Suppliers are our Power Supply.

In 2009 our Sustainable Procurement Policy was strengthened to include additional and enhanced requirements. We are committed to maintaining an active programme of engagement to work with our suppliers to support improvements in their social and ethical practices.

In 2009, we introduced a CSR compliance questionnaire for the evaluation of companies short listed to tender for key goods and services. Suppliers must produce evidence of compliance to support their responses. This questionnaire enables suppliers to be rated and for these ratings to be integrated into the selection process.

Our procurement environmental management system was formally inspected in December 2009 and recertified for a further 3 years. Since its inception, the scope of the EMS has been extended to include all the formal purchasing centres within Legal & General and includes the development of environmental specifications for paper, furniture, IT hardware and cleaning products. It has also been adapted to meet increasing legislative requirements such as the requirement for Site Waste Management Plans and management of waste electrical equipment.

In 2009, we published our intention to benchmark a sample of our suppliers against our CSR standards to establish any areas of non-compliance. The results from this review conducted by Group Compliance indicated no significant non-compliance with our standards. In 2010, we plan to work with any suppliers whose practices are identified to be non-compliant with our CSR standards.

We are constantly developing our sustainable procurement policy. We have campaigned with our suppliers on improving their standards of operation in the following areas.

• We believe that Carbon reduction regulations will eventually move towards companies being held to account for their own emissions as well as those of their suppliers. Through 2009, we have been working with suppliers to record their carbon emissions and the proportion indirectly attributable to Legal & General as a result of us asking them to make or do something on our behalf. We estimate that around 20% of our emissions are in our supply chain.
• Uphold the four 'core' ILO conventions on labour rights
• Ensuring a minimum wage (or wages) is paid for a standard week (excluding overtime) or a wage that is sufficient to meet basic needs
• Discrimination in hiring, compensation, access to training, promotion or termination on basis of race, pregnancy, caste, natural origin, religion, age, disability, gender, marital status, sexual orientation, union membership or political affiliation
• Explanation of how they will treat Legal & General's customers fairly at all times.

Each of our business procurement centres has its own campaigns, with examples of progress in 2009 given below.

General Insurance

In 2009, Legal & General recognised that waste management arising from its general insurance building and repair services was a significant environmental issue and a major initiative was launched.

A supplier workshop was held for key suppliers which was dedicated to raising the profile of waste management and identifying any opportunities for improvement. We sought information on the level of waste being produced and this data is now being collated. In 2010 we plan to develop a waste management strategy to reduce the proportion of waste sent to landfill and increase the relative amount of materials recycled.

Fleet management

From both a health and safety and environmental perspectives, regular servicing and maintenance of vehicles is essential and of paramount importance. We therefore have systems in place to ensure that our company owned cars are serviced and maintained to the highest standard. This care includes utilising main dealers and sending out regular servicing reminders with follow-up procedures in place. Compliance to all statutory legislation is monitored and training is provided where necessary.

Our overall company car emissions have shown a significant reduction - from 163gms/km to 158 gms/ km at the end of 2008 to an average of 153g/km at the end of 2009. A target has been set to reduce these emissions further in 2010. A further reduction in our hire car emissions has also been agreed with our car rental provider. In addition a fixed list of business use cars (tool of the trade) has been introduced as a further option for drivers. The cars on this list have an average emission of 134g/km and for the first time, we are offering a hybrid car.

We recognise the achievement of our suppliers in improving their environmental and social impact through our 'Supplier Making a Difference award'. The entries for the 2009 award included our supplier of hire cars with whom we have worked collaboratively to agree contractual provisions whereby they will provide us only with low emission vehicles. One supplier has significantly reduced their carbon emissions by 27.5 tonnes in one year whilst another's innovation means a reduction in the impact of environmental pollution when managing restoration claims. The winner was decided by an external panel and included representatives from Business in the Community and the Chartered Institute of Purchasing and Supply.

The 2009 winner is KwikFit who provide tyres for our managed fleet.

We see a movement of sentiment and pressure on supply chain diversity, particularly coming from the US business. This includes diversity considerations to consider in the buying decision such as women owned businesses, ethnic minorities, disability and SME bias. In 2010 we will be considering what our approach should be in this area to build upon our sustainable procurement policy.

One important consideration in our approach to procurement, especially during a recession, is whether we have unintentionally biased decisions towards bigger suppliers as we look for security of supply in our procurement decisions. An initial view of our Key suppliers shows that 50% are SMEs.