© Rolls-Royce plc 2008 Legal Information

Suppliers

The Group sets and manages its rigorous performance standards for suppliers through its quality system, Supplier Advanced Business Relationships (SABRe). This includes a supplier code of conduct, which is complemented by the Group's purchasing code of conduct that ensures suppliers and employees work together consistently.

As outlined in previous reports, the Group seeks to foster productive supplier relationships which:

• deliver mutual business benefits;
• minimise the environmental impact of business operations;
• encourage the highest standards of ethical behaviour; and
• promote human rights.

In 2007, we introduced an assessment of current and potential suppliers which includes a focus on their approach towards corporate responsibility, in particular their policies and their approach to HS&E.

The establishment of local purchasing offices continues globally, with a new office opened in South East Asia. Training of suppliers and the sharing of best practice, with an emphasis on 'lean' techniques and waste elimination, have resulted in productivity improvements among some suppliers of up to 40 per cent.

A number of activities are helping to minimise environmental impacts. An active programme to encourage suppliers to adopt the environmental standard ISO 14001 continued in 2007, along with guidance and support to help them achieve certification.

The e-business system, Exostar, has encouraged virtual teamworking between the Group and its suppliers, significantly reducing the need to travel. In addition, a drive to 'revert' - the equivalent of raw materials recycling - has resulted in an average of 83 per cent achieved globally.

Local sourcing policies reflect government regulations, such as in the US where particular rules towards working with small and disadvantaged businesses apply.

Community investment

The Group has a long standing commitment to supporting its local communities. Community investment is an intrinsic part of the way we do business, supporting the Group's strategy and future success, particularly in the areas of:

• recruitment and retention of employees, particularly by investing in the science skills we need;
• employee engagement, by encouraging a sense of loyalty and pride and motivation about our organisation;
• development of professional and personal skills such as teamwork, leadership, adaptability and ethical behaviour; and
• reputation, by building proactive and mutually beneficial relationships in the communities in which we operate.

During 2007, we conducted our fourth global survey of community contributions, including cash, employee time and gifts in kind, using the London Benchmarking Group model. The Group's total contributions across all these areas amounted to approximately £6.6million.

Donations and sponsorship

The Group's charitable donations policy is to 'directly support causes primarily relating to educational, engineering and scientific objectives, as well as social objectives connected with the Group's business and place in the wider community.' The Group's charitable donations amounted to £1.8 million, of which £1.1 million were made in the UK. These included support for The Prince's Trust, Community Foundations and Duxford Airspace. Elsewhere Rolls-Royce made charitable donations in other key regions of £700,000, with £267,000 donated in North America, including support for the work of United Way, £144,000 in Germany and £289,000 in other regions.

A further £2.5 million was contributed in sponsorships and educational programmes, including support for the Smithsonian National Air and Space Museum in North America, the Brandenberg Summer Festival in Germany and the London Symphony Orchestra tour of China.

The Group has a stated policy of working closely with governments and institutions to highlight the many career opportunities that science and engineering can offer.

Our flagship programme, the Rolls-Royce Science Prize, recognises excellent and innovative science teaching in the UK and Northern Ireland. This year's winner, St. Stephen and All Martyrs' Primary School from Bolton, England, was awarded a total of £20,000 to invest in science education, with £120,000 awarded in prizes to 61 schools in all.

Employee time

Employee time contributed during 2007 is estimated at a value of at least £2 million, with more than 5,000 employees participating in activities such as community projects and team building activities with societal benefits.

A number of employees in the UK, North America, and Germany completed a substantial community project as a formal part of their training or personal development programme. During 2007, over 100 employees took part in 13 projects, which are recognised at the Group's Annual Learning and Development Awards.

Employee giving

In addition to the Group's own contributions, Rolls-Royce also finances the administration of a Payroll Giving Scheme for UK employees, enabling them to make tax-free donations to their chosen charities. During 2007, employees gave almost £450,000 to more than 350 charitable causes of their choice. The scheme was commended at the 2007 UK Payroll Giving Awards and is recognised as Gold Award standard by the UK Government's Payroll Giving Quality Mark. In North America, employees have contributed £125,000 directly from payroll to good causes through the United Way scheme, a percentage of which is matched by the Group.

In-kind support

The Group also supports community and educational organisations with in-kind donations, including surplus computer equipment and office furniture, use of office accommodation, the loan of engines and components and places on Group training courses.

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