Managing corporate responsibility

Corporate Responsibility is a fundamental part of our business planning and strategy for growth.

Our CR strategy

Our Steering Wheel or balanced scorecard sets out our priorities for the key elements of our business: Customers, Operations, People, Finance and - since May 2006 - Community.

Our commitments under the Community segment of the Steering Wheel are to be fair, responsible and honest in everything we do and to be a good neighbour. These aims are integrated into the management of our business from decision-making to individual performance appraisals. We measure our success on meeting these challenges. Lucy Neville-Rolfe, Executive Director, Corporate and Legal Affairs is accountable for our CR performance.

To support these objectives, our Community Plans identify projects where additional resource and expertise can make a step change in our CR performance. We stated in last year's review that a key priority over the next two years would be the roll-out of the Community Plan approach to all our international businesses. Eight of our 12 businesses outside the UK had plans for 2007, and in March 2008, Malaysia, China and Japan launched Community Plans for the first time.

The Plans in our international business are based around four themes: climate change; local communities; responsible sourcing; and health and nutrition. They reflect the needs of the local communities that we serve and are also based on customer and stakeholder views. These are collected through our Customer Question Times (CQTs), meetings and surveys as well as other mechanisms. A full list of Community Plan projects for each country can be found online at www.tesco.com/crreview08/community plan

In the UK, we announced six projects for 2008: tackling climate change; waste recycling and packaging; carrier bag use; Community Champions; making our Community Plan live in stores; and trading fairly (labour standards in our supply chain). Each Plan is sponsored by the relevant Board or senior Director. Sir Terry Leahy, our Chief Executive, is the sponsor of our climate change programme. Richard Brasher, our Commercial Director sponsors the projects on waste, recycling and packaging and carrier bag use as well as our new Trading Fairly Plan, which we hope to launch in summer 2008. David Potts, our Retail Director, is the sponsor of our Community Champions plan, building on the trial that has allocated part-time roles in 52 of our stores to strengthening links with the local community and organisations such as schools, charities and sports groups.

As a whole, the Board of Directors reviews our CR strategy twice a year. Our Executive Committee receives regular updates on our CR performance, assesses future CR risks and opportunities and develops our strategy in this area. Line managers are responsible for managing day-to-day operational risks.

We set ourselves demanding targets in each segment of the Steering Wheel and use KPIs to measure our progress. The Board of Directors reviews performance quarterly and the top 2,000 managers in the Company receive a summary report to communicate to their teams. Senior managers receive bonuses on a sliding scale based on performance against the KPIs.

We review our KPIs annually to ensure they are still the most accurate and robust measurements of our performance. As our international business continues to grow, we have defined a new set of KPIs for 2008, which cover the entire Group. These can be found in Key Performance Indicators - 2008.

Corporate governance

We have a responsibility to put in place clear, transparent and effective policies and processes for managing our business responsibly and in accordance with the law.

We aim for the highest standards of behaviour at all levels in our business. This requires visible leadership and a clear framework, and for these to be well communicated so that employees know what is expected of them. Clear accountability is also vital.The Board of Directors has overall responsibility for managing risks to our business and reputation, including those relating to CR.

The Board agrees clear processes for monitoring controls through the Statutory Committees: Audit Committee; Nomination Committee; and Remuneration Committee. In addition, the Executive Committee monitors controls through three key committees: Compliance Committee; Corporate Responsibility Committee; and Finance Committee. These all provide assurance that the business is operating legally, ethically and to approved financial and operational policies. The Committee reports are circulated to the Board, which holds a formal discussion on each at least once a year.

There is more information about the roles, responsibilities and independence of Board members in our Annual Report, and at www.tescoreports.com