In March 2006 we
became a member of
the FTSE4Good Index

Although the Board believes that the environmental impact of our distribution activities is comparatively low, we are committed to sound Corporate Social Responsibility ("CSR") policies and practices for good business reasons. Our commitment to CSR is not simply a response to increased market attention in this area, but such issues reinforce the way that our various businesses operate.

We regard CSR as a sustainable approach to business that seeks benefits for all of our stakeholders, be they customers, employees, communities, the environment or the Company and its shareholders. During the year we have maintained our dialogue with stakeholders in this important area. We are committed to the highest standards of corporate governance and environmental as well as other CSR issues form part of the overall internal control process. The Board believes that the businesses are best served by creating a safe working environment that encourages and supports high levels of business performance.

We focus on issues such as safety, training, behaviour-based performance and the provision of opportunities for our employees' career growth and development. Local community initiatives are considered to be investments providing support that will assist those communities, complement the aspirations of our customers, give our employees opportunities for professional development and help us to achieve our business objectives. The Board believes that the progressive integration of CSR throughout the business and the incorporation of broader social and environmental issues into day-to-day decision making will better enable us to achieve our goals.

In March 2006, we became a member of the UK's FTSE4Good Index Series following its Policy Committee's decision that we had met its inclusion criteria. The FTSE4Good Index is designed to measure the performance of companies that meet globally recognised corporate responsibility standards and to facilitate investment in those companies where CSR issues are an influencing factor in the investor's decision making process.

Health, safety and environment

A key driver of the Group's success has been the high degree of autonomy which has been afforded to local managements, allowing them to serve local markets in the most appropriate manner. Within this decentralised structure, the Board has set down a number of health, safety and environment principles with which all the Group's businesses are required to comply. The principles relating to environment cover: the integration of environmental management into business operations; a commitment to the adoption and achievement of best practice wherever this is practicable; a commitment to prevent pollution; compliance with local environmental legislation; the adoption where practicable of local formal environmental management systems; a commitment to strive for continual improvement; and a commitment to ensure proper communication with employees on environmental matters.

Timber

PB & M ("PBM"), the French heavyside business, purchased 940,000m³ of timber in the financial year ended 31 July 2005 and 957,971m³ in the financial year ended 31 July 2006. More than 91% in the financial year ended 31 July 2006 (2005: 88%) of such timber was softwood, mainly sourced from countries such as Russia, Finland, France and Sweden. A little over 3% of the timber purchased in the year to 31 July 2006 was hardwood (2005: 5%), sourced from suppliers who have not been censured by the United Nations as part of resolution number 2001/1343. PBM works with its suppliers to ensure that timber is sourced from forests which have been certified by recognised forestry associations which promote sustainable forestry management. During the year further investment has been made in PBM's IT systems to enable more accurate tracking of the sources of timber purchased. PBM saw a 4% reduction to 44% in the timber purchased in the year from certified suppliers, although much of the reduction is attributable to increased reporting accuracy from the enhanced IT system. PBM, like Build Center and Stock Building Supply, has engaged with its suppliers of Indonesian plywood with a view to ensuring that any illegal logging is excluded from the supply chain. Imports of Indonesian plywood accounted for a little over 1% of all timber purchased by PBM in the financial year ended 31 July 2006 (2% in the year ended 31 December 2005). Stock Building Supply's purchases of Lauan plywood remained under 0.05% of its timber purchases in the year ended 31 July 2006. None of Build Center, PBM or Stock Building Supply purchase without appropriate permits any species of timber included in any of the Appendices to the Convention on International Trade in Endangered Species of Wild Fauna and Flora, which, inter alia, identify threatened species of trees. Le Commerce du Bois, the French timber trade federation of which PBM is a member, submitted a code of practice to the French environment ministry in June 2005. The code, which is based on both French domestic and internationally recognised standards, has been developed by the federation working with importers and distributors and is intended to set the standards for timber sourcing, purchasing and distribution in France. The code is expected to be agreed by all relevant parties in September 2006. In the UK, Build Center purchased 350,000m³ of timber in the financial year ended 31 July 2005 and 347,483m³ in the financial year ended 31 July 2006. More than 90% in 2005, and 88% in 2006 of such timber was sourced from Finland, Germany, Latvia, the UK and other European countries. Less than 0.9% in 2005 and 0.5% in 2006 of such purchases were of hardwood. Some 72% of Build Center's raw material purchases made in the year ended 31 July 2006 (2005: 67%) were from certified sources. During the year Build Center continued to engage with its suppliers with regard to the responsible sourcing of timber and the elimination of illegal timber from the supply chain. In June 2006 the governing board of the UK Timber Trade Federation ("TTF"), of which Build Center is a member, voted to make its Responsible Purchasing Policy ("RPP") which had been successfully trialled by Build Center in 2004, a condition of its membership, subject to the consent of its members. Formulated by the TTF to meet the requirements of the UK Government's own timber procurement policy, the RPP was developed with the benefit of input from principal suppliers, with a view to ensuring that increasing volumes of sustainable timber are progressively being made available to businesses especially where timber is sourced from forests where certification schemes are not widely in place. Wolseley UK continues to promote the use of its web-based interface onto which its suppliers can log their responses to specific questions and submit documentary evidence in support of their provenance, such as chain of custody certificates. Following a successful round of supplier audits in 2005, 80% of timber supplies to Wolseley UK are documented through the interface. It is intended that over the next 12 months the interface will be extended to collect and store data related to timber supplies from Stock Building Supply and PBM.

Stock Building Supply purchased some 4,580,000m³ of timber in the year ended 31 July 2005 and 5,398,000m³ in the year ended 31 July 2006 of which a little under 1,600,000m³ were structural panels. Over 95% of timber purchased by Stock Building Supply in the financial years 2005 and 2006 were sourced from the USA and Canada, with approximately 3% being sourced from Europe. The percentage of such purchases made from suppliers who hold certifications from recognised forestry sustainability agencies, such as the American Forest Products Association and the Canadian Standards Association remained at 90% for the third consecutive year. The American Forest Products Association's Sustainable Forest Initiative programme requires participants to meet an exacting standard of environmental principles, objectives and performance measures. The standard integrates the perpetual growing and harvesting of trees with the protection of wildlife, plants, soil and water quality, together with a wide range of conservation goals. Stock Building Supply maintains a constant dialogue with its suppliers, reviewing their environmental practices and policies, encouraging sustainable forestry management practices and seeking opportunities to improve the use of natural resources. Sales of engineered wood products, which are substitutes for wide dimension solid-sawn timber, increased by a further 10% in the year ended 31 July 2006 (2005: 21.6%). Such substitutes improve structural performance, thereby reducing the need to harvest as many larger, older trees.