Risk Management

Climate-related risks and opportunities

As a trade and tourism company, the REWE Group is affected by both the physical and transitory risks arising from climate change. Heat waves, storms, droughts and floods impact the food retail sector and raw material production. Agricultural operations suffer 63 per cent of the damage and losses caused by extreme weather events, according to the UN Food and Agriculture Organisation (FAO). The German Ministry of Food and Agriculture reports that the country’s hectare yields for grain plunged 16 percent below their three-year average as a result of the drought that struck the country during the summer of 2018. An increase of 2 degrees Celsius in the Earth’s temperature could drive up the raw-material costs of the food and beverage sector by 10 percent through 2030, according to a study done by the auditing firm PwC. The company’s own locations can also be affected by extreme weather events like the disastrous flooding that struck the German states of Rhineland-Palatinate, North Rhine-Westphalia, Bavaria and Saxony in July 2021. A total of 55 REWE, nahkauf und PENNY stores located in the Ahr Valley area of Rhineland-Palatinate were either damaged or destroyed by the flooding. In the company’s tourism business, entire destinations are threatened by climate change. In particular, these areas include islands, coastal regions and ski resorts. The REWE Group also faces transitory risks resulting from international and national efforts to reduce greenhouse gas emissions like the Paris climate agreement or the German Climate Protection Act: One example of these risks is carbon pricing, a system that will increase the costs of energy and raw materials. The general public is also calling on political leaders and companies to introduce ever-stricter climate protection measures.

Climate change is also affecting consumer behaviour: Faced with the increasingly obvious impact of climate change, German consumers want to have foods that are more sustainable. A study conducted for the Federation of German Consumer Organisations in 2021 found that 92 per cent of respondents rated the observance of tougher environmental standards and regional sources of food as important and that 95 per cent want food-production staff to have good working conditions and high animal welfare standards to be observed. Furthermore, investments in the transformation – that is things like the transition from fossil fuels to renewable energies and decarbonisation, efforts like those the REWE Group is already making – can do more than simply offset the costs associated with the negative impact of climate change: A study conducted by the auditing firm Deloitte found that the green transition will enable the economy to grow at a stronger rate over the long term than it would have if the investments in the 1.5-degree goal of the Paris climate agreement were not being made.

The REWE Group is concentrating its efforts on the company’s own impact on the environment and climate. It is continuously reducing its climate-relevant emissions in the process: After setting its climate objectives on the company level (see the section Climate Protection on the Company Level), the REWE Group issued its Guideline on Climate Action in the Supply Chain in January 2022 for the purpose of facilitating reductions in its supply chains. The REWE Group plans to more closely analyse climate-related risks and opportunities, integrate them into strategic processes and devise related measures.