What are Kaufland Romania's long-term goals for ESG performance? Are there any specific targets you have set for reducing your environmental impact (water and energy consumption)?

Since we first started reporting on sustainability, in 2017, we measured our progress using the Global Reporting Initiative (GRI) Standards, the most widely used globally. This allows us to analyze our economic, social, and environmental impact while identifying areas for improvement. At the same time, we assess ESG factors to identify and mitigate potential risks.

This dual approach of impact assessment and risk management enables us to get a better understanding of the context, trying to avoid becoming vulnerable when facing unpredictable contexts. For instance, during the pandemic, our commitment to local partnerships and a shortened supply chain - with 85% of our food products being locally sourced - allowed us to navigate the significant disruptions in the supply of imported goods.

The data collected from previous reports show how our impact has progressed. In 2015, 50% of our suppliers were from Romania; today, that figure stands at approx—80%. Our extensive network of local partners ensured we could continue providing fresh, local products in every Kaufland store throughout the pandemic. We deeply value our partnerships and believe in collaborative, mutually beneficial relationships.

Acknowledging the financial strain the first lockdown placed on our local suppliers, we proactively shortened payment terms – from 30 to 7 days for most, and from 7 to 3 days for fresh produce suppliers – providing vital support during these challenging times.

Our future priorities focus on expanding the range of sustainable products, collecting and packaging recycling, reducing food waste, strengthening internal and external communication on sustainability, and promoting sustainable construction and energy management. In total, the companies of Schwarz Group will reduce their operational greenhouse gas emissions (scope 1 and 2) by 55 percent by 2030 compared to 2019*. To achieve this mutually set goal, all companies of Schwarz Group have procured 100% of their electricity from renewable energies since fiscal year 2022. Kaufland Romania has made significant progress: over €21 million invested in solar panels installed on our buildings over the last three years. We equipped our stores with energy-efficient technologies like LED lighting and motion sensors, reducing energy consumption by 3kW per square meter. Additionally, we offer 140 customer electric vehicle charging stations powered by green energy, further promoting sustainable transportation. We also make efforts to reduce water consumption, by installing water-saving fixtures in all our stores and optimizing our cleaning processes.
 
Does Kaufland Romania have any sustainability criteria for its suppliers? How do you encourage and collaborate with suppliers to adopt more sustainable practices?

By prioritizing partnerships with local suppliers - 79% of whom are based in Romania - we reduce our carbon footprint and bolster the local economy.

Our stores offer an expanding selection of environmentally and socially responsible products. To empower our customers to make informed choices, we emphasize transparency through clear and accurate product labeling. This is particularly important for our private-label products, which adhere to stringent quality and labeling standards developed in collaboration with our suppliers.

In 2022 alone, we conducted nine social audits to assess supplier compliance with our Code of Business Conduct, which outlines our expectations for fair labor practices, environmental protection, and ethical operations. We remain dedicated to pushing the boundaries of sustainability in the Romanian retail industry, inspiring others to join us on this important journey.

Beyond reducing overall packaging waste, how is Kaufland Romania specifically working to increase the use of recycled or compostable packaging materials in its brand products? Could you tell us what the timelines are for reaching these goals?

Kaufland Romania is tackling the global plastic pollution crisis head-on through "REset Plastic", our comprehensive, group-wide strategy. Our vision is clear: "Less Plastic - Closed Loops." To achieve this, we've set ambitious targets for our private label packaging by 2025, aiming for a 30% reduction in plastic use, 100% recyclability, and an average of 25% recycled content compared to 2017 levels.

While we've made significant progress, achieving a 28% reduction in plastic use, 53% recyclability, and 17% recycled content across all Kaufland countries by 2022, we recognize there's more work to be done.

Does Kaufland Romania have a specific target for reducing its plastic packaging waste by 2025? Are there any ambitious goals for increasing the percentage of products sourced from local Romanian farms?

Kaufland Romania aims to reduce plastic in private label packaging by 30% by 2025, compared to 2017 levels. Since 80% of our emissions come from the products and services sold, we also encourage our suppliers to set climate targets by 2026, following the Science Based Targets initiative (SBTi). To drive impactful change, we set two goals by 2025, as stated in our most recent sustainability report. We plan to engage Romanian suppliers in developing innovative sustainable packaging solutions and conduct five sustainability training sessions for them, with the Sustainability Embassy in Romania but also at the international level.

About two years ago, we created a dedicated program to help Kaufland and its Romanian suppliers adopt sustainable packaging practices. From the candidates who voluntarily joined the program, ten food suppliers were selected for on-site audits to examine and identify potential improvements for their packaging processes, focusing on recyclability and environmental performance. The initial assessment revealed that none of the suppliers had a sustainability strategy, set targets, used recycled content, or communicated their environmental performance.

What percentage of your suppliers are local?

According to our latest social-economic impact report for the 2023 fiscal year, approximately 80% of Kaufland Romania's suppliers are local. This amounts to over 2,500 local partners out of our total 3,200 suppliers. We invested 2.83 billion euros in products and services from these local suppliers, representing 79% of our total supplier expenses. These figures highlight our commitment to supporting the Romanian economy and fostering local partnerships.

How is the retail industry achieving sustainability goals compared to other industries in Romania?

We feel that the retail industry in Romania has made major progress towards sustainability in recent years, driven largely by consumers' growing interest in sustainable products and practices. A 2023 global study by Bain & Company found that 50% of consumers consider sustainability to be among the top 4 criteria influencing their purchasing decisions. This trend is also evident in Romania, where consumers are increasingly seeking out responsible brands, which makes us optimistic about the future of sustainability.

What are the biggest challenges Kaufland Romania faces in implementing its ESG strategy? What exciting opportunities do you see for further integrating sustainability into your business model?

One of the main challenges Kaufland Romania faces in implementing our ESG strategy is adapting to the evolving landscape of sustainability reporting regulations, both at the European and national levels. Staying updated with the latest regulations is crucial, and we are aligning our processes with the new CSRD (Corporate Sustainability Reporting Directive) standards and incorporating new indicators into our data collection process, such as the three taxonomy indicators: revenue percentage, CAPEX, and OPEX investments in green activities, and remuneration-related metrics. These changes are necessary to comply with regulations and ensure transparency in our sustainability reporting. Locally, the Romanian Sustainability Code provides a framework for businesses to become more sustainable and transparent.

While navigating these regulatory changes can be challenging, we also see exciting opportunities for further integrating sustainability into our business model. The EU Taxonomy, for example, presents a significant opportunity to attract investment in sustainable technologies and businesses.
 
What budget will the company invest in ESG in 2024?

While we do not track a precise budget for ESG activities, in 2023, Kaufland Romania invested over €9.7 million in corporate social responsibility (CSR) initiatives, representing 4.1% of the company's gross profit. This investment encompassed various social impact projects, including two grant programs that funded non-governmental organizations across the country, as well as over 100 community and environmental projects. Furthermore, the company allocated €7 million to expand and optimize the separate collection infrastructure available to customers, demonstrating a commitment to sustainable waste management practices.
In addition to these investments, Kaufland Romania also provided employee benefits worth over €35 million, including bonuses, meal vouchers, holiday vouchers, and other benefits.