Social Aspects in the Supply Chain

The topic of Social Aspects in the Supply Chain is part of the area of action People and the Environment in the Green Products pillar.

Effect

As a leading international trade and tourism company, the REWE Group is aware of its responsibility within global flows of goods and services. In the supply chains of raw material extraction and processing, as well as in production and tourism, there is a risk of human rights violations in the form of child and forced labour or the lack of living wages and incomes. Women in particular, who often have little or no economic participation, can be affected. At the REWE Group, the focus of this problem is mainly on the 11 raw materials: coffee, cocoa, tea, palm oil, fish, fruit and vegetables in general, with a special focus on bananas and pineapples, as well as cotton/textiles and natural stone. For more information, see sections Focus Raw Materials – Food and Focus Raw Materials – Non-Food and Services.

To be able to practise business in the future, the impact of our business activities and those of our suppliers must be in line with people and the environment. We can exert an influence to avoid and reduce negative impacts on human rights and the environment, especially in the case of private label supply chains, in cooperation with suppliers and through certifications and audits by recognised standards organisations and multi-stakeholder initiatives. Comprehensive and standardised management of these risks helps to protect reputation and credibility but above all helps to prevent or minimise any violations of the human and environmental rights of potentially affected parties. The aim is to create trust among employees, business partners, suppliers and customers and to make a contribution to fair cooperation.

Principles

In its Declaration of Principles, the REWE Group is committed to strengthening human and environmental rights and preventing and minimising violations and taking remedial action. This commitment applies to its own business operations as well as to the global supply and value chains. To emphasise this firm establishment in the business, the REWE Group aligns its business operations to internationally applicable standards and guidelines, such as the Universal Declaration of Human Rights of the United Nations (UN), the United Nations Guiding Principles on Business and Human Rights (UNGP), the Conventions and Recommendations of the International Labor Organization (ILO) and the UN Global Compact. The REWE Group expects all employees and business partners to comply with applicable laws and regulations, as well as internationally recognised human rights and environmental standards.

The REWE Group also requires its suppliers to accept the Supplier Code of Conduct on compliance with corporate due diligence in the supply chain (“REWE Supplier CoC”) and to always adhere to the minimum standards set in it. According to the REWE Supplier CoC, suppliers are obliged not to violate human rights and environmental obligations in their own business areas and to pass on the corresponding obligations in a binding manner in the upstream supply chain, i.e. to the indirect suppliers of the REWE Group. The REWE Group updated the REWE Supplier CoC in October 2022. The REWE Supplier CoC therefore takes into account the requirements of the German Act on Corporate Due Diligence Obligations in Supply Chains (LkSG) that came into force on 01/01/2023.

The REWE Group’s Guideline on Sustainable Business Practices also applies to all business relationships. It includes, e.g., the prohibition of forced labour and exploitative child labour and fair treatment of employees. In the event of deliberate gross disregard of the values set out in the guideline, the REWE Group reserves the right to impose sanctions.

Due to the special nature of the tourism industry, DER Touristik Group has adopted its own supplementary Commitment to the Protection of Human Rights and also implemented a Supplier Code of Conduct . In the reporting year, a child protection guideline was also adopted (see also Child and Forced Labour as well as Child Protection).

In the Guideline on Fairness , updated in 2021, the company describes how it intends to strengthen human rights, improve working conditions and promote fair trade within the supply chains of all private label products sold at REWE, PENNY and toom Baumarkt DIY stores in Germany.

The guidelines define a binding framework for business relationships with contractual partners and specifies requirements and objectives. They are continuously updated on the basis of the latest developments. The following guidelines concern social aspects in the supply chain: Guideline on the Prevention of Child Labour, Guideline on Living Wages and Incomes and the Guideline on Women in the Supply Chain (for more information see Child and Forced Labour as well as Child Protection, Living Wages and Incomes and Women in the Supply Chain).

The commercial company is of the opinion that human rights must not be negotiable. At the end of 2019, it therefore opted in favour of binding framework conditions – combined with the indication that national legislation is insufficient, as only international regulations are effective enough and can bindingly include all stakeholders in the supply chains. In this context, the pursuit of European harmonisation in the area of corporate due diligence is generally regarded as being positive.

All corporate guidelines and processes are continuously adapted with regard to human rights and environmental due diligence and the measures established are successively implemented.

Strategic Approach

During the reporting period, the REWE Group intensively tackled implementing the German Act on Corporate Due Diligence Obligations in Supply Chains (LkSG). In order to manage risks within the supply chains and in its own business area, the REWE Group defined a process in the Declaration of Principles. The process forms the basis of the REWE Group's holistic and continuous risk management with regard to human rights and environmental due diligence. In parallel, special measures for individual sales lines exist for the reporting period (see Projects and Measures).

The following is a brief summary of the multi-stage process from the Declaration of Principles that will apply to all business areas from 2023 and is currently being implemented:

1. Risk Analysis in our own business area and in the supply chains: Detailed analyses help the REWE Group to identify potentially negative impacts on human and environmental rights as well as potentially affected parties within its own business area and within the supply chains. The results of the risk analyses are continuously incorporated into the REWE Group’s entrepreneurial decision-making processes with regard to internal business strategies as well as supplier selection and management. The REWE Group identified child and forced labour, income, working hours, discrimination, safeguarding the right to freedom of association as well as occupational health and safety as particularly sensitive areas in its supply chains.
2. Preventive and remedial measures: Following the risk assessment and prioritisation, preventive and remedial measures are taken in its own business area and in the supply chains. Where possible, relevant stakeholders are involved and information from the grievance mechanism is used. The guidelines are an important instrument with regard to preventive and remedial measures. The management of the relevant business units ensures that these guidelines, each with a clearly defined scope, take into account human rights and environmental concerns both in the respective business unit and in purchasing decisions. On the basis of the risk analyses conducted, targets and measures are defined at appropriate points. They are scrutinised and adapted when new results or findings emerge. The implementation takes place on three different levels of cooperation (see Implementation).
3. Grievance mechanism: The REWE Group has implemented a grievance procedure that allows employees and other potentially affected groups of people to report violations of human and environmental rights at any time. More information is available below in the section Grievance Management in the Supply Chains.
4. Management of violations: In cases of potential or actual human rights violations, the REWE Group endeavours to initiate appropriate remedial measures by the responsible parties. In its own business area, it takes immediate action to end the violation or risk. In cases of violations by a business partner, the REWE Group provides for appropriate responses, ranging from the request for the immediate elimination of the violation to legal action and termination of the business relationship, depending on the severity of the violation.
5. Effectiveness monitoring: The effectiveness of the measures is reviewed with the implementation of the process as part of an annual and event-related effectiveness check for continuous improvement and further development of risk management in relation to human rights and environmental aspects and monitored through training and education. The REWE Group also checks the effectiveness of its existing grievance mechanisms. The REWE Group actively cooperates with industry initiatives in order to jointly develop and operate effective grievance procedures.
6. Reporting and monitoring: The central human rights officer of the REWE Group, who is responsible for monitoring the entire risk management system, monitors and evaluates the activities carried out. The findings are incorporated into the further development of the measures. The REWE Group provides regular and transparent information on the implementation and strategic developments in its annual sustainability reports and in its publicly accessible human rights report to the Federal Office of Economics and Export Control (BAFA) from the first quarter of 2024.

On the way to achieving the targets, it was found that motivating production sites to participate in the training programme can be challenging, although most of them successfully go through the demanding training. The REWE Group is therefore adheres to the measure because of its targeted effectiveness, but is only rolling out the training to strategic production sites, as the leverage for motivation is greater here. With regard to the LkSG, the REWE Group also intends to go into supplier training even more intensively and to cooperate with platforms where suppliers can also complete training outside of REWE's offerings.

Responsibility and Resources

The REWE Group Executive Board is ultimately responsible for implementation of and compliance with the REWE Group Declaration of Principles and its approaches. In the divisions of the REWE Group, the executives supervise the operational implementation within the framework of regular and ad hoc internal reporting. The REWE Group's central human rights officer monitors the risk management system, is responsible for its continuous development, implementation of training and audits as well as external reporting. The operational implementation of human rights due diligence processes lies within the responsibility of the relevant departments, in particular the Sustainability Department, the Human Resources Department and the Purchasing Department. These are supported by other specialist departments.

Implementation of strategies and measures regarding social aspects 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 individual sales lines of the REWE Group implement the approach with measures derived for them to reduce negative social impacts on three different levels:

• Internal cooperation: Through guidelines, internal awareness-raising and training of employees, continuous monitoring of the suitability of goals and measures as well as procurement and purchasing strategies, the REWE Group establishes the importance of human rights and environmental issues among employees. The aim is to prevent or minimise risks to human and environmental rights in the selection of supplier.
• Cooperation within the supply chain: The risks that arise in the supply chain with regard to the areas of action People and Environment are specifically addressed through systematic supply chain management in close cooperation on all supply chain stages. A three-stage approach is pursued, which includes the definition of requirements, monitoring and development of stakeholders. Risks to human and environmental rights are already taken into account in the selection of suppliers, e.g. by attaching importance to the purchase of certified products.
  
  The aim is to oblige all suppliers of the individual business areas to comply with the REWE Supplier CoC. Business partners in the private label supply chains of REWE and PENNY in Germany, as well as toom Baumarkt DIY stores, are obliged to indicate the production sites where products are manufactured. By raising the contract partners’ awareness and holding them accountable, concrete rules are created to implement human and environmental rights throughout the supply chain.
  
  Training courses support suppliers and producers in implementing the requirements and continuously improving their social and ecological performance. To this end, we work directly with the raw material producers in various projects. At this level of the value chain, numerous human rights related measures are implemented (see Focus Raw Materials –Food and Focus Raw Materials – Non-Food and Services). In addition, transparency and the integration of aspects of human and environmental rights are promoted as part of the supplier evaluation. Various control mechanisms are also agreed between the individual business areas and their suppliers (e.g. rights to information, audits, certifications) to ensure the implementation of the requirements.
• Cooperation with Stakeholders: In the long term, sustainability along the supply chain can only be achieved through cooperation with all relevant stakeholders. The REWE Group is in continuous dialogue for this purpose and is involved in various national and international initiatives, alliances and forums (see Stakeholder Involvement below). The company is particularly active in projects and cooperations on the value chain level of cultivation of raw materials (see also Focus Raw Materials –Food and Focus Raw Materials – Non-Food and Services).

Business partners in the private label supply chains of REWE and PENNY in Germany, as well as toom Baumarkt DIY stores, are already obliged to indicate the production sites where products are manufactured.

The REWE Group is aware that compliance with human rights, implementation of fair working conditions and respect for environment aspects also depend strongly on states taking and implementing effective regulations and measures with regard to human and environmental rights in order to fulfil their duty to protect.

Raw Materials (Main Sourcing Countries) for REWE and PENNY in Germany

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• Cotton
  and textiles
• Fish
• Coffee
• Cocoa
• Juices
• Palm oil
• Tea
• Fruit and vegetables
• Bananas
• Pineapples
• Natural stone

For some focus raw materials, the REWE Group has defined guidelines with detailed requirements and objectives. For more information, see sections Focus Raw Materials – Food and Focus Raw Materials – Non-Food and Services.

Implementation for Production Sites in Risk Countries of REWE, PENNY and toom Baumarkt DIY Stores in Germany as well as REWE Group Austria

The REWE Group integrates into its Social Improvement Programme all production sites from defined risk countries from the first supply chain stage of private labels sold at REWE, PENNY and toom Baumarkt DIY stores in Germany. The REWE Group therefore takes the specific requirements of these supply chains into account. The programme follows the three-stage approach of requirements, monitoring and development. With regard to the risk countries, the REWE Group is guided by the assessment of the amfori standard. This is based on the World Bank’s governance indicators and further indices and is updated every year.

If a social audit is not yet available, new suppliers and production plants are informed about the REWE Group's requirements during onboarding and supported in the preparation of the first audit.

In a second step, all production sites in high-risk countries will be obliged to present audits of recognised certifications or inspection systems. These audits are carried out – both announced and unannounced – by independent third parties. Recognised social audits include audits according to the amfori BSCI standard or the SA8000 standard as well as SMETA audits by the Supplier Ethical Data Exchange. Textile production facilities in Bangladesh are also required to undergo a building safety and fire safety inspection under the Bangladesh Accord on Fire and Building Safety (see section Factory Improvement Training).

To continuously improve labour and social standards, the audit results are documented. Where the requirements are not met, improvement measures are defined together with the suppliers (remediation), and the production sites are requested to take part in amfori BSCI training courses and other trainings. If production plants are not prepared to achieve improvements, the REWE Group ultimately reserves the right to terminate the business relationship.

Proportion of Production Sites in the Stages of the Social Improvement Programme¹

	2020	2021	2022
Onboarding level	0.3 %	0.7 %	1.1 %
Audit level	99.7 %	99.2 %	98.9 %

Scope: The calculation is done on the basis of the number of production sites and covers all production sites of REWE, PENNY and toom Baumarkt DIY stores in Germany for food and non-food products of the first supply chain stage in risk countries.

Proportion of Production Sites According to Their Audit Results¹

	2020	2021	2022
SA8000	3.5 %	2.4 %	2.0 %
Naturland	0.2 %	0.2 %	0.5 %
amfori BSCI A	4.4 %	4.4 %	6.0 %
amfori BSCI B	6.6 %	6.0 %	5.4 %
amfori BSCI C	68.6 %	68.8 %	74.0 %
amfori BSCI D	0.8 %	2.2 %	1.1 %
amfori BSCI E	0 %	0 %	0 %
SMETA	6.6 %	6.0 %	6.3 %
Audit expired	9.4 %	9.2 %	4.5 %

¹ Information in rounded values.

Scope: The calculation is done on the basis of the number of production sites and covers all production sites of REWE, PENNY and toom Baumarkt DIY stores in Germany for food and non-food products of the first supply chain stage in risk countries.

Risk analyses, factory visits and work with stakeholders show that many partners at various points along the supply chain still lack the knowledge and management experience to implement processes and guidelines to ensure good working conditions and human rights. The REWE Group therefore implements numerous Measures and Projects for example to support production sites with setting up better management systems.

Involvement of Stakeholders

The topic Social Aspects in the Supply Chain was rated as relevant by stakeholders 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, which is also part of the management approach, allows stakeholders to provide important input on the issue.

For example, the area of purchasing for the sales lines REWE, PENNY and toom Baumarkt DIY stores in Germany holds annual talks with all standards organisations, as well as the emergency aid and development organisation Oxfam. The company is also in dialogue with Südwind, the Institute for Economy and Ecumenism, through the Sustainability Advisory Board. The purchasing department for the REWE, PENNY and toom Baumarkt DIY stores sales lines in Germany enters into direct dialogue with suppliers, supply chain stakeholders and also producers in joint projects. For other formats, see also section Commitment in the Context of Memberships and Initiatives below.

The measures of the individual sales lines for the reporting period are presented below – sorted thematically by the implementation levels of the approach: