Despite the perception that ethical funds are all about wind turbines and fair trade; the reality is that most of the funds are focused on finding regular businesses, doing things well. Nothing could typify this more, than investment in the mainstream retail sector and the example investee company, Dunelm, which is held in the Premier fund.
Dunelm – A case study
Chris Wright, fund manager of the Premier Ethical Fund, regularly reports to the fund’s Independent Ethical Committee on the Corporate Social Responsibility (CSR) policies of the companies in which the Fund invests, and has recently reported on Dunelm, currently a holding in the Fund. Chris has followed the company closely since it floated in 2006.
Dunelm – a case study
The company was set up in 1979 by Bill and Jean Adderley, selling curtains on a Leicester market stall. They opened their first store in 1984, appointed their son, Will, as Chief Executive in 1996, and floated on the London Stock Exchange in 2006.
For a business like this, we believe that there are two areas in particular that should be reviewed when analysing the CSR report. Firstly, and we believe most importantly, their code of conduct with regard to their suppliers and the human rights implications.
The company states: “We do not manufacture our own products therefore we need to maintain relationships with suppliers and manufacturers worldwide who can meet our high standards for design, innovation, quality and value. These suppliers must also demonstrate that they operate in accordance with recognised standards that uphold human rights.
Effectively managing human rights throughout our supply chain is one of our key requirements, and management of this area is built into our product procurement procedures.
We work with our suppliers to ensure that our products are produced in clean and safe environments, that workers are treated with respect and earn a reasonable wage, and that suppliers work within the relevant local laws and regulations. All manufacturers with whom we trade directly are required to sign up to our ‘Code of Conduct’ based on the Ethical Trading Initiative (‘ETI’) base code. No new factory source is taken on without a satisfactory audit being in place, and audits are repeated at least every two years.”
There is a very detailed document relating to their Ethical Code of Conduct on their website (http://www.dunelm.com).
Secondly, as an employer of over 8,000 workers it is also important that they treat their employees with due respect.
The company states: “We maintain regular communication with all colleagues, through store manager ‘huddles’, our Dunelm Gazette magazine which is published at least quarterly, and via the computer-based ‘Dunelm Academy’, to which all colleagues have access. We operate a Colleagues’ Council, through which colleague representatives can raise and discuss ideas and concerns with senior management. These are fed back to the Executive Board for consideration and action. In addition, we run a colleague engagement survey at least annually, the output of which also is fed back to the Executive Board and actions agreed. We offer a range of training and development opportunities to colleagues at all levels of the business. These include:
Nationally accredited modern apprenticeships and NVQs.
Our graduate programme, which leads to an Institute of Leadership and Management qualification.”
The company has been involved with an Employment Tribunal issue about the redundancy of two individuals, which they seem to have partly won, and also been investigated by the Pensions Regulator with regards to late enrolment of employees in the pensions automatic enrolment scheme. According to the Regulator: “Dunelm openly explained to the regulator the difficulties they had experienced and the cause of a number of the issues. The contributory factors were:
The bespoke payroll solution had design flaws resulting in a significant delay in achieving compliance and completing registration. The bespoke payroll solution did not fulfil the Dunelm specification, was ineffective for automatic enrolment and the reporting capability was not fully functional.
Key members of staff involved in the automatic enrolment project, including the points of contact, had ceased employment with Dunelm at critical points in the automatic enrolment timeline, namely just prior to the staging date and just after registration. Data quality issues were experienced when uploading employee information to the pension provider which prevented active membership of the pension scheme being achieved.”
The Regulator also stated: “Throughout this period Dunelm were open, forthcoming and fully cooperative with the regulator in their endeavour to meet their employer duties”. The late payments were made and Dunelm are now fully compliant with their automatic enrolment duties.
Our sense is that the Chief Executive values his reputation which makes us believe that his attempt to create a decent company is genuine, and as such we feel comfortable holding a position within the Premier Ethical Fund portfolio.
Chris Wright, Premier Ethical Fund, Premier Asset Management
The information in this article expresses the opinion of the investment manager as at the date of publication and does not constitute advice. Reference to any particular stock does not constitute a recommendation to buy or sell a stock. Persons who do not have professional experience in matters relating to investments should always speak with a financial adviser before making an investment decision.
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