Social Aspects in the Supply Chain

The REWE Group sources a large number of products and product components through supply chains which can extended across multiple countries. The supply chain links of raw materials production and processing involve a heightened risk of non-observance of labour and social standards. Therefore, these areas are the focus of REWE Group activities.

These activities connected to social aspects and fairness within the supply chain centre on the area of action of people within the Green Products Strategy 2030 and are aimed at observing and strengthening human rights, improving working conditions, and promoting fair trade. In addition, binding standards for shared supply chains are to be implemented in cooperation with business partners and suppliers and dialogue is to be promoted between all partners.

Principles

The Guidelines on sustainable business practices of the REWE Group applies to all business relationships. It is based on the UN Universal Declaration of Human Rights, the conventions of the International Labour Association (ILO), and the UN Global Compact. It addresses such issues as a ban on forced labour and exploitative child labour as well as fair employee policies. The REWE Group reserves the right to apply sanctions when the values contained in the guidelines are deliberately and flagrantly breached. These requirements are defined in the guidelines (see box below) and the Supplier Code of Conduct updated in 2021.

In its Declaration of principles on human rights, the REWE Group commits to strengthening human rights and preventing human rights violations. This commitment applies both to our own business activities and to our global supply and value chains. Due to the special features in the tourism industry, in 2019, DER Touristik Group adopted its own, additional policy statement on the observance of human rights and also implemented a Supplier Code of Conduct. Company guidelines and processes are adapted with regard to human rights due diligence and the measures formulated are gradually implemented.

Strategy process

A four-stage process is at the heart of building fairer supply chains at the REWE Group. It is used to systematically determine, minimise and prevent potentially negative impacts of business activities on human rights:

Step 1: Detailed risk and hot spot analyses are used to identify impacts. Since 2016, the REWE Group has significantly expanded and systematised its approach to recording risks. For more information, see Product-Related Risk Analyses.

Step 2: The findings obtained in the first step are used to derive focus raw materials and issues. Three focus issues have emerged which affect a large number of focus raw materials and countries. These are Child Labour and Forced Labour, Living Wages and Income and Women in the Supply Chain.

Step 3: The focus raw materials and issues are addressed with corresponding measures to counteract negative effects. These measures are implemented through a management approach which works on three different levels:

1. Internal cooperation, through training of purchasers, for example
2. Cooperation within the supply chain, through requirements for suppliers or for purchasing certified raw materials, for example
3. Cooperation with stakeholders, by further developing standards organisations, for example

Depending on the risk identified, different measures are defined such as, for example, the requirement of standards and certifications, cooperation with standards organisations, the joining of industry initiatives as well as on-site projects with suppliers and producers.

Step 4: The activities that we conduct are monitored and evaluated. The results of this monitoring work are then incorporated into refining the measures.

Implementation

Through the REWE Group's local purchasing companies, requirements and problems can be discussed directly with suppliers and production sites. In addition, any necessary measures can be implemented. In Asia, for example, the sourcing and procurement office REWE Far East (RFE) is responsible for the procurement of certain food and non-food products and plays an important role in the improvement of working conditions in the supply chain. The Corporate Responsibility Department of RFE maintains direct contact with suppliers and assists with the social compliance process on site.

The complexity of the value chain with a large number of destination countries and service providers also poses major challenges for the travel industry. For instance, within the scope of its human rights due diligence, in 2018, DER Touristik Group carried out a risk analysis to determine actual and potential negative impacts of its business operations on human rights (for more information, see Product-Related Risk Analyses). The risk analysis scheduled for 2020 has been postponed due to the corona pandemic and is planned for 2022. DER Touristik regards the human rights due diligence process as a continuous, ongoing task.

Complaint mechanisms

The REWE Group has developed a strategy for further developing and implementing complaint mechanisms in its supply chains and documented this in its Guideline on Fairness which was updated in 2021. According to the risk analyses, the company has defined a) focus raw materials and b) the production sites in risk countries as relevant supply chain areas. In these supply chain areas, there are already approaches for internal complaint mechanisms and external “back-up” complaint mechanisms. The latter are intended to ensure that those concerned are able to address their complaints to a different organisation if they come to a dead end in the company they work for. Therefore, by raising awareness and through training, the REWE Group is promoting the use and quality of existing complaint mechanisms and strengthening the expansion of “back-up” mechanisms.

The company is implementing relevant measures to promote internal mechanisms: For example, the REWE Group formulates specific requirements for the design of effective internal complaint mechanisms in its Supplier Code of Conduct (see Principles) which was updated in 2021. As part of the REWE Group's Factory Improvement Programms support is being provided to build internal complaint mechanisms into the deeper levels of the supply chain as previous experience shows that many production sites still need to catch up when it comes to establishing transparent, trustworthy processes which are actually practised. Together with an experienced service provider, the REWE Group analyses the complaint mechanisms of factories in terms of structure and possible hurdles for employees. Particular attention is paid here to the accessibility of complaint mechanisms for migrant workers and women, for example. For instance, factories are urged to provide information in the mother language of migrant workers or designate female contacts in a targeted manner.

In order to expand back-up mechanisms, the REWE Group relies on the support of audit and certification systems, many of which are also currently developing their complaint mechanisms. The REWE Group is actively involved in amfori's project group which is working to develop a complaint mechanism in the supply chain. A pilot project for this has been running in Vietnam since 2021.

Complaint process

Business partners must report any suspected violations of regulations, laws and principles. When the REWE Group receives external complaints about incidents via formal channels such as the whistleblower system, through standards systems, or via other informal channels, an internal process to investigate and resolve the complaint takes effect, with the involvement of the complainant:

1. Receipt and review of the complaint
After the complaint has been received, it is documented and checked for reliability. Relevant contacts within the REWE Group are informed.

2. Investigation of the situation and identification of possible measures
The complaint is then investigated – for example, through conversations with suppliers, industry initiatives or NGOs, through on-site visits, or in the form of interviews with those affected. Effective measures are identified on the basis of the results.

If a complaint relates to child labour, the REWE Group works together with the organisation The Center for Child Rights and Business (formerly CCR-CSR) to ensure that remedial action can be taken in the interests of the child's well-being (also see the REWE Group's Guideline on the Prevention of Child Labour).

3. Remediation, redress and monitoring of implementation of measures
The supplier or production site in question must implement the defined measures. These might include stopping the behaviour that has been criticised, preventive measures through training, or redress for those affected, for example through compensation. The REWE Group continuously monitors implementation of the measures. The failure to implement such measures can ultimately also lead to the supplier being excluded from future orders.

4. Closure of the complaint and evaluation
If countermeasures have been successfully implemented, the complaint is closed.

The REWE Group implements specific measures to reduce negative social impacts through the following three approaches:

1. Internal cooperation

The REWE Group is working to further integrate sustainable procurement into its purchasing processes so that sustainability aspects are taken into consideration for each purchasing decision. Through the provision of risk analyses and briefings, the agreement of binding goals with the purchasing departments as well as training on sustainability topics, the REWE Group is helping to raise awareness internally. In 2021, for example, 37 employees from the relevant purchasing department of the REWE Group received training on social compliance in the area of fruit and vegetables.

In addition, employees – particularly those working in purchasing at the REWE Group – receive regular training on relevant topics in the area of labour and social standards. This means that the defined standards – such as, for example, the requirement for social audits – are given consideration when selecting suppliers and during the purchasing process. Internal reports enable continuous development within the area of action of people. External communication creates transparency for stakeholders.

2. Cooperation within the supply chain

The REWE Group addresses sustainability risks in the supply chain that are pertinent to the area of action of people in a targeted fashion through systematic supply chain management involving close cooperation with suppliers as well as commitments on the production site and raw materials production levels. By doing so, the REWE Group is initially increasing transparency along the supply chain for private label products, where this is not already present. This enables risks to be identified and then avoided or directly addressed more effectively. Efforts are also made to integrate sustainability into the supplier evaluation process.

In its supply chain management, the REWE Group takes a three-step approach with regard to the area of action of people, which includes formulation of requirements, monitoring and developing the suppliers and supply chains:

Suppliers are contractually obliged to comply with the Supplier Code of Conduct (see Principles) which was updated in 2021. All business partners in the private label supply chains of the REWE Group are obliged to name the production sites in which products for the REWE Group are produced. Through awareness campaigns and the obligations of contract partners, it is possible to create specific rules to implement sustainability in the entire supply chain. These requirements are checked by the Sustainability Department of the REWE Group during the purchasing process.

Business partners of the REWE Group are obliged to comply with minimum requirements such as international and national laws as well as the core labour standards of the International Labour Organization (ILO). This is accompanied by the obligation to comply with the following principles in particular:

• Any form of discrimination is prohibited. Business partners undertake not to exclude or favour people on the basis of their gender, their origin or for any other reason.
• Business partners must pay their employees at least the applicable national minimum wage regularly (at least monthly).
• Business partners must ensure that working hours correspond to the applicable national statutory or industry-standard working hours.
• Business partners comply with occupational health and safety regulations in accordance with national law and international standards.
• All business partners enable employees to exercise their right to freedom of association and collective bargaining agreements.
• Business partners are careful not to employ any children in their operations.
• Business partners must ensure fair and respectful treatment of employees.
• Business partners must excluded any form of forced or compulsory labour or human trafficking.

The REWE Group is constantly raising awareness of human rights and working conditions, whether at supplier events or during individual discussions with suppliers. This includes, for example, the Social Improvement Coaching,carried out in 2020, which trains suppliers on how to continuously improve social standards and working conditions at production sites.

Raw Materials in Focus

Based on the product-related risk analyses, the following critical raw materials have been defined to be relevant to the area of action of people for REWE and PENNY in Germany: coffee, cocoa, tea, palm oil, juices (in particular orange juice), fish, fruit and vegetables such as, for example, bananas or pineapples as well as cotton/textiles and natural stone.

Raw materials (main supplier countries) for REWE and PENNY in Germany

The REWE Group has defined guidelines with detailed requirements and goals certain focus raw materials. For more information, see Raw Materials in Focus – Food and Raw Materials in Focus – Non-Food.

Processing in risk countries: the social improvement programme

All production sites in the first supply chain link of defined risk countries are being integrated into the REWE Group's Social Improvement Programme, which follows the three-step approach of requirements, monitoring and development. For these risk countries, the REWE Group takes guidance from the assessment of amfori. This is based on the governance indicators of the World Bank and other indices and is updated annually.

If no social audit has been carried out yet, new suppliers and production sites are informed about the requirements of the REWE Group through onboarding (1) and given support to prepare for the first audit.

In the second step, all production sites in risk countries are obliged to present evidence of audits (2) by recognised certification organisations or verification systems. These audits – both announced and unannounced – are carried out by independent third parties. Recognised social audits include audits according to the standard of amfori BSCI or the SA8000 standard as well as SMETA audits of the Supplier Ethical Data Exchange. In addition, textile production sites in Bangladesh must also conduct building and fire safety inspections as part of the “Bangladesh Accord on Fire and Building Safety” (see Factory Improvement Training).

In order to continuously improve labour and social standards, the REWE Group records the audit results. If requirements are not complied with, it works together with the suppliers to define improvement measures (remediation (3)) and the production sites are urged to participate in amfori BSCI sessions and further training (4). If production sites are not prepared to bring about improvements, the REWE Group, as a last resort, reserves the right to terminate the business relationship.

Percentage of production sites in the stages of the social improvement Programme¹

	2019	2020	2021
Onboarding stage	0%	0.3%	0.7%
Audit stage	100%	99.7%	99.3%

Percentage of production sites according to their audit results

SA8000	4%	3.5%	2.4%
Naturland	0%	0.2%	0.2%
amfori BSCI A	5%	4.4%	4.4%
amfori BSCI B	8%	6.6%	6.0%
amfori BSCI C	67%	68.5%	68.9%
amfori BSCI D	2%	0.9%	2.2%
amfori BSCI E	0%	0%	0%
SMETA	6%	6.6%	6.0%
Expired audit	8%	9.4%	9.2%
1 Figures have been rounded. The calculation was made on the basis of the number of production sites and includes all production sites of REWE, PENNY and toom Baumarkt DIY stores in Germany for food and non-food products in the first supply chain link in risk countries.

The risk analyses, factory visits and work with stakeholders show that employees at many points in the supply chain still lack the knowledge and management experience required to implement processes and guidelines in order to ensure good working conditions and human rights.

In order to implement a programme aimed at ensuring reliable safety in the textile industry in Bangladesh, the REWE Group signed the Bangladesh Accord on Fire and Building Safety in 2013 and the subsequent “2018 Transition Accord” in 2017. The REWE Group also supports the RMG Sustainability Council (RSC), which was founded in 2020 and has officially taken over the tasks of the agreement in Bangladesh. In May 2021, the REWE Group signed the three-month extension of the “2018 Transition Accord”. The REWE Group also plans to sign the new “International Accord for Health and Safety in the Textile and Garment Industry”, which would be valid until October 2023.

3. Cooperation with stakeholders

When it comes to dealing with sustainability risks in the production of private label products, the challenges often lie in the global trade structures. These are influenced by political and social framework conditions. An important starting point for identifying the relevant topics and implementing the sustainability strategy is therefore good cooperation with the stakeholders. The REWE Group is in continuous exchange with them and invites them to regular dialogue events.

In addition, the REWE Group is involved in the following national and international initiatives which deal with human rights and working conditions in the respective context – detailed descriptions of individual initiatives can be read in Industry Initiatives and Memberships:

• Member of amfori BSCI
• Member of the Bangladesh Accord on Fire and Building Safety
• Member of the Competitive Cashew Initiative
• Member of the Consumer Goods Forum
• Member of the board at Cotton made in Africa
• Founding member of the German Initiative on Sustainable Cocoa (GISCO)
• Founding member of the Forum for Sustainable Palm Oil (FONAP)
• Member of the Technical Committee of GLOBALG.A.P. GRASP
• Participation in the Initiative for Sustainable Agricultural Supply Chains
• Founding member of the Partnership for Sustainable Orange Juice (PANAO)
• Member of the Rainforest Alliance Standards Committee
• Member of the Roundtable on Sustainable Palm Oil (RSPO)
• Member of the Sustainable Juice Platform
• Member of the The Centre for Child Rights and Business
• Member of the World Banana Forum

See Internal Cooperation.