Chain of custody
volumes
in Build Center
exceeded
target by 28%

Chain of custody

It is well recognised that whilst sustainable sourcing is vital, it is also key that illegal timber is eliminated from the supply chain, from the forest of origin to the end user. In the UK, Build Center began work in 2003 on a chain of custody project that initially saw the implementation of new procedures in five branches with 16 products within scope, all of which had been independently audited and approved by, or on behalf of, both the Forest Stewardship Council ("FSC") and Programme for the Endorsement of Forest Certification ("PEFC"). The project required Build Center to identify certified sources for these initial 16 products, adapt management systems to identify and capture relevant data, undertake on-site training, create a dialogue with suppliers and create new documentation to ensure that despatch notes and invoices contain chain of custody certification numbers and references to the certified status of the product. Internal and independent third party audits have also been conducted. From the original 16 products, the number of products within the chain of custody scheme now exceeds 3,000 and certification has been achieved at a further 41 branches during the year ended 31 July 2006 (2005: 15 branches), bringing the total to 61 branches by the end of the financial year. Work continues to secure accreditation at all of its remaining branches with the current target being to achieve accreditation at a further 59 branches by 31 July 2007. The volume of timber controlled within the chain of custody scheme in the year ended 31 July 2006 was 104,500m³ (2005: 30,000m³), some 30% of total timber purchased (2005: 8.6%). This exceeded the target of 75,000m³ for the year ended 31 July 2006 by 28%. PBM's hardwood business, as well as its garden products business, Cerland, achieved certification for their chain of custody procedures in 2003. Significant progress has been made during the year to achieve the same recognition in PBM's softwood import business, with the requisite pre-audit report having been completed in March 2004 and PEFC certification awarded in November 2005. In line with the target set last year, 100% of all PBM's imported softwood in the year ended 31 July 2006 had either PEFC or FSC chain of custody certification.

Stock Building Supply does not have a formal chain of custody procedure for its timber as it relies upon the chain of custody procedures in place within its suppliers. As noted above, the vast majority of purchases made by Stock Building Supply are from suppliers who hold recognised certifications and whose harvests are strictly controlled by US and Canadian Federal and State law. Stock Building Supply maintains an extensive dialogue with its suppliers regarding sustainability issues including chain of custody.

Waste management

All of the Group's European companies comply with EU and domestic waste management regulations. In Ireland, Heatmerchants continues to reduce compliance costs by back-loading secondary waste paper, cardboard, wood pallets and plastic from branches to the main distribution centre for recycling. In the year to 31 July 2006, over 900 tonnes of such material was recycled (2005: 800) and thus saved from landfill resulting in cost savings of €144,000. Brossette in France has installed containers at each of its branches for the collection of plastic/paper, wood and metal for recycling. ÖAG in Austria continues to operate its waste management strategy that has been in place since 1994 and which streams waste for collection and reprocessing by specialist contractors. Stock Building Supply has optimised the use of off-cuts in its truss manufacturing facilities and, where possible, off-cuts which cannot otherwise be used are recycled by wood product manufacturers in order to minimise waste, reduce the need to use landfill sites and reduce costs. Stock Building Supply estimates that more than 4,800 tonnes of landfill was avoided in the year ended 31 July 2006 (2005: 4,800) which has resulted in savings of more than $345,000 (2005: $290,000) in waste management costs. Stock Building Supply intends to extend the recycling of off-cuts to its new truss manufacturing facilities which is expected to increase the number of tonnes of landfill that will be avoided. In the UK, equipment has been installed at our distribution warehouses to bale and recycle cardboard and hard plastic. Recycling programmes operate in all of the businesses' corporate offices.