Most of the raw and processed materials for the merchandise sold by Signet are traded on commodity exchanges or through multiple brokers and traders making the original source difficult to trace. Signet believes that SEE risks at the mining, trading and secondary processing phases of the supply chain are more effectively managed through co-operation within the industry. Signet therefore actively participates in Jewelers of America in considering what action Jewelers of America can take on behalf of its members to set SEE standards and influence matters throughout the supply chain. In 2002 Jewelers of America adopted a Statement of Principles relating to SEE matters and adopted a programme to communicate those principles to its members. Jewelers of America has developed a Supplier Code for the industry that was launched in the first quarter of 2004.

Signet is also working, where appropriate, with other trade bodies such as the Jewelers Vigilance Committee to be better able to respond to SEE issues at an industry level.

One of the specific issues facing the Group and the diamond sector is conflict diamonds, which are diamonds sold by rebel movements to fund military campaigns. The Group is a nonvoting member of the World Diamond Council which, together with Jewelers of America, has worked with the United Nations, government bodies, commercial interests and civil society to introduce a workable system for the certification of the source of uncut diamonds. This system, known as the Kimberley Process, and Kimberley Process Certification System (“KPCS”) was formally adopted in November 2002 and came into operation during 2003. Details regarding the Kimberley Process are available at www.kimberleyprocess.com.

Following the adoption of the KPCS process, Signet wrote to all its trade diamond and diamond jewellery suppliers. The text, based on the Jewelers of America guidance, requires them to supply the Group with merchandise that complies with the KPCS. Signet has amended its systems, procedures and documentation to take account of the KPCS so that only diamonds that are warranted to comply with the KPCS on invoices, annual agreements, or both are accepted from trade suppliers. The Group also trained its buying staff with regard to the KPCS requirements and briefed its sales associates on its operation. During the year an internal audit of these procedures was carried out, confirming the Group’s compliance with Jewelers of America’s recommendations even though Signet is not directly governed by the KPCS.

Since the formal adoption of the KPCS in November 2002, further steps to assist in the implementation have included:

• establishing formal rules of procedure for KPCS operation, enabling formal confirmation of participant status of the initial group of participant countries;
  
• enabling a system of peer review of adherence to requisite provisions of national legislation and import/export controls;
  
• enabling collection of statistics from all participant countries in accordance with standard formats and procedures;
  
• enabling annual peer review of comprehensive reporting of information and statistical data that must be submitted by all participant countries;
  
• enabling the dispatch of review visits to any participant country on a voluntary basis;
  
• enabling the dispatch of special review missions where there are credible indications of significant non-compliance with the KPCS;
  
• dispatching the first special review mission to the Republic of Congo (formerly Central African Republic) in order to assess the effectiveness of the control measures; and
  
• confirming review of the entire KPCS is to take place not later than July 2006.

In 2004 over 40 countries (including the European Union as a single entity) were participants in the KPCS and participants accounted for over 99% of world diamond production. While the overwhelming trade in rough diamonds was between participants in the KPCS, it is difficult to assess the precise level of participation. However anecdotal evidence suggests that the unscrupulous diamond dealers are finding it increasingly difficult to sell non-certified stones.

The first voluntary peer review visit took place in March 2004 annual reports having been received from all participants and by the end of 2004 review visits were made covering nearly two thirds of global rough diamond production, more than 80% of global exports and more than 90% of global imports. The Republic of Congo (Congo-Brazzaville) was suspended from membership in 2004 following the visit by a special review mission, and the Kimberley Process Participation Committee addressed issues relating to three other countries. A comprehensive statistical database is now available and general baselines for the identification of anomalies have been established. While the quality of data has substantially improved, further progress needs to be made and steps to do so are being implemented.

While Signet is the world’s largest speciality jeweller, its share of the worldwide jewellery and watch market amounts only to about 2% of the total. Therefore it is the Group’s belief that it can be most effective in influencing improvements to the supply chain by working together with other industry representatives, who together can by concentration into a single industry voice be representative of many aspects of the supply chain, and use their combined influence in working to improve it as a whole.

During the year the Group worked actively with other companies representative of the industry and was one of the signatories to a Statement of Intent that formed the basis of an agreement for further co-operation to promote increased consumer confidence and integrity in the product by promoting responsible business practices throughout the industry.

In respect of supplier payment, Group policy is that the operating businesses are responsible for agreeing the terms and conditions under which business transactions with their suppliers are conducted, rather than following any particular code or standard on payment practice (see note 30(e) regarding the number of days purchases outstanding). Accordingly suppliers are aware of the terms of payment and it is Group policy to ensure that payments to suppliers are made in accordance with these agreed terms.

Set out below is Signet's "Supplier Code of Conduct":

Supplier Code of Conduct

Signet Group plc’s (“Signet”) objective is to operate as a profitable and responsible speciality jewellery retailer, delivering increasing value to our shareholders, while seeking to uphold our Social, Ethical and Environmental Principles and considering the interests of our other stakeholders: customers, employees, those with whom we do business, and society as a whole.

In seeking to achieve our objective we recognise that there are indirect impacts generated by our activities, in particular through our supply chain. We will seek to use our influence with those with whom we do business directly, in particular our agents and suppliers, to promote the achievement of our Social, Ethical and Environmental Principles. As a customer we believe we have an opportunity to seek to influence the social, ethical and environmental performance of our suppliers in a positive manner. In order to do so it is necessary that our suppliers, and in turn their suppliers, should understand Signet's standards as set out in this Code. Therefore, we encourage suppliers to ensure that this Code is communicated throughout our supply chain.

Signet recognises that suppliers may need time to address areas in which they may not currently be in compliance. Signet recognises that the ability to influence and promote these Principles beyond its direct suppliers varies and may be limited. We believe that compliance can only be achieved through a process of continuous improvement over a period of time.

Our commitment to suppliers
Signet aims to pursue its business activities in what it considers to be an ethical and professional manner. Specifically and subject to the needs of its business, it aims to promote stable, sustainable, long-term relationships with its suppliers and other business partners. Signet intends to live by the principles of this Code within its own operations and has adopted Social, Ethical and Environmental Principles and policies to this effect.

Legal compliance
Signet expects all its suppliers to comply with their national laws and regulations and to respect the fundamental International Labour Organisation (ILO) conventions and the Universal Declaration of Human Rights.

Where the Code or national law address the same issue, the supplier is expected, as a minimum, to be in compliance with the applicable legal requirements of the country in which it operates.

Health & safety
Signet expects its suppliers to provide a safe and healthy environment for their employees in accordance with applicable local laws and regulations. Appropriate procedures should be in place to prevent accidents and injury to health arising out of, linked with, or occurring in the course of work or as a result of the operation of employer facilities. Suppliers should be encouraged to have a nominated health & safety representative who monitors the facility’s compliance with procedures.

Specifically suppliers should ensure that:

• Safe alternatives to the use of hazardous substances are adopted


• The use of cobalt discs is avoided


• Workers’ eyesight is protected by ensuring the availability and use of appropriate magnifying tools when working on jewellery, diamonds and gemstones, and by providing appropriate lighting


• Workers are protected from repetitive strain injury as far as possible considering the ergonomics of their workplace


• Facilities have adequate ventilation from harmful fumes or dust


• Appropriate protective clothing is provided and use of protective clothing is ensured


• Facilities need to have adequate fire safety standards/procedures, including regular fire drills for all employees, appropriate fire fighting equipment, and easily accessible, and marked and open fire exits in case of emergency


• Residential facilities for workers are kept safe and healthy in accordance with local laws and regulations


• Facilities should have easily accessible, adequate and clean bathrooms


• Potable water should be available at all times


• Where HIV/AIDS is a significant issue in the supplier’s location of operations, suppliers should educate workers about the risk of HIV/AIDS and assist in providing access to treatment and medication as necessary.

Remuneration
Signet expects its suppliers to comply with local laws in respect of minimum wages, working hours, employee benefits and overtime.

Working hours
Suppliers are expected to comply with applicable local laws and industry standards on working hours. Suppliers should not, except in special circumstances or as permitted by local law, expect employees to work more than the lesser of:

• 48 hours per week
  
• The limits on regular hours allowed by local law.

Signet recognises that those in management positions may exceed these limits in the course of carrying out their roles and responsibilities. Also, in light of the seasonal nature of business, Signet recognises that suppliers' employees may be expected in special circumstances to work longer hours for relatively short periods of time. Where this occurs it should be in compliance with the regulations of the country of employment. Working hours exceeding 48 hours per week should be planned in a way to ensure safe and humane working conditions. Where the company is party to a collective bargaining agreement freely negotiated with worker organisations (as defined by the ILO) representing a significant portion of its workforce, it may require overtime work in accordance with such agreement to meet short-term business demand.

Discrimination
Signet expects that its suppliers will not discriminate on race, caste, origin, religion, disability, gender, sexual orientation, union or political affiliation or age.

Harassment and abuse
Signet expects that its suppliers will provide a safe workplace free from harassment, and they will not permit the use of monetary fines, corporal punishment or other forms of mental or physical abuse, coercion or intimidation.

Forced labour
Signet expects that its suppliers will not permit the use of any forced labour, whether in the form of prison labour, indentured labour, bonded labour or otherwise. Forced labour should be considered to include any work or service which is extracted from any person under the threat of penalty for its non-performance and for which the worker does not offer himself or herself voluntarily.

Child labour
Signet objects to the employment of persons younger than 15 years of age (or 14 where the law of the country permits) or younger than the age for completing compulsory education where this is greater than 15 in the relevant country. In addition, employers must comply with all their local legal requirements for young workers, particularly those pertaining to hours of work, wages, health and safety and general working conditions. A younger worker is defined as any worker over the age of a child as defined above and under the age of 18 years old.

Child labour should be phased out in a responsible manner that does not harm the welfare of the child and ensures that the child’s right to health and education are met.

Freedom of association
Signet expects that its suppliers will not prevent employees and other workers from associating freely with any lawful workers' association or collective bargaining association. Where laws prohibit these freedoms, the supplier is encouraged to facilitate parallel means of association and bargaining.

Environment
Signet expects its suppliers to protect the Environment within their respective spheres of influence. This includes supporting initiatives to promote greater environmental responsibility along the entire jewellery supply chain as well as complying with relevant locally applicable environmental law and regulations.

More specifically Signet believes that natural resources should be developed in a manner that respects the needs of current and future generations. The jewellery industry uses metals and other minerals for a wide variety of purposes and it is therefore in the industry’s best interest to ensure that the minerals upon which it depends are obtained, produced and used in environmentally and socially responsible ways.

Ethics and integrity
Signet expects that its suppliers will conduct business with integrity and communicate honestly regarding the nature of the products they supply, disclosing accurately their weight, colour and clarity, treatments of gemstones, the standard of fineness and trademarks of articles of precious metals and other matters as required by applicable federal, state and local laws and regulations.

Conflict Diamonds
Signet requires a warranty, in the form agreed by the World Diamond Council, for any product fabricated from rough diamonds mined from 1 January 2003 onwards.

Read more about Conflict Diamonds.

Monitoring
Suppliers are encouraged to institute a self-monitoring system based on this Code and move towards independent verification of Code compliance.

Communication
Suppliers are encouraged to take appropriate steps to ensure the provisions of this Code are communicated to their employees and their own supply chain. Suppliers are also encouraged to ensure that the Principles referred to above are adopted and applied by their employees, suppliers, agents and contractors so far as reasonably possible.

UPDATED NOVEMBER 2004