GRI 305

Climate Protection in the Supply Chain

Brief Overview:

The REWE Group endeavours to make an active contribution to climate protection and to continuously reduce greenhouse gas emissions along the supply chain. The company

is committed in its Guideline on Sustainable Business Practices to the continuous reduction of greenhouse gas emissions generated in its business processes;
adopted a climate strategy in 2020 for the upstream supply chain of private labels sold at REWE and PENNY in Germany, with the three principles of "Avoid before Reduce before Compensate" providing the framework;
aims to reduce absolute greenhouse gas emissions in the supply chains of its private labels at REWE and PENNY in Germany by 15 per cent by the end of 2030 compared with 2019 and to agree climate targets in line with the Science Based Targets initiative with all strategic private label suppliers at REWE and PENNY in Germany, who are responsible for 75 per cent of product-related emissions, by the end of 2024. In addition, the company decided in the reporting year to join the Science Based Targets initiative with REWE and PENNY in Germany and to develop new science-based targets for these business units and their supply chains in line with the 1.5 degrees target.

In addition to Circular Economy and Biodiversity, Climate is a key topic in the Environment area of action within the Green Products pillar.

GRI 305: Emissions

Management Approach

Effect

For the REWE Group, climate protection is a fundamental part of its sustainability strategy. The trade company published its first climate target at corporate level as early as 2009 and has updated it ever since. It goes without saying that the REWE Group also intends to continue reducing climate-relevant emissions in its supply chains.

The REWE Group is aware that due to its business activities as a trade and tourism company, greenhouse gas emissions may occur along the supply chain, especially at direct and indirect suppliers along the upstream value chain. 25 per cent of all global greenhouse gas emissions are caused by supply chains in the food sector – from the extraction of raw material to the production of the end product (World Economic Forum, 2021). In the European food retail sector, emissions from the upstream supply chain represent the largest share of the total emissions in this sector at 90 per cent (McKinsey&Company, 2021).

Climate change also has an impact on the REWE Group (see Risk Management): Extreme weather events, which are occurring more frequently due to climate change, can lead to agricultural damage and losses and thus also reduce delivery reliability. The REWE Group's own locations can be affected, as in the case of the flood disaster in Rhineland-Palatinate, North Rhine-Westphalia, Bavaria and Saxony in July 2021. In tourism, the climate change can endanger entire destinations in the long term – such as coastal regions or ski resorts. Regulatory requirements are increasing, and there is a growing demand for sustainable climate protection by stakeholders and customers. But this also means opportunities for the REWE Group: Animal welfare measures, lower-emission production of goods, compliance with environmental standards and investments in transformation cannot only have a positive effect on the purchasing behaviour of consumers, but can also offset the costs of the negative consequences of climate change in the long term.

The company's strategy and commitment to Climate Protection at Corporate Level as well as in the supply chain make a positive contribution to reducing climate-relevant emissions.

Climate change also has an impact on the REWE Group: Since agriculture is at great risk of suffering damage and losses due to extreme weather events, this can decrease yields and lead to reduced delivery reliability, for example. In tourism, the climate change can endanger entire destinations in the long term – such as coastal regions or ski resorts.

Principles

In its Guideline on Sustainable Business Practices, the REWE Group is committed to the continuous reduction of greenhouse gas emissions generated in its business processes.

The trade company published its first climate target at corporate level as early as 2009 and has updated it ever since (see Climate Protection at Corporate Level). But the REWE Group also aims to reduce climate-relevant emissions along the supply chain. Therefore, the Group defined a climate strategy for the upstream supply chain of private labels sold at REWE and PENNY in Germany. This was adopted in 2020 and set out in the Guideline on Climate Protection in the Supply Chain at the beginning of 2022. Based on this, the REWE Group is now developing a comprehensive climate protection strategy.

Strategic Approach

At REWE and PENNY in Germany, the three principles “Avoid before Reduce before Compensate” provide the framework for the climate strategy in the supply chain.

Avoid: Avoiding the emission of climate-damaging greenhouse gases along the upstream supply chains of products wherever possible is the top priority. Especially for goods with a high impact on our climate, this objective is to be achieved, for example, by substituting products or raw materials, avoiding deforestation or omitting packaging or packaging components. An example are alternative plant-based products that cause less emissions due to the omission of greenhouse gases from animal husbandry.

Reduce: Wherever emissions cannot be completely avoided, they are to be reduced by using more climate-friendly raw materials and production methods, more eco-friendly packaging or shorter transport routes. Examples include the use of deforestation-free animal feed or recycled paper instead of virgin fibre.

Compensate: Residual emissions that are unavoidable during the extraction of raw materials, their processing or the transport of goods are to be compensated through the promotion and support of climate protection projects. These projects shall be verified or certified in accordance with a recognised standard.

REWE and PENNY in Germany have set science-based, strategic objectives with regard to Climate Protection in the Supply Chain, see section Objectives.

In order to achieve their objective, REWE and PENNY in Germany followed a four-step process in their climate strategy for the supply chain as in the Approach for More Sustainable Supply Chains: assortment and risk analysis, derivation of focus topics, implementation of measures, monitoring and reporting.

Assortment and risk analysis: The strategy on climate protection in the upstream supply chain comprises all private label products. In 2019, REWE and PENNY in Germany calculated a CO₂e footprint for their supply chains with more than 11,000 private label products - amounting to around 4.6 million tonnes of CO₂e.

The calculation of Scope 3 emissions complies with the requirements of the Greenhouse Gas Protocol, a standard for the accounting of greenhouse gas emissions. Due to the complexity of purchasing and the large number of suppliers and purchased products, the Co₂e footprint was calculated using an established expenditure-based method derived from the so-called “Environmentally Extended Input-Output Model”. This model maps global flows of goods and the climate impacts (in a specific sector and in a specific region) that correspond to the purchasing volume. The emission factors taken into account in the calculation of the CO₂e footprint include the climate impacts along the upstream value chain from the cultivation phase to the factory gate. For example, the climate impacts of rearing, slaughtering and processing a pig, including feed production (plant cultivation, harvesting and further processing), were taken into account. The emissions for packaging and transport were estimated separately.

The emission factors taken into account in the calculation of the CO₂e footprint include the climate impacts along the upstream value chain from the cultivation phase to the factory gate.

Scope 3 emissions from category 1 (purchased goods and services) were assessed based on the purchased goods data for the main product groups. Third-party brands and other purchased goods (e.g. operating materials and resources) and services were not included.

The focus of DER Touristik is currently still on Scope 1 and Scope 2 emissions as well as Scope 3 emissions caused by employees, such as business trips or the use of paper. The travels sold and carried out by DER Touristik account for by far the largest share of emissions in Scope 3. However, there is still no uniform calculation basis available for this. DER Touristik is working with various partners on a uniform calculation standard for the travel sector (see Measures and Projects).
Derivation of focus topics: Climate-relevant greenhouse gases are produced in all of the REWE Group’s upstream and downstream supply chains. Scope 3 emissions from category 1 of the upstream supply chain of private labels account for the largest share at REWE and PENNY in Germany: 62 per cent is attributable to the stage of raw material production (including agriculture), 24 per cent to processing, six per cent to packaging and eight per cent to transport.

The evaluation of the assortment and risk analysis revealed a highly fragmented footprint. REWE and PENNY in Germany were able to identify eight private label product groups that initially take centre stage when deriving measures to reduce the CO₂e footprint due to their high climate impact: Milk and dairy products, sausage, cheese, poultry, eggs, pork, beef, fruit and vegetables. Animal products account for around 42 per cent of the footprint in the product range, plant products (i.e. fruit and vegetables) account for 12 per cent. Even though plant products generally have a significantly lower greenhouse gas intensity than animal products, they must also be considered when assessing the total greenhouse gas emissions due to the increasing demand by customers.

REWE and PENNY in Germany were able to identify eight private label product groups that initially take centre stage when deriving measures to reduce the CO₂e footprint due to their high climate impact: Milk and dairy products, sausage, cheese, poultry, eggs, pork, beef, fruit and vegetables.
Implementation: This is done at three levels, see section Implementation.
Monitoring and reporting: The activities carried out are monitored and evaluated. The findings of the monitoring are incorporated into the further development of the measures.

Objectives

The strategic objectives of REWE and PENNY in Germany have a clear focus on making product ranges more climate-friendly. In doing so, the company is guided by the requirements of the Science Based Targets initiative (SBTi) - an alliance of the UN Global Compact, World Resources Institute and WWF. This internationally recognised standard supports companies in developing science-based climate targets in line with the Paris Agreement. In addition, the company decided in the reporting year to join the Science Based Targets initiative (SBTi) with REWE and PENNY in Germany and to develop new science-based targets for these business units and their supply chains in line with the 1.5 degrees target. Registration with the initiative will take until autumn 2023.

Objective	Status
Reduction of absolute greenhouse gas emissions by 15 per cent in the supply chains by the end of 2030 (compared with 2019)
Agreeing climate targets in line with the Science Based Targets initiative with 100 per cent of strategic suppliers responsible for a total of 75 per cent of product-related emissions by the end of 2024
Implementation in progress Target achieved Not available Target not achieved

Scope: Private label products sold at REWE and PENNY in Germany

On the way to achieving their Scope 3.1 emissions objectives for the private labels of REWE and PENNY in Germany, it was found that the lack of standardisation of data as well as the measurement of the achievement of objectives pose a major challenge. This makes it much more difficult to assess the relevance of the measures.

Responsibility and Resources

Implementation of strategies and measures regarding Climate Protection in the Supply Chain is the responsibility of dedicated teams and departments in the respective sales lines. For more information, please refer to Management Approach Green Products.

Implementation

The strategic approach to Climate Protection in the Supply Chain of REWE and PENNY in Germany is implemented at the following three levels:

Definition of clear requirements and objectives: REWE and PENNY in Germany use clear objectives to promote climate protection in the supply chain on a broad basis. In addition, suppliers are given clear recommendations for action, from which binding requirements are to arise in the long term. These relate to categories such as energy, agriculture or waste and call for the use of more efficient technologies, more sustainable raw materials or the promotion of a circular economy.
Identification and realisation of improvement potentials: This takes place both across and within product ranges and forms the basis for implementing greenhouse gas-reducing measures in the value chain.
Innovation projects: Together with partners along the supply chain, the REWE Group also aims at actively shaping and promoting the transformation and climate protection in its supply chains in the form of innovation projects.

For example, the REWE Group regularly exchanges ideas and information with suppliers, industry associations and NGOs on pioneering climate protection activities in the supply chain in order to identify and implement innovative approaches for more climate-friendly production methods. In addition, the Group strives to advance industry-wide solutions.

DER Touristik also aims to improve its products (Scope 3) with regard to the climate footprint in the future. In a first step, the products are to be optimised via a guiding effect: Transparency about the climate impact of products should identify offers that are more harmful to the climate, travellers should be made aware of these, sales should be geared towards more climate-friendly products and service providers should be involved and incentivised to design climate-efficient products.

Involvement of Stakeholders

The REWE Group's stakeholders rated the topic of climate protection as particularly important for the company in the Materiality Analysis. They are informed annually about the effectiveness of measures taken via the Sustainability Report and in various dialogue formats (see Stakeholder Dialogue). This exchange allows stakeholders to provide important input on the issue.

Customers, suppliers as well as other stakeholders can submit their grievances or comments. REWE Group has established reporting and grievance mechanisms for this purpose. For more information, please refer to the Compliance section.

Measures and Projects

The measures and projects relating to Climate Protection in the Supply Chain for the reporting period are presented below - sorted thematically by the three implementation levels of the strategic approach:

Definition of Clear Requirements and Objectives:

Reduction roadmaps

In order to specifically promote climate protection in the supply chains of their private labels and to reduce emissions, REWE and PENNY in Germany are developing "reduction roadmaps" for the eight product groups with a particularly high climate impact in a first step. In the reporting year, this took place for the focus product groups milk and dairy products, eggs, pork, beef as well as and fruit and vegetables. Together, these account for 35 per cent of the total footprint - with feed, fruit and vegetable cultivation, and animal husbandry accounting for the significant share. For all five groups, the decisive factors in causing emissions are, for example, the deforestation of land or the use of fertilisers and pesticides, the production and processing of packaging materials, and, in the case of transport, fuel consumption and transport refrigeration. Based on this, further measures will be implemented. New targets will also be developed as part of the reduction roadmaps, which will be continuously expanded and adapted.

Deforestation-free supply chains

The REWE Group aims to make its supply chains at REWE and PENNY in Germany deforestation-free in the areas of wood/paper, palm oil and soy feed by the end of 2025. Among other things, this serves to reduce the CO₂e footprint in the supply chains. To this end, the company has already set itself a number of raw material objectives (see Focus Raw Materials – Food and Focus Raw Materials – Non-Food and Services).

Rewetting of peatlands with NABU - and peat-free soils

When wet, peatlands store a quarter of all terrestrial carbon, even though they occupy only three per cent of the global land area. That is why REWE is committed to the conservation and rewetting of peatlands. Starting in 2022, the REWE sales line will contribute five million euros per year to the newly established NABU Climate Fund of its long-standing partner NABU for five years. Its purpose is to counteract the drainage of peatlands caused by agriculture and peat extraction, and thus the release of large amounts of greenhouse gases. In order to achieve this, the water levels on the land are raised, thus stopping peat decomposition. The climate projects focus on northern Germany and the EU. Drained peatlands are purchased or leased, or agricultural farms are supported in converting to climate-friendly wet meadow management.

In addition, by the end of 2025, REWE Group will be converting its entire range of soil products - both private label and branded products - at REWE and PENNY Germany, as well as toom Baumarkt DIY stores, to peat-free alternatives. By not using peat, the REWE Group reduces the emission of greenhouse gases from drained moors. toom Baumarkt DIY stores also focuses on replacing peat with alternative materials in the substrate of ornamental plants, see also Focus Raw Materials – Non-Food and Services.

Making packaging more eco-friendly

The REWE Group aims to achieve 100 per cent more eco-friendly private label packaging at REWE and PENNY in Germany, toom Baumarkt DIY stores and the international sales lines (BILLA, BILLA PLUS, PENNY and ADEG) by the end of 2030. In this way, greenhouse gas emissions can be avoided - for example, by saving on plastics or using recyclates. For more information see Packaging.

Identification and Realisation of Improvement Potentials:

Online platform for supplier support

As part of their strategic supplier engagement objective (see section Objectives) fordern REWE and PENNY in Germany request their private label suppliers to develop climate targets and measures in line with the requirements of the Science Based Targets initiative (SBTi). The "REWE Group Initiative - Together for More Climate Protection" serves to monitor this commitment and supports knowledge transfer. This enables suppliers to identify reduction potential, formulate their own science-based climate targets in accordance with the SBTi and derive appropriate measures. In this way, the forces for ambitious climate protection are to be joined in dialogue with their suppliers.

Transformation Through Innovation Projects:

Plant-based product alternatives Highlight

In order to avoid climate-damaging greenhouse gases, the Group is making its range of private label products more climate-friendly and is positioning itself as a driver and market leader within the industry with innovative solutions, for example, with purely plant-based private labels.

REWE Bio + vegan currently offers more than 45 vegan organic alternative products, and the range is constantly being expanded. All products are not only vegan, but also certified organic, and unnecessary additives are avoided. Since the reporting year, the products have been marked with the NABU Climate Fund label. In the production of all REWE Bio + vegan products, the emission amount of around 43,604 tonnes of CO2 equivalents was compensated between September 2021 and January 2023, for example with a combined project for reforestation in Uruguay plus additionally planted trees in Germany as well as a wind energy project in India. This is certified according to the Verified Carbon Standard Climate, Community & Biodiversity.

In 2022, REWE‘s extensive vegan range of private label and branded products was once again honoured with the PETA Vegan Food Award 2022, including REWE To Go - Vegan Sushi Nanami in the "Best Vegan To-go Dish" category.

At its launch in October 2020, PENNY‘s private label Food for Future was the first vegan private label in the German discount sector to cover all product groups. PENNY now offers its customers more than 60 different Food for Future products, providing a wide selection for a vegan diet. The number of listed products is constantly being expanded. In addition, the private label is climate neutral. Between January and August 2022, PENNY compensated 11,099,333 tonnes of CO₂ equivalents through a Gold Standard certified wind energy project in Chile and a project in the Karwendel Nature Park. A wind energy project in India has been supported since September 2022.

For both private labels, it was decided to abandon the climate neutrality label. Since then, it has been successively removed from the products. At REWE, products have been marked with the NABU Climate Fund label since the reporting year.

With its vegan private label Vegavita at BILLA, the REWE Group Austria has been offering a 100 per cent plant-based alternative with climate-friendly ingredients, processes and more sustainable packaging materials since 2002. For example, the products are palm oil-free and, from 2023, 100 per cent of the soy will come from Europe. In the reporting year, BILLA Pflanzilla, a concept store with a purely plant-based range of products, was opened in Vienna (for more information, see Promoting Sustainable Consumption).

“Zukunftsbauer" Project for energy-efficient agriculture

Since October 2021, the "Zukunftsbauer" (Future Farmers) support programme - a joint project between PENNY in Germany and the Berchtesgadener Land dairy - has been helping farmers to make their family-run farms in the Alpine region more climate-friendly. For this purpose, the farmers of the cooperative dairy receive a support of up to 10,000 euros to help them optimise the energy efficiency of their farm - for example, using self-produced electricity in a time-optimised manner for the electric machines and the electric vehicle fleet. Since the start of the programme, 80 projects have been supported and over 600,000 euros in funding has been made available for this purpose.

The funds come from two sources: PENNY in Germany waives part of the retail margin on the sale of PENNY Zukunftsbauer private label products and all dairy products of the "Berchtesgadener Land" brand; in addition, the Berchtesgadener Land dairy doubles this amount. In this way, consumers can support the farmers in the region on their way to sustainable agriculture by buying Berchtesgadener Land products. The joint project thus shows what is possible when retailers, companies, farmers and consumers cooperate.

PRO PLANET greenhouse

For PRO PLANET greenhouse crops such as peppers, tomatoes and strawberries, REWE and PENNY in Germany rely on resource-conserving cultivation in particularly sustainable greenhouses. Renewable energies are used to reduce greenhouse gas emissions.

Travel with fewer CO₂ emissions and in a more climate-friendly manner

In order to avoid climate-damaging greenhouse gases, DER Touristik is making its portfolio more climate-friendly and is positioning itself with innovative solutions in cooperation with partners. For example, "Greenfare" was offered for the first time in the reporting period with the partner Lufthansa: At selected hotels, customers can book airfares whose CO₂ emissions are compensated not only by climate protection projects, but also by the use of sustainable aviation fuels at a fixed share of 20 per cent. Since 2021, travellers have also been able to calculate the CO₂ emissions of their trip via a cooperation with the non-profit climate protection organisation MyClimate and voluntarily make a corresponding contribution to climate protection. This offer will be further expanded. In the course of the industry project "Bewusst reisen" (Conscious Travel) (see also Promoting Sustainable Consumption), the association KlimaLink e. V. was founded. The 22 founding members, including DER Touristik and Futouris e. V. as well as other organisations, are actively working to establish industry-wide CO₂ accounting for travel via the digital provision of greenhouse gas emissions data based on a reliable, uniform standard.

In this way, travellers are to be informed transparently about the climate impact of the various travel offers and more climate-friendly travel alternatives are to be promoted specifically. In addition, this creates a basis for measuring the Scope 3 emissions of DER Touristik‘s products and services in detail, setting targets and implementing more targeted reduction measures throughout the value chain. This means that the focus in the future will be even more on avoiding and reducing emissions. A contribution to climate protection through compensation remains as a target-oriented and unavoidable measure due to the limited influence on emission reduction.