2022 SUSTAINABILITY REPORT
CONTENTS. Message from the General Directors – A year of progress 4 Sustainability milestones 6 The future is made today 8 About the REPORT 10 ABOUT US AND OUR VALUE CHAIN 12 SUSTAINABILITY STRATEGY 28 PENNY Romania Sustainability Strategy PENNY 30 Alignment of sustainability pillars with the UN Sustainable Development Goals (SDGs) 31 Sustainability Operational Committee 32 SUSTAINABILITY STEP by STEP 34 Materiality analysis 35 Materiality matrix 38 Stakeholder engagement 42 CORPORATE GOVERNANCE AND BUSINESS 48 Governance and sustainable management 53 Sustainable business model 62 Risk management and compliance 78 Cybersecurity 84 SUSTAINABLE ASSORTMENT 88 Regionality and local products 92 Ethics in the supply chain processes 104 Animal welfare 112 Packaging management 118 Promoting healthy nutrition 124 ENERGY, CLIMATE AND RESOURCES 130 Climate protection 136 Resource conservation 152 Logistics and mobility 164 Green buildings 170 EMPLOYEES AND SOCIETY 174 Employee welfare 178 Social responsibility 204 Local communities 210 Education and awareness 218 Food waste management 222 REPORT ASSURANCE 232 GRI & SASB INDEX 238 CORPORATE GOVERNANCE AND BUSINESS SUSTAINABLE ASSORTMENT ENERGY, CLIMATE AND RESOURCES EMPLOYEES AND SOCIETY REPORT ASSURANCE GRI & SASB INDEX
SUSTAINABILITY REPORT PENNY ROMANIA 2022 4/250 Dear Friends, In an ever-changing world, we accept responsibility for adding value to the communities in which we operate, ensuring a better future for future generations. At PENNY, we have built our vision for a responsible future on a strong foundation of sustainability. We think that the only way we can set an example for sustainable and trustworthy business is by respecting resources, protecting the environment, and showing gratitude to our partners, suppliers, and coworkers. Because at PENNY, the future is made TODAY, we act now for tomorrow's success. Therefore, in 2022, we ensured that each of our actions were aligned inside one of the three PENNY sustainability pillars: • Sustainable assortment – because developing a sustainable assortment and promoting the consumption of such products are our main objectives, additionally providing a balanced diet with local and regional products. • Energy, climate and resources – through energy efficiency, green buildings, electric mobility, online monitoring. • Employees and society – through social responsibility and food waste management. We are proud of what we have achieved in 2022. We have continued to support local producers and offer our customers a sustainable assortment through the TripleRO (3RO) target, which we have been committed to since 2020. By the end of this year, we aim for 60% of the assortment in our stores to be produced, processed and have the main ingredient in Romania. As part of TripleRO, in 2022, we launched the initiative "100 business ideas for Romania", where we analyzed 100 opportunities for the development of local businesses in industries such as agriculture, packaging or cosmetics, in order to find solutions that will be able to offer Romanians 100% Romanian products in the near future. The year 2022 also produced extremely good achievements in terms of energy efficiency and resource restructuring, bringing us closer to the ultimate objective of having the smallest possible environmental impact and reaching climate neutrality. And because at PENNY success starts with people and returns to them, in 2022, we continued to show all our colleagues why we deserve to be a Top Employer in Romania, through programs and benefits designed to give them the best possible work-life balance. The year 2023 has been declared the year of sustainability at PENNY. By implementing sustainable policies and practices that help in building a better, safer, and greener future for all, we are strongly committed to maintain our position as a significant player in Romanian retail. In the following pages, we invite you to explore our projects that have an impact on the community and the environment. Enjoy your reading! SUSTAINABILITY STRATEGY ABOUT US AND OUR VALUE CHAIN THE FUTURE IS MADE TODAY SUSTAINABILITY HIGHLIGHTS MESSAGE FROM THE GENERAL DIRECTORS CONTENTS SUSTAINABILITY STEP BY STEP
Daniel Gross – CEO Raffaele Balestra – CFO Marek Doležal – COO The future is made by us! CORPORATE GOVERNANCE AND BUSINESS SUSTAINABLE ASSORTMENT ENERGY, CLIMATE AND RESOURCES EMPLOYEES AND SOCIETY REPORT ASSURANCE GRI & SASB INDEX
SUSTAINABILITY REPORT PENNY ROMANIA 2022 6/250 Sustainability highlights CORPORATE GOVERNANCE AND BUSINESS. SUSTAINABLE ASSORTMENT. z 87.91% share of expenditure with local suppliers z 28% proportion of products produced 3RO (have the main ingredient from Romania, are processed in Romania, are packaged in Romania) z 69.61% of food articles are from regional origin (from Romania) z 165 partner butcher stores of local farmers and producers z 48 organic and special diet articles marketed z 103 newly developed articles with secondary packaging that is FSC certified z 336 operational store z 1.46 bilion Euros net income z 96.09 million Euros expenditure on salaries and employee benefits z 99.98 million Euros paid taxes z 345 000 customers entered PENNY stores every day z 6.51% market share We are close to our consumers with sustainable assortments! The management of our business is based on a sustainable business model! SUSTAINABILITY STRATEGY ABOUT US AND OUR VALUE CHAIN THE FUTURE IS MADE TODAY SUSTAINABILITY HIGHLIGHTS MESSAGE FROM THE GENERAL DIRECTORS CONTENTS SUSTAINABILITY STEP BY STEP
ENERGY, CLIMATE AND RESOURCES. EMPLOYEES AND SOCIETY. Our culture is defined by how we treat our people! We are working towards climate neutrality! z 11% reduction in CO2-eq emissions z 6% decrease in specific electricity consumption z 6 242 MWh green energy produced internally with 64 photovoltaic panel systems z 0 own stores heated by fossil fuels z 53 sites equipped with charging stations for electric cars z 23 BREEAM in use certified stores z 6 596 active employees at the end of the year z 153 782 hours of training z 75% internal promotion rate for management positions z 56.5% women in management positions z 976 000 Euros invested in the community z 350 tones of surplus food donated CORPORATE GOVERNANCE AND BUSINESS SUSTAINABLE ASSORTMENT ENERGY, CLIMATE AND RESOURCES EMPLOYEES AND SOCIETY REPORT ASSURANCE GRI & SASB INDEX
SUSTAINABILITY REPORT PENNY ROMANIA 2022 8/250 accesibil persoanelor cu dizabilități echiparea cu monitoare a zonelor de vânzare din dreptul produse de panificație dispun de monitorizare video THE FUTURE is made today SUSTAINABILITY STRATEGY ABOUT US AND OUR VALUE CHAIN THE FUTURE IS MADE TODAY SUSTAINABILITY HIGHLIGHTS MESSAGE FROM THE GENERAL DIRECTORS CONTENTS SUSTAINABILITY STEP BY STEP
Our responsibility We have undertaken a sustainability strategy out of a desire to contribute and create a sustainable business in the Romanian market and to increase the quality of life of local communities. We have aligned our strategic objectives with the Sustainable Development Goals because this is the only way we can contribute to the EU targets assigned under the European Climate Pact. We believe that sustainable business is not built at the expense of people or the planet. Current pressures from climate change bring many challenges. When thinking about the effects of climate change we are always mindful of what the risk is for our business but also how we can generate opportunities for it while contributing to balance and synergies for local communities. Our colleagues and management are aware that it is only through a common force that we can be part of the change: a change that can bring a better future for all of us. Change requires united forces of all stakeholders, understanding of the challenges, assessment of the challenges, joint actions and collaborations in the value chain and collective action by all. Through stakeholder engagement interviews this year, we have gained an even better understanding of how much what we do matters. Our directions are those that are in line with the local need, expectations and needs of many stakeholder groups. We certainly still have a lot of work to do but in this report we concretely set out our concerns on material issues important to our business and concretely map how we are delivering value to the business and to our communities. In this report, dear reader, you will find an overview of our existing activities contributing to the achievement of the SDGs (Sustainable Development Goals), as well as our work to mainstream these goals and operationalize them in practice. For a better understanding of the content, you will find our performance translated in "Facts and Figures". A nice foray into the realm of good deeds launched into society, but also the balance we constantly strive for when we want to grow our business, to do it responsibly with as little negative impact as possible and to manage long-term value. Information z Information about PENNY and REWE Group at page 12 z Information about the Sustainability strategy at page 28 z Information about recommendations coming from you the readers as part of relevant stakeholder groups at page 43 z Information on Employees and Society issues at page 173 z Information on Sustainable Sourcing issues at page 87 z Information on Energy, Climate and Resources Care issues at page 129 Our motto is "We save money, not love", that's why we are close to our consumers in a responsible way. We actively contribute to some of the needs of consumers: z their need for local products, z ensuring sustainable mobility, z the choice of products applying a good quality-price ratio, z packaging recycling, z the use of renewable energy, z energy efficiency, z operational efficiencies as part of economic impact and providing a safer environment for a beautiful and healthy community, z environmental education for consumers in general, z a safe, inclusive, life-stage oriented working environment, z increasing of the life quality, z supporting of local communities. Throughout this report, you will be given the opportunity to discover how PENNY, based on its sustainability strategy and goals, defines initiatives to responsibly fulfill its business mission and strives to meet the needs of its local communities and consumers. Acknowledgment We will continue to grow in a healthy and responsible manner in the coming years, always taking into account international standards for responsible business practices. We thank all our stakeholders for the recommendations received throughout the online surveys. We appreciate that they have been and are with us. Together we can create a better future by creating synergies between our responsible business concerns aligned with the expectations of all stakeholders. As we have been accustomed to in prior years, we are very attentive to recommendations and we will take them on board in our internal analysis at Sustainability Committee level. Additionally, our sustainability team welcomes your suggestions and questions at contact@penny.ro or presa@penny.ro. Our effort, progress and success belong to our talented and dedicated employees. Thank you to all of them! We will remain partners in creating a better future. CORPORATE GOVERNANCE AND BUSINESS SUSTAINABLE ASSORTMENT ENERGY, CLIMATE AND RESOURCES EMPLOYEES AND SOCIETY REPORT ASSURANCE GRI & SASB INDEX
SUSTAINABILITY REPORT PENNY ROMANIA 2022 10/250 Purpose of the Report As part of the international REWE Group, we, PENNY Romania, position ourselves as a local discounter that wants to actively contribute to a sustainable future. For us, this goal means a low-carbon future, increased quality of life for our customers, excellent resource management, collaborative supply chain partnerships, reduced pollution and substantial contributions to the communities in which we operate. Through our actions, we aim to add value to the sustainable development goals set out in the Paris Pact. The 2022 Sustainability Report is the sixth report published by PENNY Romania. You will find in it information on the company's sustainability strategy and an analysis of the economic, social and environmental impact generated by our daily activity. We also wanted to be transparent with our efforts to increasingly control this impact. We highlight our activities at local level that fall under the REWE Group umbrella, but which we approach strategically and operationally tailored to the specific market in Romania. Reporting period We report annually on our non-financial performance on key aspects of the business taking into account our economic, social and environmental concerns. In this report we communicate the organization’s actions and challenges, results and performance for the period 11st of January to 31st of December 2022.. To capture progress against 2021 we have used specific operational level reporting indicators assimilated under the GRI 2021 reporting standard. Where we considered it necessary, we marked progress by reporting progress staggered over two or three years. We will continue to report data on PENNY Romania's non-financial performance each year. It is important for us to build and create long term relationships of trust and we communicate this information transparently to all our stakeholders. Area of applicability The report captures the performance of the operations of REWE (Romania) SRL and REWE Projektentwicklung Romania SRL. The company's latest sustainability report released has been for the financial year 2021. We have revised some data reported About the REPORT in the previous year, and these are highlighted by footnotes to the quantitative data reported for the specific material aspect. The data collection method to measure regional products at the company level was changed in 2022. Indicators for 2021 have been recalculated using the new method and may no longer match the information contained in the 2021 sustainability report. The year 2019 was defined as a new milestone year for CO2 reduction targets. The new targets correspond to a level of emissions that takes into account the positive effect created by the use of green electricity. The indicators for 2019, 2020 and 2021 were recalculated on this basis and may no longer correspond to the information contained in the sustainability reports for 2019, 2020 and 2021. Reporting framework, references and guidelines We have thoroughly re-examined the applicable industry standards and considered making minimal adjustments to the material topics addressed from the perspective of SASB standard requirements. In defining the boundaries of the report and defining the structure we focused our attention on double materiality analysis. This centers on the analysis of the relevance of the material topics to 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). Clarifying information on approaches can be identified in Chapter 3. The report was prepared by PENNY representatives with the support of the qualified external sustainability consultant, denkstatt Romania. The report was developed following the SASB (Sustainability Accounting Standards Board) reporting frameworks of the specific Food Retail & Distributor Industry and the methodology proposed by the GRI – Global Reporting Initiative 2021 standards. The full list of standards and indicators belonging to the two reporting frameworks can be found in the last section of this report, entitled "GRI and SASB Index". The report complies with relevant non-financial reporting requirements under applicable national and international law. SUSTAINABILITY STRATEGY ABOUT US AND OUR VALUE CHAIN THE FUTURE IS MADE TODAY SUSTAINABILITY HIGHLIGHTS MESSAGE FROM THE GENERAL DIRECTORS CONTENTS SUSTAINABILITY STEP BY STEP
Understanding the content We maintained the same concise structure for this report as we did for the 2021 report to help readers understand the content. The structure makes it easy to identify the important features of our business. We make our direct and indirect economic, social and environmental impacts visible and explain them. On the other hand, it is essential to explain how we define the impact we make, as well as to highlight our performance in numbers. We measure both progress to achieve our targets through our sustainability objectives and progress through operational objectives that support impact mitigation. You can locate specific, meaningful icons that are relevant to this in the report. EXPLAINING THE IMPACT HOW WE CONTROL THE IMPACT OUR IMPACT AND PERFORMANCE IN FIGURES INITIATIVES FOR PROGRESS External assurance We want well-informed customers who are concerned about the environmental and social issues and challenges of their local communities. It is very important for us to communicate transparently. This is an integral part of raising sustainability awareness in the community. This will make customers more open to making a purchasing decision that benefits local communities as well as themselves. When it comes to sustainability reporting, for us the term 'assurance' means an external audit, where we assess the credibility, accuracy and relevance of our report. The FY2022 non-financial data report reflects our commitment to sustainable principles and efforts to continuously improve performance. It was subject to an independent limited assurance audit by Pricewaterhouse Coopers (PwC), the audited indicators are set out on page 230. PENNY Romania's sustainability reporting assurance practice is based on management's decision to create an internal check on the processes and data transparently presented in the report. Limited auditing and assurance of the reports is requested on an annual basis and assurance expertise is sought from entities with experience in the field using internationally accepted standards in this process. We request these assurance processes from entities independent of the company with which the company did not have specific business or service relationships in the area audited and verified to prove the impartiality of the process and its results. The "Independent Limited Assurance Report on Selected Indicators Related to the Sustainability Report" at the end of the report (page 230) outlines how the report is assured, the standard used, the assurance limitations and the indicators verified. CORPORATE GOVERNANCE AND BUSINESS SUSTAINABLE ASSORTMENT ENERGY, CLIMATE AND RESOURCES EMPLOYEES AND SOCIETY REPORT ASSURANCE GRI & SASB INDEX
SUSTAINABILITY REPORT PENNY ROMANIA 2022 12/250 ABOUT US AND our value chain SUSTAINABILITY STRATEGY ABOUT US AND OUR VALUE CHAIN THE FUTURE IS MADE TODAY SUSTAINABILITY HIGHLIGHTS MESSAGE FROM THE GENERAL DIRECTORS CONTENTS SUSTAINABILITY STEP BY STEP
PENNY Romania is part of the international REWE Group, a market leader in the European commercial and toursim sectors. REWE- ZENTRALFINANZ eG, Cologne (RZF) and REWE – Zentral-Aktiengesellschaft, Cologne (RZAG) are two independent groups that make up the REWE Group. REWE was founded as REWE (Revisions-verband der Westkaufgenossenschaften) in 1927, it has its main headquarters in Cologne and 384 000 employees across Europe. It is present in 21 European countries. The International Retailing business segment comprises the Full-Range Austria, Full-Range CEE and PENNY International divisions. In Full-Range Austria and CEE, supermarkets and hypermarkets are black a total of 2 784 outlets. The PENNY International division operates the PENNY MARKT, PENNY MARKET and PENNY brands in a total of 1 703 locations in Italy, Austria, Romania, Czech Republic and Hungary. Total external turnover from continuing operations increased in 2022 by 10.4% compared to 2021 from 76.76 billion Euros to 84.76 billion Euros Turnover in the PENNY International business segment increased by 16.7% up to 6.6 billion Euros in Italy, Austria, Hungary, Romania and the Czech Republic REWE Group's turnover – excluding non-retail and equity entities – from operations continued to grow by 11.3% from 69.4 billion Euros to 77.2 billion Euros The year 2022 ended successfully for the REWE Group* with a strong growth in turnover, demonstrating once more its performance capability in the difficult post-pandemic environment, considering also the challenges caused by the war in Ukraine. * Company – REWE Group (rewe-group.com) ** Annual Press Conference 2023 – REWE Group (rewe-group.com) Investment increased by 2.8 billion Euros in 2022 despite the crisis. After adjustments were made for exchange rates, PENNY expanded the most in Romania, with an increase of over 27%, followed by Hungary and the Czech Republic.** CORPORATE GOVERNANCE AND BUSINESS SUSTAINABLE ASSORTMENT ENERGY, CLIMATE AND RESOURCES EMPLOYEES AND SOCIETY REPORT ASSURANCE GRI & SASB INDEX
SUSTAINABILITY REPORT PENNY ROMANIA 2022 14/250 Retail in Germania: International retail: Convenience: Do-It-Yourself (DIY) stores: Tourism: Other brands involved to the REWE Group: REWE Group's international activities are grouped into six sectors SUSTAINABILITY STRATEGY ABOUT US AND OUR VALUE CHAIN THE FUTURE IS MADE TODAY SUSTAINABILITY HIGHLIGHTS MESSAGE FROM THE GENERAL DIRECTORS CONTENTS SUSTAINABILITY STEP BY STEP
Sustainability is an important component of the REWE Group, and its well-defined and transparent values are transposed also for our company, guiding us in the responsible conduct of all our activities. REWE Group is one of the first companies in the retail sector which also focuses on sustainability in the area of financing. Products and services, as well as finance, can help to create a climate-neutral and socially equitable world. In spring 2021, REWE Group opened its first credit line with a focus on sustainability. It is being used to refinance the 1 billion Euros syndicated credit line from 2020. Specifically, a line with a volume of EUR 750 million with a term of 18 months has been agreed, which is based on the ESG rating of the rating agency ISS. This subsidiary of Deutsche Börse AG rates REWE Group as C+, earning its Prime status. According to the ISS report, REWE's sustainability strategy is built around sustainable products and services. In Romania, REWE Group operates through two companies: z REWE (Romania) SRL – with the object of activity retail trade, the company has headquarters in Ștefăneștii de Jos, Strada Bușteni, number 7, Ilfov, and has a share capital of 38 656 600 RON, 100% of the shares of this company are owned by REWE Beteiligung Holding International GMBH (DE). z REWE Projektentwicklung România SRL – mainly involved in real estate activities, the company is based in Ștefăneștii de Jos, Rua Bușteni, No. 7, Ilfov, and has a share capital of 1130 886 440 RON, 100% of the shares of this company are held by REWE Projektentwicklung Gmbh (DE). The legal entity included in this report is REWE (Romania) SRL and the information and data presented are specific to this company. CORPORATE GOVERNANCE AND BUSINESS SUSTAINABLE ASSORTMENT ENERGY, CLIMATE AND RESOURCES EMPLOYEES AND SOCIETY REPORT ASSURANCE GRI & SASB INDEX
SUSTAINABILITY REPORT PENNY ROMANIA 2022 16/250 PENNY Romania – a growing company Our business direction is guided by the PENNY International brand, which is active in 5 markets: Romania, Italy, Austria, Czech Republic and Hungary. We have not chosen to implement a uniform concept in all markets, but we have chosen to respond exactly to local requirements and trends. REWE Group's perspective is to further develop the positioning of the PENNY brand as a discounter tailored to specific national requirements, with a high share of regional products, with a particularly attractive price-quality ratio. We started our activity in Romania in 2005 with the first Erkrath stores. We opened the first two discount stores under the PENNY Market brand. In 2014 we started the remodeling in the Ambiente format; and then in 2017 in Future Store format. This concept has been a real success, resulting in the fact that 16 years after entering the market, PENNY boasts 336 stores, 100% of them operating under the new unique brand "PENNY." We are unveiling our slogan in 2020 "We save money, not love", based on our understanding of our business model as an integral part of the local communities and customer segment we address. This slogan gives customers the chance to shop smart without abjuring the small joys of life – unique moments with loved ones and delicious products. PENNY Romania team is continuously concerned improving the customer shopping experience. Also, the discounter model is always focused on the right value for money. In 2020 we set an ambitious target, TripleRO (3RO), whereby we aim to have 60% of the products we sell by the end of 2023 with the main ingredient coming from Romania and the products being processed and packaged in Romania. The business strategy which is integrated with the sustainability, completes our values and the business model we adopted. The pro-activity that characterizes us has allowed us to continuously develop and meet the needs of our customers. In doing so, we are adapting to today's consumer behaviors and adding more value into customers' lives by modernizing and optimizing our store formats that offer a smart shopping experience with fresh, quality products that put a smile to our customers' faces. Evolution of the total number of stores and logistics centers stores logistics centres Irina BUTNARU Corporate Communications Manager & Spokesperson 163 2014 2005 2007 220 2017 300 2021 336 2022 616 target 2029 2 3 4 6 1 16 45 SUSTAINABILITY STRATEGY ABOUT US AND OUR VALUE CHAIN THE FUTURE IS MADE TODAY SUSTAINABILITY HIGHLIGHTS MESSAGE FROM THE GENERAL DIRECTORS CONTENTS SUSTAINABILITY STEP BY STEP
In 2020 we started the new strategic cycle, through which we will invest more than 1 billion Euros in Romania until 2029 by implementing the 7 development pillars: 1. Store renovation and enhanced shopping experience In 2022, we completed the remodeling process for all stores in the network. We started this project in 2020, and in those three years we remodeled a total of 251 stores. Today, all the stores in Romania follow the PENNY Point format. 2. Expansion In 2022, the PENNY network reached 336 stores. Over the 12 months, we opened 36 new units, the first year in the company's history that we opened more than 30 branches in Romania. By 2029, we plan to reach 600 stores and six logistics centres. 3. Romanian products Under the umbrella of the 3RO (TripleRO) objective, in 2022 we launched the initiative "100 business ideas for Romania", an ambitious approach through which we want to offer Romanians, together with the relevant authorities and the local business environment, as many products as possible with the main ingredient from Romania, processed and packaged in the country. Currently, 100% of the fresh meat (beef, chicken and pork) sold in PENNY stores is in line with the 3RO target. We continue to work responsibly towards this goal so that by the end of 2023 we will reach 60% 3RO products available on the shelf. In addition, we continue to develop our private label portfolio and are pleased that many products in ranges such as the and Hanul Boieresc or SuporteRO are increasingly sought after by our customers. 4. PENNY team At PENNY, success starts with people, which is why we constantly invest in the wellbeing of our colleagues. It is important to us that every PENNY employee feels valued and have the guarantee of a stable job. That is why we take care to offer our colleagues a comprehensive benefits package, such as extra days off or performance bonuses and vouchers. It was a great joy for us to receive the Top Employer certification in 2023 for the second consecutive year. 5. Digitalization Last year, in addition to continuing our collaboration with Glovo, we entered into a new partnership with Bringo to be as close as possible to our customers, regardless of the platforms they are on. Also, to meet customer needs, we launched a cash withdrawal service at cash registers in 2022. We have installed the first self-checkout tills in selected stores and, for now, we are analyzing customer feedback to see if it is a suitable option for them. 6. Sustainability Also in 2022 we continued to be a sustainable and environmentally friendly company. The Filiași logistics centre achieved BREEAM (Building Research Establishment Environmental Assessment Methodology) International New Construction 2016 certification with a record score – 92.89%. Our efforts in this direction were recognized by the Gold Award certification we received in the Corporate Sustainability & Transparency Index 2022, a comprehensive analysis that tracks the highest standards of sustainability. At the end of 2022, we issued a first in Romanian retail. Together with our partners at Step One Spedition and Mercedes-Benz Trucks & Buses Romania, we started testing the eActros 300, the first electric truck available in Romania. 7. Integrated communication In 2022, we continued to be close to young women and mothers from disadvantaged backgrounds through the Health for Every Community project with Save the Children. Our customers supported this initiative by buying DINO toys. Also last year, we were happy to launch "The Memory of Summer Taste", a cook & travel video series with Alex Petricean. He travelled to eight regions of the country and cooked local recipes using ingredients from Hanul Boieresc. RONNY was also the most loyal supporter of the national football team in 2022, going to stadiums and being involved in influencer campaigns. On top of all these successful projects, we continued our “PENNY la zi” (“PENNY up-todate”) corporate event series with two more episodes that we are very proud of. The PENNY project to date won GOLD Sabre Awards at the EMEA Sabre Awards 2022. CORPORATE GOVERNANCE AND BUSINESS SUSTAINABLE ASSORTMENT ENERGY, CLIMATE AND RESOURCES EMPLOYEES AND SOCIETY REPORT ASSURANCE GRI & SASB INDEX
SUSTAINABILITY REPORT PENNY ROMANIA 2022 18/250 Sebastian COSTIN Head of Expansion Department PENNY business progress indicators We evolve year after year and bring more and more value to the communities and environment in which we operate. Number of PENNY stores Number of PENNY employees +11.63% +12.79% 301 5 815 336 6 559 2021 2021 2022 2022 SUSTAINABILITY STRATEGY ABOUT US AND OUR VALUE CHAIN THE FUTURE IS MADE TODAY SUSTAINABILITY HIGHLIGHTS MESSAGE FROM THE GENERAL DIRECTORS CONTENTS SUSTAINABILITY STEP BY STEP
The development of the PENNY network also involves innovation and adaptation to the needs and requirements of our customers. Thus, in 2021 we opened 4 stores with smaller selling areas than a standard PENNY store, which offer an improved consumer experience through new and welcoming design. In 2022 we added three more stores to our portfolio, one in Piatra Neamț and two in Bucharest, on Liviu Rebreanu Boulevard, bringing the total to 10 such stores (6 in Bucharest, and one each in Brașov, Buzău, Bacău and Piatra Neamț). With this ultra-proximity concept which is a smaller store in size and included in residential buildings we aim to bring the store even closer to our customers. The stores are integrated into existing urban residential projects, where we are developing retrofit alternatives to include sustainability initiatives that can reduce operating and maintenance costs, reduce environmental impact and increase the adaptability and resilience of buildings. * Of which 0.44 billion LEI from e-commerce. ** (Calculation based on Nielsen data from NielsenlQ's Retail Audit service for Total FMCG NielsenlQ (audited categories, excluding cigarettes), PENNY Market market shares of Total Romania market, by value, for 3 years (2020, 2021, 2022). (Copyright© 2022, The NielsenlQ Company.) In 2022, all stores in the national PENNY network were served by 4 logistic centers, the most recent of which opened in 2021 in Filiași, Dolj county. In the last year we have developed our partnership with Glovo and started the partnership with Bringo. We are open to learn and experiment, always taking into account the needs of our customers. In the long run, this means transparency for distribution, but also in communication. The evolution of the two partnerships is very good – the end of the year anticipating sales of over 1 million Euros per month, although delivery services are not available to all stores in the country – we are only approaching half of them. Turnover (billion RON) PENNY Romania Market share PENNY Romania Net profit (million RON) PENNY Romania +32.96% +11.09% +23.58% 5.4 5.85 123 7.18* 6.51** 152 2021 2021 2021 2022 2022 2022 CORPORATE GOVERNANCE AND BUSINESS SUSTAINABLE ASSORTMENT ENERGY, CLIMATE AND RESOURCES EMPLOYEES AND SOCIETY REPORT ASSURANCE GRI & SASB INDEX
SUSTAINABILITY REPORT PENNY ROMANIA 2022 20/250 Evolution of the share of PENNY stores by city size Evolution of the number of stores 136 126 93 63 90 72 66 50 73 70 53 31 37 33 24 5 Stores in small-sized towns (between 4 000 and 25 000 inhabitants) Stores in small-sized towns (between 4 000 and 25 000 inhabitants) Stores in Bucharest-Ilfov Stores in medium-sized cities (between 25 000 and 90 000 inhabitants) Stores in big-sized cities (over 90 000 inhabitants) Stores in medium-sized cities (îbetween 25 000 and 90 000 inhabitants) Stores in big-sized cities (over 90 000 inhabitants) Stores in Bucharest-Ilfov 2022 2021 2022 2021 2018 2013 2022 2021 2022 2021 2022 2021 PROGRES 2022 vs. 2013 +116% PROGRES 2022 vs. 2013 +80% PROGRES 2022 vs. 2013 +135% PROGRES 2022 vs. 2013 +640% 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 a change of distribution for urban environments: 126 72 70 136 90 73 37 33 SUSTAINABILITY STRATEGY ABOUT US AND OUR VALUE CHAIN THE FUTURE IS MADE TODAY SUSTAINABILITY HIGHLIGHTS MESSAGE FROM THE GENERAL DIRECTORS CONTENTS SUSTAINABILITY STEP BY STEP
10 11 Timiș Arad 13 Bihor 9 Maramureș 11 Suceava 9 Neamț 8 Iași 5 Harghita 4 Botoșani 5 Sălaj 7 Cluj 8 Călărași 6 Ialomița 3 Tulcea 5 Brăila 9 Buzău 5 Vrancea 12 Alba 10 Sibiu 13 Brașov 4 Covasna 9 Bacău 2 Vaslui 6 Galați 15 Constanța 10 Mureș 5 BistrițaNăsăud 5 Vâlcea 5 Argeș 8 Teleorman Giurgiu 5 Dâmbovița 12 Prahova 6 Olt 4 Dolj 4 Mehedinți 5 Gorj 6 Caraș Severin 14 Hunedoara 7 Satu Mare București 19 4 18 97 79 69 91 Ilfov ȘTEFĂNEȘTII DE JOS 7, Bușteni St, Ilfov Surface area: 30 826 m2 BACĂU Nicolae Bălcescu St, Bacău Surface area: 19 721 m2 TURDA 30, 22 Decembrie 1989 St, Cluj Surface area: 27 233 m2 FILIAȘI 216, Racoțeanu BLVD, Dolj Surface area: 23 291 m2 1 NUMBER OF STORES BY COUNTY NUMBER OF LOGISTICS CENTRES BY COUNTY 336 Map of PENNY stores and logistics centres in Romania on 31st of December 2022 1 CORPORATE GOVERNANCE AND BUSINESS SUSTAINABLE ASSORTMENT ENERGY, CLIMATE AND RESOURCES EMPLOYEES AND SOCIETY REPORT ASSURANCE GRI & SASB INDEX
SUSTAINABILITY REPORT PENNY ROMANIA 2022 22/250 Raluca BEȘCHEA Head of Supply Chain Department Business relations We operate as a discounter in Romania and we are active in the retail area – food & non-food. We analyze the value chain from the perspective of the direct and indirect impact we generate both in our own activity (stores and logistics centers) and upstream (supply chain) and downstream (product and service distribution chain). We want to be a promoter of sustainability in the regions where we operate, we analyze any potential impact of our activity on environmental and social factors and we consider the risks and opportunities brought by external factors on the governance and performance of our company. It is important for us to be preventive, to mitigate negative impacts and to generate value by maximizing positive impacts. We identify any new processes or needs where we can make a positive contribution. We are aware of the importance of the needs of our stakeholders with whom we collaborate throughout the value chain, be they manufacturers, producers, suppliers, employees and subcontractors in REWE logistics centers, PENNY stores, customers, academic environment, etc. Many of them can impact our business through influences in either the supply chain or the product distribution chain. SUSTAINABILITY STRATEGY ABOUT US AND OUR VALUE CHAIN THE FUTURE IS MADE TODAY SUSTAINABILITY HIGHLIGHTS MESSAGE FROM THE GENERAL DIRECTORS CONTENTS SUSTAINABILITY STEP BY STEP
Dana BĂLĂNESCU Digital Commerce Operations Manager Supply and distribution chain Compared to the previous year, there were no major changes in the location of suppliers, the structure of the approval chain, or the relationship with suppliers, including procedures for selecting suppliers or for concluding or terminating contracts. Thus, we are continuing our efforts to improve the capabilities of these supply chain actors, with whom we actively collabo- rate to ensure the sustainability of our products and services to all customers. We do this by controlling the quality and quantity of supply and by developing environmental and social criteria in the selection of suppliers. The products marketed by PENNY involve collaboration with many actors in the value chain, and their overall structure is: manufacturers, suppliers, logistics centers, PENNY stores, E-Commerce partners, customers. As far as external suppliers are concerned, we have developed sustainable supply chains, based on the application of sustainable development principles, supply control and the development of environmental criteria in the selection of suppliers. The goods we receive from them are examined by our employees, who are regularly trained on hygiene and other requirements necessary for handling the goods. In addition to our continued collaboration with Glovo, in 2022 we entered into a new partnership with Bringo to be as close as possible to our customers regardless of the platforms they are on. Together with our partners at Step One Spedition and Mercedes-Benz Trucks & Buses Romania, we have started testing the eActros 300, the first electric truck available in Romania to transport the products we put on the shelf. CORPORATE GOVERNANCE AND BUSINESS SUSTAINABLE ASSORTMENT ENERGY, CLIMATE AND RESOURCES EMPLOYEES AND SOCIETY REPORT ASSURANCE GRI & SASB INDEX
SUSTAINABILITY REPORT PENNY ROMANIA 2022 24/250 Alexandru IANCU National Sales Director Channels We are remodeling our stores to give a pleasant shopping experience for our customers. The Future Store format was the latest store concept developed in recent years. By the end of 2022 all stores were remodeled under this concept and we started designing the future store concept that creates a new shopping universe aligned with new consumer, market and technology trends. The new store concept has Romanian origins. Our customers are interested and have a special affinity for local products which led to validate our commitment to offer a diverse local assortment. We improve our commitment to localization and the quality of the products in our stores with each new store concept we introduce to the customers. We are constantly working on improving our commercial range, internal processes, new communication and payment tools and methods of fulfilling our commitments. The store infrastructure increasingly includes digital elements, such as headset communication for employees, electronic price tags or electronic monitoring of fresh pastry stock. All newly opened PENNY stores are BREEAM In-Use (Building Research Establishment's Environmental Assessment Method) certified, which confirms our focus on sustainability principles, aligned with European legislation and global environmen- tal requirements. We equip stores and logistics centers with photovoltaic panels to reduce the environmental impact of energy consumption. In 2022 we equipped 12 new opened stores with photo-voltaic panels. We maintained our energy management system certification, ISO 50001 with a consistent and focused energy management program for the energy efficiency of our operations and buildings. 50001 Certified Energy Management System SUSTAINABILITY STRATEGY ABOUT US AND OUR VALUE CHAIN THE FUTURE IS MADE TODAY SUSTAINABILITY HIGHLIGHTS MESSAGE FROM THE GENERAL DIRECTORS CONTENTS SUSTAINABILITY STEP BY STEP
Monica ȘERBAN Head of Non-Food Buying Department Products We invested more and more in the development of high-quality products made through collaborations with local Romanian producers. We have launched the initiative "100 business ideas for Romania", together with the Academy of Economic Studies in Bucharest, an ambitious approach through which we want to offer Romanians, together with the relevant authorities and the local business environment, as many products as possible with the main ingredient from Romania, processed and packaged in the country. Currently, 100% of the fresh meat (beef, chicken and pork) sold in PENNY stores is in line with the 3RO target. We continue to work responsibly towards this goal so that by the end of 2023 we will reach 60% 3RO products available on the shelf. Additionally, we are happy that many of the goods in lines like the Hanul Boieresc and SuporteRO are becoming more in-demand by our clients and this is why we will continue to expand our private label portfolio. More than half of our food items are of local origin and 87.03% of our suppliers are from Romania. These strategic directions were reflected in both our permanent product range and our in-out promotions throughout 2022. Thus, 28.02% of turnover came from the sale of private label products in 2022. In order to guarantee the safety of private label foods, we implemented 76 Global Food Safety Initiative (GFSI) audits for those items throughout 2022. CORPORATE GOVERNANCE AND BUSINESS SUSTAINABLE ASSORTMENT ENERGY, CLIMATE AND RESOURCES EMPLOYEES AND SOCIETY REPORT ASSURANCE GRI & SASB INDEX
SUSTAINABILITY REPORT PENNY ROMANIA 2022 26/250 Nicoleta TOBĂ Head of MPDA Department Managing the value chain The value chain is the foundation of sustainability reporting, as it is on this basis that we determine stakeholder categories and identify material issues that may impact stakeholders and influence our company's performance. The value chain serves as the foundation of sustainability reporting since it allows us to categorize stakeholders and identify material issues that may impact stakeholders and influence our company's performance. In addition, the value chain has strategic value for business development because it allows us to apply continuous improvement practices to our products and services, stimulating innovation and new methods of collaboration with all of the stakeholders. We constantly strive to enhance our operations because end-to-end stock planning is one of our main areas of focus. We take control of the supply chain by automating, effectiveness and simplifying the complexity of stocks, in order to maximize availability with the least number of stocks. Our priority is to have integrated end-to-end inventory planning. We have implemented artificial intelligence-based forecasting and digital twin modeling to predict customer demand in each store, anticipate inventory requirements across the PENNY network, and improve inventory visibility in our warehouses to ensure optimal supply. We automatically monitor stock and order levels in near real-time and respond quickly to requests by triggering regular co-orders to our suppliers. SUSTAINABILITY STRATEGY ABOUT US AND OUR VALUE CHAIN THE FUTURE IS MADE TODAY SUSTAINABILITY HIGHLIGHTS MESSAGE FROM THE GENERAL DIRECTORS CONTENTS SUSTAINABILITY STEP BY STEP
PRODUCER MANUFACTURERS Raw materials PENNY WAREHOUSE PENNY STORES E-Commerce SUPPLIER SUPPLIER CLIENT Delivered products Products Products Products Products Order / Demand Order / Demand Placed Order Order / Demand Materiale Products CORPORATE GOVERNANCE AND BUSINESS SUSTAINABLE ASSORTMENT ENERGY, CLIMATE AND RESOURCES EMPLOYEES AND SOCIETY REPORT ASSURANCE GRI & SASB INDEX
Sustainability STRATEGY SUSTAINABILITY REPORT PENNY ROMANIA 2022 28/250 SUSTAINABILITY STRATEGY ABOUT US AND OUR VALUE CHAIN THE FUTURE IS MADE TODAY SUSTAINABILITY HIGHLIGHTS MESSAGE FROM THE GENERAL DIRECTORS CONTENTS SUSTAINABILITY STEP BY STEP
SUSTAINABILITY A PRIORITY PENNY grew with the goal of helping people save money and live better lives. We are aware that for our business to last and thrive, it must have a fundamental motivation to exist – which is found in the value it creates for society as a whole. That is why we work with other stakeholders to generate a positive impact in our supply chains. Our focus on climate, nature, resources and people across the value chain has strengthened our business and communities in measurable ways. Going forward, we strive to help people live better, not only through our offers, but also through how we deliver them, by operating efficiently, through a supply chain of sustainable products that help create well-being while sustaining and restoring the planet, by providing access to fair-paying jobs that encourage inclusion and development, and last but not least, through philanthropic support for community needs. Claudia Ivan – Sustainability Manager CORPORATE GOVERNANCE AND BUSINESS SUSTAINABLE ASSORTMENT ENERGY, CLIMATE AND RESOURCES EMPLOYEES AND SOCIETY REPORT ASSURANCE GRI & SASB INDEX
PENNY Romania's Sustainability Strategy STRATEGIC PILLARS, OBJECTIVES – GENERAL DIRECTIONS As a multinational retailer, our main focus is on assortment issues. These include topics such as social standards in the supply chain from harvesting to production and logistics, animal welfare and resource efficiency in packaging our products. DEVELOPING A SUSTAINABLE ASSORTMENT AND PROMOTING THE CONSUMPTION OF SUSTAINABLE PRODUCTS SUSTAINABLE ASSORTMENT Because we operate throughout Romania and purchase products from around the world, energy consumption and resource conservation are essential to our journey towards climate neutrality. ACTIVE CONTRIBUTION TO RESOURCE CONSERVATION, ENERGY EFFICIENCY AND CLIMATE PROTECTION ENERGY, CLIMATE AND RESOURCES With over 6 500 employees and an operating footprint in a variety of local communities, we take care of our employees as well as our "neighbors". FULFILLED, INVOLVED AND EFFICIENT EMPLOYEES, WORKING TOGETHER IN A HEALTHY COMMUNITY EMPLOYEES AND SOCIETY SUSTAINABILITY REPORT PENNY ROMANIA 2022 30/250 SUSTAINABILITY STRATEGY ABOUT US AND OUR VALUE CHAIN THE FUTURE IS MADE TODAY SUSTAINABILITY HIGHLIGHTS MESSAGE FROM THE GENERAL DIRECTORS CONTENTS SUSTAINABILITY STEP BY STEP
SDG SDGs Specific Targets PENNY Sustainability Pillar 1.3 Implement nationally appropriate social protection systems and measures for all, including floors, and by 2030 achieve substantial coverage of the poor and the vulnerable. EMPLOYEES AND SOCIETY 2.3 3 By 2030, double the agricultural productivity and incomes of small-scale food producers, in particular women, indigenous peoples, family farmers, pastoralists, and fishers, including through secure and equal access to land, other productive resources, and inputs, knowledge, financial services, markets and opportunities for value addition and non-farm employment. EMPLOYEES AND SOCIETY 4.1 By 2030, ensure that all girls and boys complete free, equitable, and quality primary and secondary education leading to relevant and effective learning outcomes. EMPLOYEES AND SOCIETY 4.3 By 2030, ensure equal access for all women and men to affordable and quality technical, vocational and tertiary education, including university. EMPLOYEES AND SOCIETY 5.5 Ensure women’s full and effective participation and equal opportunities or leadership at all levels of decision-making in political, economic, and public life. EMPLOYEES AND SOCIETY ENERGIE ACCESIBILĂ ȘI CURATĂ 7.2 By 2030, increase substantially the share of renewable energy in the global energy mix. ENERGY, CLIMATE AND RESOURCES 7.3 By 2030, double the global rate of improvement in energy efficiency. ENERGY, CLIMATE AND RESOURCES 7.a By 2030, enhance international cooperation to facilitate access to clean energy research and technology, including renewable energy, energy efficiency, and advanced and cleaner fossil-fuel technology, and promote investment in energy infrastructure and clean energy technology. ENERGY, CLIMATE AND RESOURCES 8.2 Achieve higher levels of economic productivity through diversification, technological upgrading, and innovation, including through a focus on high-value added and labor-intensive sectors. SUSTAINABLE ASSORTMENT 8.3 Promote development-oriented policies that support productive activi- ties, decent job creation, entrepreneurship, creativity, and innovation, and encourage the formalization and growth of micro-, small- and medium- sized enterprises, including through access to financial services. SUSTAINABLE ASSORTMENT EMPLOYEES AND SOCIETY 8.5 By 2030, achieve full and productive employment and decent workfor all women and men, including for young people and persons withdisabilities, and equal pay for work of equal value. EMPLOYEES AND SOCIETY 9.4 By 2030, upgrade infrastructure and retrofit industries to make them sustainable, with increased resource-use efficiency and greater adoption of clean and environmentally sound technologies and industrial processes, with all countries taking action by their respective capabilities. SUSTAINABLE ASSORTMENT 10.4 Adopt policies, especially fiscal, wage, and social protection policies, and progressively achieve greater equality. EMPLOYEES AND SOCIETY 12.2 By 2030, achieve the sustainable management and efficient use of natural resources. SUSTAINABLE ASSORTMENT 12.3 By 2030, halve per capita global food waste at the retail and consumer levels and reduce food losses along production and supply chains, including postharvest losses. SUSTAINABLE ASSORTMENT ENERGY, CLIMATE AND RESOURCES EMPLOYEES AND SOCIETY 12.5 By 2030, substantially reduce waste generation through prevention, reduction, recycling, and reuse. SUSTAINABLE ASSORTMENT ENERGY, CLIMATE AND RESOURCES 12.6 Encourage companies, especially large and transnational companies, to adopt sustainable practices and to integrate sustainability information into their reporting cycle. ENERGY, CLIMATE AND RESOURCES 12.8 By 2030, ensure that people everywhere have the relevant information and awareness for sustainable development and lifestyles in harmony with nature. EMPLOYEES AND SOCIETY 13.2 Integrate climate change measures into national policies, strategies, and planning. ENERGY, CLIMATE AND RESOURCES 13.3 Improve education, awareness raising, and human and institutional capacity on climate change mitigation, adaptation, impact reduction, and early warning. ENERGY, CLIMATE AND RESOURCES 14.1 By 2025, prevent and significantly reduce marine pollution of all kinds, in particular from land-based activities, including marine debris and nutrient pollution. SUSTAINABLE ASSORTMENT 15.6 Promote fair and equitable sharing of the benefits arising from the utilization of genetic resources and promote appropriate access to such resources, as internationally agreed. SUSTAINABLE ASSORTMENT 16.5 Substantially reduce corruption and bribery in all their forms. SUSTAINABLE ASSORTMENT 16.7 Ensure responsive, inclusive, participatory, and representative decisionmaking at all levels. SUSTAINABLE ASSORTMENT 17.16Enhance the Global Partnership for Sustainable Development, complemented by multi-stakeholder partnerships that mobilize and share knowledge, expertise, technology, and financial resources, to support the achievement of the Sustainable Development Goals in all countries, in particular developing countries. EMPLOYEES AND SOCIETY 17.17Encourage and promote effective public, public-private, and civil society partnerships, building on the experience and resourcing strategies of partnerships. EMPLOYEES AND SOCIETY Aligning PENNY sustainability pillars to the UN Sustainable Development Goals (SDGs) CORPORATE GOVERNANCE AND BUSINESS SUSTAINABLE ASSORTMENT ENERGY, CLIMATE AND RESOURCES EMPLOYEES AND SOCIETY REPORT ASSURANCE GRI & SASB INDEX
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