program and build strong, trusted relationships with our strategic suppliers, Finlays' US business has identified our priority soluble coffee suppliers and started implementing quarterly review meetings with each of them.

This is an opportunity to look at day-to-day supplier management in areas such as product quality and service levels for the previous quarter, but also to align on a more strategic level. We get feedback on how Finlays performs as a customer and discuss opportunities to align on sustainability initiatives and focus areas.

Through this, we can understand challenges our suppliers face and identify areas to work together for mutual improvement and benefit. We are excited to see where this more systematised approach can take us in growing our partnerships with key suppliers.

CASE STUDY

Reducing the carbon footprint of coffee in Colombia

Building on learnings from previous climate-smart coffee projects in Colombia, in 2022 we started supporting a new multistakeholder project which aims to produce coffee with a lower carbon footprint. The project focuses on 34 women-led coffee farms in the Risaralda region of Colombia and is spearheaded by ExpoCafe in collaboration with the coffee growers’ cooperative of Risaralda (CoopcafeR) and supported by the University of the Andes in Colombia, Cardiff University in the UK, and Finlays.

Initially, the project helped establish a baseline carbon footprint at farm level. In 2023, the focus was on introducing and quantifying carbon mitigation measures. These included: reducing the application of fertilizers with high urea content and replacing them with an alternative source of nitrogen alongside a smart fertilization plan and training on soil analysis; installation of septic systems to treat water from wet coffee processing; providing filters for water purification; and reforestation activities. In total, six 50kg bags of fertilizer were provided to each farmer, 13 water treatment systems were installed to reduce water contamination, 36 water filters were provided to improve the quality of drinking water, and 1,000 native tree saplings have been delivered through the project so far.

Measurements have been taken initially from four pilot farms to prove the concept and test the calculations. This demonstrated that changing the fertilizer resulted in a 31% reduction in carbon emissions on these farms. Calculations will be completed for the larger group of farms following the next coffee harvest, at which point the emissions reductions will be audited and verified for low-carbon certification.

31% reduction in carbon emissions on these farms

CASE STUDY

Encouraging regenerative agriculture practices in Brazil

Finlays has been working with our Brazilian coffee suppliers COOMAP and Café Responsável to encourage their small-scale farmers to introduce regenerative agriculture practices. In particular, farmers are encouraged to plant legumes, along with natural flowers and grasses, in between the coffee trees. The legumes provide nitrogen to the soil, which is crucial for plant growth; the flowers encourage pollinators and natural insect predators; and the grasses help to retain moisture in the soil. Farmers who adopt these practices can reduce their pesticide use by 20% and fertilizer use by 50%. Fertilizer is the largest contributor to carbon emissions of coffee at origin.

In 2023 our Head of Coffee visited farmers to share insights into the benefits of regenerative agriculture and raise awareness of the opportunity to achieve higher returns through better agricultural practices. The visit was supported by a specialist agronomist. We also worked with COOMAP to set up a pilot that uses some of the Fairtrade premium paid by Finlays to provide training and plants to a number of farms, enabling farmers to see the benefits of regenerative agriculture for themselves.

Ultimately, the aim is to help farmers increase their yields from 30 bags of coffee per hectare to 50 bags, while reducing input costs and fertilizer use.

CASE STUDY

Empowering female tea suppliers in Argentina

In 2022, our Casa Fuentes business in Argentina launched a project to support female workers at their tea farm suppliers, particularly the wives of local tea producers. The goal was to make women’s work on the farm more visible and appreciated, and to create a support network and space for women to meet and share experiences. There were two meetings held in 2023, with 12 women participating out of a total of 21 producers’ wives. Space was provided for children to play to ensure meetings were accessible for mothers. The sessions included workshops facilitated by a specialist in gender equality issues to encourage women to discuss their experiences on topics such as the role of women in society and how to achieve greater equality. Casa Fuentes plans to expand this initiative to reach more women, deliver more sessions, and build a thriving support network.

Two meetings held in 2023, with 12 women participating out of a total of 21 producers’ wives