Risk Management

GRI 102-11: Precautionary Principle or approach

REWE Group strives to create a balance among the economic, environmental and social impacts of its business operations wherever possible. In this process, it continuously measures its own performance and progress. When different goals come into conflict with one another, the company calls on experts from its own ranks and on external stakeholder groups.

As an international trade and tourism company, REWE Group faces a number of economic risks related to its business activities. These risks include logistics risks, price trends, and amended laws and regulations that occasionally may have short reaction times. Uniform group-wide risk management successfully addresses these risks and ensures long-range opportunities. The company’s management and supervisory bodies are informed annually about the combine’s current risk situation in a standardised report. In inventories, risk managers report to the combine about relevant individual risks from the risk areas at a specific closing date. Risks with similar content and causes are subsequently aggregated at the combine level into risk categories and classified as high, medium or low with regard to their relevance to the combine, based on the threat potential to the company’s business activities, financial position, results of operations, cash flows and REWE Group’s image.

For more information about risk management, see also the  Combined Management Report for the 2017 Business Year, pages 23–32.

Analysis of the social and ecological risks in the supply chains

To implement the topic of sustainability in the supply chains, REWE Group works in Germany with a due diligence approach that is based on the OECD guidelines for responsible agricultural supply chains. The process includes five levels: Management system, risk analysis, strategy, review and reporting.

The risk analysis in the due diligence approach is used to determine and evaluate the effects of the business activities on humans and nature. In 2016 and 2017, REWE Group Germany expanded this approach considerably to obtain a comprehensive overview of the value chains. The aim was to identify which significant negative ecological and social effects the store-brand products have and where these occur. Hence, the analysis created a basis for the strategic alignment in the area of more sustainable product ranges and can be used to decide what measures are to be taken and with which priority – with the aim of minimising risks and taking advantage of opportunities.

In one aspect of these activities, REWE Group Germany carried out a formalised risk analysis for food and non-food products of its store brands. The approach covered the company’s entire product range. To do this, the range of food and non-food products was split into 37 clusters of goods.

Two analyses were carried out: a qualitative and a quantitative analysis. Within the scope of the qualitative analysis, studies and reports were evaluated and buyers and NGOs were interviewed to determine significant sustainability topics throughout the value chains. In addition to the ecological effects, risk in the areas of working conditions and human rights were identified.

The quantitative analysis based on an input-output analysis is based on an economic model. In this case, the ecological effects in the supply chain, such as greenhouse gas emissions, were determined and converted into monetary amounts. The social effects were assessed by identifying how many people are employed in the entire supply chain for each cluster of goods. These data were linked with the company’s purchasing volume and with information about production countries and countries of origin to specifically evaluate ecological and social risks from a monetary aspect. For example, the external costs of the company’s management could be quantified for the individual clusters of goods.

Scorecards aggregate the results of the analysis for each individual cluster and provide an overview or the social and environmental costs of the respective products in the value chain. Allocating goods to the five levels of the value chain allowed a detailed consideration of the key issues.

In the “fruit and vegetables” cluster, air emissions and energy, biodiversity, soil, water, working conditions and human rights were determined to be the most important sustainability issues along the supply chain:

The scorecards indicate the key issues and their relevance and present the individual findings in detail. The results are also compared with the current sustainability activities of REWE Group Germany. This allows the necessary measures to be derived and taken.

For instance, based on the facts, REWE Group Germany was able to identify its ecological and social hot spots in the entire value chain and to determine particularly high-risk product groups. The results are used to develop new measures and are also a basis for future decisions. For example, the information was used to develop the “Green Products 2030” strategy , in which topics, key performance indicators (KPIs), goals and measures are defined. The analysis also corroborates existing activities that the company is already implementing and is the basis for continued development of the measures – such as in the area of the palm oil, cocoa and textile supply chains.