Sustainable procurement and assortment

Our aim is to procure products that are safe and unobjectionable from a social and environmental point of view. This forms the basis of responsible product assortment. As a retail company, we also depend on resources being available in the long term as the raw materials are used to produce and package the products that we sell in our stores. To take these aspects into consideration, we observe our group-wide sustainable purchasing policy for all our products. It defines the basic standards for sustainable supply chain and procurement management. At the same time, our purchasing policy brings together various guidelines that address specific questions relating to individual product and raw material categories and are specified within the sales lines. By developing and implementing such guidelines for sustainable purchasing, we strengthen our procurement channels and contribute to improving the sustainability of our range of products.

More information on the METRO GROUP procurement policy can be found on our website.

Topic

Goals

Status – goal achievement

Measures

Status – measures

SUSTAINABLE PROCUREMENT
AND ASSORTMENT

By 2015, we will have defined processes with which to assess the sustainability impact of the METRO GROUP sales lines’ own-brand products. By continuously implementing our general METRO GROUP purchasing policy on sustainable procurement, we will work on all product categories relevant to aspects of sustainability.


Goal achieved

Assessment of the social impacts of METRO Cash & Carry’s own-brand portfolio and its effects on the environment along the supply chain has been completed. The assessment was performed at the levels of raw materials, products and product groups and follows the standard international assessment criteria for social and ecological impacts.

The purpose of this process was to establish basic requirements and to make supply chain and procurement management more sustainable in the relevant categories. We accomplished this with our guidelines.

Assessing the product portfolio, defining minimum standards and establishing specific KPIs enables METRO Cash & Carry to fulfil the requirements for a more sustainable assortment.


Measure completed

Fair and socially equitable working conditions

Social standard systems are an essential part of the process of and also a tool for the implementation of socially acceptable working conditions within our procurement channels. They help us to identify and prevent potential risks by taking specific measures. After all, irresponsible practices undermine people’s trust in what we do and therefore also in our business.

The key labour standards defined by the International Labour Organization (ILO) are a fixed part of METRO GROUP’s general terms and conditions of purchase. As one of the founding members of the Business Social Compliance Initiative (BSCI), we have also been involved for years in systematically establishing socially fair working conditions in the manufacturing of our own-brand products. Our approach is to assist our suppliers and production facilities in setting up a suitable management process. As evidence of fair and socially equitable working conditions, we accept either audits based on the BSCI requirements or equivalent social standard audits.

Fire prevention and occupational safety training

We endeavour to sensitise our partners to specific aspects of safe working conditions. Fire prevention is one of our most important requirements. For this reason, we check the fire prevention precautions of our own-brand manufacturers – including escape routes, emergency exits, fire extinguishers and regularly held fire drills – as well as the relevant management processes.

In addition to our ongoing auditing programmes, METRO GROUP’s import organisation, MGB METRO GROUP Buying Hong Kong, has been conducting fire prevention and occupational safety training courses for producers in Bangladesh and other risk countries in conjunction with our cooperative partners since February 2013. In financial year 2015/16, we were able to train some 600 producers in addition to the training programmes offered by the BSCI. In order to improve the structural safety of textile factories in the production countries, we signed the Bangladesh Accord on Fire and Building Safety in 2013. The accord came about as part of a multi-stakeholder initiative involving company representatives, trade unions and NGOs. By signing the accord, we further extended our commitment to improving working conditions in the supply chain.

Auditing producers

We aim to audit all the producers in defined risk countries (based on a BSCI assessment) that supply MGB Hong Kong with import articles and also producers that manufacture own-brand clothing, footwear, toys and consumer durables for the METRO GROUP sales lines on the basis of the BSCI standard or equivalent standards. As of 30 September 2016, this comprised a total of 1,632 producers. Of these, 86 per cent (1,405 producers) passed the audit. Producers whose audit results identified a need for improvement have twelve months to provide proof of those improvements through a follow-up audit. As of 1 January 2017, METRO Cash & Carry and Real will tighten the requirements for suppliers such that new producers will only be used if their audit results are at least acceptable. A two-year transitional period will apply to current producers.

Establishing the deal breaker processes

As a further measure contributing to ensuring socially acceptable work conditions, we defined so-called deal breaker processes in 2016, in addition to the BSCI standard processes. The assessment criteria comprise the aspects of child labour, forced labour, occupational safety (in particular fire prevention) and ethical behaviour. The deal breaker process ensures that suppliers and their producers who identify a deal breaker develop short-term and long-term solutions to remedy the critical findings. To make sure our suppliers and producers comply with these requirements, orders which are already in production may be completed, but new orders or follow-up orders will be stalled until the findings of the deal breaker process have been rectified.

As of 30 September 2016, there were deal breaker findings relating to 50 non-food own-brand manufacturers. This equates to 3 per cent of all the producers audited. Among the deal breaker findings as at the reporting date, 83 per cent showed a heightened risk in the category of occupational safety, in particular concerning fire prevention, 14 per cent presented a heightened risk concerning child labour, and 2 per cent a heightened risk in the areas of forced labour and ethical behaviour. During the reporting period, 74 per cent of the producers with deal breaker findings were able to document improvements and 26 producers were barred from receiving further orders due to insufficient corrective measures.

Social audits of own imports through MGB Hong Kong and non-food own brands of the METRO GROUP sales lines


 Producers with valid audit

Producers with valid audit (Grafik)Producers with valid audit (Grafik)


 Thereof with passed audit in %

Producers that have passed the audit can demonstrate their successful compliance with the BSCI standard or an equivalent social standard system by presenting a certificate awarded by an independent third party.

1 Adjustment of the 2014/15 figures for social audits at producers relating to own imports through MGB Hong Kong; in addition, the 2014/15 figures include producers relating to non-food own brands of the METRO GROUP sales lines.

2 Adjustment of the 2015/16 figures due to the sale of the former METRO GROUP sales line Galeria Kaufhof.

3 From 2015, adjustment of BSCI rating system from three rating categories (good/improvements needed/non-compliant) to five rating categories (A/B/C/D/E). The result “improvements needed” was understood as a passed audit. Under the new measurement system, a portion of the previous “improvements needed” results was assigned to the categories “C” (passed audit) and “D” (failed audit). This adjustment resulted in a lower share of producers with a passed audit in the last financial year.

Definition: Status of all the producers in defined risk countries in which MGB Hong Kong has import goods manufactured based on the assessment of the Business Social Compliance Initiative (BSCI), and of producers that manufacture own brands or own imports in the areas of clothing, shoes, toys and consumer durables for the METRO GROUP sales lines. Producers that have passed the audit can demonstrate their successful compliance with the BSCI standard or an equivalent social standards system by presenting a certificate awarded by an independent third party.

Explanation: 1,632 producers were audited as of 30 September 2016. Of these, 86 per cent (1,405 producers) passed the audit. Producers whose audit results identified a need for improvement have twelve months to provide proof of those improvements through a follow-up audit. As of 1 January 2017, METRO Cash & Carry and Real will tighten the requirements for suppliers such that new producers will only be used if their audit results are at least acceptable. A two-year transitional period will apply to current producers..

The key performance indicator relates to all the factories of which we are made aware by our suppliers.

Topic

Goals

Status – goal achievement

Measures

Status – measures

1

This includes merchandise factories (non-food own brands and own imports) that carry out the final significant and value-creating production step.

2

BSCI definition of a risk country.

SUSTAINABLE PROCUREMENT AND ASSORTMENT

METRO GROUP is intensifying its commitment to ensure fair working conditions at its suppliers.


Work in progress

Continued inclusion of all non-food own-brand producers1 in a valid BSCI or equivalent social standard system and increase the proportion of valid audits for products manufactured in a risk country2.

Tightening of requirements made to suppliers of METRO Cash & Carry and Real such that all the producers used1 must have at least acceptable audit results by 1 January 2019.


Measure ongoing