Focus Raw Materials – Food

For REWE and PENNY in Germany, the critical raw materials in the food sector are assigned to the three areas of action People, Animals and Environment within the Green Products 2030 Strategy. Within these areas of action, effective measures were developed to reduce and improve ecological and social impacts.

Effect

The REWE Group is aware that its business activities as a leading international trade and tourism company may have a wide range of impacts on people, animals and the environment. In the supply chain stages of raw material cultivation and processing for the company's private label products, the ecological challenges are particularly high – as is the risk of labour and social standards being disregarded. In order to counter this risk, the REWE Group is working more closely with its suppliers.

Principles

With its Guideline on Sustainable Business Practices the REWE Group formulates the principles of its business relationships. In the area of ecology, this includes the careful use of resources such as soil, air, water and natural raw materials, the protection and preservation of natural ecosystems and biodiversity, and the avoidance and reduction of environmental risks.

Moreover, the Guideline on Sustainable Business Practices is based notably on the United Nations Universal Declaration of Human Rights, the Conventions of the International Labour Organization (ILO) and the UN Global Compact. It includes, among other things, the prohibition of forced labour or exploitative child labour. In the event of deliberate gross disregard of the values set out in the guideline, the REWE Group reserves the right to impose sanctions. The company specifies requirements on ecological and social issues in its Guidelines as well as in the PRO PLANET process for various sales lines.

Moreover, in October 2022 the Supplier Code of Conduct of the REWE Group for the compliance with its corporate due diligence in the supply chain was updated. It applies as of 1 January 2023 and outlines the minimum standards that suppliers must observe and comply with when doing business with companies of the REWE Group. According to this, suppliers must, for example, be able to prove the origin of the raw materials used all the way back to their source. The Supplier CoC also takes into account the requirements of the German Act on Corporate Due Diligence Obligations in Supply Chains (LkSG, in force since 01 January 2023). Within the framework of the law, the REWE Group also prepared the required Declaration of Principles in the reporting period, which shows its strategy for respecting human rights and environmental concerns. The REWE Group specifically addresses the risks that arise in the supply chain with regard to the areas of action People and Environment through systematic supply chain management. This is characterised by close cooperation with suppliers and commitment at the production site and raw material production level, especially through its local procurement companies. Risks to human and environmental rights are already taken into account in the selection of suppliers, by the REWE Group attaching particular importance to the purchase of certified products.

Responsibility and Resources

At REWE and PENNY in Germany, the Sustainable Goods Department is responsible for implementing strategies and measures for the individual focus raw materials together with Purchasing and Category Management. At toom Baumarkt DIY store, this is managed by a specialist department in the purchasing area with toom Purchasing and also Category Management. At the REWE Group in Austria, these are the Category Management Purchasing, Private Labels and Sustainability departments, at Lekkerland the Quality Management and Corporate Responsibility departments. Within these departments, the topics are worked on and driven forward by selected teams or specialists. For more information, please refer to Management Approach Green Products.

Implementation

As part of a Product-Related Risk Analysis for the supply chains of private label products sold at REWE and PENNY in Germany, the REWE Group identified the following critical raw materials in the food sector: fruit and vegetables, including high-risk crops such as bananas, meat and dairy products, including animal feed, as well as coffee, cocoa, juices (formerly orange juice), tea, palm oil and fish (for more information on selected supply chains for individual focus raw materials see Supply Chain).

The REWE Group is continuously working on taking social and ecological factors as well as aspects of animal welfare into account in its supply chains. In doing so, the business units rely, among other things, on internationally recognised certification standards, work together with industry initiatives and carry out own projects (for more information on the REWE Group's involvement in organisations and initiatives, see section Initiatives and Memberships).

The approaches for the individual critical raw materials are presented below:

• Fruit and Vegetables
• Palm Oil
• Cocoa
• Juices
• Coffee
• Tea
• Fish
• Meat
• Soy in Animal Feed

In general, the REWE Group's purchasing policy for fruit and vegetables is that regional procurement from local farms always has priority. Some fruit and vegetables also come from Spain, Italy or the Netherlands; specialities and exotics, for example, are also imported from South and Central America. The production of fruit and vegetables can pose human rights risks in the supply chains. Since 2013, REWE and PENNY in Germany as well as the REWE Group in Austria have therefore required in their framework agreement that suppliers of primary agricultural products in the fruit and vegetable sector commit to complying with the core labour standards of the International Labour Organization (ILO) - within the framework of the respective applicable national legislation. This includes the lawful payment of at least the applicable statutory, collectively or contractually agreed wage. Suppliers must be able to demonstrate both requirements. They are also responsible for ensuring that these requirements are also met by their suppliers. All producers of fruit and vegetable products must ensure compliance in accordance with the above requirements through external audits (for example, GLOBALG.A.P. Risk Assessment on Social Practice (GRASP), SA8000, Rainforest Alliance or amfori BSCI). This is reviewed on a risk basis as part of social compliance monitoring.

The production of fruit and vegetables can also result in increased water use or water pollution, with impacts on biodiversity. In addition to the social aspects in fruit and vegetable production, the REWE Group is therefore committed to reducing the ecological impact for REWE and PENNY in Germany. This includes the promotion of biodiversity through specific projects, for example in fruit and vegetable cultivation in Germany, guidelines on the use of pesticides and close cooperation with standards such as GLOBALG.A.P., Rainforest Alliance or Fairtrade. The focus is primarily on critical raw materials such as bananas and pineapples. At the REWE Group in Austria, all fruit and vegetable products have been subject to the strict criteria of the Pesticide Reduction Programme (PRP) of the environmental organisation GLOBAL 2000 since 2003.

Scope: REWE and PENNY in Germany.

For further information, specifically regarding challenges and commitment of the REWE Group to the raw material bananas, see raw material supply chain Bananas.

Increasing palm oil cultivation results in a loss of peat swamp and rain forests. As a result, the local population is often deprived of its livelihood and valuable habitats of animal and plant species are lost. In addition, the clearing of rainforests releases large amounts of CO₂. Against this background, in July 2021, the updated Guideline on Palm Oil and Palm Kernel Oil Products formulated the objective of using only palm oil from more sustainable production for all private label products containing palm (kernel) oil that are sold in Germany and Austria. To this end, specific requirements for the purchase of certified palm oil products were formulated in line with the different supply chain models. To ensure that this is the case, the REWE Group relies primarily on the certification standard laid down by the Roundtable on Sustainable Palm Oil (RSPO), of which it has been a member since 2011. REWE and PENNY in Germany have been using 100 per cent certified palm oil for around a decade. The REWE Group in Austria has also been sourcing exclusively certified palm oil since 2014 and has dispensed with palm oil completely for the Ja! Natürlich brand since 2018. Since the merger with the REWE Group in 2020, the Lekkerland sales line has used only certified palm oil in its private labels.

Much of the world's raw cocoa production comes from West Africa, mainly from small family-owned farms. The cocoa farmers there have to struggle with difficult economic conditions and often live with their families below the poverty line. As a result, there is a lack of necessary investment funds, and poor working conditions often prevail. This goes as far as exploitative forms of child labour (for more information see section Child and Forced Labour as well as Child Protection).

In its Guideline on Cocoa Products , the REWE Group formulated the objective of sourcing all raw cocoa used for its private labels at REWE and PENNY in Germany from more sustainable production structures by the end of 2015 – ensured by the use of the Fairtrade, Fairtrade Sourcing Program, Rainforest Alliance, Naturland and EU organic standards. By the end of the reporting year 2022, 99 per cent (2021: 99) certified raw cocoa was used for the private labels of REWE and PENNY in Germany. The missing one per cent are mainly suppliers who process very small quantities of cocoa, as they often have difficulties sourcing certified cocoa. For this reason, the REWE Group was unable to achieve its complementary objective of closing the gap to the 100 per cent target for REWE and PENNY private labels in Germany by the end of 2020. The REWE Group is continuing to work on it. At the REWE Group in Austria, the entire raw cocoa volume for the private labels was certified in 2021. Lekkerland also only uses certified cocoa in its private label products in accordance with requirements of Rainforest Alliance and Fairtrade.

In order to make a lasting contribution to improving local living conditions in the cocoa sector, at the end of 2020, the REWE Group completely switched to Fairtrade or the Fairtrade Cocoa Programme for chocolate products as well as instant chocolate milk, chocolate nut spreads and pastries of the private labels at REWE and PENNY in Germany. The same applies to all organic private labels with cocoa ingredients at REWE and PENNY in Germany. These were additionally certified according to a social standard².

For further information, specifically regarding challenges and commitment of the REWE Group to the raw material cocoa, see raw material supply chain Cocoa.

Many of the processed fruits and juice products (mixed juices and nectars) come from tropical and subtropical regions. There, but also in Europe, cultivation in monocultures, clearing for the plantations and a high use of energy, pesticides and fertilisers have a negative impact on the environment and biodiversity. Especially in tropical and subtropical countries the living and working conditions for smallholder families or pickers are often precarious or even dangerous. There are violations of human rights, such as child and forced labour, non-living wages or a lack of occupational health and safety. Such violations can also occur in Europe.

In its Guideline on Juices , which was revised in 2022, the REWE Group formulated the objective that 50 per cent of all private label juices, nectars and fruit juice drinks at REWE and PENNY in Germany (excluding promotional, seasonal and regional products) are to be certified in accordance with Rainforest Alliance, Fairtrade, Naturland, organic, SAI FSA bronze/silver/gold, GLOBALG.A.P. The REWE Group’s objective of converting its direct orange juice and orange juice for REWE and PENNY in Germany to products that are certified in accordance with Rainforest Alliance or organic by the end of 2025 was already achieved in 2020. Since the end of 2018, only certified pineapple juice has been available at REWE and PENNY in Germany.

The cultivation of coffee as a globally traded good is an important economic sector in many countries in Latin America, Asia and Africa. However, the yields of the mostly smallholders are often too low to ensure a sufficient income for the coffee farmers and their families. In addition, there are health and ecological risks due to the improper use of pesticides. In order to improve the situation of coffee farmers, the Guideline on Coffee formulated the objective of converting all coffee products of the private labels of REWE and PENNY in Germany to 100 per cent Rainforest Alliance, organic or Fairtrade certified coffee by 2020. This was achieved in 2020.

With its private label coffee, Lekkerland also contributes to sustainable cultivation: The coffee beans of the Coffee Bean Company private label are Rainforest Alliance certified and thus stand for environmentally friendly land use and socially responsible business practices.

The conventional cultivation of tea plants is often done in monocultures and with a high use of pesticides. This threatens biodiversity and the drinking water supply for people in the cultivation areas. Local workers are also face challenges such as low wages, inadequate health protection and a lack of occupational safety. This is why REWE and PENNY in Germany promote more sustainable agriculture in tea production and purchase certified goods primarily bearing the Rainforest Alliance label, but also the Fairtrade label and the EU organic logo.

In 2018, the REWE Group achieved its objective that all black and green tea products of the private labels of REWE and PENNY in Germany should contain 100 per cent certified raw materials. In addition, all herbal and fruit tea products (including rooibos tea) of the private labels of REWE and PENNY in Germany are to be certified by the end of 2025 and contain at least 30 per cent certified raw materials. The long-term objective is to continuously increase the share of certified raw materials per tea product. These objectives, as well as challenges and measures are summarised in the Guideline on Tea Products.

Global fish consumption is steadily increasing, and fishing and aquaculture provide a livelihood for millions of people. The downside: Fish stocks suffer from overfishing, and some species are even at risk of extinction. Unwanted bycatch can lead to loss of biodiversity and changes in the composition of marine ecosystems. Aquaculture also faces many ecological problems.

The REWE Group aims to actively contribute to the reduction and elimination of negative ecological, social and economic impacts in the fish and seafood supply chain. To this end, the company has formulated the following objectives for REWE's and PENNY's private label products in Germany in its Guideline on Fish and Seafood, which was updated in 2022: 100 per cent private label fish products in the areas of frozen food, convenience, fresh produce and canned food in Germany certified in accordance with Marine Stewardship Council (MSC), GLOBALG.A.P., Aquaculture Stewardship Council (ASC) or organic certification, if available. Particularly when purchasing MSC-certified goods, the REWE Group is dependent on the agreements of the riparian states regarding catch quotas. Thus, certification can be withdrawn repeatedly for individual fish species. This was the case in the reporting year: In 2022, there was a reduction in the level of objective achievement due to a lack of certified goods or the loss of certifications. For this reason, the REWE Group is committed to political agreements.

Furthermore, the aim is that all fish mono-products of the private labels at REWE and PENNY in Germany, i.e. fish products containing only one type of fish, will have tracking codes on the packaging in the long term, which will provide customers with detailed information on the origin and processing of the fish. This does not apply to the areas of convenience, snacks and ready meals. After a lower value in 2021, resulting from an error due to which the tracking code was not shown on all intended products in 2020, the resulting gap closed and improved in 2022.

The product range of the REWE Group in Austria private labels and industrial labels includes 271 MSC-certified and 71 ASC-certified fish products. Since 2019, private label fish and seafood have come exclusively from more sustainable fisheries.

Meat is a firmly established part of present-day dietary habits. Thus, the production of animal products is an essential part in agricultural production. Livestock farming in Germany is frequently characterised by a high degree of efficiency and business-oriented thinking which prioritises maximum animal output. This can have a negative impact on the animals. On the other hand, there is a social awareness of the living conditions of animals in livestock farming and the desire of consumers for more animal welfare. The REWE Group aims to reconcile this and is committed to animal-friendly husbandry. To this end, the company works together with business partners and suppliers to implement binding standards and promotes dialogue between all partners. As an additional approach, REWE and PENNY in Germany as well as the sales lines in Austria also offer vegan private labels, for example, to accompany the dynamic trend of vegan nutrition. In the Guideline on Animal Welfare, updated in 2022, the company lays down concrete measures and objectives for products of animal origin of the REWE Group's private labels sold at REWE and PENNY in Germany. For more information and a comprehensive insight into the strategic approach as well as the concrete objectives and measures, see Animal Welfare.

In conventional livestock farming, soy meal imported from overseas is often used to provide animals with sufficient protein. As land-intensive soy cultivation has a drastic impact on the environment, especially in South America, REWE and PENNY in Germany are continuously analysing all supply chains with high soy consumption. The aim is to gradually reduce the amount of soy meal imported from overseas and – where there is no substitute – a switch to certified deforestation-free soy. This was already laid down in 2013 in the Guideline on Soy in Animal Feed for private label products of animal origin sold at REWE and PENNY in Germany.

Since the end of 2019, the REWE and PENNY private label range of fresh eggs, drinking milk and fresh poultry sold in Germany has been certified deforestation-free and in major parts also physically deforestation-free. Since the end of 2021, the soy feed for the private label range of fresh pork and beef has also been certified deforestation-free. In addition, the company set itself a new target for the private labels in 2021: 100 per cent certified deforestation-free soy feed for dairy products and processed meat products with a meat content of over 50 per cent by the end of 2025. The focus is on the avoidance of soy, domestic legumes, European soy, low-risk countries of origin and certification by the recognised standards Pro Terra, ISCC+, Donau Soja/Europe Soya and RTRS.

Shares of Products with the Seal of the German Association Food without Genetic Engineering (VLOG) or organic certification

For further information, specifically regarding challenges and commitment of the REWE Group to the raw material soy in animal feed, see raw material supply chain Soy.