Ferguson : 2023 Modern Slavery Act Statement 1.21 MB

UK MODERN SLAVERY ACT

Statement for the financial year ending July 31, 2023

This statement is made pursuant to the UK Modern Slavery Act 2015, Section 54 ("MSA"), and describes the steps that Ferguson plc and its subsidiaries (collectively, "Ferguson") have taken during the fiscal year ending July 31, 2023, to prevent slavery and human trafficking in our global supply chain.

Ferguson's Structure and Business

Ferguson plc (NYSE: FERG; LSE: FERG) is a leading value-added distributor in North America providing expertise, solutions and products from infrastructure, plumbing and appliances to HVAC, fire, fabrication and more. We exist to make our customers' complex projects simple, successful and sustainable. Ferguson is headquartered in the U.K., with its operations and associates solely focused on North America and managed from Newport News, Virginia.

Ferguson principally operates in North America through over 1,700 branches spread across the United States and Canada. We employ approximately 35,000 associates, of which approximately 91% are US-based, and supply over one million customers, primarily local tradespeople who operate locally, near our branch locations.

Ferguson buys products from approximately 36,000 suppliers. Over 95% of the products sold in the United States are sourced from US-based suppliers, and approximately 90% of the products sold in Canada are sourced from Canada-based suppliers. Other countries where we principally source from include China, India, Taiwan, Thailand, Vietnam, Italy, Turkey and South Korea. No supplier is larger than 5% of our total cost of sales.

Key areas of focus in FY'23 included (a) our ongoing commitment to compliance with applicable U.K. and U.S. legal requirements that prohibit forced labor, child labor or human trafficking related activities; and (b) continuing to enhance our supplier audit capabilities which includes ethical business conduct and anti-slavery components.

Ferguson's Policies to Combat Modern Slavery

A. Our Workforce

Ferguson holds itself to high standards of business integrity and ethical conduct. Committed to extending the principles of the UN Global Compact and Universal Declaration of Human Rights to our workforce, we have adopted policies to seek to foster a respectful environment where associates have a right to freedom of association and are treated humanely and are free from harassment or discrimination in safe and secure workplaces.

These principles are embedded in our Code of Business Conduct and Ethics, which was updated in August 2023 and applies to the Ferguson board, associates and subsidiaries. It should also be followed by anyone who works on behalf of Ferguson, and Ferguson's agents, consultants and contractors. It reflects Ferguson's commitment to ensuring that human rights are respected and encouraging our suppliers to adopt fair labor practices. Our associates, including those employed by our Asia-based sourcing subsidiaries, are trained on the Code of Business Conduct and Ethics and are encouraged to

"speak up" about any situation or condition believed to violate our fundamental employee welfare standards. Moreover, our Internal Reporting and Anti-Retaliation Policy and Ethics Helplineoffer a confidential mechanism for associates (as well as other stakeholders in our supply chain) to report (anonymously, if requested) any incidents of unfair treatment - protected from retaliation by management. During this past fiscal year, no reports were received by Ferguson that involved a potential modern slavery or human trafficking incident at any Ferguson location.

Compliance with our policies is monitored via financial controls, internal audit, management oversight, security procedures and via the Ethics Helpline reporting. Corrective action for non-compliance with Ferguson policies depends on the severity of the situation and can range from counseling and training to termination of an associate's employment or an agent's, consultant's or contractor's engagement.

B. Our Supply Chain

Ferguson also holds our suppliers to high standards of ethical conduct and treatment of workers. Our Supplier Code of Conductcodifies our commitment to source from ethical suppliers to ensure the products we supply are safe, reliable and manufactured by companies that share Ferguson's values of integrity and respect for the human dignity of workers. Our Supplier Code of Conduct specifically requires that any human rights violation or human trafficking is reported to Ferguson, and that suppliers provide fair working conditions, hours and compensation, and prohibit child, forced or prison labor in their operations or supply chains. In July 2022, our Supplier Code of Conduct was updated to direct suppliers to report any suspected violation to the Ethics Helpline. Should there be a violation of our Supplier Code of Conduct, the relationship with the supplier may be terminated.

As a matter of general practice, higher risk suppliers (as determined by our Third-Party Risk Matrix described below) ("Higher Risk Suppliers") are asked to sign our Supplier Code of Conduct or we seek to incorporate the Supplier Code of Conduct clauses into supply contracts with them. By doing this, Ferguson seeks to ensure that our Higher Risk Suppliers are contractually obligated to provide fair working conditions, hours and compensation, and to prohibit child, forced or prison labor in their operations or supply chains. Among other terms, the Supplier Code of Conduct sets forth minimum standards of human rights and working conditions that are subject to on-site inspections and audits. Ferguson carries out periodic audits of Higher Risk Suppliers to verify their compliance with Ferguson's standards of product quality, safety, labor practices (including human rights: modern slavery / trafficking / forced labor) and security.

Ferguson achieved notable success during FY'23 to bring Higher Risk Suppliers, including those of its regional operations, under contractual human rights commitments. Over 1,500 suppliers have contractually pledged to abstain from use of child, forced or involuntary labor in their operations. Further, most of our suppliers are not in countries with a prevalence of modern slavery according to the Global Slavery Index.

Managing the Risks of Modern Slavery in Ferguson's Global Supply Chain

Ferguson primarily sources manufactured goods from suppliers based in North America, where the risk of forced, involuntary or child labor in manufacturing activities is relatively small. While we have included our North American suppliers in our modern slavery risk analysis, effective risk management calls for focused attention on our international suppliers. This year, we continued to deploy our risk assessment tool to help us to identify modern slavery risks in our supply chain.

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Using extensive research published by human rights NGOs and the U.S. Department of Labor1, the tool employs three criteria:

1. Country

2. TI Corruption Rating

3. Sector

• Has credible research identified a high prevalence of forced/child labor in the country (based on GSI Modern Slavery Global Index)?
• What is the level of corruption in the country as measured by the TI Corruption Index?
• What is the risk of forced/child labor used to manufacture the product supplied?

Suppliers are rated using these criteria, with the level of engagement correlated to the supplier's rating. For example, elements 1 and 2 above rate countries based on their risk for modern slavery or corruption and element 3 rates the product for risk of forced / child labor. Ferguson does not source any products that appear on the U.S. Department of Labor's List of Goods Produced by Child Labor or Forced Labor. Therefore, application of this tool directs engagement to Higher Risk Suppliers located in countries known to be a higher risk for corruption or slavery, such as China or India. High priority engagement generally entails a review of the supplier's employment practices, increased frequency of on-site monitoring and audits, the development of corrective action work plans (if/when needed) and capacity building activities to support the supplier's adoption of specific anti-slavery controls. Prioritization of engagement with Higher Risk Suppliers helps to ensure the effective deployment of resources in our anti-slavery compliance program.

Ongoing Due Diligence and Monitoring of Suppliers

Ferguson's Higher Risk Supplier due diligence program consists of three elements. First, corruption and adverse media screening is carried out, which includes checking for any adverse media that might link a Higher Risk Supplier to allegations of modern slavery. Second, site audits of production facilities are performed on all Higher Risk Suppliers and include a review of product quality, safety, ethical labor practices (including human rights: modern slavery / trafficking / forced labor) and security. And third, as set out above, we seek a contractual commitment to our ethical standards from our Higher Risk Suppliers. If a modern slavery incident were to be identified, Ferguson would complete additional due diligence requiring the supplier in question to complete a detailed questionnaire, provide evidence of their anti-slavery program or practices and develop a corrective action plan to be tracked for completion and impact.

Ferguson screens new and existing Higher Risk Suppliers on an ongoing monthly basis using a third- party software program for reports of modern slavery incidents (based on the level of risk, as described above). The monthly screens help to ensure that we capture any new information that might come to light. During FY'23, approximately 2,500 suppliers were screened.

Ferguson also has incorporated ethics and anti-slavery elements in our supplier audit methodologies. Our Ferguson Global quality associates (based in Asia) receive ongoing audit training that includes modern slavery issues. In FY'23 we continued to develop the centralized auditing team's capabilities through training and practical experience, which has further illuminated our understanding of our Asia- based suppliers' operations beyond quality considerations. In addition, we are gradually expanding our audit team which includes five third-party firms on our list of our approved international compliance auditors.

Beyond on-site audits of potential new Higher Risk Suppliers, we also visit and re-audit our suppliers periodically based on risks associated with product assurance and our risk assessment tool described

1 Sources relied upon in Ferguson's assessment include Country Profiles in the Global Slavery Index; U.S. Department of Labor "List of Goods Produced by Child Labor or Forced Labor"; and Transparency International's Corruption Perceptions Index.

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