Victoria : ESG Report 2022

Environmental, Social and Governance Report 2022

www.victoriaplc.com

stock code: VCP

Environmental, Social and

Governance Report

OVERVIEW

Victoria has long been a supporter of sustainable action: reducing waste and improving efficiency while maintaining high quality. Doing more with less and looking after the health and safety of our people are at the heart of what makes us successful as a Group.

Sustainable operational improvements have been at the core of our track record in growing and enhancing the business. For example, the consolidation of our UK carpet manufacturing and logistics operations, and investment in more efficient machinery, saw our production output increase by 46% while delivering a significant reduction in man hours and waste (see below).

OUR APPROACH TO ESG

We are now refining and formalising our ESG strategy so that the way we manage sustainability issues, collect data and report our progress is fully embedded and consistent across the Group. This report sets out what we believe are the key ESG issues we face as a business and what we are doing to address them.

We will develop policies and establish targets and KPIs for priority ESG focus areas, setting a level of ambition for each to help us continuously improve our performance. We will also develop tangible action plans to ensure we deliver against those targets.

SUCCESSFUL CONSOLIDATION OF OUR UK CARPET MANUFACTURING & DISTRIBUTION

Through a number of acquisitions, Victoria used to have a number of sites in the UK for the manufacturing, distribution and operations of our carpet business. Today, we have consolidated what were four manufacturing sites into just two- in Newport, Wales and in Dewsbury, England. Despite this, we're making more carpet, at a higher quality, less waste and lower overheads.

In 2013, Victoria acquired Westex for £12.5million, just a year later in 2014, we acquired Abingdon Flooring for £13.4 million, finally, the Group acquired G-Tuft in 2019 for £1.6m. G-Tuft's production capacity was consolidated into the Westex site a year later. In 2017, we commenced a £10.3 million investment plan to improve the throughput, efficiency and quality of Abingdon's production. First, we consolidated our production from the Victoria Carpets Kidderminster site into the Abingdon factory in Wales, which already had newer and more efficient machinery and production lines.

During this period, we also offshored our yarn extrusion process to businesses with more modern, energy efficient equipment. We also replaced two old and inefficient finishing lines with one modern line and invested in new, faster tufting machines.

Overall, our investments for growth saw production capacity increase by 46% to 24 million square metres per year. We also achieved production cost savings per square metre of carpet produced. This means less waste, less power usage, reduced carbon emissions per square meter of carpet produced and overall improved efficiency.

We also opened a new warehouse capable of providing better customer service, including delivery to 94% of the UK within three days from stock rolls. Meanwhile, the logistics fleet was enlarged to 270 vehicles to improve our service offering to customers and investment in software for routing and delivery planning has improved vehicle utilisation and reduced the fuel used per square metre of carpet delivered.

01

Victoria PLC Environmental, Social and Governance Report 2022

Stock Code: VCP

The table below sets out what we believe to be the key ESG risks for each area of our business along with their priority, it is not intended as an objective measure the Group's risk exposure in each area. The priority of a particular risk to each area of the Group depends on the nature of their operations. For example, soft flooring and ceramic tile manufacturing are very different processes and therefore some risks will naturally be of higher or lower priority to different parts of the Group.

			Business Area
		Soft Flooring	Ceramic Tile
ESG topic area		Manufacturing	Manufacturing	Logistics
	Environmental
Energy management		•	•	•
Carbon Emissions		•	•	•
Waste and Water management		•	•	-
Product lifecycle		•	•	-
Chemicals Management		•	•	-
	Social
Attracting, Developing and Retaining Talent		•	•	•
Diversity & Inclusion		•	•	•
Health Safety and Wellbeing		•	•	•
Responsible Sourcing		•	•	•
Human Rights and Modern Slavery		•	•	•
	Governance
Reporting, Disclosure and Transparency		•	•	•

ESG Risk Priority

• Low Priority    • Medium Priority    • High Priority

www.victoriaplc.com

02

Environmental, Social and

Governance Report

ENVIRONMENT

Managing our energy usage & our Carbon Emissions

We already review our GHG footprint through the Streamlined Energy and Carbon Reporting (SECR) process. This will data has enabled us to identify the areas of our business which produce the most emissions and take significant, direct action to reduce our energy usage and carbon emissions. These activities align the business with the long-term goals of the Paris Agreement to limit global temperature increases in this century to 1.5 degrees Celsius.

Streamlined Energy and Carbon Reporting (SECR)

The section below presents the energy usage and associated carbon dioxide emissions for Victoria Plc global operations. This section has been prepared in compliance to the SECR Framework as implemented in the Companies (Directors' Report) and Limited Liability Partnerships (Energy and Carbon Report) Regulations 2018.

GHG Emission		UK & Europe	UK & Europe
(1st April 2021 to 31st March 2022)	Units	soft flooring	ceramic tiles	Australia	North America	Total
Emissions from combustion of gas (Scope 1)	tCO2e	13,629	232,522	3,084	-	249,234
Emissions from combustion of fuel for transport
purposes (Scope 1)	tCO2e	10,712	2,889	322	-	13,924
Emissions from purchased electricity (Scope 2)	tCO2e	10,760	24,005	5,696	21	40,482
Emissions from business travel in rental cars or
employee-owned vehicles where company is
responsible for purchasing the fuel (Scope 3)		59	18	-	-	77
Total Gross emissions	tCO2e	35,160	259,434	9,102	21	303,717
Energy consumption used to calculate above
emissions	kWh	159,031,444	1,364,436,619	25,085,776	100,451	1,548,654,291

Within the UK, the total Gross emissions for the year were 26,259 tCO2e (previous year 21,842 tCO2e) and total associated energy consumption was 126,414,714 kWh (previous year 103,569,298 kWh).

The intensity ratios have been calculated for the four reporting divisions. These have been calculated from sales volumes for each division and include all energy usage and emissions stated within the above emissions figures and the methodology.

		UK & Europe	UK & Europe
	Units	soft flooring	ceramic tiles	Australia	North America	Total
Intensity Measurement	m2 of sales volume	105,938,357	49,216,413	23,143,346	4,642,262	182,940,376
Intensity Ratios 2021-22	tCO2e/ 1000m2	0.332	4.887	0.393	0.004	1.660
Intensity Ratios 2020-21	tCO2e/ 1000m2	0.299	5.652	0.351	-	1.856

Victoria Plc have followed the 2019 HM Government Environmental Reporting Guidelines and report in alignment with relevant aspects of the GHG Protocol. Emissions factors used are tonnes of CO2 equivalent and data has been calculated using the 2021 UK Government's Conversion Factors for Company Reporting, for all UK electricity and global fuels data. The Australian Government National Greenhouse Accounts Factors, International Energy Agency, Association of Issuing Bodies and the Environmental Protection Agency have been used for all remaining geographical electricity conversion factors for location-based reporting.

03

Victoria PLC Environmental, Social and Governance Report 2022

Stock Code: VCP

Scope 1 emissions relate to on-site gas usage and emissions from Company owned and long-term lease vehicles.

Scope 2 emissions relate to on-site imported electricity usage and CO2e emissions calculated are associated to the generation only and do not include Scope 3 Transmission and Distribution losses.

Scope 3 emissions relate to grey fleet.

Where there is Combined Heat and Power (Cogeneration) plant operated on site, the emissions reported have been associated and calculated from the natural gas input.

The primary source for energy consumption data is supplier invoices and supplier consumption data. The majority of transport usage has been calculated from record of litres used. The remainder of the transport data has been taken from mileage records, some of which have been estimated where records did not exist. Estimated data makes up less than 5% of reported emissions.

The usage and emissions presented align with monthly supplier invoices and are calculated and presented for 1st April 2021 to 31st March 2022. Companies acquired during the financial year have been included from the start of the following month, with the exception of Graniser given it was acquired towards the end of the year. The Graniser emissions have been included in the total Gross emissions but excluded from the intensity metric.

The emissions reporting includes all of Victoria Plc sites globally, this reflects the activities and financial information presented within the financial reporting. There has been no de-minimis applied and all Victoria Plc Companies with a physical presence have been included.

Investing in clean energy

With global energy prices continuing to fluctuate, investing in cleaner, greener and more secure energy, sourced more locally to our operations, has been a key focus across the Group.

Many of our sites have installed solar photovoltaic (PV) panels and wind turbines to generate their own green energy to use on site and sell any excess electricity back to the grid. A number have made the switch to procure their energy from renewable sources, including local wind and solar farms, while some have entered into new contracts to increase the mix of clean energy they use.

In our Spanish and Italian manufacturing operations, we are using the heat from our spray driers to produce electricity from co-generation plants, reducing the need to purchase electricity generated from power stations. At our UK carpet

manufacturing site in Newport, a nearby wind turbine is supplying up to 40% of our electricity needs.

Using green hydrogen in Italy

Our Italian ceramics business aims to use green hydrogen technology to reduce its carbon footprint and use of gas.

A new 25,000m2 plant will generate 16GW of green energy. Together with onsite solar panels and a wind turbine, the business will replace 30% of the site's use of gas with green energy, used to power equipment, including two kilns and two tile dryers. It also means the business will need to purchase fewer GHG emission certificates.

We are also working with the supplier of the hydrogen production plant to find ways to use the oxygen molecules produced by the water electrolysis process in as a catalyst to further abate the carbonic anhydride emitted during the ceramics production process.

By 2030, we expect that improvements to hydrogen technology will enable up to 75% of the plants' energy needs to be met by clean energy, reducing carbon emissions by 35%.

Logistics - Improving our carbon footprint

Moving our products around accounts for a large proportion of our environmental footprint. The fuel we use to run our fleet of trucks represents a significant cost and contributes to the GHG emissions we produce across our Group.

We have made significant investments in recent years to transition our European fleet to be Euro 6 compliant, the latest European standard to reduce pollutants from vehicle exhausts, particularly nitrogen oxide and particulate matter. This has reduced the environmental footprint of our vehicles, particularly in Europe.

In the UK, we have made significant progress in using biodiesel to fuel our trucks. The next cycle of delivery vehicles purchased will use HVO (hydrotreated vegetable oil), a bio-based liquid fuel originating from vegetable oils, such as rapeseed, sunflower and soybean that can be combined with conventional diesel. In addition, our current HGV fleet is able to detect and run on an HVO mix. Therefore, as we move over to using more HVO, we will also be able to adapt our current fleet alongside bringing new vehicles in.

www.victoriaplc.com

04