2021 PENNY SUSTAINABILITY REPORT
CONTENT. MESSAGE FROM THE MANAGEMENT 4 TOGETHER FOR A BETTER FUTURE 6 SUSTAINABILITY MILESTONES 7 ABOUT THE REPORT 8 ABOUT PENNY 10 Part of the REWE Group 11 A Reliable Company 13 Consumer perception of PENNY 16 Governance and Sustainable Management 20 Top Management 22 Risk Management & Compliance 24 Cyber security 28 Partnerships and affiliations 31 Awards and honors 32 Transparency and responsible communication 33 SUSTAINABILITY STRATEGY 42 A sustainable business model 44 Aligning the PENNY sustainability pillars to UN Sustainable Development Goals (SDGs) 45 Sustainability Operational Committee 47 SUSTAINABILITY STEP by STEP 48 Value chain 50 Materiality Analysis 52 Materiality Matrix 55 Business Relevance 56 The organization's impact on the community 57 Stakeholder Involvement 59 EU Taxonomy 61 SUSTAINABLE ASSORTMENT 62 Ethics in the Supply Chain Processes 68 Animal welfare 80 Environmental protection Nutrition 84 Initiatives for progress 87 ENERGY, CLIMATE AND RESOURCES Energy efficiency 94 Climate protection 100 Resource conservation 104 Logistics and mobility 110 Green buildings 114 Initiatives for progress 117 EMPLOYEES AND SOCIETY 118 Employees 124 Social Responsibility 136 Local Communities 138 Education and Awareness 142 Food Waste Management 144 Initiatives for progress 149 REPORT ASSURANCE 150 GRI & SASB Index 156 CONTENT ABOUT PENNY SUSTAINABILITY STRATEGY SUSTAINABILITY STEP BY STEP SUSTAINABLE ASSORTMENT ENERGY, CLIMATE AND RESOURCES EMPLOYEES AND SOCIETY REPORT ASSURANCE GRI & SASB INDEX
SUSTAINABILITY REPORT PENNY ROMANIA 2021 4/168 One thing is certain: we want all of these amazing projects to reach as many Romanians as possible and to contribute significantly to the Romanian economy through our activities. We intend to conceive even bigger plans in the future years to be closer to the areas in which we operate. We are sure that we will continue on the same upward trend as in recent years in terms of business and that we will achieve double-digit growth in the coming year as a result of a good strategy and a healthy growth model. Every day,wemove closer to our objectives,we turn obstacles into possibilities, and we never forget that the future is made TODAY. We invite you to inquire into our projects which have an impact on our projects with an impact on the community and the environment. To achieve transparency in communication, PENNY team will continue to publish the sustainability report annually! We wish you a great reading experience! Dear friends, In 2021 PENNYwas a sustainable company more than ever. We have learned a lot in the last completely unexpected year, characterized by uncertainty and a lot of effort on the part of the whole society. Despite all the challenges, we adapted and kept the same commitments. For us, sustainability is howwe think and design every PENNY store, and this commitment is reflected in everything we do. We believe that responsibility for the environment, colleagues, business partners, suppliers and communities is the key component for our optimal functioning. We can have successful projects and achieve performance if we take responsibility for our actions towards those around us. Our team has become stronger and stronger over the years, a performance that has to do with both the experience we have acquired on the Romanian market and the constant investments we have made in the development of our employees. For us 2021 was an important year for at least 3 reasons: • During the BREEAM Awards of 2021, the Otopeni store was designated as the most sustainable building in Central and Eastern Europe. • Also, in 2021 we built the fourth logistics center in Filiași, an industrial building with the highest BREEAM score in the world. The result obtained is exceptional: Outstanding – 92.89%. • An aspect that shows once againour determination for sustainable development is that all new stores will be certified BREEAM In-Use. And we're not going to stop there. In the coming years, our ambition is to continue our expansion strategy to serve asmany clients as possiblewhile their level of satisfactionwith our services will be improved. We also want to be closer to our customers by offering services like home delivery and accelerated expansion of the network. We plan to open more concept stores and expand our assortment portfolio. We intend to broaden our close engagement with local and regional producers. We are on the right path to align our private brand portfolio with the TripluRO goal, by which we propose that by 2023, 60% of the range will be manufactured, processed, and the main ingredient will be sourced from Romania. This will be accomplished through active participation throughout the entire production chain. As a result, we are a part of the entire process while we work closely with the producers. We will continue to prioritize sustainable development, particularly on three key pillars: • Sustainable assortment – the foundation for a balanced diet with local and regional products – all made with care throughout the operational processes and with good practices in optimizing the supply chain • Energy, climate and resources – energy efficiency, green buildings, electric mobility, online monitoring • Employees and society – social responsibility and food waste management Daniel Gross, CEO Raffaele Balestra, CFO Marek Dolezal, COO CONTENT ABOUT PENNY SUSTAINABILITY STRATEGY SUSTAINABILITY STEP BY STEP SUSTAINABLE ASSORTMENT ENERGY, CLIMATE AND RESOURCES EMPLOYEES AND SOCIETY REPORT ASSURANCE GRI & SASB INDEX
The future is made by us! Daniel Gross – CEO Raffaele Balestra – CFO Marek Dolezal – COO CONTENT ABOUT PENNY SUSTAINABILITY STRATEGY SUSTAINABILITY STEP BY STEP SUSTAINABLE ASSORTMENT ENERGY, CLIMATE AND RESOURCES EMPLOYEES AND SOCIETY REPORT ASSURANCE GRI & SASB INDEX
SUSTAINABILITY REPORT PENNY ROMANIA 2021 6/168 accesibil persoanelor cu dizabilități echiparea cu monitoare a zonelor de vânzare din dreptul produse de panificație dispun de monitorizare video TOGETHER for a better future CONTENT ABOUT PENNY SUSTAINABILITY STRATEGY SUSTAINABILITY STEP BY STEP SUSTAINABLE ASSORTMENT ENERGY, CLIMATE AND RESOURCES EMPLOYEES AND SOCIETY REPORT ASSURANCE GRI & SASB INDEX
Sustainability milestones We create value in the Romanian community for several stakeholder groups through sustainable business management. Close to consumers with Sustainable Assortments A Sustainable Business model We advocate for carbon neutrality and resource conservation The way we treat our people defines our culture! z 301 operational stores z 1 094 579 Euro – net income z 76 670 Euros – expenses for salaries and benefits for employees z 2 274 Euros – taxes and fees paid z 300 000 customers crossed the threshold of PENNY stores daily z 5.8%market share z 86.24% of the total turnover from local suppliers z 64% of food products of regional origin z 86.31% of suppliers from Romania z 48% of stores with butchers z 24 diet items Private organic brand – ”My Bio” z 17 articles within the first private plant-based diet brand – ”Food for Future” z 2.5% decrease in the specific consumption of electricity z 2 957 MWh green energy produced internally with 52 photovoltaic panel systems z 301 stores online monitored z 0 own stores heated based on fossil fuels z 2 BREEAM Outstanding certifications z 21 charging stations for electric cars z 5 815 employees z 106 708 training hours z 89% internal promotion rate z 56%women in management positions z 320 000 Euros – support for NGOs z 82.5 tons of surplus food donated CONTENT ABOUT PENNY SUSTAINABILITY STRATEGY SUSTAINABILITY STEP BY STEP SUSTAINABLE ASSORTMENT ENERGY, CLIMATE AND RESOURCES EMPLOYEES AND SOCIETY REPORT ASSURANCE GRI & SASB INDEX
SUSTAINABILITY REPORT PENNY ROMANIA 2021 8/168 About the REPORT Purpose of the report We wish to actively contribute to a low-carbon future and provide value to sustainable development goals by the Paris Agreement. The Sustainability Report for 2021 is PENNY Romania's fifth report. You will discover information on the company's sustainability plan, as well as a study of the economic, social, and environmental impact caused by our daily operations, as well as data on our ongoing attempts to reduce this impact. We emphasize our local activities that are part of the REWE Group but are approached strategically and operationally to meet the needs of the Romanian market. Reporting period We report our nonfinancial performance on key aspects of the business, actions and challenges, results, and performance of the organization for the period 1st of January - 31st of December 2021. To capture the progress from 2020 onwards, we used specific reporting indicators at the operational level. We will continue to report data on the nonfinancial performance of PENNY Romania every year. We want to be close to all our stakeholders by applying transparent communication principles. It is of high importance for us to build long-term trust relationships. Area of applicability The report captures the performance of the operations of REWE România SRL and REWE Projektentwicklung România SRL. The company's last sustainability report was the one launched for the financial year 2020. There are no data revisions compared to the previous reporting year. Reporting framework, references and guidelines After detailed research on the applicable standards in the industry, we brought minimal adjustments at the level of the approached material topics, from the perspective of the requirements of the SASB standards. For defining report limits and defining the structure, we focused our attention on the double materiality analysis. This process focuses on the analysis of the relevance of material topics for the business (outside-in perspective) in correlation with the analysis of the social and environmental impact of the organization in the community (inside– out perspective). In chapter 3, further information can be found on the minimal changes made. The report was prepared by representatives of PENNY,with the support of the external consultant qualified in the field sustainability, denkstatt Romania. The report was produced following the SASB reporting frameworks (Sustainability Accounting Standards Board) from the industry specifies Food Retail & Distributor Industry andmethodology proposed by the GRI – Global Reporting Initiative standards and meets the requirements of the Core option. The full list of the standards and indicators belonging to the two reporting frameworks, can be found in the last section of this report, named ”GRI and SASB Index”. Moreover, the report meets applicable national and international legal requirements on non-financial reporting. Understanding the content We want to disclose our economic, social and environmental impact, may it be direct and indirect. It is also important to highlight our performance in numbers, because we measure progress so that we can achieve our assumed targets. Therefore, we created a concise structure with the help of which you can identify more simply and easily aspects of our business, information regarding relevance of material topics, howwemanage impact in the community, our quantitative performance information and last but not least our initiatives thatwill lead to the achievement of the assumed targets. For this youwill find in the report specific icons of interest that have a special meaning. IMPACT EXPLANATION HOWWE MANAGE THE IMPACT OUR IMPACT AND PERFORMANCE IN FIGURES INITIATIVES FOR PROGRESS External assurance We want to be economically successful in the long term and to design our business activities so that they meet the needs of our communities while having a reduced footprint on the environment. To integrate sustainability into the community, well-informed customers are needed. Only such customers will be concerned with this issue and include it in their purchase decision. Hence, our long-term success relies on transparency in reporting our actions. When it comes to reporting the sustainability actions, for us, the term ”assurance” means an external audit, inwhich we evaluate the credibility, accuracy and relevance of our report. The report for 2021 reflects our commitment to the sustainability principles and continuous performance improvement efforts. Therefore, the report was subject to an independent audit of limited assurance, performed by Pricewaterhouse Coopers (PwC), the audited indicators being presented on page 150. CONTENT ABOUT PENNY SUSTAINABILITY STRATEGY SUSTAINABILITY STEP BY STEP SUSTAINABLE ASSORTMENT ENERGY, CLIMATE AND RESOURCES EMPLOYEES AND SOCIETY REPORT ASSURANCE GRI & SASB INDEX
Always responsible The pandemic period has left its mark on us all. Together, we face new challenges and we try to find the best solution to overcome them. We do it for our future. Because natural resources are not infinite and at the community level, we can face various social problems, our organization works with our stakeholders on critical issues that reduce the negative impact on social, environmental, and economic issues. By being responsible as an organization, we want to contribute to changing the major issues that matter most to the community in which we operate and to the world at large. By believing that a sustainable business is not built to serve people or the planet, we have established an organizational strategy that positions our business model as a sustainable one and with this, we want to reduce our environmental footprint and increase our positive social impact, while stimulating business growth. However, addressing these enormous challenges and achieving systemic transformation cannot be accomplished by a single actor. It requires close collaboration of all stakeholders, partnerships in the value chain, and collective action on the part of all. We are committed to making a difference and contributing to a brighter future for all. In this report, you will be able to identify the material factors that are essential to our business, the areas where our organization strives, and the areas where our organization together with other stakeholders produces value to create a better world for future generations while correlating an improved quality of life for everyone. To our readers As stipulated in the Paris Agreement, we have carefully examined the 17 global objectives known as the SDGs – Sustainable Development Goals, and refined our sustainability plan to align with the majority of the SDGs. This report provides an overview of our current operations that contribute to the achievement of the SDGs, as well as our efforts to integrate and operationalize these goals. For a better understanding, our performance will be translated into qualitative and quantitative forms. The European Climate Pact points out that: ”No action is too small to make a difference”. This report is intended for you (dear reader) so that you can discover the beauty of the sustainability approach from our organization’s perspective. We would like to present in this report our most important good deeds that we strived to bring into our society,with the purpose of reaching the right balance between responsible business growth, minimum negative impact and overall added value on the long term. You will find information on REWE Group, of which PENNY is a part of, at pages 10-12, information on our sustainability strategy at pages 42-47, figures and approach regarding our commitment to employees and community on pages 118-149, figures and initiatives regarding our assortment of products designed for you at pages 62-87, and figures and initiatives which are of great importance regarding our care for the environment and our planet’s resources at pages 88-117. Close to us We encourage you to read the report and remain in touch with us since we can only make a difference if we all work together. Only by working together can we begin to take action to protect the environment. Only by taking responsibility can we create a brighter future for all of us. We regard each stakeholder individually; you are all very important to us, and we are constantly willing to learn from each other. For a happy customer We set out to take action and promote awareness among many people and organizations by adopting the Paris Agreement's goals of sustainable development. You will understand what sustainability means to PENNY and how you can join this movement. You will see how we can actively contribute to some of your needs, such as the need for local products, the use of renewable energy, and being more operationally efficient to offer a safer environment and a beautiful and healthy community. We want to savemoney, not love. As a result, we establish a trustworthy relationship with our customers. Acknowledgment As a growing and dynamic organization, we will continue to be available to our employees, customers, suppliers, and collaborators. PENNY will continue to grow healthily and responsibly in the coming years, always keeping in mind worldwide standards for responsible business operations. Because every piece of input is valuable, we welcome your suggestions and comments on our report. Our sustainability team appreciates all suggestions sent to contact@penny.ro or presa@penny.ro. The success of PENNY would not be possible without all of our talented and dedicated employees.We develop together because we always want to be together. Because only those who set the standard for sustainability now will be able to succeed tomorrow and build a better future. CONTENT ABOUT PENNY SUSTAINABILITY STRATEGY SUSTAINABILITY STEP BY STEP SUSTAINABLE ASSORTMENT ENERGY, CLIMATE AND RESOURCES EMPLOYEES AND SOCIETY REPORT ASSURANCE GRI & SASB INDEX
CONTENT ABOUT PENNY SUSTAINABILITY STRATEGY SUSTAINABILITY STEP BY STEP SUSTAINABLE ASSORTMENT ENERGY, CLIMATE AND RESOURCES EMPLOYEES AND SOCIETY REPORT ASSURANCE GRI & SASB INDEX About PENNY SUSTAINABILITY REPORT PENNY ROMANIA 2021 10/168
CONTENT ABOUT PENNY SUSTAINABILITY STRATEGY SUSTAINABILITY STEP BY STEP SUSTAINABLE ASSORTMENT ENERGY, CLIMATE AND RESOURCES EMPLOYEES AND SOCIETY REPORT ASSURANCE GRI & SASB INDEX The REWE Group completed the fiscal year 2021 with a strong increase in turnover of approximately 2 billion euros, demonstrating its performance power in the challenging environment produced by the Coronavirus pandemic. Total external turnover from continuing operations increased by 2.5 percent from €74.6 billion to €76.5 billion in 2020. REWE Group's turnover fromcontinuing operations increased by 2.5 percent (2.4 percent after exchange rate adjustment) from 67.7 billion euros to 69.4 billion euros, excluding independent retail and equity entities. PENNY increased its global turnover in the International Discount business segment by 1.8 percent (1.6 percent after currency adjustment) to €5.6 billion in Italy, Austria, Hungary, Romania and the Czech Republic. The REWE Group operates through two companies throughout Romania: z REWE (Romania) SRL – as an object of activity in retail trade, the company is headquartered in Ștefăneștii de Jos, Strada Bușteni, number 7, Ilfov and has a share capital of 38 656 600 lei; 100% of the shares of this company are owned by REWE Beteiligung Holding International GMBH (DE). z REWE Projektentwicklung România SRL – carrying out mainly real estate activities, the company is headquartered in Ștefăneştii de Jos, Bușteni street, number 7, Ilfov and has a share capital of 737 786 440 lei; 100% of the shares of this company are owned by REWE Projektentwicklung România SRL). REWE (Romania) SRL is the legal entity included in this report, and the information and data presented are specific to this company. Part of the REWE Group PENNY Romania is a subsidiary of the REWE international group, a market leader in the European commercial and tourism sectors. REWE ZENTRALFINANZ EG, Cologne (RZF) and REWE – Zentral – Aktiengesellschaft, Cologne (RZAG) are the two independent groups that make up the REWE Group (RZAG). The REWE Group is committed to sustainability. Its well-defined and transparent values are also transposed for our company, guiding us in the responsible conduct of all our activities.
CONTENT ABOUT PENNY SUSTAINABILITY STRATEGY SUSTAINABILITY STEP BY STEP SUSTAINABLE ASSORTMENT ENERGY, CLIMATE AND RESOURCES EMPLOYEES AND SOCIETY REPORT ASSURANCE GRI & SASB INDEX Retail in Germany: International retail: Convenience: Do-It-Yourself (DIY) stores: Tourism: Other brands belonging to the REWE Group: REWE Group's business activities are grouped into six different sectors SUSTAINABILITY REPORT PENNY ROMANIA 2021 12/168
CONTENT ABOUT PENNY SUSTAINABILITY STRATEGY SUSTAINABILITY STEP BY STEP SUSTAINABLE ASSORTMENT ENERGY, CLIMATE AND RESOURCES EMPLOYEES AND SOCIETY REPORT ASSURANCE GRI & SASB INDEX A Reliable Company Within PENNY Romania, sustainability is an integral component of our company identity. We aim to actively contribute to the society in which we operate by protecting people, animals, and the environment.Wewant tomake a positive contribution to society while also granting value to the communities in which we operate because only in this way can we sustainably grow our business and meet our development goals. PENNY Romania began operations in 2005, with the inauguration of two discount stores under the Penny Market brand. This concept was a huge success, and 15 years later, PENNY has 301 stores, with over 70% of themoperating under the new distinctive brand ”PENNY.” The new communication platform ”We save money, not love” allows clients to shop wisely without foregoing the minor pleasures of life, such as special moments with loved ones over tasty and tender products. The ambitious expansion objectives of the PENNY Romania team are based on the continuous improvement of the customer experience and an honest price-quality ratio. Our values and the businessmodel we had adopted enabled us to growand be proactive in serving the demands of our clients. As a result, we adapt to today's consumer behaviors and add value to their lives by upgrading and updating our the format of our stores, which provides a smart shopping experience with fresh and excellent products that bring consumers a smile. Because we are part of an international organization, the PENNY International brand leads our business in five markets: Romania, Italy, Austria, the Czech Republic, and Hungary. We chose not to implement a consistent approach across all markets but to respond precisely to local requirements and trends. REWE Group's vision is to further strengthen the PENNY brand's positioning as a discounter tailored to specific national needs, with a large share of regional products and a particularly appealing price-quality ratio. We accomplish this through our brands, on which we mostly cooperate with local successful partners. As a result, we now provide a variety of locally produced goods that is greater than 50% in each of the nations where we do business, and in some, like the Czech Republic, even over 70%. In Romania, we created and assumed the TripluRo aim, which implies that by 2023, 60% of the items in the PENNY line are not only made in Romania but that the primary ingredients are also sourced from Romania and that the prefabrication process is completed in Romania.
CONTENT ABOUT PENNY SUSTAINABILITY STRATEGY SUSTAINABILITY STEP BY STEP SUSTAINABLE ASSORTMENT ENERGY, CLIMATE AND RESOURCES EMPLOYEES AND SOCIETY REPORT ASSURANCE GRI & SASB INDEX In 2020, we began a new strategic cycle in which we would invest over 1 billion Euros in Romania until 2029 through measures implemented within the seven pillars of development: 1. Renovation of the store and enhanced shopping experience. We finished 2021 with 94 refurbished stores, and we expect to remodel the remaining 84 locations in 2022. As a result, by 2022, the entire network will use the new store format. 2. Expansion. By opening the newwarehouse in Filiași in 2021, wewould have reached themilestone of 301 stores and 4 logistics centers. We intend to accelerate the pace of shop openings in the future so that by 2029, we will have over 600 stores and six logistics centers. 3. Romanian products. In 2021, we also focused on expanding the portfolio of Romanian-origin products and established a promise, the TripluRO aim, in which we propose that by 2023, 60% of the assortment will be produced, processed, and have the principal ingredient from Romania. 4. PENNY team. Our people come first in everything we do, and 2021 rewarded us with good retention results. We continued to invest in their development, raising the minimum net income required to join the company to 2 275 lei, and launching a new employer branding campaign, ”PENNY's success begins with people.” We were named a Top Employer 2022 as a result of all of this. 5. Digitalization. In 2021, we began a partnership with Glovo to improve our clients' purchasing experiences. Furthermore, we focused on simplifying and streamlining operational procedures through various solutions. 6. Sustainability. We treat everything around us with responsibility, especially regarding the impacts of our activity on the community and the environment; because our company is a partner of the Romanian economy and society, one of our strategic objectives is to invest 19.5 million Euros in sustainability measures until 2024. Within the framework of the BREEAM Awards 2021, the Otopeni store was designated the most sustainable building in Europe Central and Eastern. In 2021, we developed the logistics warehouse at Filiași, the industrial building with the highest score at BREEAM (Building Research Establishment Environmental Assessment Methodology) International New Construction 2016. The result obtained is an exceptional Outstanding - 92.89%. 7. Integrated communication. We started a newpartnershipwith the Romanian Football Federation - for the first time, both the senior and U21 teams have a main sponsor: PENNY. The partnership focuses on SuporteRO, the first and only own brand dedicated to supporters, which received UEFA international recognition. From the series of campaigns dedicated to our customers, we continued to reward loyalty in 2021. We've rewarded loyalty by bringing into highlight Lego sets and fluffy bugs. Furthermore, in 2021 we continued with four episodes of the corporate event “PENNY la zi” (“PENNY up-to-date”) and enjoyed the recognition of our efforts through the prizes obtained at the PR Award, the most important national competition to recognize excellence in the field of Public Relations. SUSTAINABILITY REPORT PENNY ROMANIA 2021 14/168
CONTENT ABOUT PENNY SUSTAINABILITY STRATEGY SUSTAINABILITY STEP BY STEP SUSTAINABLE ASSORTMENT ENERGY, CLIMATE AND RESOURCES EMPLOYEES AND SOCIETY REPORT ASSURANCE GRI & SASB INDEX Every year, wework on expanding our network and developing PENNY Romania, and as we grow, we providemore andmore value to the communities and environments inwhich we operate. Number of stores Number of employees Evolution of Business indicators 2020 2021 ** Calculation based on Nielsen data from the Retail Audit service for Total FMCG Nielsen (audited categories, excluding cigarettes), and separately for Total Food, Penny Market market shares from the Total Romaniamarket, in value, for 2 years (2017 and 2018). (Copyright ©2020, The Nielsen Company.) *** Calculation based on Nielden data from the Retail Audit service for Total FMCG Nielsen@ (audited categories, excluding cigarettes), Penny Market market shares from the Total Romania market, in value, for 3 years (2019, 2020, 2021). (Copyright © 2022, The NielsenQ Company.) Turnover (bilion RON) Market share of PENNY in Romania (%) Net profit (bilion RON) * Of which 0.016 billion LEI from e-commerce 5.5** 5.8*** 5% 45% 9% 9% 14% 85 276 5326 123 301 5815 4.73 5.4*
CONTENT ABOUT PENNY SUSTAINABILITY STRATEGY SUSTAINABILITY STEP BY STEP SUSTAINABLE ASSORTMENT ENERGY, CLIMATE AND RESOURCES EMPLOYEES AND SOCIETY REPORT ASSURANCE GRI & SASB INDEX Consumers’ perception of PENNY We monitor consumer perception of PENNY by carrying out an annual study that quantifies customer satisfaction with the PENNY brand and their interest towards the company's actions in the field of sustainability. The 2021 results show a 7.89% increase compared to the 2017 base year in overall customer satisfactionwith thePENNYbrand.Thisgrowth isdueboth toactions instrategic directions such as pricing, the quality of the products offered, loyalty, the behavior of employees, as well as to PENNY's actions in the field of sustainability in directions such as: environmental protection, involvement in community projects, promotion of sustainable products and assortments, and commitments regarding employees. The positive results of the study are also supported by the monthly average of 748 045 active PENNY cards, which holds an increase by 9.68% from the previous year. At the same time, this year, the percentage of card transactions in the total number of transactions in 2021 was 35.10%. The customers' orientation about PENNY actions in the field of sustainability in 2021 compared to 2017 (%) Customers' satisfaction in relation to the PENNY brand (%) Equal opportunities and fair treatment of employees Active social engagement Care for the environment Strengths in the organic and regional products category + 7.34% +12.50% +12.50% +12.60% 11.93% 2,20 2,28 2017 2019 2020 2021 1.87% 2,10 2,14 SUSTAINABILITY REPORT PENNY ROMANIA 2021 16/168
CONTENT ABOUT PENNY SUSTAINABILITY STRATEGY SUSTAINABILITY STEP BY STEP SUSTAINABLE ASSORTMENT ENERGY, CLIMATE AND RESOURCES EMPLOYEES AND SOCIETY REPORT ASSURANCE GRI & SASB INDEX The evolution of the PENNYbrand is based on the correct implementation of the business strategy, and for this, every year we make investments in strategic directions, which help us achieve our business objectives. Accordingly, 3% of the capital expenditures made in 2021 were directed to sustainability. Also, in order to develop the PENNY brand, we paid special attention to increasing our presence in big cities. The expansion of the PENNY network in Romania is carried out according to the development pillar, and the increase in the number of stores also results in the change of distribution in urban environments: The evolution of the share of PENNY stores according to the size of the city 24% 72 2021 42% 126 23% 70 11% 33 stores in small cities (between 4 000 and 25 000 inhabitants) shops in Bucharest-Ilfov stores in medium-sized cities (between 25 000 and 90 000 inhabitants) stores in large cities (over 90 000 inhabitants) 100% +7,9 p. a. 93 126 63 24 33 5 53 70 31 66 72 50 Development of stores compared with 2013 2013 2018 2021 560% +3,5 p. a. Bucharest-Ilfov 126% +4,9 p. a. Big cities 44% +2,75 p. a. Small cities Medium-sized cities p.a. - per annum
CONTENT ABOUT PENNY SUSTAINABILITY STRATEGY SUSTAINABILITY STEP BY STEP SUSTAINABLE ASSORTMENT ENERGY, CLIMATE AND RESOURCES EMPLOYEES AND SOCIETY REPORT ASSURANCE GRI & SASB INDEX PENNY STORE The expansion of the PENNY network also entails innovation and adaptation to our clients’ demands and expectations. As a result, in 2021, we opened the first four City Concept stores, which provide a better experience to customers thanks to a modern and friendly design. We are looking forward to bringing the store even closer to our clients with this new ultra-proximity concept. The stores are integrated into existing residential urban constructions, where we develop retrofit solutions which include sustainability approaches that can cut both operating and maintenance costs, reduce the environmental impact, and boost the building flexibility and resilience. These new City Concept stores can be found in Brașov, Bacău, and in two locations in Bucharest, on the Iuliu Maniu and Decebal boulevards. P P P P P P P P P P P P P P P P P Bc11, 4 Bvd. Decebal, Bucharest, 30962 220c Iuliu Maniu, 6 sector, Bucharest, 61126 17 Map of PENNY stores in Bucharest SUSTAINABILITY REPORT PENNY ROMANIA 2021 18/168
CONTENT ABOUT PENNY SUSTAINABILITY STRATEGY SUSTAINABILITY STEP BY STEP SUSTAINABLE ASSORTMENT ENERGY, CLIMATE AND RESOURCES EMPLOYEES AND SOCIETY REPORT ASSURANCE GRI & SASB INDEX 9 10 Timiș Arad 13 Bihor 7 Maramureș 9 Suceava 8 Neamț 6 Iași 4 Harghita 4 Botoșani 4 Sălaj 7 Cluj 6 Călărași 5 Ialomița 3 Tulcea 5 Brăila 8 Buzău 4 Vrancea 9 Alba 7 Sibiu 13 Brașov 4 Covasna 9 Bacău 2 Vaslui 6 Galați 13 Constanța 8 Mureș 3 BistrițaNăsăud 4 Vrancea 5 Argeș 8 Teleorman Giurgiu 5 Dâmbovița 10 Prahova 6 Olt 4 Dolj 4 Mehedinți 5 Gorj 6 Caraș Severin 14 Hunedoara 6 Satu Mare București 16 Ilfov 4 17 ȘTEFĂNEȘTII DE JOS 7 Bușteni Street, Ilfov Surface: 30.826 m2 BACĂU Nicolae Bălcescu Street, Bacău Surface: 19.721 m2 TURDA 30, 22 Decembrie 1989 Street, Cluj Surface: 27.233 m2 FILIAȘI 216 Racoțeanu Boulevard, Dolj Surface: 23.291 m2 1 NUMBER OF STORES IN THE COUNTY LOGISTICS CENTERS 301 Map of PENNY stores and logistics centers in Romania
CONTENT ABOUT PENNY SUSTAINABILITY STRATEGY SUSTAINABILITY STEP BY STEP SUSTAINABLE ASSORTMENT ENERGY, CLIMATE AND RESOURCES EMPLOYEES AND SOCIETY REPORT ASSURANCE GRI & SASB INDEX Governance and Sustainable Management ECONOMIC SOCIAL MEDIU Guvernanța și managementul companiei dictează evoluția afacerii. Astfel, performanța noastră economică și creșterea sustenabilă a afacerii noastre depinde de proiectarea și implementarea unei guvernanțe corporative și a unui management sustenabil pe toate palierele de activitate PENNY. Guvernanțașimanagementulsustenabilalcompaniei noastre pot aduce plus valoare comunităților în care ne desfășurămactivitatea prin facilitarea investițiilor și alocarea resurselor atât pentru implementarea proiectelor de responsabilitate socială, cât și pentru acțiunile de îmbunătățire a calității vieții angajaților noștri și crearea de noi locuri de muncă. Impactul oricărei activități PENNY asupra factorului mediu are la bază modul în care afacerea noastră este guvernată și administrată. În acest sens, un sistem sustenabil de guvernanță și management va sprijini alocarea de resurse pentru diminuarea impactului negativ asupra mediului înconjurător. Astfel, dacă nu sunt alocate fonduri la nivel de management, proiectele de protecție a mediului nu pot fi desfășurate. De exemplu, dacă sistemele de panouri fotovoltaice pentru producerea de energie verde proprie nu pot achiziționate, iar echipamentele de refrigerare nu pot fi modernizate, ducând la sporirea numărului de emisii în atmosferă. I I ENVIRONMENTAL The evolution of the business is dictated by the company's governance andmanagement. Therefore, the design and implementation of sustainable corporate governance and management at all levels of PENNY activities is critical to our economic performance and the long-term growth of our company. Our company's governance and sustainable management may offer value o the areas in which w operat by facilitating investments and allocating r sources for the mpl mentation of social respons bility project a well as activi ies to improve our employees' quality f life and create new jobs. The impact of ny PENNYactivity on the viro mental fac or is bas d on the way our business is governed nd dministered. In this sense, a s stainable system of overnance and management will support the allocation f resources to reduce the neg tive i pact on the nvironment. Therefore, if funds are not allocated at the management level, nvironmental protection proj c s cann t b carried out. SUSTAINABILITY REPORT PENNY ROMANIA 2021 20/168
CONTENT ABOUT PENNY SUSTAINABILITY STRATEGY SUSTAINABILITY STEP BY STEP SUSTAINABLE ASSORTMENT ENERGY, CLIMATE AND RESOURCES EMPLOYEES AND SOCIETY REPORT ASSURANCE GRI & SASB INDEX prohibit and condemnany formof corruption, bribery, or blackmail and remove any personal interest or conflict of interest from business operations. Our vision is to communicate as effectively as possible about these issues, both internally and externally, preventing nonconformities and finding solutions with the help of an internal monitoring and control process. Each of these principles was translated into related policies, and a series of procedures andmanagement systems allow their implementation, both in PENNY's activity and in the relationship with the business partners. We adopted and implemented human resources policies and guidelines based on the Universal Declaration of Human Rights proclaimed by the UN and the conventions of the International Labour Organization (ILO). Forced labour, exploitation of minors, any form of physical abuse or violent threat, sexual, physical, or psychological harassment, and discrimination in the activity and profession on grounds such as gender, skin colour, religion, ethnic origin, age, nationality, civil status, sexual orientation, disability, social origin, or political opinions are strictly prohibited. The most important documents that help us implement sustainability in our governance and management system are the following: z The Code of Conduct (adopted at the PENNY Romania level according to the REWE Group Code of Conduct) and the related compliance system z Specific policies, which are based on the principles of ethics and integrity z Internal order regulation z The Collective Labour Agreement z Work procedures such as: z The Procedure for implementing the Antitrust Policy z Compliance, anti-corruption, and anti-fraud policy implementation procedure, including conflict-of-interest practices z Money Laundering and Terrorist Financing Risk Management Procedure z Risk Assessment procedure Sustainability is integrated from the highest level of management, and this top-down approach allows the structuring of our corporate governance to include elements of environmental protection, energy efficiency in operations, ensuring social standards in the supply chain, and corporate responsibility for our people, but also for the communities in which we operate. In the top-down business strategy approach, we initially try to identify the divisions with the greatest potential for sustainable development, then we act within each operational business division that could bring a higher yield in developing our business model into a sustainable one. This approach allows the implementation of the company's vision and ensures the interest of shareholders, colleagues, customers, and stakeholders, fulfilling the assumed business promises. OUR IMPACT AND PERFORMANCE IN FIGURES In the reportingyear 2021, therewas no caseof corruption at the company level, and the standards of collaboration with commercial suppliers were kept at the same level, continuing this year with the 100% rate of signing and assuming the anti-corruption clause -corruption for all new suppliers. IMPACT EXPLANATION The governance and management that we have created underpin our entire business and all of the actions that we carry out within PENNY Romania.Therefore, for our company to be sustainable, sustainability must be incorporated not only in the operations performed, but also at the highest business level, in the governance structure, and the company's management. The design and implementation of corporate governance and management determine not only economic performance and business development, but also the impact our organization has on the social and environmental issues that surround us. HOWWE MANAGE THE IMPACT To be able to manage the impact that our company's governance and management have on economic, social, and environmental factors, we have included sustainability in our management systems and implemented a series of values and principles that guide our work: z Ethics and Integrity – We implement in our activity both concern for legal compliance and managerial responsibility for ethical behaviour and integrity in all actions carried out. z Fairness – we are fair in business activities and interactionwith others, we take responsibility for our actions, and respect those around us. z Anti-competitive practice – we support and implement fair competition and anti-trust practices; we prohibit in our activities and the relationshipwith our business partners any form of understanding or exchange of information to or between competitors regarding prices, terms, and conditions of suppliers. z Anti-corruption practice – within our company and in the relationship with our business partners we
CONTENT ABOUT PENNY SUSTAINABILITY STRATEGY SUSTAINABILITY STEP BY STEP SUSTAINABLE ASSORTMENT ENERGY, CLIMATE AND RESOURCES EMPLOYEES AND SOCIETY REPORT ASSURANCE GRI & SASB INDEX Top Management The governance structures within REWE România are the governing body, the management structures, and the execution structures. The governing body of an organization is the board of directors or management team that makes strategic decisions and has the authority to formpolicies and drives the overall direction of an organization. For PENNY Romania, the governing body is represented by the Board of Directors, which in 2021 was formed by Daniel Gross (CEO), Raffaele Balestra (CFO), and Marek Dolezal (COO). The individuals holding key responsibilities for business coordination across the network have been designated within executive management. HR CFO IT Accounting Controlling Legal Sustainability Project management Digital commerce Compliance Corporate Communication Expansion Constructions Logistics Sales CEO Marketing Strategic MPDA Security and Purchasing COO Internal Audit Quality management Merchandise process and data analysis SUSTAINABILITY REPORT PENNY ROMANIA 2021 22/168
CONTENT ABOUT PENNY SUSTAINABILITY STRATEGY SUSTAINABILITY STEP BY STEP SUSTAINABLE ASSORTMENT ENERGY, CLIMATE AND RESOURCES EMPLOYEES AND SOCIETY REPORT ASSURANCE GRI & SASB INDEX Demographic evolution of management structures 2020 – 2021 < 30 years > 50 years 30 - 50 years 2020 2021 Both themanagement and the execution structures aremade up of REWE România employees who have an employment contract registered in Romania. People in the management structures have the duties of coordination, leadership, control, and managing the resources of the organization. On the other hand, the execution structures are made up of all other employees of the company, who are not part of the management category, and who carry out their activity according to the attributions established by the management. For more details related to the management structure within our company, please see page 22 of the 2020 Sustainability Report. The individuals holding key responsibilities for business coordination across the network have been designated within executive management. Due to the development of our activity, in 2021 we expanded our management team by 7%, having 435 colleagues within these structures, of which the majority (over 55%) are women. At the same time, 89% of open management positions were filled by internal promotions. Accordingly, we keep the alignment to the principles of diversity and equal opportunities, and non-discrimination. 23 24 24 26 185 153 196 162 16 5 23 4 + 4% + 6% + 4% -20% +8% +4%
CONTENT ABOUT PENNY SUSTAINABILITY STRATEGY SUSTAINABILITY STEP BY STEP SUSTAINABLE ASSORTMENT ENERGY, CLIMATE AND RESOURCES EMPLOYEES AND SOCIETY REPORT ASSURANCE GRI & SASB INDEX Risk Management & Compliance ECONOMIC SOCIAL ENVIRONMENTAL Inefficiently managed risks and non-compliance with legal obligations can negatively impact the activity of our company through pecuniary sanctions, damage to the image of the brand and reputation. These impacts can result in reduced income or interruption of activity. On the other hand, correct risk management can result in the identification of business opportunities, which can lead to the growth of our business. Incorrect risk management and non-identification of risks can harm the social component by causing redundancy or degrading employeewell-being. This negative impact can spread to the areas in which we operate, hurting employee families and lowering the standard of living in the community as a result of job losses. Inefficient risk management and the lack of legal compliance can bring negative impacts on the environment in the event of not correctly identifying certain categories of operational risks, the absence of a management plan for these risks, or noncompliance with the legislative conditions in force. These situations can lead to exceeding the quality limits of environmental factors. As a consequence, these situations lead to fugitive emissions that can have a potential negative impact on the environment. SUSTAINABILITY REPORT PENNY ROMANIA 2021 24/168
CONTENT ABOUT PENNY SUSTAINABILITY STRATEGY SUSTAINABILITY STEP BY STEP SUSTAINABLE ASSORTMENT ENERGY, CLIMATE AND RESOURCES EMPLOYEES AND SOCIETY REPORT ASSURANCE GRI & SASB INDEX ”Evaluating and managing company-wide risks is one of the key activities that we pay a lot of attention to. They cover all aspects of the organization, including financial, business, and reputational riskmanagement. Riskmanagement involves not only the discovery and assessment of risks but also the measures we must take to reduce or eliminate them, as the case may be. Considering these aspects, risk management is a component of our activity that not only protects us as employees but also our business as a whole.” Gabriela Mihăilescu – Compliance and public affairs coordinator
CONTENT ABOUT PENNY SUSTAINABILITY STRATEGY SUSTAINABILITY STEP BY STEP SUSTAINABLE ASSORTMENT ENERGY, CLIMATE AND RESOURCES EMPLOYEES AND SOCIETY REPORT ASSURANCE GRI & SASB INDEX IMPACT EXPLANATION The proper management of our businesses depends on identifying and managing risks and complying with applicable regulations. Our business cannot be successful if it does not comply with legal conditions and if we do not demonstrate resilience in the face of crises, which can only be anticipated and managed with effective risk management. At the same time, we cannot grow the business if we do not correctly identify the opportunities that we can address. HOWWE MANAGE THE IMPACT We apply the precautionary principle in our activity by implementing well-defined risk management, both for new services and products put on the market, as well as for current activity through constant risk re-evaluations. We allocate resources to properly identify andmanage all risks and complywith corporate requirements, applicable legal requirements, or specific stakeholder requirements. We manage risks by taking the following steps. z Identification – we consider political, economic, legal, social, technological, and environmental factors to identify risks and opportunities z Assessment – we analyse the causes and potential impact in detail and in a structured way z Aggregation – we classify and fit identified risks into different categories based on type, severity of impact, and relevance to our business z Addressing – we make plans and strategies to manage both risks and opportunities z Reduction – we manage risks through concrete actions to minimize negative impacts The general conditions, guidelines, and riskmanagement processes are uniform throughout the Group. Risks are managed by risk responsible employees, who identify, inventory, and report the risks identified within the activity. OUR IMPACT AND PERFORMANCE IN FIGURES In 2021, we conducted 57 hours of compliance-related training, attended by 239 employees, 128 of whom held management positions (42 percent more than the previous year). The training sessions are part of the compliance program and cover subjects like: z Compliance z Anti-corruption z Antifraud z GDPR z The right to competition In addition to these training sessions, there were also round tables on the topic of competition law. As we make every effort to meet legal compliance, there were no environmental litigation filed against our company during 2021. However, following the compliance checks carried out by the authorities on environmental protection issues, our company collected fines of 4 000 lei and we registered 4 non-financial sanctions. These situations are recorded for the entire year 2021, nationally, for all our company's locations. SUSTAINABILITY REPORT PENNY ROMANIA 2021 26/168
CONTENT ABOUT PENNY SUSTAINABILITY STRATEGY SUSTAINABILITY STEP BY STEP SUSTAINABLE ASSORTMENT ENERGY, CLIMATE AND RESOURCES EMPLOYEES AND SOCIETY REPORT ASSURANCE GRI & SASB INDEX Reportable risks are identified in an annual inventory by risk managers, using a bottomup approach, whereby the identified risks are classified and evaluated in the same manner within the Group. Consequently, in 2021, at the Group level, the following risk categories were identified*: Risk type Specifics of relevant risks Value at risk The probability of incidence Data security and cybercrime Cyber-attacks and data security requirements Substantial/ Essential Less often Valuation risk Evaluation and depreciation Substantial/ Essential Less often Pandemic risk – Substantial/ Essential Occasional Compliance Antitrust law Substantial/ Essential Less often IT-Delivery Introduction of the IT system Considerably Occasional Purchase of goods Supply chain Considerably Less often Electricity supply The price of energy Considerably Probable Customer Marketing Advertising processes Considerably Less often To properly manage all these identified risks, we continuously apply the precautionary principle. Therefore, for the risks identified at the Romanian level in 2021, we have established 115 specific actions to reduce risks and address opportunities. Among the actions that are taken, we mention: z Updating the standard operation procedures z Updating the contractual clauses with our partners z Employee participation in online and physical training on various topics z Organisation of training courses in the field of data protection z Realization of round tables z Updating the Monitoring Measures of Quantitative Key Performance Indicators z Updating the working conditions with suppliers z Applying the four eyes principle for designing work tasks The top management is informed of the results of the analyses carried out by the risk managers and the degree of implementation of the management plans. At the same time, according to the mandatory provisions, any significant risks identified, new or existing, that may have a material impact, are reported on time and directly to the management. For the identification and classification of risks, the following parameters are taken into account: the relevance of their potential threat to activity, financial situation and earnings, cash flows, as well as the reputation of the group. Each identified risk is categorized as high, medium, or low. The tools we implement for riskmanagement are those defined at the REWE Group level by applying our fundamental values: z Codes of Conduct z Guideline to a Sustainable Economy z Specific guidelines concerning rawmaterials rawmaterials z Self-assessments – the Governance, Risk, and Compliance (GRC) approach to identifying, assessing, and managing the risks with a focus on the ”antitrust” and ”corruption” components z Risk to chance ”R2C” software tool, primarily intended to identify and reassess compliance risks To ensure compliance with legal and internal regulations, we implement several tools, such as: z A compliance program that includes a variety of preventive measures, such as risk assessments, training, and counselling z Compliance Management System (SMC), to ensure compliance with legal and internal regulations and ensure the personal liability of company management members and employees z Telephone line dedicated to customers, partners, and employees for informing on compliance issues z Training for all employees in procedural and compliance rules at least once a year The compliance management system (SMC) is managed by the local Compliance Department, through a specific system, implemented at the Group level; in addition, there is a Compliance Officer with administrative authority, established at the Group level. All referrals reported by internal and external stakeholders, on topics such as ethics, corruption, unfair competition, and discrimination, are evaluated by the Compliance Officer through interviews and internal checks, paying particular attention to confidentiality. An internal reporting tool is also provided. For more details on how we manage risk and ensure legal compliance, you can access previous sustainability reports. *The information presented in the table above is transposed as it appears in the REWE Group Management Report 2021, page 27
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