CO-OPERATIVE GROUP LIMITED

Co-operative Group Limited

Annual Report and Accounts 2022

Co-operating for a Fairer World - Co-op Annual Report & Accounts for 2022

A successful year for our Co-op in which we have continued to deliver for our

members, customers and communities, maintained profitability and significantly

reduced debt levels despite the challenging external environment we have been

operating in.

2022 in brief

•

£11.5bn

Revenue up on FY 2021 (£11.2bn), despite the revenue generated by the Group

from the petrol forecourts being £150m lower as a result of their sale during the year

•

£100m

Underlying operating profit maintained against FY 2021 (£100m), despite energy and

salary inflation of over £100m and profits generated by the Group from the petrol

forecourts being £10m lower as a result of their sale during the year

•

£247m

Group profit before tax* up by £190m on FY 2021 (£57m)

•

£490m

Underlying EBITDA* down by £15m (FY 2021: £505m)

•

£455m

Net cash from operating activities improves by £277m (FY 2021: £178m)

•

Group net debt down to £333m from £920m at 2021 year end

Represents a £587m improvement, driven by disposal of petrol forecourts business,

strong cashflow generation and renewed focus of cost discipline

4.41 million active members in 2022

–

overall growth achieved for the first time in five

years (2021: 4.27 million).

£117m raised for our local communities since 2016, when our Local Community Fund

launched, including £24.6m in 2022.

£12m invested in payments on to colleague membership cards during the cost of living

crisis. Colleague discount extended to 30% on own brand products.

£1m ‘Warm Spaces’ funding boost,

to support local communities navigating rising energy

costs.

We became the first retailer to launch such a project.

New partnership launched with Your Local Pantry, set to see its network triple within

three years from 75 to 225 pantries across the UK.

New colleague fertility treatment policy launched, providing unrestricted paid time off for

colleagues where needed and support for those with partners undergoing fertility

treatment. Menopause policy reviewed and refreshed.

Recipients of both the Queen’s Award for Enterprise for

Sustainable Development and

the Relex Responsible Retailer Award.

Co-operative Group Limited

Annual Report and Accounts 2022

More than 1.5 million people signposted to information, activity and support for mental

wellbeing since 2020, through partnerships with Mind SAMH and Inspire.

Our 2022 Co-

operate Report includes detail on the progressive actions we’re taking to fulfil

our Vision of Co-operating for a Fairer World. To read the report, visit:

www.co-

operative.coop/ethics/sustainability-reporting

* PBT in 2022 includes £319m of profit on the sale of our petrol forecourts in October 2022.

Co-operative Group Limited

Annual Report and Accounts 2022

Co-operating for a Fairer World

We’re a consumer owned co

-operative running an ethically responsible business. Our Vision

‘Co

operating for a Fairer World.’

Every day we champion a better way of doing business for you and your community

offering a range of products and services which create value for our Co-op members and

their communities.

When you spend at Co-op it does good for you, your local community and communities

across the country and around the world.

It’s what we do.

Our Co-op is

the UK’s largest consumer co

-operative, with more than four million active

members and a presence in every postal area in the country.

We’re a major food retailer and wholesaler; we’re the largest funerals services provider in

the UK; a major provider of regulated consumer legal services, particularly probate and wills,

and a major provider of life planning and insurance products.

Our businesses are all UK-based and our main support centre is in Manchester.

Since 1844, the co-operative movement has promoted organisations with a clear social

purpose and our Co-op continues that tradition. A stronger Co-op means stronger

communities; we’re here to create value for our members and the communities in which we

trade and we can only do this by running a successful co-operative business.

How we run our business is important to us. We set ourselves high standards for responsible

retailing and service. And, we have a responsibility to be a campaigning business, speaking

out on the issues that matter to our members.

By offering great products and services we grow our customer base, our membership and

the positive Co-op impact and value we can bring to wider society.

For more information on our responsible business performance in 2022, please see our Co-

operate Report on

www.co-operative.coop

Our Co-op continues to stand apart from other operators in its markets, demonstrating the

power of co-operation and firmly placing democracy and those issues that matter most to

members at the heart of our business. During 2022, our Co-op led the way:

•

We were the first UK reta

iler to remove ‘use by’ dates from own

brand yoghurts and

add ‘freeze me’ storage guidance

to milk, in a bid to reduce food waste at home.

•

As an industry first, we moved all of the South African wine stocked in our range,

across branded and own label, to being 100% Fairtrade.

•

We were the first UK retailer to sell Fairtrade Ecuadorian roses, as well as the UK

’s

first Fairtrade stir fries and own brand Fairtrade olive oil.

•

We introduced and continued the rollout of electric hearses in our funeral business,

and we were one of the first UK funeral directors to trial the fully electric Tesla

hearse.

•

We became the first national funeral provider to launch a new airborne ashes

scattering service, where ashes are scattered by a drone.

•

We were the only UK pet insurance brand to offer a discount on policies for dogs and

cats who had been adopted from a registered pet rehoming charity.

•

We became the first regulated law firm in the UK to offer our services via the Amazon

UK platform, making our services more accessible to more people.

Co-operative Group Limited

Annual Report and Accounts 2022

•

We became the first law firm to partner with the LGBT+ foundation based in

Manchester, providing free wills to their supporters where legacies left in wills

will help support the

charity’s

goals.

Co-operative Group Limited

Annual Report and Accounts 2022

hair’s introduction

“

For us to maintain a lasting Co-op impact we need to be clear in terms of our Vision,

be commercially successful and have the underlying financial strength to face into

whatever short to longer-

term headwinds confront us.”

Against a rather bleak external backdrop, we are pleased to say that our Co-op enters 2023

in a much stronger financial position than it was in a year ago, and has continued to deliver

for our members, customers and communities throughout a challenging 2022. T

hat’s

something we’re very pr

oud of, when we consider the events of the last 12 months and what

we’re

continuing to face into this year.

I wish, in writing this introduction, that we could be living in a world more certain of its future,

more confident in its outlook and with its nations more peaceful and respectful in their

approach to one another

–

alas, we know that isn’t the case.

The tragic war in Ukraine continues to devastate that nation, with its impact reverberating

around the world politically and economically. Our thoughts remain with those affected by

the ongoing conflict, and we join them in hoping for peace to return as soon as possible to

Ukraine.

Closer to home, it was a highly turbulent, unsettling and volatile year for those living in the

UK. The death of Her Majesty The Queen in September marked the passing of our longest

serving monarch. The outpouring of grief, respect and remembrance for a lifetime of service

and devotion to both country and Commonwealth was both deeply moving and richly

deserved.

Her Majesty’s death occurred, as we know, during a period of intense political and economic

upheaval, with three Prime Ministers and four Chancellors coming and going over a matter

of weeks. Soaring inflation and rising interest rates dominated the news agenda and the UK

entered a cost of living crisis not witnessed in decades, from which the country will take

many years to recover.

On behalf of the Board, we would like to thank our CEO Shirine Khoury-Haq, the Operating

Board and wider leadership team and our 57,000 Co-op colleagues for all that has been

achieved, during a highly challenging but ultimately successful year for our group in 2022.

Shirine was appointed as interim CEO in March, taking on the CEO role permanently in

August - she has led through significant changes in our leadership structure and in our

business strategies, ensuring our Co-op remains resilient in the face of a challenging

environment across all of our businesses.

Much has been made of the need for ‘businesses with purpose’ to play more active roles in

helping our country address some of the environmental and societal issues it faces. Our Co-

op has origins that date back to 1844, when the Rochdale Pioneers came together with an

enduring Purpose of championing a better way of doing business, going on to later establish

the original business of purpose, anchored upon our ethical Values and Principles.

There are notable parallels between the world we live in today and the world which prompted

the Rochdale Pioneers to act. Both periods witnessed, and are witnessing, social and

economic inequality as well as gaps in access to nutritious food, education, skills and

opportunity. These are issues which our Co-op has always faced into and will continue to do

so on behalf of our members and their communities.

For us to maintain a lasting Co-op impact, we need to be clear in terms of our Vision, be

commercially successful and have the underlying financial strength to face into whatever

short or longer-term headwinds confront us. Over the past year, Shirine and her team have

brought this clarity to fruition and this report will detail how we have become financially

stronger and commercially sustainable, whilst continuing to deliver on our Vision

Co-operative Group Limited

Annual Report and Accounts 2022

commitments. For the number of active members to increase for the first time in five years,

from 4.27 million to 4.41 million, is a testimony to the increased confidence we hope our

members have in our Co-op, and

the improvements we’re making to the way our businesses

are run, but also the products and services they offer.

In the face of unprecedented levels of inflation, we have taken the tough but necessary

decisions to significantly cut costs to mitigate these headwinds.

We’ve prioritised our capital

expenditure and investments. We’ve streamlined our business processes while at the same

time introducing clear strategies for our Food, Funeralcare, Insurance and Legal Services

businesses. We also successfully sold our petrol forecourts business, allowing us to focus

on our core convenience business. The net result is a Co-op Group which has generated

more cash, with net debt greatly reduced and with the foundations in place for us to grow

more sustainably in the years ahead.

We are of course not immune to the stark realities facing all consumer-led businesses, with

soaring energy and other inflation related costs continuing to weigh heavily on short-term

expenses and operating profits. The actions we have taken already have provided us with

the ability to weather this over the short term and to capitalise more fully over the longer

term.

The Board accepts and understands that ongoing inflation in energy and salary levels will

mean our profits are likely to reduce in 2023, as we face into another year of economic

uncertainty and higher prices, while committing to invest in our colleagues and communities.

The underlying strength of our Co-op provides reasons for optimism and long-term success

when things stabilise.

The next 18 months will see change in our Board as Sir Christopher Kelly, Simon Burke,

Stevie Spring, Paul Chandler and I all reach the maximum nine years of tenure and will step

down at different points during 2023 and early 2024. Our Board remains whole-heartedly

committed to supporting our businesses, colleagues and members as we transition through

this change. We have been carefully planning ahead to ensure orderly succession, but also

the continued momentum of everything we’re proud to see our Co

-op achieving.

Allan Leighton

Chair, The Co-op Group

Co-operative Group Limited

Annual Report and Accounts 2022

Report from the

President of the National Members’ Council

2022 has truly been a year of challenge and change, both for our National Members’ Council

and our Co-op.

I’m proud of how our different way of doing business has supported members, colleagues

and communities through the cost of living crisis, with Council members using the first year

of delivering our Three-Year Plan to align our priorities to key issues and topics whilst

keeping members’ views and our values at the core of decisions and discussion

As part of my role as Council President, I co-ordinate how our National Members Council

considers how we deliver our Vision

of ‘Co

operating for a Fairer World’ during challenging

times and how our Co-op best supports our members, customers, communities and

colleagues as the cost of living crisis continues.

Ahead of the winter months, we hosted our annual Join In Live events and met with nearly

400 members online and in-person for the first time since 2019. These focused on the

launch of our new partnership with Your Local Pantry and asking members to shape how we

work together in communities to provide people with access to food. We got lots of great

ideas and I was honoured to host our London event in Westminster, where I was able to

meet so many local members and hear their ideas about what community and membership

means to them.

In my last report, I mentioned that I was keen to see us develop a thriving, active co-

operative movement and I think that these last 12 months have made this even more

important. We need to work together and find co-operative solutions to the issues that

people from all walks of life are experiencing. Throughout the year, myself and other Council

members attended and spoke at high-profile events, including Co-op Congress and the Co-

operative Retail Conference. In particular, I’ve been considering with fellow co

-operators

how we make membership meaningful. As I entered my second year as President, I felt

empowered by the progress we’d made in bringing members closer to our

Co-op through

opportunities on Join i

n around how they can play their full part in the business they own. It’s

clear that when we talk about our Co-op Difference, people connect with it and want to get

more involved, so I was delighted to hear that Shirine and our Operating Board have been

looking at how we unleash the power of co-operation and take who we are and what we do

to the next level. Shirine will speak more to the Operating Board in her overview.

To support our Co-op with deepening member engagement, our Community & Member

Participation Joint Working Group has been helping to develop our Member Participation

Strategy, so we can create a journey for members from the minute they join Co-op and

create advocates out of our colleagues too. The joint working group has also inputted into

proposals for our new charity partnership with Barnardo’s, which is helping to provide young

people with a better future.

Supporting young people to succeed in life despite the constant adversity their generation is

facing is something I’m really passionate about. I was thrilled to join our Public Affairs &

Campaigns team at the 2022 Labour Party Conference, where we heard from young

activists working with Mind as they led thought-provoking panels on mental health and

wellbeing. Young people are the future in every sense and their passion for making the world

a fairer place is inspiring - we invited some of our young Council members to share their

views during a panel to kick off our February Council meeting, to help us better understand

how we can work with them on the things they care about and appeal to new audiences.

As we get stuck into 2023, I want to say a massive ‘thank you’ to all of our amazing Council

members and our supportive, innovative (and patient!) Council Secretariat team, led by the

Co-operative Group Limited

Annual Report and Accounts 2022

brilliant Kate Brown

. You’ve pushed us into a progressive space in 2022 so that we can be a

modern Council in a modern co-

op. I’m looking forward to seeing where 2023 takes us

the business adapts to new challenges and Council begins a review of its own effectiveness,

to make sure we’re fulfilling our roles meaningfully and supporting each other and the

business in

‘

Co-operating for a Fairer World

’

It’s been

seven years since Council was set up

in its current form, and I’m proud that we’re taking the time to look at how we work and be

honest with ourselves about where we are and where we need to be, so that we can be at

our best as representatives of our member-owners. After all, our members owning our Co-op

is where our difference starts, but its power and impact lies in us all working together and

using our platform and voice to make amazing things happen.

Please read Council’s 2022 Annual Statement on page

131 to find out more about all the

ways you can participate and how we’ve worked for our members over the last 12 months.

Denise Scott-McDonald

President, National Members’ Council

Co-operative Group Limited

Annual Report and Accounts 2022

hief Executive’s overview

I am very glad that we were able to quickly foresee the impact of the economic

upheaval and international events that were to affect our businesses. The pre-emptive

actions we took at pace to address them have stabilised both our short and long-term

future, giving our Co-op a solid platform for growth when market conditions allow.

This is my first annual report as Group Chief Executive for our Co-op and I am honoured to

have been given the opportunity to lead our amazing organisation through a year which has

been fast-paced, challenging, tough and, at times, heart-breaking.

Our Co-op has origins that date back to 1844 and a mission to provide fair, affordable and

ethical access to food and other goods and services, with profits being shared amongst our

members for their benefit and the benefit of their communities.

We were, and remain, the original business with purpose and, in toda

y’s modern world, co

operation and those ethical Principles will continue to remain at the heart of our decision

making.

We’re proud to be a trusted household name and a respected brand

- we touch the lives and

enter the homes of millions of people every day. When our members and customers buy Co-

op products and services, they create value for themselves, for others and for their local

communities.

It’s this value that we use to deliver our

Vision of

‘Co

operating for a Fairer World’

supporting our members, colleagues, communities

and the planet sustainably. That’s what

makes our Co-op unique now and throughout our rich history.

2022 was a truly incredible year across the globe, and one in which our organisation also

saw many changes.

These included leadership changes and the introduction of our Operating Board, a

necessary change to drive our priorities as one Co-op. It brings together our most senior

leaders and decision makers, working together collaboratively on the decisions and actions

we need to take to run our business effectively - and at pace. They ensure that our

members, colleagues and Vision are at the heart of our organisation.

Structural changes to our teams meant we said goodbye to some colleagues, welcomed

new colleagues and, through careful succession planning, provided career progression for

others.

In this report, we welcome Matt Hood and Gill Stewart, our new Managing Directors of our

Food and Funeralcare businesses, and also Peter Batt, new Managing Director of Nisa, to

report on how their businesses performed last year.

While we entered 2022 hoping for a time of calm, after a couple of years of significant

upheaval as a result of Covid, we quickly saw that volatility and significant change instead

were on the cards.

As with practically all businesses across the UK, we saw substantial challenges across our

markets as increased disruption and unpredictability continued to generate pressure.

Consumer habits continued to shift as unprecedented levels of inflation and the cost of living

crisis impacted household budgets.

I am very glad that we were able to foresee the impacts that economic upheaval and

international events would have on our businesses. We have the advantage of being a

member owned organisation and, as such, we were not only able to speak publicly about

these challenges very early on, but we were also able to start addressing them at pace and

engaging our members.

Co-operative Group Limited

Annual Report and Accounts 2022

In March 2022, we set some short-term strategic priorities that would allow us to focus on

what matters most to our members, colleagues, customers and communities, while

protecting our Co-op from external headwinds.

Our focus has been rigorously and unapologetically aligned to these and this is beginning to

show clearly in our performance. This in turn will stabilise the long term future for our Co-op

and all who rely on it, particularly as 2023 is predicted to be another year of increasing

inflation, interest rates and energy costs, as well as possible recession.

These focus areas were:

Ensuring our businesses continue to deliver to our members'

and customers’

expectations in the current climate, and outperform within their respective

markets

Despite the many challenges, our businesses have all traded well, led in their respective

markets, made considerable progress with their individual strategies and yielded many

highlights of 2022.

Our Food business

As we reported at the half year, profitability was partly affected by the

rollout of our new SAP supply chain systems, as we continued to feel the effects of a global

pandemic and supply chain crisis in H1 2022.

Our Technology and Food teams worked incredibly hard together to combat this. By the end

of the year, availability had improved in our Food business

–

94% of products were available

in all our stores on average each day (against our target of 95% for the financial year)

despite continued supply chain challenges.

In Q1, we opened our Biggleswade distribution centre. It's the largest, greenest depot in our

network, with up to 1,000 colleagues, delivering up to two million cases a week to stores up

and down the country.

I also took the decision to review our Food strategy. We needed to identify, focus and invest

only in the areas that played to and capitalised up

on the strength of being the UK’s number

one convenience retailer. And, as in all of our businesses, we needed to find ways to remove

unnecessary costs and increase efficiency.

Our Pure Convenience strategy launched in Q3 with a renewed focus on convenience and

value. Lower pricing on key products, more focused ranging and better targeting what our

customers and members want from our Co-op, combined with our decades of experience in

the convenience market, will enable us to continue to grow our business through four key

routes to market:

Retail, Wholesale, Franchise and Online.

Recognising the challenging retail environment and the cost headwinds we have faced, our

overall retail trading performance was strong, and we have managed to mitigate the

pressures that these would have otherwise placed on our business. Revenue grew (sales for

the full year were £7.8bn (2021: £7.7bn), basket size declined as customer behaviours

shifted and profitability was also affected. Despite this, we continued to broadly maintain

market share (2022: 6.1%, 2021: 6.2%).

Our Wholesale business Nisa saw strong growth in sales of Co-op own brand products, an

increase in profitability and strong partner growth with the addition of over 475 new stores

during 2022.

Funeralcare achieved an important milestone in 2022

, with the creation and FCA

approval of Co-op Funeral Plans Ltd, our regulated business supporting members and

customers through the sales and redemption of funeral plans. Despite many changes and

disruption in the marketplace, due to regulation and competitor activity, we had a positive

Co-operative Group Limited

Annual Report and Accounts 2022

performance and saw an increase in revenue for the year (2022: £271m, 2021: £264m) and

market share (end of 2022: 14.67%, end of 2021: 13.92%).

Contributing factors to this strong performance include marketing investment and activity; a

new all-colleague code, designed by colleagues to improve their experience of working for

our Co-op; and first to market initiatives such as distribution of ashes via drone.

We also said a sad goodbye to our Managing Director Sam Tyrer in October after a long-

planned exit, to pursue a career in a different industry. Former Chief Operating Officer, Gill

Stewart, took up the role to lead our Funeralcare business and teams with a comprehensive

hand over from Sam. Our colleagues continued to work tirelessly to ensure the best possible

experience during such a difficult time for the families that trust us to care for their loved

ones.

In 2022, we supported over 3,000 more families following the loss of a loved one, with an

increase in popularity of lower cost Direct Cremation and Burial funeral options, and a slight

decrease on tailored services, resulting in slight increases in both revenue and operating

profitability.

Our

Legal Services

business outperformed the market and produced outstanding year-on-

year growth with revenue up by 19%, to £46.3m (2021: £39.0m).

Our strategy to enable digital access to our products and enhancing our services led 50% of

all clients to access Legal Services digitally during the year, with client satisfaction across all

channels staying strong at 85%.

We made significant progress in strengthening the growth of our business through major

partnerships, with renewed contracts during 2022 including Newcastle and Saffron Building

Societies and Cancer Research UK, and new partnerships with The Co-operative Bank PLC

and Amazon UK.

Our

Insurance

business continued to develop during 2022 and build on the foundations

created during 2021. Having products which are easily accessible to our members and

customers is key, and we sought innovative ways to bring them to more places where our

members and customers shop. We were one of the first insurers to bring our home

insurance policies to Amazon UK.

Due to the external pressures affecting the insurance market specifically including car sales

at an all-time low, cost of parts and labour increasing with inflation, regulatory changes

impacting policy pricing and a decrease in consumers switching policies at renewal,

performance was mixed.

However, challenges in Motor and Home products were offset by positive performances in

Travel and Pet policies, with our new Pet partnership with Markerstudy doubling the number

of customers holding pet policies with us.

And, of course, our Funeralcare, Legal Services and Insurance businesses continued to

excel as a combined

‘Life Services’

portfolio, helping members and clients navigate life

changing moments. In 2022, our Moving Home Hub continued to develop and support with

buying, selling or moving home by bringing together products, services and information from

our Legal Services and Insurance businesses. Also, our market leading funeral and legal

expertise continued to offer joined up guidance and support bereaved families through their

emotional moments and practical needs.

More detail on each of our businesses can be found on pages 20 - 30 where our Managing

Directors share their updates and reflections on 2022.

Co-operative Group Limited

Annual Report and Accounts 2022

2. Improving operational efficiency

We entered 2022 with a plan which included increasing our operational efficiency. We knew

our costs to operate and serve our members, customers and communities were too high,

and we needed to reduce our capital expenditure and debt.

Everyone in our Co-op has pulled together and worked co-operatively to make this happen.

Our results show that hard work beginning to pay off. Mike Hazell, our Interim Chief

Financial Officer will explain our year end results in more detail in his financial overview.

At times, this has involved taking some very difficult decisions, especially with the

restructuring of many of our teams.

This has meant, though, that we were able to mitigate new headwinds in 2022, while

maintaining our margin and delivering an underlying profit in line with what we achieved in

2021 despite significant increases in operating costs that were driven by external factors.

Also, a

s you’ll see in Mike’s update, we began 2022 with £920m of net debt, reducing to

£731m at the end of H1 2022, and further to £333m at the end of 2022. This is thanks to

trading well, managing our cost base, driving cashflow disciplines, the successful appeal of

the IBM legal claim and the sale of our petrol forecourts.

Sheer determination across our Co-op to reach our cost saving targets of £101m for the year

mitigated significant increases in energy costs and salary inflation, driven by the external

environment, which would otherwise have materially impacted Group profits this year.

It’s a

robust performance in what has been a difficult and disruptive trading year for many

businesses.

I’m very proud that

, thanks to the efforts of everyone in our Co-op, we ended

2022 with a much improved and substantially more stable balance sheet to take us into

2023.

3. Delivering our Vision

–

‘Co

operating for a Fairer World’

Making things Fairer for our Members and Communities, Fairer for our Colleagues and

Fairer for our Planet is always at the heart of everything our Co-op does.

There is much we can be proud of when we look back at 2022.

Through our community programmes and in true co-operation with colleagues, members

and partner organisations, our focus on providing fair access to food, fair access to mental

wellbeing support and fair access to opportunities for young people continued to be relevant

and needed.

We simply couldn’t do this without the support of our members, who, by trading with us and

buying Co-op products and services, generate the value we re-invest in our businesses and

re-distribute to communities and local causes.

In 2022, we celebrated our members generating over £117m for local communities since

2016, when the Local Community Fund launched, followed by the Communities Partnership

Fund in 2020 - £24.6m was raised through the Local Community Fund, Community

Partnerships Fund and Carrier Bag Levy in 2022 alone and, during the year, the Local

Community Fund supported over 4,000 individual community projects.

Our charity partnership with Mind, SAMH and Inspire, after three years of fundraising, hit our

target of £8m (£8.33m) bringing communities together to support mental wellbeing across

the UK. This was a staggering £2.3m more than our original £6m target.

Co-operative Group Limited

Annual Report and Accounts 2022

And we found new routes to support those who found they needed it in 2022. More than

£1.2m was raised for the Ukraine and Pakistan appeals driven by the Disaster Emergency

Committee, which brings together 15 leading UK aid charities.

Our network of Co-op academies grew to 29, providing fairer access to education for young

people with the addition of two new academies in Manchester and Stoke-on-Trent. The Co-

op Academies Trust was also successful in bidding to build a new free school in East Leeds

- Co-op Academy Brierley will open in September 2023.

And in November, our charity, the Co-op Foundation, launched its new five-year strategy,

‘

Building communities of the future together

’, to deliver unrestricted grants in 2023 of up to

£30,000 a year for five years to help organisations develop diverse young leaders of the

future.

We cannot achieve our Vision alone, nor should we aim to. In 2022, our Co-op, our

charitable Foundation and Co-op Academies Trust formed new partnerships which helped

see young people in our schools get access to a healthier breakfast, see families in our

communities gain greater access to affordable food and see the fair distribution of surplus

food through our new platform Caboodle.

here’

s more detail on all of our community support and partnerships in our Vision update.

Despite the challenges and headwinds faced during 2022, we remained true to our Purpose

of championing a better way of doing business. We were honoured that our efforts to

operate our businesses sustainably and for the longevity of our planet were acknowledged

with the Queen’s

Award for Sustainability in April 2022, followed by the Relex Responsible

Retailer Award in July at the 2022 Retail Week Awards.

Our Co-op being involved in and influencing conversations that can drive external decision

making - benefitting our members, customers, colleagues and communities - is a

responsibility we take seriously and that sits within our core principles of co-operation.

During 2022, for the first time in my role as Chief Executive, I had the honour of being

invited

by the World Resources Institute to speak at COP27 about our pioneering water security

partnerships with Water Unite and The One Foundation. Together we have raised over

£20m since 2007, funding critical WASH (water, sanitation and hygiene) and water security

programmes, positively impacting the lives of over 2.9 million people.

I joined the World Wildlife Foundation at their Commitment to Nature Steering Group, and

the British Retail Consortium Climate Action Roadmap Steering Group, as their Chair.

Energy dominated the headlines during 2022 and as the war in Ukraine continued to push

up prices and threaten supplies, with no visible end to the volatility, we joined forces with

other leading retailers to request Government open discussions about the sourcing, security

and investment in renewable energy sources.

Our commitment to our colleagues is to create a truly co-operative, diverse and inclusive

workplace and culture, and to support their wellbeing.

2022 saw our first ever ethnicity pay gap report, the establishment of a new colleague fertility

policy and refreshed menopause policy, offering greater support for colleagues. You can find

more details on pages 37 and 38

and within our Co-operate Report.

We were also proud to maintain our first place Silktide ranking against 11 other UK retailers

for our website accessibility.

Our colleagues were not immune to the increased cost of living. Rising costs were top of the

agenda in every conversation during 2022. In April, we again re-aligned our minimum hourly

Co-operative Group Limited

Annual Report and Accounts 2022

rates to the Real Living Wage for all colleagues including younger colleagues and

apprentices.

We also invested £12m in payments onto colleague membership cards, and we extended

colleague discount to 30% on Co-op own brand products from 20 October until April 2023.

Thank you

2022 was another year of challenges for our Co-op, which our organisation met together and

resiliently. Because of this, it was a year of incredible progress.

None of this would be possible without our members, colleagues and my leadership team.

Our Co-op is owned by our members. As Allan references in his introduction, I am delighted

to have seen an increase in the number of active members choosing to be part of our Co-op.

Every single member makes

our organisation special, however I’m particularly pleased that

as Allan said, we’ve seen new growth

in our active members, for the first time in five years.

I’m grateful

to our National

Members’ Council

- a passionate group of members, including

colleagues and other co-operative societies, totalling 100 people from a variety of

backgrounds. The Council continued to champion the interests of our members across

everything our Co-op does in 2022, inputting into areas including our Pure Convenience

strategy in Food and our Diversity and Inclusion strategy. Their advice on our cost of living

support to members, colleagues and communities proved invaluable.

I thank them for their warm welcome when I took on my role and I look forward to their

continued support and involvement in 2023, as we work together to ensure co-operation and

membership sit firmly alongside delivering our Vision.

My heartfelt thanks and gratitude also go to each and every member, customer and client

who has placed their trust in us over these 12 months by trading with our businesses and

advocating our products and services.

My thanks also go to our amazing 57,000 colleagues, without whom our Co-

op wouldn’t be

where it is today. Words cannot express how grateful I am to them for showing up and giving

their very best each day as we faced the challenges and headwinds of 2022.

I am so proud of them for their hard work, passion and commitment to our organisation,

members, customers and communities, and the care that they show for each other. I am

also so grateful to them for speaking up and telling me both when we have gotten things

right, and also when they think we could do better. Each and every colleague plays their part

in making our Co-op the special place it is and working alongside them is a real honour.

I’m also thankful to my leadership team who have stepped up this

year in the face of

adversity, supporting and embracing the change, challenge and, at times, very difficult

decisions that were necessary for us to affect the future course of our Co-op.

I thank them all for their bravery and commitment, and for their ability to take on new roles

and responsibilities with incredible professionalism while maintaining a sense of perspective

and humour.

One often hears that the CEO job is a lonely one. I can genuinely say that, with my

leadership team, this is absolutely not the case. They are a strong, focused and supportive

group of people that - along with our colleagues, our Board and our Council - make (almost!)

every day working at our Co-op a joy.

All of us, together, truly co-operated for a fairer world during an incredible year. We should

be very proud of what we’ve achieved. Our future is positive, and I’m looking forward to what

2023 brings.

Co-operative Group Limited

Annual Report and Accounts 2022

Shirine Khoury-Haq

CEO, The Co-op Group

Together with th

is report’s

Vision update on page 31, our 2022 Co-operate Report includes

detail on the progressive actions we’re taking to fulfil our Vision of Co

-operating for a

Fairer World. To read the report, visit:

www.co-operative.coop/ethics/sustainability-reporting

Co-operative Group Limited

Annual Report and Accounts 2022

Financial overview

–

from Mike Hazell, Interim Chief Financial Officer

Our headline performance

2022 was a year of significant macro-economic and geopolitical turbulence, translating into

very difficult trading conditions for most businesses including our Co-op.

Our full year financial performance sits against a backdrop of a deep and lasting cost of

living crisis, double digit food inflation, soaring energy costs and continued disruption to

global supply chains from the impact of the war in Ukraine.

Despite this challenging backdrop, our Co-op has had a successful year, delivering a strong

set of results, with a very solid profit performance, strong cashflows and a growing top line.

We have grown our sales, successfully maintained margin and managed our cost base to

mitigate the significant cost inflation on ourselves, our members and our customers. This

was also supported by some difficult decisions, including the restructuring of the team at our

support centre.

There is no avoiding the impact that inflation is having on the profits of most businesses

–

for

our Co-op, energy costs increased by £48m in 2022 compared to 2021, and salary inflation

drove a further £55m of additional cost. Faced with such inflationary pressures, the renewed

cost disciplines we have instilled in 2022 have served us well and we successfully delivered

our targeted cost savings of £101m during the financial year, to mitigate these pressures.

Recognising the difficult time many of our customers and members were experiencing, we

sought wherever possible to protect our customers and absorb inflation. Throughout the

year, we continued to focus on delivering the propositions and value that our customers

need at this difficult time, including £38m of direct reward for our members and their

communities. Importantly, we also sought to support our colleagues through the winter cost

of living crisis with additional one-off support of £12m and by increasing our colleague

discount to 30% on Co-op own brand products from 20 October until April 2023.

This solid financial performance, combined with a focus on balance sheet and cash,

delivered a very strong cashflow position and a step-change reduction in our net debt. Part

of this action included the sale of our petrol forecourts in October (roughly 5% of our Food

store estate) which generated a significant one-off profit and cash proceeds.

Furthermore, through continued focus on cost control, management of working capital and

our measured approach to capital investment, we strengthened our balance sheet

significantly. This means we are well set to ride out the economic storm whilst still being able

to invest in our longer-term future through capital light and commercial opportunities.

Group financial metrics

Revenues

: Group revenue of £11.5bn is 3% higher than last year. We saw increased

inflation but also smaller baskets and more conservative spending, according to our data.

This represents a strong result across our portfolio of businesses in light of the challenging

economic trading conditions. Sales in our main Food business are £134m higher than 2021

even though the comparative period included two more months (or around £150m) of sales

from our petrol forecourts which we sold in October 2022. Like-for-like sales in our core

convenience stores were up 3.2% with downward pressure on consumer spending from the

cost of living crisis being offset by significant food inflation. Sales in our Wholesale,

Funeralcare, Legal Services and Federal businesses are all also up in 2022, on the prior

year.

Profitability:

despite the significant inflationary cost pressures we have faced (particularly

on energy and salaries), our robust sales performance and tight cost control means we have

maintained our 2022 profit levels, broadly in line with 2021 levels at £100m (2021: £100m)

Co-operative Group Limited

Annual Report and Accounts 2022

and underlying EBITDA (earnings before interest, taxes, depreciation and amortisation) of

£490m (2021: £505m). This is commendable given the challenging economic backdrop and

demonstrates how hard all of our Co-op colleagues worked in 2022, driving efficiency

throughout our business and helping shield our members and customers from the worst of

the cost increases. Delivering in this way, despite the unprecedented headwinds, is all the

more impressive when considering that 2021 included two more months of profit (around

£10m) in our Food business from the petrol forecourts we subsequently sold in October

2022.

Full year underlying profit within our Food business fell slightly following the forecourt

disposal, but this has been offset by improvements in our Wholesale, Funeralcare and Legal

Services businesses.

At £5m, our operating profit in 2022 is £59m lower than 2021. Although our underlying

operating profit is comparable to last year, we’ve incurred

£59m more of non-underlying

charges in 2022 compared to 2021. These changes primarily relate to the impairments we

have recorded against some of the assets that we hold to reflect the continued difficult

trading conditions we anticipate going forward as well as other non-recurring items.

At £247m, profit before tax (PBT) is significantly higher than last year (2021: £57m).

Although our operating profit is lower this year (as noted above) we have recorded a gain on

the disposal of our petrol forecourts of £319m which increases our PBT number. This

relative increase is partially offset by the one-off gain of £99m that we recognised in 2021

following the settlement of a long-term liability.

Net Debt:

our net debt reduced by £587m to £333m (2021: £920m). This significant

reduction was generated by the £408m net proceeds from the sale of our petrol forecourts

(excluding lease disposals of £171m), £72m payment following the judgement on the IBM

legal case but also a strong underlying cash performance in the Group, which generated

positive cashflows from continuing operations of £383m.

Further detail on our trading performance and that of our individual businesses can be found

within ‘Our Financial Performance’ section on page

47 with business unit updates over

pages 20 - 30.

Co-operative Group Limited

Annual Report and Accounts 2022

Membership update

The cost of living crisis left our vulnerable members in even more need of the value we

create across our Co-op, but also our support of local causes, safeguarding access to food

and basic amenities across our communities. As economic challenges look set to continue

into 2023, our Co-op took the decision to re-assess our membership offering and what more

could be done for those 4.41 million members who were active over 2022. This is the first

time we have seen this number grow in five years.

As always, we worked closely with our passionate National

Members’ Council in 2022,

collaborating on how we best engage our members, who own our Co-op, and demonstrate

how our Co-op Difference can offer meaningful support, especially during the cost of living

crisis.

Council continued to help develop key initiatives that matter to our members, including the

Warm Spaces funding boost for local community organisations, helping others to navigate

energy costs during winter. It also remains an important touchstone for our Co-

op’s culture,

championing work around diversity and inclusion.

Recruitment and rewards

592,000 new members joined us in 2022, more than 2021 (517,000) and we ended the year

having achieved our target for active members, having also reactivated over 219,000 of our

lapsed members.

And we’re deligh

ted to be attracting younger members

–

more than 45.3% of our new

members are aged 35 and under. This is above the 40.4% target we set ourselves.

In 2022, we shared a bonus digital offer of £3 off a £10 shop with just under 190,000 new

members to welcome them to our Co-op and encourage them to engage with our app.

Specifically, from May, we lowered the price of our lunchtime meal deal to £3.50 for all

members, saving them 50p. More exclusive member deals were made available in 2022

than any other year, including a saving of £5 when members buy three Irresistible wines,

Irresistible crisps at 90p and £1 off pizza.

Seven digital offers were sent to all members to mark the World Cup. Across November and

December, members received a price reduction on

Walkers Sensations and Ben and Jerry’s

ice cream. As a thank you for helping us raise £117m for local communities since 2016 (the

year our Local Community Fund launched), members received an offer of 25% off a Co-op

Irresistible product.

Engaging our members

Our members play a unique role in helping to power our Vision of

‘

Co-operating for a Fairer

World

’. They’ve been able to learn more about their Co

-op and the big issues affecting their

communities, and have helped choose how our funding is used while making sure we focus

on the things that matter most.

They continued to help shape how we deliver our community missions nationally and locally,

as well as the products and services we provide for members. They also added their voices

to many campaigns and actions that helped us make a difference together. In 2022,

members contributed to our Vision through 1.9 million participations and by volunteering

over 116,000 hours of their time to our community, campaigning and co-operative

participation activities.

Co-operative Group Limited

Annual Report and Accounts 2022

To ensure our members’ voice continues to be heard and their insight drives what we do,

members help design new products and services, shape strategies and policies and support

us with campaigning.

Over four dates in October, Co-

op’s Join

In Live events were back online again and also in-

person for the first time since 2019. Hosted by our National Members’ Council, the events

shared performance updates from our businesses and an overview of our Co-

op’s new

community partnership with Your Local Pantry

–

for more information, see page 33. They

also offered opportunities to put questions to Board members, leaders from our Operating

Board and generate conversations around what more could be done to support members,

customers and colleagues through the cost of living crisis, with some members offering to

support Local Pantries.

The events build upon those monthly opportunities to develop products, share thoughts and

ideas and shape plans

that go live on our members’ online

Join In

platform. Our Member

Pioneer team also take our Join In Live events to a local level throughout the year, theming

them on important topics and initiativ

es and inviting members and customers to come along

stores and community spaces. More than 300 ‘Live Local’ events

- led by Member Pioneer

Co-ordinators and attended by thousands of members, customers and local causes - were

focused on Fairtrade, membership and sustainability.

And those successful collaborations with our members shone through in 2022, as further

testimony to the role they play in shaping our business.

•

In September, Crumbs - the gingerbread character available in our Food stores - was

given a skeleton makeover for Halloween, thanks to design winner Lorcan Smith

from North Hykeham in Lincoln.

•

Co-op members played an important role in designing our new Co-op Irresistible

Rosé wine. Based on member feedback during online wine events and a fizz and

rosé masterclass, Co-op Solo Pale Spanish Rosé was developed based on what our

members told us they prefer in terms of wine colour, bottle shape and label

information.

•

Announced in March, our first ever member-inspired ice cream hit Co-op freezers,

after more than 90,000 members shared ideas on flavour combinations in 2022.

Members who had been involved were invited to a special tasting event in

Manchester before 900ml tubs of Raspberry Pavlova ice cream landed in our Food

stores. The ice cream went on to sell more than 285,000 tubs before the end of the

financial year.

To read more about how our Co-op rewards members, including 2p back for every £1 spent

on selected Co-op branded products and services, as well as personalised and exclusive

offers, please see page 60 of our Co-operate Report.

Co-operative Group Limited

Annual Report and Accounts 2022

Business unit updates

Food

–

from Matt Hood, Managing Director, Co-op Food

As with all retail organisations, throughout 2022, we've continued to operate in a challenging

and demanding economic climate. The impact of the pandemic, Brexit and the ongoing war

in Ukraine caused workforce shortages, supply chain constraints and drove a cost of living

crisis, which affected our members, customers, communities and our business, resulting in

changing consumer shopping habits and much more.

Our performance

As we reported for H1 2022, profitability was partly affected by the rollout of our new SAP

supply chain systems, as we continued to feel the effects of a global pandemic and supply

chain crisis.

However, performance in FY2022 overall was strong for our Food business, considering the

significant headwinds in play across our market, including rising energy costs and inflation.

We also stood by our commitment to invest in colleague pay during the year.

Mitigating actions

that we’d already taken

ensured tight cost control with available funds to

navigate cost challenges:

•

Energy initiatives to reduce our energy consumption through dimming lighting in

stores with excess brightness and reducing target temperature in stores from 19

degrees to 17 degrees.

This also helps us be ‘Fairer for our Planet.’

•

Tight prioritisation of spending helped us improve our cashflow.

•

We closed some of our poor-performing stores and took the difficult decision in July

2022 to restructure some of the teams at our support centre in Manchester, as we

faced tough trading conditions down to rising inflation in H1.

Nevertheless, profitability for the full year ended 11% lower than in 2021 (2022: £139m,

2021: £156m), albeit that £10m of this reduction is due to the sale of petrol forecourts in

October.

Sales

for the full year were £7.8bn; representing a slight increase on the previous year

(2021: £7.7bn). Based on our own data (comparing the 2022 average selling price to that of

2021), our food sales (excluding fuel) were heavily impacted by increased cost prices driven

by market wide inflationary pressures, with full year inflation of 5.9%, peaking at 8.9% in

December 2022. In response, to support members, customers and colleagues, £37m was

invested in our prices, across a series of popular products.

Inflationary increases offset lower volumes in the year, with unit volumes down 5.5% on

2021 (2022: 3.7 billion, 2021: 3.9 billion). Corroborated by our own data, customer behaviour

incited

‘smaller’ baskets

across the market, with fewer products per transaction on average

during the year, although frequency of shop did increase.

Product availability in our Food

stores improved in 2022

–

by the end of the year, availability continued to improve from Q4

2021 and 94%

of products were available in all our stores on average each day (against our

target of 95% for the 2022 financial year)

In October, we completed the sale of our 129-site petrol forecourt business to Asda for an

enterprise value of £611m. This represented 5% of our retail estate of 2,564 stores.

Fuel

performance was strong in 2022 with sales £69m higher year-on-year (2022: £571m, 2021:

£502m) despite only operating for 10 months of the year. Trading profit for our petrol station

stores overall was £47m, which was £2m lower than 2021 (2021: £49m).]

Co-operative Group Limited

Annual Report and Accounts 2022

Despite a turbulent year, we ended 2022 with a market share of 6.1% by the end of 2022

(2021: 6.2%) according to data from Kantar Worldpanel.

Margin held up well

overall for the year, with new customer behaviour driving significant

change in three key areas:

1. Cigarettes and tobacco sales

–

as lower margin products

–

were lower overall, as

confirmed by data from IRI.

Our own data shows that customers switching to vapes increased significantly in 2022.

We saw an increase in the number of food to go soft drinks sold in 2022 compared to

2021, where customers shopped more multipack purchases during the pandemic.

In our Wholesale business, Nisa has had a successful 2022, despite these same economic

challenges impacting all retailers. Please see the update from Nisa’s Managing Director,

Peter Batt, for more detail, on page

Key highlights

•

Refreshed strategy

–

Pure Convenience

Over the last few years, we

’

ve continued to invest in our estate, infrastructure and people.

Our focus on convenience has, in turn, powered up our proposition, extending our reach

through our four routes to market

–

Retail, Wholesale, Franchise and Online

–

to get closer

to where people are.

In September 2022, we unveiled our new-look Food strategy with a renewed focus on

convenience and commitment to offer greater value, led by a £37m investment to slash the

price of over one hundred products.

Our refreshed strategy aims to capitalise on the experience we

’

ve gained in the market over

the last decade. We

’

ve grown our business to operate more than 2,400 Co-op stores,

supported by online platforms, built a nationwide franchise business and served almost

5,000 independent convenience stores through our wholesale arm.

•

Product range

In response to the cost of living crisis, we lowered prices on more than 120 Co-op own brand

products from pizza, pasta and burgers to fruit and vegetables, by as much as 36% in 2022,

and

‘

locked

’

these prices into the new year to support our members, customers and

communities who face rising household bills.

Our target shoppers come to us looking for treats, food on the go, inspiration in meals for the

night and to top up their bigger shops.

In the first half of 2022, we began repositioning our fresh, chilled and frozen meals, bringing

them together consistently across all our stores so customers could quickly shop our meal

offers and easily identify our new ones. These changes set the foundations to ensure we

fully complied with the Government

’

s new High in Fat, Sugar and Salt (HFSS) regulation,

which came into force for England-based stores of over 2,000 sqft in October.

We know that creating member and customer value is our key to success, balanced with a

sustainable cost to serve. This requires continued focus on range, investment in value and

price and rewarding our members and customers for their loyalty.

To enable this, in 2022, we began an 18-month range review programme to revamp every

category in our shops to ensure real customer value through our four levers of price,

promotions, range and quality. Through this work, we began looking to balance branded

versus own brand products, improve the distribution of our Honest Value range, improve

packaging and our use of plastics and introduce member-only deals.

Co-operative Group Limited

Annual Report and Accounts 2022

Whilst doing this, we also looked to reduce the number of products in our range, removing

those we know don

’

t matter as much to our members and customers. As well as helping us

to improve overall value perception, work like this allows us to manage our overall cost to

serve our members and customers.

•

Online

We continued to focus on growing our online presence in 2022, supporting efforts to make

shopping quick, easy and convenient for our members and customers. Our aim remains to

be the most convenient home delivery service in the UK, as we continue to innovate to meet

the needs of consumers.

Our online business (including the expansion of our own site offering and our offering

through partners) could reach 81% of the UK population before the end of the

year and revenue grew to be 24% more than we achieved in FY 2021 (2022: £222m, 2021:

£179m). Our online delivery services were available in more than 1,800 individual

Food stores across 859 locations in 2022, with stores acting as micro-distribution hubs in

communities.

By the end of H2, Deliveroo was available in 1,296 stores (1,235 if we exclude our petrol

forecourt sites), and Uber Eats in 1,001 stores. Of all the orders placed through our online

shop (coop.co.uk) in 2022 overall, 64% of transactions came from Co-op members.

A key part of our online strategy in 2022 continued to be the development of our ecommerce

offer, using the competitive advantage of our store footprint to provide fast home deliveries,

click & collect and added services.

Growing market share remains our priority, targeting 30% of the quick convenience market

share (rapid delivery from store to door) within four years

We started to develop plans in

2022 to simplify the online delivery operation for our colleagues, working with our partners to

move all their platforms to our hand-held terminals, meaning everything will be in one place

for our store teams.

•

Distribution

In January, we opened our new Biggleswade depot

–

our largest regional distribution centre

(660,000 sqft). The depot became fully operational in H1 as the most sustainable and

environmentally friendly depot in our network, handling over two million cases of frozen,

ambient and fresh products a week. This depot brought thousands of products closer to

communities across the South and South East. In April, we also began to extend and

enhance our Newhouse distribution centre, as we continued to strengthen our existing

logistics network, ensuring we have suitable distribution facilities to deliver improved

services and access to food conveniently for our communities into the future.

A better way of doing business

’

re committed to supporting British farmers

–

100% of our fresh and frozen meat is

British, and we only use British meat as an ingredient in our products. I

’

m proud that all our

hard work has enabled us to continue to back British farmers when others pulled back in

2022, with our pledge to back British egg producers through a multi-million-pound support

package for producers, on top of the £19m we also pledged to support pig farmers during

the year. By supporting British farming, we believe we can boost the economies of

communities across the UK and ensure the highest animal welfare standards.

In the context of the climate crisis, we recognise that global producers and farmers in our

supply chains are some of the most vulnerable to the shocks of extreme weather and

disease outbreaks, but are without the resources to protect themselves and their livelihoods.

Co-operative Group Limited

Annual Report and Accounts 2022

Our ambition continues to be the achievement of net zero greenhouse gas emissions by

2040, 10 years ahead of international agreements. From products and packaging to power

and pension fund investments, our Climate Plan details how Co-op will reduce the impact of

operations. For more information about our Climate Plan

and how we’re suppo

rting

international communities, see our Co-operate Report.

For more information about our new partnership with Your Local Pantry and how we worked

together on a live stream at Christmas time, see our Vision update

Wholesale

–

from Peter Batt, Managing Director, Nisa Retail

As with the wider Co-op Group, Nisa must remain commercially strong now and in the future,

to continue supporting our customers

’

(or partners

’

) stores, communities and shoppers. To

ensure that, we took some difficult decisions in the financial year including the restructure of

some of our teams, streamlining operations and making cost efficiencies to get Nisa into a

position where we can reinvest in lower prices for our customers and their shoppers.

Our 2022 trading profit was £22m (2021: £9m), representing 1.5% of sales. This figure was

enhanced in 2022 by £4.4m of one-off gains.

Sales in our Wholesale business were 3.8% higher than the prior year at £1,439m (2021:

£1,386m). This represents a solid performance in light of significant inflationary pressures and

tough economic headwinds, impacting consumers and retailers alike. Of that total, sales in our

Nisa business were £1,385m and although retail like-for-like performance was down 2.5%, new

member recruitment remained strong.

The performance and improving profitability of Wholesale demonstrates the underlying

strength of the synergies between Co-op and Nisa. Ensuring the profitability of the business

is important, so that we can continue to invest in Nisa in 2023 and beyond, and pass on

associated benefits to our customers.

Nisa’s sales of Co

-op branded products grew by 12.5% in 2022 to £199m

(2021:

£176.6m) and now represents 20% of total sales, excluding tobacco. In Q4 2022, we made a

significant investment in the pricing of Co-op branded products, to improve the margins our

Nisa partners make but also ensuring retail selling prices remained competitive. Our data for

financial year end 2022 shows just over 91% of Nisa customers were buying Co-op branded

product.

Recruitment throughout 2022 remained strong, with 475 new stores added, with in-year

sales of £66m (£113m annualised). Co-op disposal stores remain key for recruitment

–

recruited 33 more year-on-year (2022: 88, 2021: 55) with total sales at £42m by financial

year end.

Our Co-op is the major shareholder in Federal Retail and Trading Services Limited (FRTS),

which is a joint buying group collectively owned by us and Independent Society Members

(ISMs), which are all retail co-operatives.

The group operates for itself, but also acts as a wholesale to other independent co-

operatives. Revenue for the year was £1,895m (2021: £1,756m).

FRTS continues to be run on a cost recovery basis, meaning the group doesn’t make or

record any profits from these sales. We continue to explore ways to maximise our impact as

independent co-operative societies, in the increasingly competitive markets in which we

operate.

Co-operative Group Limited

Annual Report and Accounts 2022

Funeralcare

–

from Gillian Stewart, Managing Director, Co-op Funeralcare

2022 proved to be a very important year for our business. We achieved consistently high

client satisfaction scores throughout, set up a new business

–

Co-op Funeral Plans Ltd

–

and then achieved Financial Conduct Authority (FCA) approval for that business to sell,

service and redeem funeral plans.

We said goodbye to Sam Tyrer who, almost a year prior, had taken the decision to move on

to her next challenge. I was then honoured to take on the Managing Director role, having

previously been Chief Operating Officer, to continue the delivery of our business strategy.

We also made great progress with the important work we began in 2021, to transform the

culture within Funeralcare and make it a great place to work for everyone.

Business performance

A significant amount of work went into getting ready for funeral plan regulation and we were

very proud to be granted authorisation when the UK’s funeral plan market became regulated

by the FCA on 29 July. We saw a reduction in funeral plan sales in the lead up to this date,

as customers’ confidence in the market overall was impacted pre

-regulation and there were

changes to our distribution channels due to regulation. Our plan sales for the year were

16,774, down from 44,751 in 2021, not least due to exiting some third party distribution

arrangements not permitted under the new legislation.

In preparation, Co-op Funeral Plans Ltd (CFPL) was set up as a new legal entity and we

started to sell funeral plans under the Co-op Funeralcare brand from this entity on 1 May

2022. Our regulatory compliance advisory function was introduced and

over 700 colleagues

became certified to sell, service and redeem funeral plans on 29 July 2022, the day that

CFPL became regulated. We also launched a new digital Halo Plans system, which is a key

part of our core system transformation programme, ensuring our systems and ways of

working are regulatory compliant and future proof.

We continue to be recognised as providing one of the best funeral plans in the market.

We’ve been recognised for the fifth year running as Moneynet’s best funeral plan provider

and awarded Highly Commended in the Best Funeral Plan Provider category by readers of

the Money Pages.

There has been significant change in the wider funeral plan market, with 26 out of 70 players

becoming authorised to sell funeral plans (these 26 players cover 87% of the market). This is

expected to bring greater confidence in the market, now that it is under FCA regulation.

However, in the short term, it has led to some of our competitors ceasing to sell plans or

even falling into insolvency. We have been in active discussions with the FCA throughout

2022 to provide assistance where customers have been affected by this. We were one of the

providers who offered support to those who held plans with providers that are no longer

operating, through the availability of a heavily discounted funeral plan as well as discounted

funerals for some families at their time of need.

The death rate was low in the first few months of 2022, but increased in Q2 and remained at

higher than historical average levels through the rest of the year, with a slight reduction

overall year-on-year, as confirmed by data from the Office of National Statistics. We saw

growth in our share of the market throughout the year, which more than offset the lower

death rate and resulted in higher funeral numbers of 93,867 for 2022 compared to 90,731 in

2021. Clients continued to mention colleague interactions as the primary driver of high

satisfaction scores for their experience.

Throughout 2022, our Direct Cremation and Direct Burial funeral options grew in popularity

with members and clients, making up 11.7% of our funerals (an increase from 7.9% the

previous year), as people continued to choose our unattended, lower cost services, as

Co-operative Group Limited

Annual Report and Accounts 2022

anticipated during the cost of living crisis. Our simpler Essential funeral option stayed at 11%

of our funerals year-on-year. As a result, we saw clients move away from our higher cost,

bespoke Tailored service, which made up 49.3% of our funerals in 2022, down from 51.7%

the previous year.

These factors resulted in revenue of £271m for 2022, which is a marginal increase on the

previous year’s £

264m in 2021.

We increased our investment in marketing activity in 2022, which had positive results. By

focusing more on brand-led messaging in our advertising and the re-introduction of TV into

our media mix, we saw a stronger response and improved return on investment compared to

previous years. We continued to evolve our digital strategy by making our content more

personal and relevant to the recipient’s local community, as well as driving the conversation

around grief and bereavement on a national level through our partnership activity with

publisher Reach and podcast company Acast, developing podcasts which featured guests

including Rev. Richard Coles and Coleen Nolan.

The higher revenue performance was partially offset by this increased marketing spend, and

some inflationary headwinds with the business delivering improved operating profit in 2022

of £16m (vs £12m in 2021).

We’re passionate about giving our clients truly unique and personal ways to remember their

loved ones, so in November we led the market by becoming the first funeral provider to offer

a service where ashes can be scattered by drone. Families now have the option to scatter

their loved one’s ashes

by drone in memorable locations over land or sea. More than a third

(35%) of those who have cremated a loved one in the past five years opted to scatter ashes

in a location of significance.

Partnerships

To enable us to support the growing demand in Direct Cremation services, we welcomed a

new partnership with crematoria provider Westerleigh on 1 August. They’re the leading

developer and operator of crematoria and cemeteries across the UK, as well as having

state-of-the-art systems and processes to give our members and customers an improved

service.

In January, we launched a partnership with Cruse Bereavement Services with the aim of

helping people to talk about death and grief more openly, and empower people in their local

communities to provide everyday bereavement support to those who have experienced loss.

Related YouGov research we carried out showed 54% of UK adults had lost a loved one in

the last five years. Of those who were bereaved, 31% said it impacted their mental health

and 15% were left isolated.

This work continued throughout 2022 and, in October, we re-launched our Co-operate

platform, which helps connect people with events, groups and activities happening in their

local communities. We also updated our online hub to include more useful tips and

information about grief and bereavement.

In November, we joined with Cruse and local MPs to host an event in Parliament highlighting

our ‘Connecting Communities’ partnership and welcom

ing the findings of the UK

Bereavement Commission. We also launched a new podcast in partnership with Cruse

called ‘Let’s Talk About Grief’, with the aim of opening up the conversation about grief and

bereavement.

In November, we welcomed a new partnership with EverWith, the UK’s largest memorial

jewellery company, as we expand the services and support we provide to families beyond

the day of the funeral.

Vision

Co-operative Group Limited

Annual Report and Accounts 2022

As part of our focus on bereavement support within the community, colleagues in our funeral

homes across the country encouraged people to come together and take part in Marie

Curie’s National Day of Reflection on 18 March, as the nation reflected on the second

anniversary of the pandemic.

We also continued to innovate in the way we co-operate for a fairer planet. We invested

further in environmentally friendly and sustainable alternatives, including the use of an

electric fleet, trialling both electric hearses and ambulances. We also began trialling more

eco-friendly funeral options.

Colleagues

Throughout 2022, we continued the work we began last year of looking into our culture. Our

Funeralcare colleagues pioneered the launch of an All Colleague Code, with the purpose of

creating a workplace where everyone feels they belong and has a safe space to work

together. Both the Code and the launch approach have

been positively received and we’re

seeing

the difference it’s making in how

colleagues feel about working in Funeralcare. There

was significant improvement in our annual colleague survey results across engagement,

enjoyment with working for Co-op, empowerment and a decline in those colleagues who

have witnessed or experienced bullying, harassment or discrimination at work since 2021.

We recognise how important our caring and professional colleagues are to our business and

our clients’ experience. They play

a unique and valuable part in their local communities,

where the support they provide goes beyond the day of the funeral. It’s v

ital that our

colleagues feel a sense of belonging at work and that they receive the care and support they

need. We will continue building on the progress we’ve made over this past year, to ensure

Funeralcare is an inclusive, diverse and safe place for everyone.

Co-operative Group Limited

Annual Report and Accounts 2022

Insurance

–

from Charles Offord, Managing Director, Co-op Insurance

2022 saw further development of our insurance business with new partners, products and

distribution channels added. We successfully transferred to new partners for Pet and Travel

insurance and made our Co-op products available in more places where our members and

customers shop. Like Home and Motor insurance, Pet insurance is now available across all

main price comparison sites and Co-op Home insurance is now available through Amazon

UK. In addition to extending our reach, we are also expanding our insurer partnerships to

strengthen pricing and coverage to meet more of our member needs.

We achieved revenue of £24m (2021: £34m) and profit of £8m, after an adjustment of £4m

relating to the accounting treatment of deferred income following the sale of the underwriting

business in 2020 (2021: £15m). This is as expected - our new distribution model continued

to establish itself and

–

since the sale of our underwriting business and as part of the

agreement

–

we continued to process those policies that were owned by our underwriting

business before its sale to Markerstudy, and see, and have seen policies to their end.

Home and Motor insurance products

As with the whole insurance market this year, our performance has been mixed and subject

to external pressures and changes caused by the pandemic, claims cost inflation and

regulatory changes.

According to price comparison website commentators, overall customer demand for Motor

insurance policies reduced by around 7%. This has happened for several reasons.

According to the

Association of British Insurers’ (ABI)

Motor Insurance Premium Tracker,

published in December, car insurance claims inflation went up by 16%, making them just

over £3,000 each on average in the year to Q2 2022. The ABI reference a number of

complex supply chain issues as responsible, as well as the increasing sophistication of

vehicles (leading to more expensive repairs) and rises in the costs of raw materials and

labour.

Despite this, the ABI Tracker shows that the average price paid for motor insurance rose by

a marginal two percent over the year to September 2022.

We also saw new pricing regulations come into effect for Home and Motor insurance from 1

January 2022, which treated loyal customers as favourably as new customers.

During 2022, 50% of consumers were seeing either a decrease or no change at renewal, the

largest proportion since mid-2015. Shopping and switching rates were at their lowest point

since 2009 (when market data collection began) as a result of lower renewal pricing, based

on data from ConsumerIntelligence.com.

Despite these factors, we were still able to deliver 103,388 new Home and Motor Policy

sales.

Although we’ve experienced challenging market conditions, we’ve continued to focus on

improving our customer experience. In 2022, we introduced a new online claims portal which

is already used by just under half of our Motor insurance customers going through a claim.

Throughout 2022, we improved our online Motor insurance journey meaning 9% more users

who start a quote with us are completing their quote compared to 2021,

and we’ve also

improved our quote follow up communications which drove a 60% increase in users visiting

our ‘retrieve quote’ pag

e, year-on-year. These improvements, plus others, make it easier

than ever for members and customers to engage with Co-op Insurance.

These improvements in customer experience were recognised by The Institute of Customer

Service in their UK Customer Satisfaction Index survey. In the insurance sector report, Co-

op Insurance rose to number four across the industry. In addition to this, Co-op Insurance

Co-operative Group Limited

Annual Report and Accounts 2022

was the most improved brand in the year not only within the insurance sector but across all

UK sectors.

Travel, Pet and Life insurance products

These challenges in Motor insurance have been offset by a strong performance from some

of our other products. Travel, Pet and Life insurance have all performed very well in 2022,

with 61,232 new policy sales

By the end of 2022,

we’d refreshed all our insurance products

with an aim to provide better cover, more choice and better prices. We added new features

to help our products meet the needs of our customers and members. This included a

discount on policies for rescue pets and providing cover for older pets who traditionally find it

harder and more expensive to get protection through insurance.

Having focused on our product offering and customer experience for a number of years, in

the second half of 2022 we moved our focus to extending our distribution and maximising

the market leading products we have.

We’re now getting our products to more people,

making insurance easier to buy and offering it in more places.

We also put a renewed focus on our members and communities, and responded to the cost

of living crisis with help for our members and the community causes we support.

Partnerships and distribution

Our new Pet insurance partnership with Markerstudy has gone from strength to strength

since the new proposition was launched at the start of the year. Customer feedback has

been positive, and this has been reflected in the sales of the products, with customers

holding a Co-op Pet insurance product doubling in the space of 12 months.

Our new partnership with AllClear for Travel insurance has been very well received by

customers. Their ability to support our ‘any age, any condition’ proposition, and also

enhance this with the Doctor Anywhere online support, has led to industry recognition and

consumer champion Which? nominating Co-op Travel insurance as one of their

recommended providers.

At the end of the year, we announced that Co-op Home insurance was to be one of only

three home insurance products offered through the new Amazon UK insurance store. This

will ensure our Co-op Home insurance products are in front of millions more potential

members and customers, in a way that suits them.

The increasing use of online platforms to distribute products will be a future development of

our strategy to make it easy for members and customers to access our Co-op products.

Members and communities

In July, we launched our Motor insurance campaign, offering both new and renewing

members £50 to spend on their Co-op membership card when they took out a policy directly

with us. We ensured this applied to new members so more people could take advantage,

while supporting the further growth of Co-

op’s

membership base. Given the economic

climate and cost of living crisis in the UK, we wanted to make sure our communities also

benefited, so for each policy sold we also gave £5 to local causes.

By the time the offer came to an end in December 2022, we had shared £1.3m with

individual members and raised over £130,000 for Co-

op’s Local

Community Fund. To read

more about the performance of our Local Community Fund, please see our Vision update on

page 31.

Co-operative Group Limited

Annual Report and Accounts 2022

Legal Services -

from Caoilionn Hurley, Managing Director, Co-op Legal Services

2022 has been a strong year for our Legal Services business - in the context of challenges

and economic uncertainty, we’ve continued to grow our business. Revenue increased by

19% year-on-year to £46.3m (2021: £39.0m), and our underlying profit increased 60% to

£8m (2021: £5m).

The majority of our growth came from the largest part of our business: probate. Our market

leading business experienced huge growth, taking on 24% more cases than in 2021, leading

to revenues increasing by 28% year-on-year.

Our Estate Planning business had a very strong second half to the year, resulting in a 9%

increase in revenue in 2022.

Our strategy of increased digitalisation and accessibility, growing and maintaining strong

partnerships and our unique customer journeys has supported our growth this year and led

to continued high performance for our clients. Our colleagues have been key in supporting

this growth and our work in the charity sector is demonstrating our difference as a legal

business.

Digital and accessible services

•

Our continued work in the digital space contributed to our success as 50% of our

clients came to us through one of our digital channels this financial year.

•

We focused on enhancing our existing digital tools in 2022, which clients can use to

help them quickly and easily access our services or legal information. We launched a

new and improved digital wills service, which led to improved conversion rates, leads

and a better customer booking journey. We also improved some of our internal

systems and processes to create efficiencies in how we manage consultant time and

workload.

•

As we develop digital tools, and improve the systems we use internally, it’s a priorit

that they’re accessible for everyone. Our aim is to help people use and understand

the law and provide routes to our services that work for each client.

•

We regularly check our website’s accessibility as well as organising live user testing.

We’ve used th

is information to improve our Lighthouse accessibility metrics to a

market leading position, often reaching a perfect score of 100% in 2022.

Partnerships

•

Our partnerships strategy continued to grow in 2022. We secured new long-term

contracts with M&G, Newcastle Building Society, Saffron Building Society and

Cancer Research UK , who will continue to refer their customers to us for estate

planning services.

•

We closed the year signing contracts with two new partners. We have partnered with

The Co-operative Bank PLC for probate and estate planning. We have also signed

an agreement with Amazon UK for our digital wills to be sold through their platform.

We are the first legal firm to work with Amazon UK and this arrangement fits with our

strategy of making legal services more affordable and accessible, bringing our

services to new groups of customers in a way that works for them.

Client Service

No matter if clients come to us digitally, through a partner or a more traditional route, we

want to give a great customer experience. We’re delighted that our customer service scores

stayed strong, and our customer satisfaction score for 2022 is 85% (2021

: 86%). We’re also

really proud of our Trustpilot scores, which improved to 4.8 stars in 2022 (2021: 4.7 stars).

Co-operative Group Limited

Annual Report and Accounts 2022

Supporting our growth through recruitment and D&I

•

Our colleagues are key to supporting and delivering our strategy and, as we grow as

a business, our recruitment approach and colleague numbers need to grow too. We

continued to give opportunities for legal careers to a wider range of candidates from

diverse backgrounds.

•

We’ve continued to hone and develop our essential criteria and assessm

ent for

recruitment in 2022 which has helped us recruit 347 colleagues (this is 45% up

compared to 2021.)

•

In 2022, our new hires identifying as disabled went up from 5.4% between Jan

–

Oct

2021 to 13% in 2022. We also saw an increase in colleagues identifying as being

from an ethnic minority. In 2022, a total 25% of our new colleagues identified as

being from an ethnic minority background. We’ve seen this increasing throughout the

year from 19% in Q1 of 2022.

•

Inclusion training for line managers, the review of role profiles and recruitment criteria

as well as improvements to the training we're able to give less experienced

colleagues have all contributed to these increases.

Charity and community

•

In 2022, we continued to play a strong role in the charity wills space. Our Estate

planning team wrote 2,903 charity wills in 2022 (2021: 2,463), whilst pledges in wills

written totalled an estimated £51m in 2022.

Co-operative Group Limited

Annual Report and Accounts 2022

Vision update: Co-operating for a Fairer World

2022 proved to be an incredibly challenging year for our business, but also those depending

upon our Co-op, who remain at the very heart of our

‘

Co-operating for a Fairer World

’

Vision.

When the V

ision was introduced a few years ago, we couldn’t have

anticipated how it would

be tested in years to come -

we’ve seen it become increasingly relevant to our members and

communities, our colleagues and our planet, all of which endured so much over the 12

months.

This has included the fallout from the war in Ukraine, which has affected energy security and

the UK economy, through inflation and the availability of key goods. By the end of the year,

the UK was facing the biggest fall in living standards since the 1920s, with members and

colleagues anticipating headwinds for the short and long term, including increases in the

price of food and fuel, but also fewer affordable mortgages and pension funds stretched to

their limits.

‘

Co-operating for a Fairer World

’

allowed our Co-op to take important strides in tackling

hardships and injustices, while also taking up new opportunities to improve the wellbeing

and prospects of others. This year, our focus remained steadfastly upon making things

Fairer for our Members and Communities, Fairer for our Colleagues and Fairer for our

Planet.

Sharing with our members and communities

Our community plan has three interconnecting missions to support programmes developed

to bring about meaningful change in local communities. These are:

•

Fair access to food.

•

Fair access to mental wellbeing support.

•

Fair access to opportunities for young people.

Raising funds

At a time where the finances of our members and their communities had been so sorely

tested, in 2022 our Co-op celebrated raising £117m for local communities, since 2016. This

amount has been generated when members buy selected Co-op branded products and

services, with 2p in every pound spent split between supporting:

•

Our Local Community Fund, helping thousands of local community causes. 2016

marks the year that this fund launched.

•

Our Community Partnerships Fund, creating targeted partnerships and resources to

support vulnerable local communities across the UK.

Our Local Community Fund is at the heart of our Co-

op’s support for the communities that

we serve, bringing to life the co-operative principle of concern for community at a genuinely

local level. Co-op colleagues who live and work in communities across the UK, led by our

Member Pioneers, play a key role in determining which projects will best meet the needs of

their communities, while members chose to support a cause that matters to them more than

one million times during 2022.

Our Local Community Fund supported over 4,000 community projects in 2022, offering a

share of £12.4m, providing critical support during a challenging year.

•

More than half of causes (53%) confirmed that the funding allowed them to develop

new or improved partnerships with other local organisations

Co-operative Group Limited

Annual Report and Accounts 2022

•

Co-

op’s support was seen to assist

43% of causes with mobilising volunteer support

from their local communities.

•

More than 47% of causes reported that their project, funded by Co-op, had helped

them obtain further funding for their organisation.

We also secured a new partnership; o

ur relationship with Crowdfunder’s funding website

allows those same local causes the chance to benefit from match funding and unlock

additional support.

July saw the culmination of three years of fundraising across our Co-op on behalf of our

charity partners Mind, SAMH (Scottish Association for Mental Health) and Inspire

–

three

organisations well known for their work supporting mental wellbeing across the UK. After

setting an initial fundraising target of £6m, our members, colleagues and customers raised

£8.3m for these three causes in total. The money raised helped to launch more than 50 new

mental wellbeing services in local communities across the UK, supporting over 22,000

people in 2022.

82% of service users said that they felt their mental wellbeing had improved

as a result, and that they were better able to cope with the challenges they faced.

And as well as continuing to meet long-standing fundraising targets like these, our Co-op

also found new and pragmatic routes to responding to the cost of living and its effects upon

communities over 2022.

•

Our Co-op pledged £19m in support of UK pig farmers, following our move to delist

imported bacon from Food stores more than five years ago. Matt Hood, the new

Managing Director for our Food business, encouraged other retailers to help the

sector tackle high feed costs, exacerbated by the conflict in Ukraine and leading

farming communities to suffer significant losses.

•

Co-

op became the first retailer to launch a £1m ‘Warm Spaces’ funding boost, to

provide urgent support to local community organisations across the UK, as they help

communities navigate rising energy costs during the cold winter months.

Funds

raised by Co-op members supported local groups in providing warm spaces for

people to use over the coldest months, through its partnership with Crowdfunder.

Eligible groups who were already offering a warm space, but wanting to increase

opening times or extend existing services or activities during the winter, could also

apply for match funding.

•

Co-op was a founding member of the Disaster & Emergency Committee, when it was

originally established. More than £1.2m was raised between members, colleagues

and customers in 2022 for their appeal in response to the devastating events in

Ukraine and Pakistan. In addition, the decision was made to remove Russian-made

vodka from sale in our Food stores, and introduce Chernigivske Ukrainian Lager on

to shelves in April, to support a business seeking safety and security for its

employees.

And in December 2022, Nisa's Making a Difference Locally charity, which enables retailers

to support good causes in their local community, reached £15m. The milestone amount has

been raised for communities across the UK since the registered charity's formation in 2008,

with more than £1.1m raised through the sale of Co-op brand products during its last

financial year (July 2021 - June 2022).

Key partnerships and our Community Missions

Over the course of this year, we continued to focus upon our three Community Missions,

ensuring long-term ambitions while making an immediate difference where needed, as

communities still felt the effects of the pandemic and faced into a cost of living crisis. In

2022, we were able to put in place major new partnerships which greatly enhanced our

efforts and impact in these three key areas.

Co-operative Group Limited

Annual Report and Accounts 2022

•

Fair access to food

We continued to deliver on our commitment with Hubbub to help its community fridge

network expand to 500 locations by the summer of 2023, meaning it could distribute millions

more meals than the original 100 locations when our partnership first began. Community

fridges continue to offer more than just food - they were developed to bring people together

to build skills, improve their mental wellbeing and increase their resilience. By the end of

2022,

we’d i

dentified 350 fridge locations.

And in September, we announced our significant new partnership with Your Local Pantry,

intended to help improve household finances, while bringing people together around food.

The partnership will see Your Local Pantry network triple within three years from 75 to 225

pantries across the UK, with the addition of 150 new pantries, expected to see almost

650,000 visits by July 2025. The partnership will focus on communities where additional food

solutions will make a significant difference to the cost of living. The first 20 Your Local Pantry

locations had been identified, as part of the partnership, by the end of 2022.

Each location is run by uniformed staff and volunteers who manage the pantries. Pantries

are open to all and work like any other grocery store, in that Your Local Pantry members -

who pay a nominal subscription each week - choose the food from the shelves.

Members save, on average, £15 per shop and around £1,000 or more a year on shopping

bills. Overall, the new locations are forecast to help Your Local Pantry members up and

down the UK save an estimated £5m a year when fully operational.

Instead of a traditional Christmas TV commercial, with the potential to cost millions of

pounds, our Co-op chose instead to spotlight Your Local Pantry, partnering with TV chef and

rapper Big Zuu on a livestream across the country, from one of its locations in Peckham. The

event included demonstrations around simple and nutritious recipes for only a few pounds,

as well as an opportunity to meet Your Local Pantry volunteers and its members, who are

working to help their community grow and thrive.

As part of our access to food mission, at our May Annual General Meeting, we announced

Caboodle: a new digital platform built to help reduce food waste between founding partners

Co-op and Microsoft, with technology consultancy BJSS and TeamITG.

The not-for-profit initiative enables supermarkets, cafés and restaurants to connect with

community groups and volunteers and redistribute surplus food. Its ambition is the creation

of a single place where food retailers and businesses across the hospitality sector can

connect with volunteers and community groups in every city, town and village in the UK,

helping to share food when and where it is needed.

Initially trialled in Co-op Food stores in Northern Ireland, Milton Keynes and London, the

platform went live across 2,500 Co-op Food stores in July and supported a total 14%

increase in the amount of surplus food redistributed to local community groups by our stores,

year-on-year. More than 6,500 tonnes was shared in 2022, compared to under 5,800 tonnes

in 2021.

News of Caboodle was publicly supported by WRAP

–

a climate action non-governmental

organisation - which acknowledged its potential to curb food waste and redistribute to those

who needed it. It has also been utilised by Co-

op’s partner Hubbub.

•

Fair access to mental wellbeing support

As well as our ongoing support for Mind, SAMH and Inspire, teams across our Co-op

invested time throughout 2022 and actively participated in key mental wellbeing initiatives

intended to make a real difference in communities.

Co-operative Group Limited

Annual Report and Accounts 2022

On Time to Talk Day, we partnered with Mind, SAMH, Inspire and Rethink Mental Illness on

the nation’s biggest conversation around mental health, encouraging nearly

two million

conversations to take place, both inside and outside of our Co-op. Senior leaders from our

Manchester support centre spent time with Paul Farmer, the CEO of Mind, and local

organisations to encourage conversations around greater support and open dialogues on

mental health between families, friends, others within our communities and our colleagues.

Alongside this, more than 1.5 million people have been signposted to information, activity

and support for mental wellbeing since 2020. This includes through our online community

centre Co-operate (developed to bring people together to make good things happen in

communities -

coop.co.uk/co-operate)

, our Member Pioneers and Funeralcare business.

To further encourage openness and support, we began the year with a new partnership with

Cruse Bereavement Support, brought about to help people discuss grief more openly. The

initiative sought to empower mutual support across communities, to best help those who

might have experienced a bereavement. Bite-size resources were developed to help signs of

grief be identified, understood and normalised, and further signposts to support were made

available. Over 13,000 people accessed new bereavement resources on Co-operate in

2022.

In addition, our agriculture and fisheries team worked with the Farm Safety Foundations to

undertake important training to better understand mental health, in particular the challenges

felt in rural communities, and garner new ideas on how they could best support these

groups.

•

Fair access to opportunities for young people

The impact of the pandemic and the cost of living crisis upon young people will be felt for

years to come. Working with external partners has been key, enabling our Co-op to provide

sustainable solutions to support those young people whose communities and prospects

have been so badly affected.

The Peer Action Collective (PAC), which we launched alongside the Youth Endowment Fund

and #iwill Fund, is rooted in our Vision of

‘

Co-operating for a Fairer World

’

and co-operative

Values. The PAC provides 10-25 year-olds with a voice and the opportunity to make their

own communities safer and fairer places.

The £5.2m youth-led programme

–

£1.6m of which is funded by our members through their

contribution to the Community Partnerships Fund

–

supported more than 6,000 young

people across England and Wales in 2022, including 4,588 young people being heard as

research participants, 1,310 young people taking social action as change makers and 169

people in paid employment as peer researchers.

In July, a new partnership between Co-op and UK Youth was developed in support of young

people in Scotland and Northern Ireland making a difference through social action in local

communities as part of the #iwill movement. The #iwill movement is a collaboration of over

1,000 organisations and 700 young #iwill ambassadors & champions from across the UK,

supported by charities UK Youth and Volunteering Matters. The £250,000 investment from

Co-op (again, funded by Co-op members through the

Co-op Community Partnerships Fund

)

has been used to recruit, train and support new #iwill ambassadors across the nations. The

10-25 year-olds will work together to make a difference in their communities through social

action.

Co-op Academies Trust

Our focus on young people continues with our growing network of 29 academies across the

North, supporting our ambition to provide fair access to education. In 2022, Co-op

Co-operative Group Limited

Annual Report and Accounts 2022

Academies Trust added two new schools; it welcomed Co-op Academy New Islington in

Manchester and Co-op Academy Glebe in Stoke-on-Trent, both Ofsted rated Outstanding

primary schools. The Trust was also awarded a new free school by Leeds City Council, and

will be officially opening Co-op Academy Brierley in September 2023. T

his will be the Trust’s

third special school for children with additional needs and its first through school, supporting

children from the ages of 4-18.

Our network of schools remain an important part of our Co-op and to all within our group,

who share our

‘

Co-operating for a Fairer World

’

Vision. In 2022, the Trust worked to ensure

that every student (more than 18,500 of them) had access to a healthy nutritious breakfast

before school. A newly-established and ongoing partnership between Co-op Food and

Kel

logg’s s

ees

cereal sales contribute towards the Trust’s breakfast clubs. All Co

-op

Academies began to offer a breakfast club,

and a free breakfast to ‘Pupil Premium Students’

who are students from low income households or have considerable disadvantages to their

peers.

In May, our LGBTQ+ Respect colleague network hosted a conference for Academy libraries,

in support of greater representation of diversity across books in our schools and, over the

summer, all colleagues were invited to donate their favourite non-fiction, fiction books and

magazines to be enjoyed by our students.

Following its success in 2021, our Co-op relaunched its virtual work experience programme

for its Year 9 Academy students, engaging over 2,500 young people, helping them to reduce

barriers to the best possible work experience opportunities, while they developed key

employability skills through interactive sessions.

Co-op Foundation

Also supporting young people and communities in 2022 was our charity, the Co-op

Foundation, which marked the year by launching its new five-year strategy:

‘

Building

communities of the future together

’. This strategy was co

-created with Foundation

colleagues, funded partners and our Co-op. It is led by a vision of future, fair co-operative

communities shaped by almost 100 diverse young people, including Co-op colleagues,

members and Academy students. See

www.coopfoundation.org.uk

for more information.

The first round of funding from this new strategy is the £1.5m Future Communities Fund.

This was launched in November, to

deliver unrestricted grants of up to £30,000 a year for

five years to help organisations develop diverse young leaders of the future. Grants will be

awarded in 2023, led by a ‘Future Communities Collective’ of 10 diverse young people

working alongside the Foundation.

In addition to developing its new strategy, the Foundation also built partnerships and

awarded grants all over the UK in 2022.

In June, the Foundation announced a new match-funding partnership with the UK-based

Astra Foundation to continue its work tackling youth loneliness. Funding included a £450,000

grant to UK Youth and Youth Focus: North East to help upskill youth workers to better

identify and tackle loneliness. This is an example of how the Co-op Foundation can leverage

money from other funders to increase its impact and make Co-op member donations go

further.

Over the summer of 2022, the Foundation also awarded £1.4m of grants from its Carbon

Innovation Fund partnership with Co-op Food

to help reduce carbon emissions in food and

farming; a £250k two-year grant to Refugee Action; and £1.2m of follow-on funding for 37

current #iwill Fund partners to build on their social action projects with young people.

Co-operative Group Limited

Annual Report and Accounts 2022

Co-op Foundation finished the year by putting young people in charge again. It launched

year four of its annual Lonely Not Alone campaign to tackle the stigma of youth loneliness

and signed the Power of Youth charter, committing to give young people a chance to shape

their future.

Working with others

During the first half of 2022, our Co-op worked closely with the Purpose Coalition throughout

H1, to evaluate the impact of our work. This independent body, led by the Right Honourable

Justine Greening,

prepared a ‘This is Purpose’ report

, focused on our Co-op, which was

published and presented to the House of Commons in July. The report considered our Co-

op, its missions and what more we can do for our communities, as well as the partnerships

we can create that will make a difference. Along with many other ideas in many other areas,

it also provided brilliant ideas to build on our flourishing programme of activity for greater

social mobility, and for the greater education and employment of young people. We

continued to work with Justine and her team through 2022, developing our plans to act on

her recommendations.

In 2022, Cooplevyshare.co.uk

–

built for employers to come together, create opportunities

and support apprenticeships for individuals from under-represented socio-economic groups

–

exceeded the initial three-year target of £15m we set when it launched in 2021.

Since its inception and before the end of the financial year, the service reached 54 donating

employers and 138 receiving organisations, detailing potential apprenticeships. 1,397

matched apprentice opportunities have been confirmed over this time, to a value of £14m.

And towards the end of the year, we were

named one of the UK’s leading employers in the

Social Mobility Index, which recognises employer-led social mobility and is developed by the

Social Mobility Foundation. In 2022, we were one of just 12 businesses asked to join the

Social Mobility Commission

’s Employer Advisory Group, put in place to drive social mobility

in the workplace in the UK.

•

Beyond the cheque

Underpinning all of our exceptional community achievements continues to be our Member

Pioneers

–

we simply couldn’t

have achieved what we have without their hard work in our

communities across the UK, connecting members, colleagues and local causes; helping

them during a difficult 2022.

Our 1,000 Member Pioneers and Member Pioneer Co-ordinators invested over 116,000

hours in our UK communities over the year and engaged with an average of 51,000 people a

month, reaching more than seven million through their social media channels. They played a

critical role in activating campaigns, initiatives and national partnerships.

During 2022, they delivered more than 300 Live Local events, reaching those in our

communities and colleagues alike with important messages, ideas and opportunities to

participate. Themes ranged from Fairtrade to sustainability, and highlighted activity such as

the launch of our soft plastic recycling.

For more information, or to get involved, visit

www.communityspirit.co.uk

or, to find your

nearest Member Pioneer Co-ordinator, visit

www.coop.co.uk

Our 2022 Co-

operate Report includes detail on the progressive actions we’re taking to fulfil

our Vision of Co-operating for a Fairer World, including our support of Fairtrade and

international communities. To read the report, visit:

www.co-

operative.coop/ethics/sustainability-reporting

Colleague policies

Co-operative Group Limited

Annual Report and Accounts 2022

Our colleagues have endured those same hardships as our members and communities, and

we took the opportunity during 2022 to review and reassess key colleague policies, and their

suitability for those dependent upon on them.

•

Our leaders worked to shift perceptions at Co-op, and fundamentally change our culture

when it came to menopause, challenging the stigma tha

t it is a ‘women’s issue’ when it

should be considered a workplace issue, requiring the support of affected colleagues’

whole teams.

After being one of the first retailers to launch a menopause policy back in 2019, we

took the opportunity to refresh the policy in April, which included the introduction of a

menopause support guide for all 4,500 managers across Food stores, funeral homes

and our Legal Services and Insurance businesses.

A related guide was also made available to other employers for free, as part of an

attempt to break the taboo of menopause in UK workplaces more widely. Developed

in partnership with USDAW and Unite, as well as Co-op colleague networks, the

guide is designed to help achieve a greater understanding of

the menopause’s

impact and the supportive role our managers can play. Our Aspire colleague network

- a network of Co-op volunteers that advocate and co-operate for a fairer world for all

colleagues who identify as women - also continued to hold regular menopause coffee

mornings throughout 2022

. The sessions remain a safe space for colleagues to

share their experiences and hear from related experts.

•

Coinciding with National Fertility Week, a new colleague fertility treatment policy was

launched in October.

The policy, as part of our commitment to create a truly inclusive workplace and

deliver a fairer world for colleagues, provides flexible unrestricted paid time off for

colleagues to attend medical appointments while undergoing fertility treatment,

including colleagues using a surrogate.

Importantly it also recognises the need for paid time off for those colleagues whose

partners are undergoing fertility treatment, to enable them to provide support through

treatment, regardless of how long they have worked for Co-op or the number of

hours they work.

Endorsed by charities Fertility Matters at Work and Surrogacy UK, the enhanced

policy provides a range of flexible support, including a section which covers embryo

transfer and pregnancy rights specifically. It also outlines access to counselling and

wellbeing support, through partners Lifework and YuDoctor.

Even greater inclusivity for colleagues

2022 saw some important initiatives to make working within our Co-op even more achievable

and accessible, especially to those from disadvantaged or diverse backgrounds.

•

In February, Co-op Legal Services announced five new apprenticeships for students

wishing to pursue a career in law, meaning candidates did not need to complete a

university law degree

–

potentially saving them each over £36,000 in tuition fees.

The apprentice solicitor roles were open to students who had achieved three A-levels

and five GCSEs, with the role undertaken over a six year period at which point

candidates would qualify as solicitors, which goes beyond the outcome of a

traditional law degree. Sitting within Co-

op Legal Services’ team of experts, roles are

fully salaried and rise in line with career progression over the course of the 72-month

period.

Co-operative Group Limited

Annual Report and Accounts 2022

•

In May, leaders were provided with new recruitment resources, to support hiring

processes and considerations to aid the development of a more diverse culture at our

Co-

op.

Beyond recruitment and to support a more inclusive culture for those colleagues already part

of our Co-op:

•

2022 saw us share our first ever ethnicity pay gap with colleagues and wider

audiences, revealing the difference in pay between those who identify as being from

ethnic minority backgrounds within our group, and white colleagues.

The report, published in June, was designed to bring greater transparency and

challenge our ways of working in a similar way to the Gender Pay Gap Report, but

with more intersectional insight that our Co-op could use. It has been shared with

parliamentary and political stakeholders as part of our social mobility campaign

where we are suggesting that this reporting should be mandatory.

It’s available to

read here:

www.co-operative.coop/ethics/ethnicity-pay-gap-report

•

Access to important new resources was made available to our colleagues, to support

greater inclusivity across our Co-op.

We shared an information pack ahead of International Non-Binary Day (14

July) with colleagues, explaining the event’s significance

and the best ways to

role-

model inclusive behaviours and bring our ambition for ‘endless inclusion’

to life.

Packs were also available for International Women’s Day in March and

programmes of events, activities and resources were shared with our

colleagues in support of South Asian Heritage Month, Black History Month

and other dates of significance.

In November, a new disability inclusion module was launched with the

support of our Represent network for line managers and colleagues, aligned

with Disability History Month. It includes insight from colleagues living with

disabilities, helps line managers learn how they can better support disabled

colleagues and offers signposts to those working to unlock their potential and

thrive at work. Represent

also placed within The Shaw Trust’s Disability

Power 100 in 2022, which celebrates Britain’s most influential disabled people

and organisations.

Namratta Bedi, co-chair of Rise, our colleague network for ethnic minority,

hosted

the network’s

first Vaisakhi session in April, raising awareness and

discussing how the festival is celebrated for different reasons by different

faiths and cultures. This day also marks the founding of the Sikhism faith by

Guru Gobind Singhji in 1699. A related live cooking session with Co-op chef

Ed Fraser was also made available to colleagues in our support centre and to

all colleagues virtually.

Peter Batt, Managing Director for Nisa, was awarded Silver in the Page

Group Diversity Champion category of the 2022 Retail Week Awards.

For an update on achievements against our diversity and inclusion commitments, see our

Co-operate Report.

The wellbeing of our colleagues

As the year brought with it another raft of new and unique challenges, our priority was to

protect all aspects of our colleagues’ wellbeing, including their financial wellbeing.

Co-operative Group Limited

Annual Report and Accounts 2022

In April 2021, we aligned our minimum hourly rates to the Real Living Wage, as set by the

Living Wage Foundation (

www.livingwage.org.uk

), and we subsequently aligned them to the

new rate from April 2022. For Customer Team Members (CTMs) in our Food stores, this

resulted in a 4.2% pay rise. We also increased the pay rate differential between CTM and

Team Leader roles. Our hourly pay rates apply to all colleagues, including younger

colleagues and apprentices.

In September, we took the decision to offer further support as part of the rising cost of living,

the ongoing risk of energy cap increases and increased inflation. Our work during the year to

increase cashflow and stabilise our business made a one-off additional investment of £12m

possible, with the most support going to those who we

ren’t eligible to participate in our

bonus plan, including many of our frontline colleagues. A payment of £50 was loaded on to

eligible colleague membership cards in November and December, with plans to do so again

in January, making £150 in total. Later in the year, the decision was also made to offer the

majority of colleagues another financial boost, with a further £75 added to colleague

membership cards in December

–

this reached more than 55,000 colleagues.

Payments

were structured so that they would not impact any universal credit payments and we also

covered the benefit in kind tax due so colleagues would receive the full benefit.

Beyond this £12m investment, colleague members saw an increase to 30% discount on Co-

op own brand products, excluding alcohol, from 20 October until April 2023.

Talk Money Week in November signposted colleagues to tailored support whether they were

dealing with a one-off surprise bill, building a savings buffer or handling debt. Pointers to Co-

’s

and partners

’ resources

were made available

–

such as Grocery Aid; Keep Credit Union

the Co-op Credit Union; debt charity Stepchange and lenders Salary Finance. We also

increased how much colleagues could access from their basic pay in advance, through

partners Wagestream.

Beyond supporting our colleagues’ financial

wellbeing, we continued to find routes to help

ensure their physical and mental wellbeing was safeguarded. In May,

following an initial

pilot, we launched a brand new benefits partnership with YuLife for all colleagues, with

access to a wellbeing app that rewards healthy behaviours like meditating, walking and

cycling, with chances to earn vouchers to spend with well-known brands.

We also held a range of events and activities around Mental Health Awareness Week. For

the theme of loneliness in 2022, a series of recorded sessions, on demand events, podcasts,

videos and a quiz were all available. Signposts to further support were included as were free

virtual exercise classes from partners Nuffield Health, including Yoga and Body

Conditioning.

Our Co-op remained firm in 2022 that discrimination or abuse of any kind would not be

tolerated in any part of our group. In March, as part of our efforts to ensure fair treatment for

colleagues feeling bullied or harassed, we called out across our Co-op for those who had

experienced discrimination of any kind at any time in their career to help shape our people,

processes, systems, policy, procedure and training. We launched an all-colleague code for

behaviours within our Funeralcare business, including a range of associated interventions

such as listening groups to ensure the code was meaningful and supported outcomes from a

cultural audit of behaviours. Work to address behaviours began in Logistics during 2022, and

is expected to extend into Food stores in 2023.

Building on the success of our ongoing Safer Colleagues, Safer Communities campaign,

Paul Gerrard, who oversees our campaigns and public affairs, was a keynote speaker in

Westminster, as part of the USDAW Freedom from Fear Summit in November. Paul made

clear our continued support for USDAW’s campaign

, reiterating that that there was no

excuse for our frontline colleagues to feel anything other than safe and respected.

Co-operative Group Limited

Annual Report and Accounts 2022

We also continued to monitor very closely the implementation of the new legal protections

enacted by Holyrood and Westminster to ensure the criminal justice system takes every

opportunity to ensure those who would abuse or attack shopworkers face the proper

sanction for doing so.

Recognising our efforts for the planet

In April, we were honoured to receive the

Queen’s Award for Enterprise for Sustainable

Development, in recognition of our excellence in sustainability.

The award, which involves a

rigorous application process, recognises the reach and depth of our work reducing the

impact of operations, its focus on the UN sustainable development goals and its commitment

to continually drive initiatives, which affect its environmental impacts and see real change.

Initiatives such as introducing Europe’s most extensive soft plastic in

-store recycling

scheme, to make all Co-

op’s own brand food and drink packaging easily recyclable

, were

considered.

Our Co-op was also awarded the Relex Responsible Retailer Award as part of the 2022

Retail Week Awards for our commitment to greater sustainability. Again, our soft plastic

recycling scheme was acknowledged

–

data shared in July, to mark the scheme’s first

anniversary, showed that around 75% of polled members regularly used the bin in their local

store, with 41% saying they used it once a week, 30% a few times a month and 29% more

than once a week. Fruit and vegetable bags, bread bags and crisp packets were the items

most recycled by members.

And our Food stores continued to find other ways of empowering members and customers to

think and act more sustainably:

•

In April, we removed

‘

use by

’

dates from all of our own brand yoghurts in a bid to

reduce food waste and as part of an industry

first move, favouring instead ‘best

before’ dates.

•

This same month, the Sustainable Fisheries Partnership, the Royal Society for the

Protection of Birds and the Whale and Dolphin Conservation completed an

independent audit of the risks to ocean wildlife in the fisheries that supply our Co-op.

They deemed us ‘one of the top retailers in the UK selling

sustainable seafood.’

•

As part of a relaunch of our food to go offering in May, we significantly reduced the

amount of packaging in our food to go products and removed all single-use plastic

cutlery in favour of wooden sporks.

•

In a UK supermarket first, our Glastonbury festival store sold ice cubes in bags

certified as 100% recyclable paper, which could

be sorted at the event’s onsite

recycling centre in June. We also did not sell single-use plastic bottles at the store

and only offered water in cans. Our soft plastic recycling units were made available at

the store for customers to return their soft plastics.

•

In August, we expanded our trial with tech-recirculation start-up Spring to help

consumers cut e-waste and unlock the value in their old and unwanted phones and

electronic devices. Self-service pods in selected Food stores allow consumers to sell

their old devices quickly and conveniently, such as phones, tablets, e-readers and

smartwatches, which then get repaired, refurbished, reused or recycled.

•

And in November, we committed to removing all coloured milk bottle caps from

shelves to move to clear caps across all our stores, which can be more easily

recycled into food grade packaging. We also launched a trial in partnership with tech

specialists Polytag to uncover the number of our own brand plastic bottles that are

being recycled, to improve our understanding of true recycling figures and to help

benchmark future rates for the industry.

Our Funeralcare business continued to invest in environmentally friendly initiatives, such as

an electric fleet, including trials for both electric hearses and ambulances.

Co-operative Group Limited

Annual Report and Accounts 2022

Our Co-op also continued to play a role in key conversations, using its influence to engage

and inspire oth

ers to be ‘Fairer for our Planet.’ Leaders encouraged all colleagues to

participate in Great Big Green Week, as the UK’s biggest celebration of community action to

tackle climate change and protect nature. Starting in September, resources were provided to

support colleagues in organising related events, such as a plastic-free picnic or a nature trail;

writing to their MP or finding local events or groups they could support, including a series of

Sustainability Live events hosted by our Member Pioneer network.

And beyond our colleagues, we continued to campaign for UK Government to bring about

change and participate in important conversations:

•

Leveraging our position as a retailer with its own brand charity water - having shared

£17m over the past 15 years with clean water and sanitation projects - Shirine

Khoury-Haq joined other influential leaders via video at COP27 to work through how

UK businesses could come together, co-operatively, and use water more

responsibly, as a precious resource.

•

Shirine also represented our Co-op at

the WWF Retailer’s Commitment for Nature

Steering Group with other retail CEOs, to make our

members’ voice

s heard on how

we can come together and halve the environmental impact of UK shopping baskets

by 2030.

•

As chair of the

British Retail Consortium’s Climate Action Roadmap

Steering Group,

Shirine addressed other businesses at a Climate Action Showcase towards the end

of October. It was a celebration of everything that has been achieved by the steering

group, but also by our Co-op, in terms of reducing harmful emissions, waste and

driving towards net zero.

•

Our Co-op joined other retailers and some of the biggest co-operatives in the UK

alongside Community Energy England in December to call on the Government to

prioritise incentives that encouraged

investment in renewable energy. The group’s

signed letter pressed for an overhaul of the planning regime to fast-track new wing

and solar schemes and create fairer pricing for green energy used by households

and industry. For more information on our energy strategy, see the Co-operate

Report 2022.

Also, in 2022, total Scope 1 and 2 greenhouse gas emissions continued to decrease by

9.58% in 2022 (location-based emissions in 2021: 320 ktCO

₂

e, 2022: 288 ktCO

₂

e). This is

due to using less energy, less fuel, a decrease in emissions from fugitive refrigerant gases

and the UK grid electricity mix generating lower carbon emissions. For more data and

detailed updates on our Climate Plan, as well as work to reduce our carbon emissions, see

our Co-operate Report.

Task Force on Climate-Related Financial Disclosures

As a large organisation, our Co-op

is committed to complying with the UK Government’s

mandate to disclose Task Force on Climate-Related Financial Disclosures (TCFD) aligned

financial information

–

we signalled an intention to do just that in our 2021 Annual Report

and Accounts and we will do by 2023.

During 2022,

we evolved our plans and worked to identify the physical and transitional risks and

opportunities to our business and supply chains from the changing climate, along with the

potential impact of policy, technology and market changes as we move to a lower carbon future.

We made progress here but recognise that there is more to do in the next year.

As an ethically responsible business, we are committed to playing our part in addressing the

climate emergency.

In 2021, we set out our blueprint

–

a Climate Plan, which sets out our

pathway to achieving net zero by 2040, 10 years ahead of international agreements.

It details how Co-op will reduce the impact of operations and products across our Food,

Funeralcare, Legal Services and Insurance businesses. The Plan sets out targets, endorsed by

Co-operative Group Limited

Annual Report and Accounts 2022

the Science-Based Targets initiative (SBTi), in line with the carbon reduction that is required to

cap global temperature increases and meet the goals of the Paris Agreement.

You can read more about our Climate Plan and related activities in our 2022 Co-operate Report,

including:

•

Focusing the missions relating to running our stores, transport and logistics network.

•

Our work to improve the robustness of supply chain emissions data.

•

Our work on establishing a new supplier engagement programme to accelerate

Scope 3 emissions reduction.

•

How we are collaborating for system change.

Governance

All environmental and sustainability matters including climate change risks are currently

managed within our Co-

op’s

overall risk management framework and reported through the

Risk & Audit Committee to the Board.

In 2023, the Board will review this governance structure in the light of TCFD requirements.

Strategy

Our Co-op has carried out an initial, high level risk and opportunity identification with the

assistance of DNV

–

providers of risk management services across multiple industry sectors.

Our technical and sustainability teams continue to have a good understanding of the climate-

related risks we face in different parts of our business. However, in the second quarter of

2022, we went through a structured process to test and challenge our thinking as we

prepared for our first disclosure. Supported by experts from DNV, we worked with colleagues

across the business to map our risks and opportunities and explore possible responses.

Information gathered through an online survey and key stakeholder interviews was analysed

and used as the basis for a facilitated workshop, during which participants integrated and

built upon initial findings, moving on to identify practical responses to the material issues

raised. Risks fall in to two broad categories: Physical and Transitional.

Physical risks

principally relate to:

•

The impact of flooding and extreme heat on operations. Whilst it isn’t practical to

carry out individual assessments on each of our premises, an assessment has been

carried out on principal premises, including distribution centres where, although there

is overall a 15% risk of flood damage, specific vulnerabilities have flood defences.

•

The global food supply chain contributes to and is impacted by climate change and

many of our key sourcing communities are already experiencing its impacts. In the

medium to long term, we can expect to experience disrupted supply chains,

shortages and increased foo

d prices if steps aren’t taken to adapt food supply chains

to climate change. We are working with our suppliers to better understand these risks

and work with them to create climate adaptation plans to help address the

challenges.

Transitional risks

are made up of several components:

•

Carbon pricing relating to greenhouse gas emissions

–

our Co-op is in the process of

developing a long-term sustainability strategy and transition plan which will address

all aspects of our energy use. In the meantime, we are focusing on applying energy

saving projects around refrigeration, doors, windows and lighting to our estate on a

rolling programme as well as re-fitting existing stores and fitting out new ones with

the most efficient products available. The cost of this is already built into our current

Co-operative Group Limited

Annual Report and Accounts 2022

budget and Four-Year Plan. Some 1,200 Energy Saving Opportunities Scheme

audits have been conducted.

•

Market risks

–

there is a reduced opportunity to shift customer behaviour away from

animal products because of the convenience business model and heavy reliance on

carbon-intense milk, eggs and mince.

•

Policy & Legal risks

–

resources and investment required for the volume of incoming

regulation and legislation may exceed our Co-

op’s

current capacity in transport and

logistics in particular.

•

Technology risks

–

investing in new energy friendly technology in agriculture.

During 2023, we will validate and finalise this initial analysis then carry out a detailed impact

assessment to determine the timescale, likelihood and financial effect of each risk, as well as

available mitigations.

We will carry out scenario analysis, both qualitative and quantitative, to determine our

resilience to the effects of varying climate change scenarios.

Risk management

Climate change is recognised as a principal risk to our Co-op, which is further disclosed on

page 65. The way we identify, assess, manage and monitor risk is explained on pages 58 -

60.

Metrics and targets

Our plan sets out targets, endorsed by the Science-Based Targets initiative (SBTi) across all

scopes. Our current targets reach to 2025

–

however, recognising the need to decarbonise

further and faster, we are now resetting these across all scopes, in the near and long term.

This will ensure that they are in line with keeping the global temperature increase to no more

than 1.5 degrees Celsius above pre-industrial temperatures.

We are expecting these updated targets to be released and validated by the SBTi in late

2023. Our long-term goal is to reach net zero greenhouse gas emissions from both

operations and products by 2040 at the latest. We have also set a target that suppliers that

collectively contribute to 50% of our emissions will have set science-based net zero targets

aligned to 1.5ºC by 2025.

In 2021, we reported that we had met our target to reduce our operational (Scope 1 and 2)

emissions by 50% compared to 2016 reduction, three years early. You can read about how

we have reduced our Scope 1 and 2 emissions during 2022 on page 124

We measure and

report our indirect greenhouse gas emissions (Scope 3) every two years. The most recent

report was in 2021 (for emissions over the period 2020/21), where we quantified an 8%

reduction in Scope 3 emissions since 2016. In the 2023 Co-operate Report, we will publish

an updated Scope 3 inventory, covering the period 2021/22. We align to the Greenhouse

Gas Protocol Corporate Standard and the Science Based Targets Initiative Criteria. Our

Basis of Reporting is published online here: www.co-operative.coop/sustainability-reporting-

our-reporting

In addition, Co-op is taking action on other climate related metrics including water, food

waste reduction, healthy and sustainable diets and responsible sourcing. For more

information, see our Co-operate Report.

Co-operative Group Limited

Annual Report and Accounts 2022

Looking Ahead

We look ahead to 2023 with confidence and optimism for a co-operative and stable trading

year resulting in delivery of our Vision,

‘

Co-operating for a Fairer World

’

We will continue to strengthen and evolve our organisation, placing our members,

colleagues, co-operation and our Co-op Difference at the heart of everything we do, whilst at

the same time carefully investing and continuing our ambition to create a more modern and

agile Co-op that is strategically positioned to grow sustainably when the economy and

market conditions allow.

Our organisation is now in a much stronger place due to the focused actions we took in 2022

to significantly strengthen our balance sheet, reduce our net debt position, strengthen our

cash position, decrease our operating costs and prioritise improvements to inefficient

processes and systems.

We’ll be mindful of the world around us,

and we will continue to support members,

colleagues and customers through the cost of living crisis. We have the capability to adapt

our businesses at pace, as economic and consumer behaviour demands.

We, along with many others, fully expect the challenging external conditions to continue

throughout 2023.

High levels of inflation are predicted to continue until at least mid-year, before beginning to

fall and a recession, both here in the UK and globally, remains a significant possibility. We

are committed to doing all we can to shield members, colleagues and customers from this,

and other rising costs, as much as we possibly can.

We, along with other organisations, and indeed many households, are facing energy costs

that will be as much as double what they have been in previous years.

Energy was a core focus point for us in 2022. While the future of energy still looks uncertain,

we’ve been working hard to reduce our energy consumption through capital light quick wins,

simplifying processes and implementing energy efficiency changes across our businesses,

sharing the details with partners across our Nisa business. You can read more information

on our energy efficiency and other activities in our Co-operate Report.

Despite this we have every reason to expect great things from our Co-op, during 2023 and

into the future.

We have confidence in all of our businesses. They are market leaders with strong strategies

to take them forward, as well as the leadership and plans in place to deliver them.

Our 2022 strategic priorities have evolved for 2023 and we will continue to focus tightly on a

smaller number of priorities that support the growth of our Co-op and protect our ability to

deliver our Vision:

Delivering on our financial plan

We will continue to build on the progress made during 2022 in enhancing our financial

controls and processes, adding rigour and governance to ensure that our financial targets

are met, that our Co-op is operating as efficiently as it possibly can and that

we’re generating

the value we need to invest in our growth plans for our businesses, and re-distribute through

delivery of our Vision.

Accelerating growth

We’ll seek to grow our

Co-op cautiously, and in a way that supports the creation of a more

modern Co-op for a modern world.

Co-operative Group Limited

Annual Report and Accounts 2022

Where we choose to invest, we will do it in a capital light and cash generative way,

leveraging partnerships and modern routes to market, making the most of the assets and

strengths that we have.

Our Food business

will remain true to convenience. We’ll maximise the four established

routes to market that we have (Retail, Wholesale, Franchise and Online) and also re-open

our new store and refits programme in 2023. This will all be while cautiously remaining within

the financial and capital parameters we’ve set for ourselves.

Our Funeralcare business will continue to focus on a personal service, further building our

propositions and continuing its digital transformation to allow clients access to us in the most

convenient way for them.

Legal Services will continue its incredible journey with digital products and services in

partnership with some of the UK’s largest financial services providers.

And in Insuran

ce, we’ll continue to innovate and make the new products and services we

introduced in 2022 work hard, alongside making our products easier to buy through

partnerships, such the one we have with Amazon UK.

e’ll do all of this with membership

, co-operation and our Co-op Difference firmly in our

sights. W

e’ll be reviewing our

membership strategy to attract, reward and retain our

members, alongside how we better engage them in our modern Co-op, not only in what we

do, but also how they can support and influence what we do.

And the time is now right for us to review our Co-op Group strategy and our Vision, to ensure

that we’re truly a successful, co

-operative business. A business that is adding the most value

possible where our members, colleagues and customers need us the most.

Supporting members, colleagues and customers through the cost of living crisis

We are committed to doing all we can to shield members, colleagues and customers from

this, and rising costs, as much as we possibly can.

We will continue, as in previous years, to align frontline colleague pay to the real living wage.

We’ll do all we can to not pass increased prices due to inflation onto our members and

customers.

Operating our business efficiently

We will continue to operate our business as effectively and efficiently as possible, ensuring

cost is ever present in our decision making processes, embedding a culture of cost

consciousness that will empower everyone in our Co-op to be more efficient and effective.

We will deliver 2023 savings already identified during our work over the last 12 months,

stopping any activity that isn’t included in our growth plans, or that doesn’t support our

strategic priorities.

Our focus on energy efficiency will continue with investments into technology and equipment to

help us reduce our energy consumption in our Food business.

And we’ll explore

even more

energy saving opportunities across Logistics and Funeralcare.

And by listening to our colleagues we’ll identify those areas in our businesses that not only

cause us, and them, issues operationally, but that also cause us to be less efficient. During

2023, we’ll be investing £11

m, one of the largest amounts invested in our store technology

for over 11 years, to address some of the legacy and obsolete systems, and technology

platforms that our colleagues tell us stop them serving our members and customers

effectively.

Co-operative Group Limited

Annual Report and Accounts 2022

This includes printers, wi-

fi, payment and bakery terminals, back office PC’s and

, in 50% of

our stores, replacing self-service checkouts.

2023 will also begin an investment phase for our Funeralcare business as we start the

journey to remediate our legacy property estate and refresh our fleet of vehicles over the

coming years.

And,

of course, we’ll

achieve all of these aims co-operatively, with a future focused, cost-

conscious growth mindset, in the way that only we can.

In summary

2023 will be another challenging year for our Co-op. However, the actions taken during 2022

see us well placed to weather the ongoing headwinds of inflation, rising energy and payroll

costs and forecasted recession. Nevertheless, it is for these reasons that we realistically

plan a lower level of profit this year.

However, the underlying strength of our business, passion and determination of our

members and colleagues and the compelling nature of our Vision gives us every confidence

and optimism for the future.

Our Co-op was created to address social and economic unfairness and we are still ideally

placed to make things fairer for our members, communities, colleagues and the planet in the

future.

Together, we’ll win as a modern, decisive Co

-op, and deliver our Vision of

‘

Co-operating for

a Fairer World.

’

Co-operative Group Limited

Annual Report and Accounts 2022

Our financial performance

Economic backdrop

As noted in our CFO’s Financial Overview on page

16, 2022 has proven to be a particularly

challenging year for most businesses, but our Co-op has successfully navigated the

turbulent markets and ended the year in a significantly stronger financial position.

Our members and customers have been facing into a sharp and prolonged cost of living

crisis, with soaring inflation and spiralling household bills squeezing family budgets to near

breaking point.

Throughout 2022, there has been downward pressure on consumer spending compounded

by significant cost inflation for businesses. This has hit profits, stifled growth and ultimately

seen the UK economy bordering on recession.

Our headline performance

Despite the challenging backdrop, our Co-op has delivered a creditable set of results with a

solid profit performance, strong cashflows and a growing top line.

We have grown our sales, successfully maintained margin and managed our cost base to

mitigate the significant cost inflation on ourselves, our members and our customers. This

was supported by some difficult decisions, including the restructuring of the team at our

support centre.

There is, however, no avoiding the impact that inflation is having on the profits of most

businesses

–

for our Co-op, energy costs increased by £48m in 2022, compared to 2021,

and salary inflation drove a further £55m of additional cost. Faced with such inflationary

pressures, the renewed cost disciplines we have instilled in 2022 have served us well and

we successfully delivered our targeted cost savings of £101m during the financial year.

Recognising the difficult time many of our customers and members were experiencing, we

sought wherever possible to protect our customers and absorb inflation. Throughout the

year, we continued to focus on delivering the proposition and value that our customers need,

including £38m of direct reward for our members and their communities. Importantly, we

sought to support our colleagues through the winter cost of living crisis with additional one-

off support of £12m, and by increasing our colleague discount to 30% on Co-op own brand

products from 20 October until April 2023.