Environmental
Standards in the Supply Chain

GRI 308: Supplier Environmental AssessmentManagement Approach

REWE Group obtains a broad range of products and product components from sources located inside and outside Germany. To improve the environmental impact along the supply chain, REWE Group considers observance of environmental standards when it selects its suppliers and business partners. It also works with its suppliers and business partners to make supply chains more transparent and production more environmentally conscious. With the Guideline for Sustainable Business Practises, REWE Group has formulated the principles of its business relationships. Its environmental principles include:

• Prudent use of such resources as land, air, water and natural raw materials,
• Protection and preservation of natural ecosystems and biodiversity
• Avoidance and reduction of environmental risks

The principles apply both to the company’s own business processes and to those of REWE Group’s business partners and suppliers. REWE Group reserves the right to apply sanctions when the principles contained in the Guideline for Sustainable Business Practices are deliberately and flagrantly breached.
To identify significant environmental impacts and to take appropriate steps in product supply chains that, on occasion, can be both complex and global, REWE Group has set up a strategic process that bundles the various strategies related to the pillar Green Products.

Activities relating to environmental standards in the supply chain are included in the “Strategy Green Products 2030”, which was newly developed in 2017 for REWE and PENNY in Germany under the area of action “conservation of resources”. The content of the area of action will be implemented using the overarching management approach that defines the principles and instruments for implementing measures. (link to Management Approach).

The objective of the area of action “conservation of resources” is the protection of natural resources and the preservation of biodiversity along the supply chains. The focus issues of circular economy, biodiversity and water have been defined, and specific work is being carried out on these.

In order to make progress in the area of action “conservation of resources” measurable, the following key performance indicators for store brands have been defined (for more information, see the overarching Management Approach Green Products):

KPI 1: By the end of 2030, 100 per cent of relevant food and non-food producers are to be integrated into an environmental programme

KPI 2: By the end of 2030, 100 per cent of store-brand packaging is to be more environmentally friendly (see GRI 301: Materials).

Measures to achieve KPI 1

In 2016, REWE Group markedly expanded its effort to identify risks. The results of the risk assessment were used to develop measures for the area of action “conservation of resources” for the various product groups. In addition, an environmental programme for suppliers will be implemented in the future. The so-called Green Production Programme is based on a process that identifies the environmental effects in production sites in order to improve them. A pilot project with selected suppliers of metal and plastic products will take place in 2018, as the environmental impact in these product groups is comparatively high. The plan is for additional production sites to be integrated into the programme after completion of the pilot project. In addition to the Green Production Program which, among other things, is based on instruments from the amfori Business Environmental Performance Initiative (BEPI), there are already established programmes for other product lines, such as the detox programme.

Standards

When it implements improvements, REWE Group applies internationally recognised standards such as the GOTS seal for sustainable textiles or FSC® and PEFC™ certification for sustainable forest management. REWE Group successfully achieved the goal of increasing its share of store-brand textile products made of more sustainable cotton from 56 per cent in 2015 to 70 per cent by the end of 2017. REWE Group is now working to increase its share of textiles made of more sustainable cotton at REWE, PENNY and toom Baumarkt DIY stores in Germany to 100 per cent by 2025. The company uses CmiA (Cotton made in Africa), GOTS and textiles made from recycled fibre. REWE Group also plays an active role in platforms like the Forum for Sustainable Palm Oil and the German Initiative on Sustainable Cocoa as a way of refining standards and initiating industry-wide improvements in environmental conditions (see GRI 204: Procurement Practices).

GRI 308-2: Negative environmental impacts in the supply chain and actions taken

Pesticide Use in Conventional Fruit and Vegetable Farming

REWE Group has set the goal of continuously reducing the amount of pesticides used in the conventional cultivation of fruit and vegetables. In this effort, REWE Group works with farmers, NGOs and scientific experts to develop solutions that have the lowest-possible impact on the environment and assure production and yield certainty for farmers. REWE Group has drawn up a black list that contains substances that farmers may not use. The list was significantly expanded in 2016. REWE Group regularly monitors the progress being made in its pesticide-reduction programme. As part of this work, REWE Group has commissioned the environmental group GLOBAL 2000 to prepare an annual pesticide-impact report since 2009. This report includes three impact indices based on a defined methodology. The results show that a reduction in the indices has occurred since the base year of 2009.

Detox Programme for Safe Textiles

To improve the environmental impact of the textile supply chain, REWE Group joined Greenpeace’s detox campaign in 2014. In addition, it has set up a related programme for products with REWE Group as the distribution company in the product groups clothing, shoes and household textiles. The goal is to create safe textile production that eliminates hazardous chemicals by 2020. To achieve this objective, REWE Group is working with its suppliers to systematically remove hazardous chemicals from textile production.

Chemicals are primarily used in textile production during so-called wet processes that involve dyeing, bleaching and washing. The health of factory workers can be endangered when hazardous substances are used in these production steps. In addition, bodies of water and other ecosystems can be negatively impacted if chemicals contained in wastewater enter the environment.

As part of the implementation of the detox programme, a roadmap pointing the way to 2020 was approved in 2014. The current status of the roadmap is documented in annual progress reports (the progress reports can be downloaded here: Progress report 2015, Progress report 2016, Progress report 2017). REWE Group’s strategy comprises three elements:

1. Chemical Management

Chemical management includes the continuous development of requirements for suppliers and products. REWE Group has developed the following instruments to perform this work:

• The Manufacturing Restricted Substances List (MRSL) contains chemicals that REWE Group has rated as hazardous and that may not be used in production operations. It also includes thresholds, testing methodologies and schedules for eliminating the chemicals. The MRSL is updated annually. The methods used to perform the updating were enhanced in 2016 as well. As part of the new screening process, 38 new substances were rated as hazardous and added to the MRSL. The new MRSL 3.0 was released in December 2017 (more information on the screening process is available here, the current MRSL can be downloaded here).
• REWE Group has conducted five pilot projects in which suppliers and wet-process factories were assisted in their efforts to eliminate selected chemicals. The fifth project is currently being implemented. The results are available to other suppliers as case studies.
• A ban on the hazardous chemical groups polyfluorinated and perfluorinated chemicals (PFCs), alkylphenol ethoxylates (APEOs) and alkylphenols (APs) took effect on 31 December 2016 as part of the detox programme. Information about these chemicals was provided to the suppliers in the form of chemical fact sheets. REWE Group has also conducted training about the substitution of these chemicals. Since 31 December 2017, bans have been in place for four other chemical groups (chlorophenols, flame retardants, short-chain chlorinated paraffins and the individual substance chromium VI). Chemical fact sheets are also now available for the new chemical groups.
• Wastewater tests are used to determine the current status of wet-process factories and to verify whether substitutions have been made. As a way of initiating improvements, REWE Group helps factories introduce systematic chemical management.

2. Supplier Management

An important pre-condition for the success of the detox programme is collaboration along the supply chain. This is necessary in particular because hazardous chemicals are generally used by the upstream suppliers of REWE Group’s direct business partners and not the direct business partners themselves. For this reason, supplier management aims to create close relationships with strategic suppliers and to gain them as partners for the detox programme. REWE Group has already reached an important goal: All suppliers in the supply chain have committed themselves to the detox programme. REWE Group has implemented the following measures:

• In the first step, REWE Group developed a brochure containing the most important information and had it translated into four languages.
• In 2015 and 2016, REWE Group organised a number of meetings, events and workshops, including a supplier conference that was held in August 2015 in Bangkok.
• REWE Group has developed a manual for suppliers. This supplier tool kit contains the most important information related to the implementation of the detox programme.
• A capacity-building programme was developed for wet-process factories. This programme is designed to enable the factories to adapt their chemical management practises to the detox requirements. For this purpose, local advisory structures are to be set up in China and Bangladesh to provide practical guidance to the factories. Experts will be trained as part of this work with local organisations, and a tailored training programme will be developed. As part of the pilot phase, two kick-off events were held in 2017 with suppliers and producers in Shanghai and Dhaka, and local trainers were trained in two five-day workshops. During the course of the training programme, a total of 110 producers are undergoing training and receiving advice. As part of this effort, REWE Group is working with the German Corporation for International Cooperation (GIZ) within the develoPPP.de programme of the German Federal Ministry for Economic Cooperation and Development (BMZ), as well as with the company Tchibo.
• To ensure that the detox programme is carried out effectively, REWE Group and its strategic suppliers are jointly creating a pool of wet-process factories with which they are intensely working to reach the detox goals.
• The detox requirements are a binding stipulation in the business agreements reached with suppliers. Suppliers must sign the detox commitment, a pledge in which they are required to eliminate hazardous chemicals and to list wet production sites in the supply chain that must also agree to adhere to the detox commitment. Suppliers must provide valid water test reports to document their successful substitution work and their observance of pre-defined thresholds. These reports must be posted on the publicly accessible IPE platform. The supplier must present this proof before products may be shipped. If these requirements are not met, an action plan to eliminate the causes will be developed.

3. Stakeholder Commitment

Given the nature of complex supply chains and the variety of chemicals being used, a joint approach to the issue of safer textile production is imperative. REWE Group plays an active role in the dialogue with stakeholders on a number of different levels:

• It talks about its experiences and describes best practices in discussions with other retailers and textile companies.
• REWE Group is also in dialogue with academic and scientific institutions. For example, it participated in a colloquium organised by the University of Stuttgart on the subject of “Chemical Management and Environmental Protection in the Textile Chain”.
• In its position in the Chemical and Environmental Management working group and alliance initiative of the Alliance for Sustainable Textiles, REWE Group is working to refine standards and their implementation in the supply chain.
• In cooperation with testing institutions, tests are being conducted to determine whether the thresholds set for chemicals reflect the current state of technology.
• REWE Group continuously evaluates the data from wastewater tests to track overall progress in the work to substitute hazardous chemicals and publicly releases this analysis as discharge data reports. In the future, REWE Group will no longer publish separate discharge data reports, as the analysis of effluent test results will be integrated into the detox progress report (see above).
• To transparently inform stakeholders, REWE Group releases an annual detox progress report and posts information on the REWE Group’s website (the progress reports can be downloaded here: Progress report 2015, Progress report 2016, Progress report 2017).

4. Closed Loop

As part of its detox commitment, REWE Group is developing measures to promote closed loops in textiles. The following steps have been taken in recent years:

• Completion of an scientific study on the topic of closed loops in cooperation with Hong Kong University of Science and Technology.
• Introduction of a collection system for textiles. By the end of 2017, 334 containers had been placed at 276 locations for the collection of used clothing.
• Assortments of products with recycle fibres.
• Customer communications on the topics of environmentally conscious washing and upcycling textiles.