Risk Management

The REWE Group strives to reconcile the economic, ecological and social impacts of its actions, wherever possible. The REWE Group continuously examines its own performance and progress in this regard. It reflects on conflicting objectives both with experts within the company and with external stakeholders.

As an internationally active trade and tourism company, the REWE Group is exposed to various economic risks in the course of its business activities, such as logistical risks, price developments, changes in legislation and regulations with sometimes short reaction times, which can also be triggered by geopolitical risk situations, as was the case in the reporting year. A uniform risk management successfully counteracts the potential danger and sustainably secures opportunities. Each year, the management and supervisory bodies are notified in standardised form regarding the current risk situation of the Combine. To this end, risks are identified, assessed and managed independently by risk officers throughout the year using a bottom-up approach in the risk areas. Once a year, the risks of the various risk areas are identified by means of a risk area inventory and classified according to uniform Combine guidelines. Risks that occur between the respective risk inventories are reported in an ad hoc report if they have a significant impact on the Combine.

Risks having similar content and causes are combined into risk types. Subsequently, the Value at Risk is defined at corporate level and for each type of risk and classified according to the potential threat they pose to business operations, the financial and earnings position, cash flows and reputation as well as legal the position of the REWE Group.

For more information on risk management, please refer to the Management Report for the 2022 Financial Year, page 31–38.

Climate-related risks and opportunities are not yet included as part of the risk management in the management report. However, the company is already actively addressing these issues. As a trade and tourism company, the REWE Group is affected by both physical and transitory risks due to climate change. Heat, storms, droughts or floods have an impact on the food sector and the extraction of raw materials. According to the Food and Agriculture Organisation of the United Nations (FAO), agriculture alone bears 63 per cent of the damage and losses caused by extreme weather events worldwide, which are occurring more and more frequently due to climate change. According to the German Federal Ministry of Food and Agriculture, cereal yields per hectare in the drought summer of 2018 were 16 per cent below the three-year average of previous years. Global warming of just two degrees Celsius could increase raw material costs in the food and beverage sector by ten per cent by 2030 according to the auditing firm PwC. The company's own locations can also be affected by extreme weather events, as was demonstrated by the flood disasters in Rhineland-Palatinate, North Rhine-Westphalia, Bavaria and Saxony in mid-2021. In tourism, the climate change can endanger entire travel destinations in the long term. This mainly concerns islands, coastal regions or ski resorts.

Furthermore, international and national political efforts to address the topic of climate change give rise to transitional risks for the REWE Group. These include, for example, the pricing of CO₂ emissions to reduce greenhouse gas emissions as part of the Paris Agreement or the German Climate Change Act as well as increased reporting requirements under the Corporate Sustainability Reporting Directive (CSRD) or the EU taxonomy.

Climate change also has an impact on consumer behaviour: Due to the increasingly visible effects of climate change, German consumers are already demanding more sustainable food. This entails compliance with high environmental standards, regional origin of food, good working conditions for employees in food production as well as high animal welfare standards. Meeting consumers' wishes with innovative product lines or projects and initiatives can also open up opportunities for the REWE Group.

Moreover, investments in transformation – such as switching from fossil fuels to renewable energies and decarbonisation, as the REWE Group is already striving for – can offset the expected costs of the negative impacts of climate change and even more: According to a study by the auditing firm Deloitte, the economy can grow more strongly in the long term through the green transformation than without the investments in the 1.5-degree target of the Paris Agreement.