Sustainable procurement and assortment management

In our procurement activities, we strive to purchase high-quality and safe products that are socially acceptable and environmentally safe. This provides the foundation for a sustainability-focused management of our assortment. As a retailer, our business also depends on the long-term availability of resources, as these raw materials are needed to produce and package our products.

Therefore, our actions are consistently geared to implement our group-wide purchasing policy for sustainable procurement across our entire product range. This policy sets out the fundamental requirements for sustainable supply chain and procurement management. At the same time, our purchasing policy forms the framework for various guidelines that address specific issues related to individual categories of products and raw materials. By developing and implementing these guidelines for sustainable purchasing, we are strengthening our procurement channels and help improve the sustainability of our products and thus our entire assortment.

Issue	Goals	Status of goal attainment	Measures	Status of measures
SUSTAINABLE PROCUREMENT AND ASSORTMENT MANAGEMENT	METRO committed itself to a company-wide mandatory guideline for sustainable fish purchasing. In 2016, METRO Cash & Carry set itself the target to purchase 80% of the 12 most popular fish and seafood products from sustainable sources by 2020.	Work in progress	Positioning of METRO and active exchange with experts on the issue: METRO is actively involved in numerous external committees and partnerships, such as the Global Sustainable Seafood Initiative (GSSI), the North Atlantic Seafood Forum (NASF), the World Economic Forum (WEF) and the Marine Stewardship Council (MSC) for sustainable fisheries. Another example is the Tuna 2020 Traceability Declaration, which METRO joined as a signatory in July 2017. METRO Cash & Carry further conducts sustainability workshops in the METRO Cash & Carry national subsidiaries. Their objective is to develop a specific implementation plan for each country.	Measure ongoing
	METRO committed itself to a group-wide mandatory guideline for the sustainable purchasing of products containing palm oil. METRO Cash & Carry set itself the target to purchase 100% of its own brand products containing palm oil from sustainable sources by the year 2020.	Work in progress	Sustainability workshops conducted in the METRO Cash & Carry national subsidiaries: Their objective is to develop a specific implementation plan for each country. Croatia, Poland and Italy have already switched pure palm oil to sustainability-certified palm oil.	Measure ongoing
	Real has been purchasing 100% of its own brand range of food products containing palm oil from sustainable sources since the year 2015. During the reporting period, Real set itself a new goal: 100% of the palm oil used for its own brand food products must be certified with regard to “Segregation and Identity Preservation” criteria by the year 2025.	Work in progress	Comprehensive annual supplier review: The objective is to ascertain the availability and use of palm oil or palm kernel oil that is certified with regard to “Segregation and Identity Preservation” criteria.	Measure ongoing
	METRO committed itself to improving the environmental footprint of its own brand product packaging by adopting a group-wide mandatory guideline. In the period until 2018, METRO Cash & Carry will take the following measures in the national organisations taking part in the project and the Global Own Brand Management: Investigate the packaging of 10,000 own brand products for optimisation potentials, Phase out polyvinyl chloride (PVC) packaging as much as possible and replace it with more sustainable packaging and Obtain an FSC^® (Forest Stewardship Council^®) certification for 100% of SIG and Tetrapak beverage cartons.	Work in progress	Investigation of optimisation potentials: METRO has adopted the 5R principle: remove, reduce, reuse, renew and recycle. Assessment of the environmental footprint of product packaging: METRO Cash & Carry uses PIQET, a system for analysing the life cycle of product packaging. Knowledge transfer and best-practice-sharing: METRO conducts regular packaging workshops. 10 METRO Cash & Carry national subsidiaries and the Global Own Brand Management have set themselves country-specific targets that will contribute to the overall target. In financial year 2015/16, METRO has successfully reduced the amount of packaging materials by 15%. 83% of Tetrapak and SIG private label beverage cartons are now FSC^® certified, while 62% of PVC-based own brand packaging has been replaced by more sustainable alternative solutions.	Measure ongoing
	Real will successively Switch 100% of its paper and carton packaging for own brand food products to FSC^®- and PEFCcertified materials and Assess the packaging of all own brand products on potentials for improvement of their environmental footprint (e.g. use of less material, certified materials).	Work in progress	Numerous projects on reducing the amount of packaging are ongoing. Trials with alternative fruit and vegetable packaging are also conducted. This led to the discontinuation of plastic shopping bags in January 2017.	Measure ongoing
	In 2016, METRO Cash & Carry adopted a guideline with the objective to source more than 50% of its own-brand products containing timber or paper from legal and sustainable sources by 2020.	Work in progress	Sustainability workshops in the METRO Cash & Carry national subsidiaries prepare the country-specific implementation plans. We have already been using 100% recycling paper in our head office in Düsseldorf, Germany, since the year 2015. Moreover, all products belonging to our range of centrally procured own brand outdoor furniture range are already FSC^®-certified.	Measure ongoing
	Real intends to switch its own brand products to 100% sustainable timber and paper by 2020, provided at least 50% of weight of the product consists of these resources. All printing paper, copy paper and sanitary tissues used internally at Real will be switched to 100% sustainable timber and paper. Real also intends to switch service packaging, such as packaging materials used at fresh food counters, to 100% sustainable timber and paper by 2020.	Work in progress	Involvement of Real suppliers in the objective and implementation of a supplementary supplier agreement.	Measure ongoing

We aim to ensure socially acceptable working conditions within our sourcing channels. A systematic approach to achieving social standards is an integral part of the process as well as an important tool. It enables us to take effective action against any potential risks from violations. Irresponsible practices within the supply chain can damage the confidence in our conduct and, consequently, also our business. We will therefore require our producers to be audited to the standard set out by the Business Social Compliance Initiative (BSCI) or an equivalent standard. This applies to all producers in certain high-risk countries (based on the BSCI rating) that manufacture imported goods for METRO SOURCING. It also applies to the producers of our own brand products and our own import products in the area of clothing, shoes, toys and household hardware. As of 30 September 2017, 1,218 producers have been audited. Of that group, 89% (1,080 producers) passed the audit. Producers who fail the audit are allowed a period of 12 months to provide proof of improvement by way of a follow-up audit. METRO Cash & Carry and Real have introduced more stringent supplier requirements on 1 January 2017: New suppliers will only be accepted if they are able to prove at least an acceptable audit result. Existing suppliers have been granted a transitional period of 2 years.

Social audits relating to own imports by METRO sourcing and non-food own brand products of the METRO sales lines

as of the closing date of 30/9

1 Adjustment of the BSCI rating system from three rating levels (good / improvements needed / non-compliant) in 2015 to five levels (A/B/C/D/E). The result “improvements needed” has been counted as a “passed” result. Some of the results previously counted as “improvements needed” have been reassigned to either “C” (passed) or “D” (failed) under the new rating system. The adjustment resulted in a declining proportion of producers in financial year 2015/16.

Issue

Goals

Status of goal attainment

Measures

Status of measures

1	BSCI definition of risk country.
2	This includes merchandise producers (non-food own brand products and own non-food imports) that carry out the final value-creating production step.

SUSTAINABLE PROCUREMENT AND ASSORTMENT MANAGEMENT

METRO is intensifying its efforts for fair working conditions at all producers in high-risk countries¹ where import goods are manufactured for METRO SOURCING. Our efforts also target the producers of our own brand products or our own imports in the area of clothing, shoes, toys and household hardware.

More stringent requirements for suppliers: All factories producing for us² must prove at least acceptable audit results by 1 January 2019.

Work in progress

Continued inclusion of all factories² producing non-food own brand products in a valid BSCI social standard system or equivalent.

Increasing the proportion of current audits, e.g. by providing specific training to the producers. As of 1 January 2017, new listings will only be accepted with at least an acceptable audit result.

Measure ongoing

Supply chain

Different processes that contribute to the added value of a company. At METRO, these include logistics, marketing and sales.

Glossary

Business Social Compliance Initiative (BSCI)

Founded in 2003, this alliance of European retailers works to ensure that production in all supplier countries complies with minimum social standards. The initiative aligns its standards with the UN’s Universal Declaration of Human Rights and the conventions of the International Labour Organization (ILO).

Glossary

Rating

In the financial sector, ratings represent the systematic, qualitative assessment of creditworthiness. Ratings are expressed in various grades of creditworthiness. Well-known agencies that issue ratings are Standard & Poor's, Moody’s and Fitch.

Glossary

Own brands

Developed by a retail company and trademark protected brand products with an attractive best price/performance ratio.

Glossary

Audit

A procedure that assesses an organisation’s processes and structures according to previously formulated standards and guidelines. Audits shed light on the effectiveness of process optimisation measures. If an audit is conducted by an external auditor, the certificate issued after the review can be used as evidence of adherence to standards

Glossary

Audit

Glossary