Risks & Opportunities

At Grainger, our approach to sustainability is based on a rigorous assessment of potential political, economic, social, technological and environmental (PESTE) risks and opportunities to our business.

ETHOS Corporate Responsibility strategy is Grainger’s response to the material issues likely to impact our business over the next five to ten years. These issues were identified in 2009 through a rigorous assessment of potential political, economic, social, technological and environmental (PESTE) risks and opportunities.

Alongside this long-term CR strategy, we monitor immediate risks and opportunities and proactively manage these by setting annual targets in each of our ETHOS areas. The monitoring process includes discussions of key climate change issues within our Green Projects Group as well as consultation with our external sustainability advisors, Jones Lang LaSalle, Upstream Sustainability Services. Grainger carefully considers the long-term costs and benefits of all CR initiatives to ensure that our approach makes commercial sense.

2012/13 Risks:

Grainger regularly considers the changing landscape of sustainability risks and opportunities and has identified the following as key areas to manage.

• External Environment: We need to influence the political and legislative environment in which we operate to protect against risk and threats to market opportunities.

• Our properties: If we are to manage future external risks to our business, we need to understand more about the characteristics of our assets, for example their energy efficiency..

• Supply Chain: This is a major area of focus in terms of managing costs, minimising risks and delivering service to our customers.

• Customers: We are moving to a business environment where our customers have choice (PRS) and we need to focus on customers in a different (progressive) way than we have in the past.

• Reporting: Our investors and other stakeholders are increasingly demanding that we are transparent about what we do and how we perform. Communication of our CR activities and achievements is also important in ensuring that we are recognised as aspiring leaders in this area.

2012/13 Opportunities

Grainger proactively seeks opportunities to distinguish itself from its peers and to future-proof our assets in order to protect asset value and secure a long-term income stream for the business.

• External Environment : To influence government (and other relevant regulatory, industry and legislative bodies) so as to protect our interests and those of our investors, tenants and other stakeholders;

• Our properties: To continue to develop our understanding of our existing portfolio so that we can:

• Identify and model future risks (such as carbon price increase impacts); and

• Talk with authority and credibility to government and other stakeholders about the impact of future legislation.

• Supply Chain:

• To reduce the cost and number of suppliers we use;

• To increase the certainty of the quality of service provided to our tenants;

• To measure the environmental impact of our supply chain and set targets to reduce this impact;

• Customers:

• To understand what potential customers of the PRS value and how we can meet their aspirations;

• To measure (comprehensively) the quality of the services we provide to our tenants (in tenures where they have choice);

• Reporting: To report in an accurate, transparent, relevant, efficient and timely manner to investors and other stakeholders.

These risks and opportunities should be viewed in the context of our corporate risk management process, which is set out on pages 48 and 49 of our Annual Report 2012.