Csr Report 2017 Page Page Page 04-07 14-17 20-27 Improving Our Our Everyday Life Business Risks

CSR REPORT 2017 PAGE PAGE PAGE 04-07 14-17 20-27 IMPROVING OUR OUR EVERYDAY LIFE BUSINESS RISKS

14-15 OUR OWNERS 22 HUMAN RIGHTS – THE SALLING FOUNDATIONS 23 SOCIAL AND EMPLOYEE CONDITIONS 16-17 OUR FINANCIAL FOOTPRINT 24 ANTI-CORRUPTION AND BRIBERY 25 CLIMATE 26-27 ENVIRONMENTAL IMPACT

PAGE PAGE PAGE 08-13 18-21 28-39 OUR FOCUS OUR DUE OUR AREAS DILIGENCE PERFORMANCE

08-09 SUSTAINABILITY 18-19 OUR DUE DILIGENCE 28-29 ENGAGING WITH OUR STAKEHOLDERS 10-11 CUSTOMER VALUE IN PROCUREMENT 30 KEY PERFORMANCE INDICATORS 12-13 OPPORTUNITIES 20-21 OUR RISKS 32-33 INDEPENDENT PRACTIONERS LIMITED ASSURANCE 33 MANAGEMENT STATEMENT 34-35 REPORTING APPROACH 36-39 REPORTING CRITERIA AND PERFORMANCE 40-41 COMPANY INFORMATION IMPROVING EVERYDAY LIFE

IMPROVING EVERYDAY LIFE

Integrity Eleven million customers visiting our A NEW SHARED PURPOSE WILL stores every week indicate that we GUIDE OUR DECISIONS We build trust by acting with decency, are an impactful retailer, particularly in responsibility and honesty. Denmark. We recognise the responsi- With the values in place, we have also bility that is embedded in our position, introduced a purpose that will unite and and in 2017 we took further steps to drive us across the group. The purpose increase our social footprint. In addition, ‘Improving Everyday Life’ expresses the some of the fundamentals related to role we want to play in people’s lives Passionate our history, identity and culture were regardless of whether they are custo- anchored further to encourage a more mers, colleagues, neighbours or part- value-driven organisation with a strong ners. We have identified three overall We are driven by the desire to improve social engagement. areas that we will focus on: Sustainabi- everyday life for our customers, our lity, Customer Value and Opportunities. colleagues and our communities. NEW SHARED VALUES WILL In this report, we have described more GUIDE OUR BEHAVIOUR specific activities within these areas. Regarding our customers, we work with One important activity in 2017 was the a variety of activities that we believe introduction of corporate values. For will improve their everyday lives. One Agile the first time ever, we have a common of these is making responsible choices set of values across all formats and simple and affordable. We believe that We embrace change, adapt quickly to functions in the entire Dansk Super- the majority of our customers would new demands and never stop learning. marked Group. Five values – Integrity, like to increase their share of respon- Passionate, Agile, Competitive and sible shopping, and our contribution Efficient – have been identified as to this development is to encourage already existing behaviours that we customers with affordable prices, want to enforce by formalising them step-by-step solutions, label trans as our corporate values. parency and visibility in our stores. Competitive

Our new values replace all earlier Our purpose, however, reaches beyond We aim to win in all areas of the business, values in all formats and functions and what we offer our customers. We also seize opportunities and resiliently over- will serve as a common language for take part in everyday life in local com- come challenges together. what is expected from us as individuals munities and actively contribute to and as teams. On a daily basis, we will solving some of the challenges here. use the values in our discussions about A significant contribution is creating op- behaviour, priorities and ways of wor- portunities for people who find it difficult king. We believe our values will help us for various reasons to gain a foothold in Efficient remain a successful and trusted retailer the job market. We have several struc- in the future. tures and programmes which help them to gain employment, an education or We seek simplicity and aspire to create useful job experience, and, in all formats, productive and cost-effective ways of colleagues make a daily effort to sup- working.

Page 4 port these people in taking the next step Dansk Supermarked Group forward in their work life. CSR Report 2017 IMPROVING EVERYDAY LIFE

We see our focus areas as our purpose drivers, which are all related to parts 100 % FOUNDATION OWNERSHIP and have two purposes: to ensure that of one or more of the 17 global Sustainable Development Goals that we have GIVES US A STRONG PLATFORM Dansk Supermarked Group develops committed ourselves to help achieve. to meet our customers’ needs – and to A significant fundament of our corpora- contribute to society through donations tion was changed in November. Dansk of the profits earned in the retail group. PURPOSE DRIVER SCOPE SUSTAINABLE DEVELOPMENT GOALS Supermarked Group became fully Since 2012, the foundations have owned by the Salling Foundations as donated more than DKK 850 million they acquired the remaining 19 % of the to projects within culture, sports and Sustainability Full value chain shares from A. P. Moeller – Maersk. charity. This brought 53 years of partnership to an end. The Group is once again 100 % The foundation ownership is very much Customer Value Our customers under the wings of the Salling name. in line with our purpose and is a strong platform for us to stand on as we further The Salling Foundations were establis- develop our social responsibility for the hed by our founder, the entrepreneurial future. Opportunities Our employees and visionary retailer Herman Salling,

Købmand Købmand Herman Sallings Fond Ferdinand Sallings Mindefond

100 % 70,81 % 29,19 %

F. Salling Invest A/S F. Salling Holding A/S

48,29 % 51,71 %

Dansk Supermarked Group

100 %

Salling føtex Bilka Netto Wupti Starbucks Carl’s Jr.

(Salling.dk, Bilka.dk, føtex.dk, føtexdagligvarer.dk and Salling.dk are covered by their respective formats. Starbucks and Carl's Jr. Page 6 are franchises and not in scope for the reporting). Page 7 Dansk Supermarked Group Dansk Supermarked Group CSR Report 2017 CSR Report 2017 OUR FOCUS AREAS

Food waste development

45,000

40,000

35,000 OUR FOCUS AREAS 30,000 25,000

20,000

SUSTAINABILITY 15,000

10,000

5,000

0 MINIMISING OUR FOOD WASTE, from 42,826 to 21,413 tonnes a year. 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 MATERIAL WASTE AND ENERGY In 2017 we reduced our food waste by Actual Target 2,401 tonnes or 7.2 percent in absolute Running a financially sustainable and numbers, compared to 2016, which resilient business has always been means that we are actually ahead our number one priority. We believe of our calculated reduction forecast 19 percent less bakery waste 50 tonnes of food donated to that a financially sustainable business despite growth in the number of stores. the Food Bank that distributes goes hand in hand with a sustainable the donated food items to approach to our activities. Looking at material waste in general, organisations helping socially Increased direct sourcing from As Denmark's largest retailer, we con we have previously set an optimistic marginalised people. tinuously strive to create more sustain target of recycling 90 percent of our producers of fruit and vegetables able and climate friendly solutions and total amount of our yearly tonnes of = fresher goods and less waste. initiatives. Within this area, we have waste before the end of 2018. By particularly focused on the fight against investing in new technologies and co- Participation in the food waste, material waste and energy operating with leading innovative waste Building Management System World Food Summit. consumption. management companies, in 2017 we in all Netto stores optimises hit a recycling rate of 75 percent, and energy consumption. in the long term we aim Food waste in formats and total for a rate of 100 per- Pilot project with repackaging cent. With a recycling in Netto in order to minimize 45,000 42,826 rate of slightly more We have developed a heat food waste by only throwing 40,000 than 90 percent, Netto recovery unit so that the heat out the bruised fruits and 35,000 from our cold counters and vegetables in the packages. 30,963 Denmark is a frontrun- 30,000 ner in this area, and fridges is re-used in our stores – and the surplus heat is distri- 25,000 we have strengthened 19,458 buted to external heating plants. 20,000 17,635 our attention on føtex, 15,122 Netto Sweden is fighting 15,000 Bilka and Salling, where sorting is more complex food waste in cooperation with 10,000 8,723 8,033 the organisation Food2Change due to more product We have invested around 5,000 4,176 and will expand this categories and waste DKK one million in waste 0 fractions. partnership in 2018. føtex Bilka Netto** Total* handling systems in Bilka and føtex so they can become *Incl. Salling and warehouses In recent years we have 2014 2015 2016 2017 better at sorting waste. ** More stores account for 514 tonnes increased our focus on Netto Poland is collaborating energy consumption with the Polish Food Bank In 2017 we were the first retailer to in our stores significantly. In 2017 we and also donating food publish our 2016 figures for food waste launched a behavioural change cam- 27 tonnes of food donated around Christmas, Easter in Denmark. In line with the UN Sustain paign where we appointed more than from føtex to Wefood and School Holidays. able Development Goal 12.3 – ensuring 100 Energy Ambassadors in our føtex – surplus food supermarkets sustainable consumption and produc- stores and Bilka hypermarkets. Our run by DanChurchAid tion patterns – we have set a target to target was to reduce our consumption reduce our food waste by 50 percent of electricity by 3 percent by the end by 2030, using 2014 as a baseline. For of 2017 equal to 622 MWh/month. We Page 9 us this equals a reduction of food waste managed a 12.6 percent reduction. Dansk Supermarked Group CSR Report 2017 OUR FOCUS AREAS

CUSTOMER VALUE

INCREASED FOCUS ON ANIMAL The label grades animal welfare on WELFARE three levels – one, two or three hearts. This approach makes animal welfare We want to improve everyday life and affordable for even more customers create value for our customers by – a market-driven approach that is making responsible shopping affor- perfectly in line with our philosophy dable for everyone. and commitment.

We work widely on providing our custo In May 2017 the label started off by mers with the possibility of shopping covering pork, and by the end of 2017 more responsibly within many catego- we could see that our sales of conven- Cage eggs sales stop Denmark Germany Sweden Poland ries – and in 2017 we have especially tional pork had declined while sales of focused on increasing our assortment pork products marked with the National Whole eggs ✓ ✓ ✓ By end 2025 of products labelled with animal wel Danish Animal Welfare Label or the Cage eggs as an ingredient fare. This development took off in 2016 Danish Animal Welfare Society Label in private label products By end 2019 ✓* By end 2019 By end 2025 when we entered a five-year partner had increased. This indicates that ani-

ship with the Danish Animal Welfare mal welfare labelling is actually moving *Internationally sourced products will follow strategy as in Denmark. Society to increase our sale of products customers’ purchasing patterns in a direc with the highest level of animal welfare tion towards increased animal welfare. by DKK 500 million by 2020. We strongly welcome that the work Sales of whole cage eggs Increase in number of articles To support this target, we have actively to develop the national label in more stopped in Denmark and labelled with highest level of participated in the development of The product categories will happen as Sweden in 2017. In Germany animal welfare – from 94 in National Danish Animal Welfare Label. quickly as possible. cage eggs have been 2016 to 124 in 2017. banned since 2009. Replacing article numbers Animal welfare sales increase within conventional broilers In the coming years, Netto will with higher level of animal focus even more on providing welfare broilers: five in føtex 225 customers with healthy choices. and Bilka, and three in Netto. 200 200 175 Participation in the Food 150 We have changed the production Festival and the People’s Political Festival in Denmark. 125 methods of lamb from Chile in 111 cooperation with the Danish 100 89 Animal Welfare Society and Netto launched the campaign 75 our supplier – thus our lamb ”Organic Grower of the Year” in corporation with the Danish 50 from Chile has now reached the highest level of animal welfare. Organic Trade Board – almost 25 16,000 unique customer votes. 0 Increase

Page 10 2016 2017 Total Page 11 Dansk Supermarked Group Dansk Supermarked Group CSR Report 2017 CSR Report 2017 OUR FOCUS AREAS

130 different agreements on partnerships with 74 municipalities. Bilka Vejle received the Salling Foundation OPPORTUNITIES Diversity Prize 2017

32 participants on IGU – 2-year training programme Partnerships with different for refuges whose qualifica organisations and local EVERYONE DESERVES A CHANCE Over the coming years, we will seek to tions do not match the competence centres enhance our contribution to the debate Danish job market. supporting people on the As one of the largest employers in on the challenges our society is facing fringes of the job market. Denmark – and also a steadily grow- in creating opportunities for the unfor- ing retailer and employer in Germany, tunately large number of citizens on the Dansk Supermarked Poland and Sweden – we have a fringes of the job market. Group educates the largest A central team of HR diversity natural interest in creating a recruitment number of trainees among partners covering regions all base that is as broad as possible. GENDER EQUALITY all Danish companies. over Denmark and collaborating with municipalities and job Combined with the fact that we offer Gender equality is an untapped leader service centres. job positions within all levels and across ship opportunity and we are definite- a very wide range of disciplines, we ly challenged in complying with our have built a strong reputation through targets, so we need to enhance our 12 agreements We have 122 diversity the years as one of the leading emplo- work within this area. on youngsters. coordinators across yers when it comes to giving everyone Denmark who support a chance and providing each individual With more female than male promotions the stores in integrating with opportunities to grow their compe- at management level – 56 percent, we people in job training. tencies. are on track, but our gender balance is 28 language projects. insufficient at senior management level. The philosophy behind this also applies By the end of 2017, the percentage of when we cooperate with municipalities women at management level was 58, Bilka certified as and job service centres in helping but this drops to 25 percent when it Great Place to Work. citizens with special needs by clarifying comes to senior management level and their ability to take up a job – regard- continues to decrease to 14 percent less if it is in one of our stores or in when it comes to positions on or above another company. directorship level.

This also applies when we educate It is our ambition to increase the level more than 500 trainees a year on of women at top management level. Bøgehøj, our own training facility in the We have therefore decided to initiate city of Grenaa. Here we continually offer new and different programmes desig- our colleagues throughout the organi- ned to strengthen career planning and 5,4 % sation the best possible opportunities to create visible and clear career paths 4,6 % develop their talents further through our for female talents. widely respected training. This training INTERNSHIP / WORK covers a wide range of courses from At board level, our target was to have EXPERIENCE % trainee and graduate to leadership and the underrepresented gender reach 43,1 % management programmes. 40 percent by 2017. We ended up Job training (job no aim) 25,4 % Job entry (job aim) staying at last years level of 17 percent Language training as there were neither elections nor Prior to flex/light job appointments to the board in 2017. School We will sustain the target of 40 percent – now by 2020.

21,5 % Page 12 Page 13 Dansk Supermarked Group Dansk Supermarked Group CSR Report 2017 CSR Report 2017 OUR BUSINESS

OUR BUSINESS OUR OWNERS – THE SALLING FOUNDATIONS

The Salling Foundations consist of two In 2017 the foundations decided to independent foundations: hand out a number of donations for charitable purposes – some of the 1. Købmand Herman Sallings Fond and largest were: 2. Købmand Ferdinand Sallings Minde- fond • Team Denmark; support for elite Danish sports towards In 2017 the foundations bought back the Olympic Games in 2020. the remaining shares from A.P. Moeller • Renovation of the main stage – Maersk and are now 100 % owners at Aarhus Theatre. of Dansk Supermarked Group. Their • Realisation of the “Cirk(h)uset” objectives, apart from being owners, in the Aarhus municipality as part are to support employees and different of a Sports and Culture Campus; charitable purposes. From 2012 until an innovative movement house in the end of 2017, the foundations dona- the “Gellerupparken”. ted more than DKK 850 million. • The Foundation of “Lyseng Sports Club”; addition to the existing Throughout the years, the foundations facilities. have contributed to a long series of • Establishment of “Salling Rooftop”; local initiatives and projects for the a new urban space and culture benefit of people in various parts of platform on top of Aarhus for the Denmark. At the same time, they have benefit of all citizens and guests. made a series of donations for cultural, church, sports, educational and charity organisations, amongst others.

KØBMAND HERMAN SALLINGS FOND Købmand Herman Sallings Fond is the largest of the two foundations and has donated larger amounts to cultural life over the years.

KØBMAND FERDINAND SALLINGS MINDEFOND Half of the funds in Købmand Ferdinand Sallings Mindefond is given out as special bonuses to employees according to the deeds of the foundations, and the other half is given out on the basis of grant applications for common good and common charity purposes.

Page 15 Dansk Supermarked Group Salling Rooftop in Aarhus. CSR Report 2017 OUR BUSINESS

OUR FINANCIAL FOOTPRINT

At Dansk Supermarked Group, we According to the published corporate collected), such as VAT, employee duties on locally produced products are wish to be transparent about our tax tax record for 2016, F. Salling Holding income tax etc., and taxes paid directly paid to the authorities by the manufac- contribution in the countries where we A/S, which is the administration unit for (taxes borne), such as corporate in- turing companies. operate. Last year we reported on 2015 Dansk Supermarked Group, is the 30th come tax, property taxes etc. figures since 2016 figures were not largest corporate income tax payer Taxes and duties borne consist of cor- available for all formats in all countries in Denmark with a total corporate tax Taxes and duties collected consist of porate tax, energy tax, environmental at the time of reporting. This year we payment of DKK 203 million. F. Salling value added tax, taxes withheld from tax and property tax. will report on 2016 figures. Holding A/S is responsible for paying employee wages and excise duties. all corporate tax to the authorities on The largest amount of taxes and duties We have operating companies in Den - behalf of the Danish companies in the The included amount for value added borne relates to corporate income tax mark, Germany, Poland and Sweden, but Group. tax is calculated as the net VAT pay- (43 %). The Danish companies in the the largest activity occurs in Denmark. ment to the state, meaning VAT on Group paid a total corporate tax pay- In 2016 the total tax contribution1 from sales minus VAT payable. ment of DKK 203 million. Additionally, We do not operate companies in low our company amounted to DKK 7,319 DKK 67 million company tax was paid tax jurisdictions and we do not utilise million, compared to DKK 7,219 million Collected excise duties in Denmark abroad. special tax optimisation models desig- in 2015. This includes both taxes paid (e.g. on chocolate, alcohol etc.) are only ned for the purpose of tax avoidance. indirectly by our company (taxes included for imported goods as excise

Total tax contribution Total tax contribution Taxes and duties collected Taxes and duties borne – divided by countries – divided into categories Total DKK 6,685 million Total DKK 634 million Total DKK 7,319 million Total DKK 7,319 million

4% 2% Total taxes and 6% Sweden 354 7% 12% duties paid for... 2% Value added tax (output 20% minus input VAT) (52%) Poland 269 1% Employee taxation (33%) Value added tax Environmental tax (12%) Excise duty (imported (output minus input VAT) Property tax (20%) Germany 592 goods only) (6%) 36% Excise duty 25% Corporate tax (43%) 52% Corporate tax (4%) 57% (imported goods only) Energy tax incl. PSO (25%) Denmark 6,105 33% Energy tax incl. PSO (2%) Employee taxation Environmental tax (1%) Property tax (2%) 0 5,000 10,000 43%

1 The presentation is made in accordance with the standardised Total Tax Contribution methodology. Our Tax Policy can be found at dansksupermarked.com. Page 16 Page 17 Dansk Supermarked Group Dansk Supermarked Group CSR Report 2017 CSR Report 2017 OUR DUE DILIGENCE

OUR DUE DILIGENCE IN PROCUREMENT

Code of conduct

We source products from all parts of The platform is fully integrated with the the world and we acknowledge that amfori BSCI database, which allows Risk assessment we cannot solve all global issues alone, supplier information from the amfori New cyclus after two Responsible but we strive to make a positive impact BSCI database to be automatically years from start Procurement System through various initiatives. synchronised with data on our platform, thus providing us with the most We have been a member of the amfori up-to-date and accurate risk assess- Business Social Compliance Initiative ment across all our high-risk suppliers, Private label (amfori BSCI) since October 2006. regardless of products and sourcing Compliant / and unbranded Full audit amfori BSCI works to strengthen social destination. This transparency allows In process product producers responsibility and to protect human Dansk Supermarked Group to utilise in supply chain rights in high-risk countries. We are risk mitigation tools to a much larger committed to sourcing by the amfori extent than prior to the implementation BSCI principles, and the amfori BSCI of our new platform. Code of Conduct serves as our code of conduct as well as being part of our By the end of 2017, almost 83 % of Re-audit Corrective action plan trade term agreements. suppliers in our target group were activated, and we expect to on-board To help prevent the violation of human the remainder of the pool to our digital rights, proper due diligence systems platform in 2018. Follow-up must be in place, and we have invested considerably in further enhancing our SAMPLING methodology for responsible supplier surveillance. As a consequence, we In the next step, we will make sample have made a new two-step strategy. verifications – i.e., take out information and documentation that has been Suppliers uploaded 1346 RESPONSIBLE PROCUREMENT uploaded by our suppliers – and SYSTEM scrutinise these with regard to trace Completed profiles 837 ability, validity and proper information compliant 746 In the first step of our strategy, which on production sites. This step will be in process 88 was initiated in 2017, we had a custo- initiated during 2018. no go/suspended 3 mised digital platform developed – Re- sponsible Procurement System – upon which documentation and certificates from, among others, our suppliers of private label and unbranded products from high-risk countries are uploaded.

Page 18 Page 19 Dansk Supermarked Group Dansk Supermarked Group CSR Report 2017 CSR Report 2017 OUR RISKS

OUR RISKS

As illustrated below we acknowledge the existence of several risks in our supply chain, where we might have a negative impact. In order to mitigate those risks, we seek to have due diligence processes in place, however focusing primarily on the supply chain of our private label and unbranded products, since this is where we have the largest influence.

CLIMATE HUMAN RIGHTS CLIMATE CO2 emissions and particles HUMAN RIGHTS Child labour CO2 emissions from transportation Food safety Forced labour from transportation ENVIRONMENT ENVIRONMENT Minimum wage Noise Food waste ENVIRONMENT CORRUPTION HUMAN RIGHTS Use of water Fair living wages of Chemicals etc. DISTRIBUTION truck drivers MANUFACTURER CENTRE STORE

PRIMARY TRANSPORT TRANSPORT CONSUMER PRODUCTION CORRUPTION SOCIAL HUMAN RIGHTS Employee accidents Food safety HUMAN RIGHTS Stress Fair living wages of cleaning staff Forced labour Working hours SOCIAL Child labour HUMAN RIGHTS Employee accidents Discrimination and CLIMATE equal treatment CO2 emissions from stores ENVIRONMENT Waste and food waste CORRUPTION Theft

WHEN ASSESSING OUR RISKS, WE FOCUS ON FIVE MAIN AREAS, WHICH ARE: (1) Human rights (2) Social and employee conditions (3) Anticorruption and bribery (4) Climate (5) Environmental impact Based on a materiality risk assessment conducted in 2017 in cooperation with Page 20 Page 21 Dansk Supermarked Group external partner Ernst & Young, we have identified the risks within the five main areas Dansk Supermarked Group CSR Report 2017 where we, as a retail company, are most likely to have a potentially negative impact. CSR Report 2017 OUR RISKS

HUMAN RIGHTS SOCIAL AND EMPLOYEE CONDITIONS

We respect human rights and work to ensure that we do not contribute to any human rights violations. We are committed to taking care of our employees, and therefore working environment and safety issues are taken very seriously.

ISSUE RISK ACTIONS IN 2017 ISSUE RISK ACTIONS IN 2017

Food safety Risk of wrong storing of food. Food safety Third party and own Employee accidents There is a risk, in both warehouses and stores, Regular analyses and considerations include the origins of food, control of food hygiene, of sudden accidents because of physical hand- monitoring of lost time including observance of the practices relating handling, preparation ling of boxes, slippery floors, use of forklifts, incidents from top level to food labelling, food hygiene, food additives and storage in our stores knives or other machinery and tools. down to department and pesticide residues in order to avoid and distribution centres. level in each store and potential consumer poisoning. Foreign objects warehouse. Focus areas (e.g., glass) also form a risk that constitutes a are typically lifting, slip/ danger for consumers. Poor food safety can trip and robbery. potentially affect a lot of people, and in some cases food poisoning can have fatal Stress Risk that employees are diagnosed with stress. We seek to match consequences (e.g., listeria and salmonella). Stress can affect the health of staff, reduce pressure and demands productivity and lead to performance issues or to our employees' Child labour, forced The nature of our supply chain comprises amfori BSCI Code of employees taking time off or being on sick leave. knowledge and abilities. labour, minimum risks in some of the countries we source from, Conduct and third-party wages and conflict especially in agricultural, apparel, electronic audits, including inter- Physical attrition Risk of physical attrition due to heavy lifts and Where possible we try to minerals and jewellery industries, where child labour, views with workers. moving, or too much sedentary work, that may support job rotation, and forced labour and wages below minimum Mandatory responsible lead to poor quality of life, more frequent sick sedentary employees are according to local legislation might occur. procurement courses. leave and higher employee turnover. offered sit-stand desks.

Page 22 Page 23 Dansk Supermarked Group Dansk Supermarked Group CSR Report 2017 CSR Report 2017 OUR RISKS

ANTI-CORRUPTION CLIMATE AND BRIBERY

Climate change is a global concern that we share, and we recognise the risks climate change poses for society. We strive to maintain a fair and transparent business culture.

ISSUE RISK ACTIONS IN 2017 ISSUE RISK ACTIONS IN 2017

Facilitation pay- Risk of facilitation payments, corruption and amfori BSCI Code of CO2 emissions Risk of high release of CO2 We seek to control costs and take into ments, corruption bribery in our supply chain, which is a barrier Conduct and Anti- from transport emissions from transportation of account the impact on sustainability and bribery for economic and social development, parti Corruption Policy. goods to our distribution centres initiatives in our choice of transport cularly in developing countries, and is often and further transportation from mode and by managing more and more synonymous with increased costs. distribution centres to stores. of the inbound transportation ourselves. For the outbound transport, we do not Corruption and Risk of corruption, e.g., related to accounting Business Principles, Anti- have our own trucks as we use the bribery in Dansk fraud, bribery related to obtaining building Corruption Policy, well services of hauliers with whom we Supermarked permissions or receipt of money or values established internal controls, seek to reduce CO2 emissions, among Group for placing an order. responsible procurement others, by optimising truck loads, courses and update of logistics and driving routines. whistle blower set-up.

Page 24 Page 25 Dansk Supermarked Group Dansk Supermarked Group CSR Report 2017 CSR Report 2017 OUR RISKS

ENVIRONMENTAL IMPACT

By sourcing from all over the world, we are at risk of contributing to a negative environmental impact on some of the places we source from or places where some of the ingredients in our products are grown or produced.

ISSUE RISK ACTIONS IN 2017

Water usage Risk of excessive water usage in We have begun mapping our direct business the production of the goods we water footprint in order to see where and sell. Everything we use, wear, buy, how we can contribute to minimising water sell and eat takes water to produ- usage. The next step will be to map water ce, and extensive water usage in usage in the supply chain. areas with scarce water resources has a considerable impact on the environment and local inhabitants.

Deforestation Risk that products we sell may We demand from our private label suppliers that have contributed to deforestation, any content of palm oil has to be RSPO2 mass and as a consequence the loss of balance certified as a minimum. The status is biodiversity and the enhancement reported once a year. By end 2018, the require- of the greenhouse effect, ment will be raised to segregated for food pro- because of their content of palm ducts. We do not yet have a soy policy, but we oil or soy, for example. are participating in a soy working group under DIEH (the Danish Initiative for Ethical Trading).

First hybrid truck to transport Netto articles. The text says: 87 % less CO2 emission. 2 Round Table on Sustainable Palm Oil

Page 26 Page 27 Dansk Supermarked Group Dansk Supermarked Group CSR Report 2017 CSR Report 2017 OUR PERFORMANCE

OUR PERFORMANCE

ENGAGING WITH OUR KEY STAKEHOLDERS FORM OF DIALOGUE HOT TOPICS STAKEHOLDERS Municipalities Ongoing dialogue Noise Waste management Opening of new stores Diversity

With 53,000 employees and 11 million To deliver efficiently on our strategy, our NGOs (WWF, The One-to-one meetings Sustainable sourcing customers visiting our stores every management of stakeholder relations is Danish Society for Ongoing dialogue Animal welfare week, we play a significant role in based on a materiality factor, taking into Nature Conservation, Partnerships Food waste society. This great impact calls for consideration our impact on important DanChurchAid, Fair Environment extraordinary responsibility in the way themes and developments – and vice Trade, The Danish Food safety we conduct our business. Engaging versa. Animal Welfare Society, Requests for donation with important stakeholders and The Danish Organic Fundraising partners is crucial to succeed in order Trade Board, FSC to deliver on our responsibility goals – Denmark, Børns Vilkår, because cooperation is key in reaching MSF etc.) goals within common agendas. Trade and other organi- One-to-one meetings Sustainable sourcing sations (The Danish Ongoing dialogue Labelling KEY STAKEHOLDERS FORM OF DIALOGUE HOT TOPICS Chamber of Commerce, CSR networking groups The Danish Agriculture & Customers Social media Customer satisfaction Food Council, Danish Surveys Selection of products Ethical Trading Initiative Customer support centre Food quality etc.) Mail boxes in stores Diversity The Food Festival – Aarhus Responsibility Media One-to-one meetings Product safety Ongoing dialogue Animal welfare Employees Employee representatives at board meetings Employee satisfaction Ethical sourcing One-to-one meetings Employee benefits Competition and prices Team meetings Career development Ethical products Satisfaction surveys Labour conditions Employee accidents Suppliers One-to-one meetings CSR requirements Producer audits Code of Conduct Owners Ongoing dialogue CSR strategy Supplier satisfaction survey CSR labelled products Board Meetings CSR initiatives Competitors Roundtable discussions, e.g., Labelling Regulators Governmental working groups Taxes and duties on organised by public authorities Animal welfare (national politicians) Roundtable discussions certain products Palm oil Food labelling Soy

Ministry of Environment Control inspections Hygiene, food safety Trade unions One-to-one meetings Labour conditions and Food Food certifications (HK, 3F etc.) Ongoing dialogue Employee safety and Smiley agreement security OUR PERFORMANCE

KEY PERFORMANCE INDICATORS

KEY PERFORMANCE INDICATORS 2014 2015 2016 2017 CSR as perceived by employees Diversity (directors +) Diversity (board level) Employee engagement People in job training Employees trained in CSR *** Employee safety (LTIF and LTI) Employee sick leave Employee turnover Food safety Inbound transport – m3/transport mode Outbound transport – CO2/pallet Energy – MWh/m2 Water – m3/m2* Waste recycling Food waste Buyers trained in responsible procurement Employees trained in responsible products Number of organic and Fairtrade products** Revenue from responsible products Supplier risk screening* Supplier satisfaction

*New **No longer relevant to our strategy ***E-learning module under replacement

Page 30 Dansk Supermarked Group CSR Report 2017 OUR PERFORMANCE

• Evaluation of the appropriateness LIMITED ASSURANCE of accounting policies used and CONCLUSION INDEPENDENT the reasonableness of accounting estimates made by Management. Based on the procedures performed • Test of a sample of documentation and the evidence obtained, nothing PRACTIONERS LIMITED to determine whether the informa- has come to our attention that causes tion in the CSR report is supported us to believe that Dansk Supermarked ASSURANCE by sufficient evidence. Group’s CSR Report for the year ended 31 December 2017 has not been pre We believe that our procedures pro- pared, in all material respects, in accor- vide a reasonable basis for our con- dance with the reporting approach and clusion. The procedures performed criteria described on pages 34-39. in connection with our examination TO THE STAKEHOLDERS OF Ernst & Young Godkendt Revisionspart- are less than those performed in Aarhus, 14th of March 2018 DANSK SUPERMARKED GROUP nerselskab is subject to the Internatio- connection with a reasonable assu ERNST & YOUNG nal Standard on Quality Control (ISQC) As agreed, we have examined Dansk 1, and thus uses a comprehensive quali- rance engagement. Consequently, the Godkendt Revisionspartnerselskab Supermarked Group’s CSR Report ty control system, documented policies degree of assurance for our conclusion CVR-no. 30 70 02 28 2017 (the CSR Report) for the period 1st and procedures regarding compliance is substantially less than the assurance January 2017 to 31st December 2017. with ethical requirements, professional that would have been obtained had We are to conclude on whether the standards and applicable requirements we performed a reasonable assurance CSR report has been prepared in accor- in Danish law and other regulations. engagement. dance with the reporting approach and criteria described on pages 34-39. We complied with independence The degree of assurance expressed in requirements and other ethical stan- Morten Friis Carina Ohm the conclusion is limited. dards under FSR – Danish Auditors’ Partner, State Authorised Executive Director Code of Ethics for Professional Accoun- Public Accountant MANAGEMENT’S RESPONSIBILITY tants, which rely on general principles regarding integrity, objectivity, profes Dansk Supermarked Group’s Manage- sional competence and due care, con ment is responsible for the preparation fidentiality and professional conduct. of the CSR Report in accordance with the reporting approach and criteria PROCEDURES MANAGEMENT STATEMENT described on pages 34-39. Dansk Supermarked Group’s Management As part of our examination, we is also responsible for such internal performed the below procedures: control as the Management considers necessary to enable the preparation of • Interviews of relevant company The management of Dansk Super- • the information given in the the CSR Report free from material mis- professionals responsible for CSR marked Group has gone through and CSR report has been made up statement, whether due to fraud or error. strategy, management and repor- endorsed its CSR report for the period according to the established ting located at Dansk Supermarked January 1st – December 31st 2017. accounting policies. AUDITOR’S RESPONSIBILITY Group’s headquarters in Aarhus, Netto’s headquarters in Køge, The 2017 CSR report has been Aarhus, 14th of March 2018 Our responsibility is to conclude on Denmark, and Netto International completed in accordance with the DANSK SUPERMARKED GROUP Dansk Supermarked Group's CSR offices in Sweden, Poland and principles stated in the reporting CVR-no. 35 95 47 16 Report on the basis of our procedures. Germany. approach described on pages 34-39. We performed our procedures in accor • Assessment of whether data have dance with ISAE 3000, “Assurance been collected, assessed and To the best of our knowledge, Engagements Other than Audits or quality-reviewed as prescribed we confirm that Reviews of Historical Financial Informa- in Dansk Supermarked Group’s • the accounting principles are tion” and additional requirements under manual for data collection. appropriate Danish audit legislation to obtain limited • Analytical reviews, including trend • the CSR report provides an assurance for our conclusion. analyses, of data supplied by accurate picture of the Group's Per Bank Page 33 Dansk Supermarked Group Dansk Supermarked Group. impact on society President & CEO CSR Report 2017 OUR PERFORMANCE

For stores in Netto Poland, waste calculation OUTBOUND TRANSPORT has been prepared on the basis of the exact REPORTING number of containers multiplied by an average The calculation of CO2 emissions is for weight per container. For Netto Sweden, waste own-controlled outbound transport only, and calculation has been prepared on the basis of only for Denmark. Outbound transport is the APPROACH the 30 stores where waste is weighed all year. transport of goods from our distribution cen- The remaining stores have been calculated on tres to our stores in Denmark, and emission the basis of the average amount of waste per per pallet is calculated on the basis of mileage, unit of turnover for the sample stores. CO2 factor per kilometre and number of pallets. CO2 factor is calculated on the basis SCOPE OF THE CSR REPORT WATER DATA SUPPLIER SATISFACTION SURVEY of external carrier Frode Laursen's calculated mileage per litre of diesel. Estimates account The CSR report covers the relevant and signi- Both majority-owned and controlled entities The supplier satisfaction survey has been for 3-5 % based on the calculated CO2 for the ficant social, ethical and environmental issues opened and closed during the financial year conducted in cooperation with Rambøll largest part of our outbound transport. for the financial year January 1st – December are included in the reporting. If a store opens Management Consulting. 31st 2017. We have received recommendations during a reporting period and the opening The respondents invited represent our list INBOUND TRANSPORT on our CSR activities and reporting from our date is after reporting start date, then the store of regular suppliers to our Danish stores assurance provider Ernst & Young. will be reported with an annual zero consump- (except from Salling) with whom we conduct The calculation of m3 for inbound transport is tion. If a store opens during a reporting period trade term negotiations on a yearly basis. made on inbound freight by all modes of trans- BOUNDARY SETTING and the opening date is before reporting start portation, i.e., sea, air, road and rail. Data are date, then the store will be estimated until data SUPPLIER RISK SCREENING collected from internal statistics and invoices Entities included in the performance data acquisition is established. Estimates for stores from freight carriers. Train is calculated based include majority-owned subsidiaries/formats with missing data have been prepared on the Supplier risk screening is conducted by means on data/methodology for road. defined as companies that Dansk Supermar- basis of the average use in comparable stores of our Responsible Procurement System (RPS). ked Group owns or controls, including web within the same retail format and country. Esti- The system captures information about our TAX FOOTPRINT stores, i.e., Salling, føtex, Bilka, Netto, Wupti mates account for 12.4 % in føtex, 2.1 % in Bilka, private label and unbranded product suppliers' and Netto Germany, Poland and Sweden. Real 0.0 % in Salling and 2.5 % in Netto Denmark of production units and documentation on social Taxes and duties collected consist of value estate owned by Dansk Supermarked Group is the total energy consumption for each format. audits and/or certificates. The system works added tax, taxes withheld from employee excluded from both this and future reports, and In Netto outside Denmark, estimates account with colour rating where green means that all wages and excise duties. The included amount so are the franchises Carl's Jr. and Starbucks. for 0.0 % in Germany, 8.2 % in Poland and 0.0 required audit documentation is in place, yel- for value added tax is calculated as the net % in Sweden of the total water consumption. low means not yet in place but in process, and VAT payment to the state, meaning VAT on ENERGY DATA finally red means that the required documen- sales minus VAT payable. Collected excise WASTE DATA tation is not in place and/or producer is not in duties in Denmark (e.g., on chocolate, alcohol Both majority-owned and controlled entities process. etc.) are only included for imported goods as opened and closed during the financial year Both majority-owned and controlled entities excise duties on locally produced products are are included in the reporting. If a store opens opened and closed during the financial year FOOD WASTE paid to the authorities by the manufacturing during a reporting period and the opening are included in the reporting. Some stores companies. Our direct taxes consist of corpo date is after reporting start date, then the store have reported based on estimates. Estima- Food waste is calculated in tonnes and stems rate tax, energy tax, environmental tax and will be reported with an annual zero consump- tes account for 0.6 % in føtex, 0.0 % in Bilka, from our stores and distribution centres in property tax. The largest amount of taxes and tion. If a store opens during a reporting period 0.0 % in Salling and 1.9 % in Netto Denmark Denmark. The calculation is based on scrap- duties borne relates to corporate income tax. and the opening date is before reporting start of the total waste for each format. In Netto ping in pieces multiplied by net weight. In the date, then the store will be estimated until data outside Denmark, estimates account for 10.6 Bakery category, shrinkage has been added, We report on 21 key areas. KPIs, definitions acquisition is established. Estimates for stores % in Germany, 0.0 % in Poland and 29.7 % in which is also the case for the Fruit & Vege- and performance for each area listed under with missing data have been prepared on the Sweden of the total waste for the format in tables category in Netto. Where net weight Reporting Criteria and Performance. basis of yearly averages of the reporting stores each country. For Netto Germany, waste for for a given article is missing, we have used within the same retail format and country. Esti- incineration from stores has been calculated the average weight for articles in the relevant mates account for 2.6 % in føtex, 0.0 % in Bilka, based on a total of 43 weighing samples category. Estimates account for 4.3 %. 0.0 % in Salling and 0.6 % in Netto Denmark of throughout the year in 8 sample stores. Estima- The target baseline has been calculated on the total energy consumption for each format. tes for the remaining stores in Germany have the basis of our market share in 2014 in pro- In Netto outside Denmark, estimates account been calculated on the basis of the average portion to the Danish Ministry of Environment's for 0.0 % in Germany, 10.3 % in Poland and 0.0 amount of waste for incineration from stores 2014 calculations of food waste in tonnes in % in Sweden of the total energy consumption. per unit of turnover for the sample stores. Danish retail. Page 35 Dansk Supermarked Group CSR Report 2017 OUR PERFORMANCE

REPORTING CRITERIA AND PERFORMANCE

KEY PERFORMANCE INDICATOR DATA AND CRITERIA PERFORMANCE 2014 2015 2016 2017 TARGET Barometer survey conducted by Rambøll – scores CSR as perceived by employees 75 78 77 78 - (%) on questions about diversity and responsibility

Diversity % of female leaders – directors + 17 15 15 14 20³

Diversity (board level) % of female representatives 20 20 17 17 40⁴ Employee engagement Barometer survey conducted by Rambøll – overall score (% of respondents) 87 89 90 90 - Number of citizens outside the job market in unsalaried training to clarify People in job training - 839 1,093 963 - their ability to take up a job (average throughout the year) LTIF (lost time injury frequency) = number of work related injuries with Employee safety 102 79 95 91 - more than one day of absence per 10,000 headcounts – Denmark LTI (lost time injury) = total number of work related injuries with Employee safety 250 224 242 250 - more than one day of absence – Netto outside Denmark

Employee sick leave Sick hours divided by working hours (overtime included) % DK 2.8 2.8 2.7 2.7 - DE 3.5 3.5 4.1 4.2 - PL 4.2 4.8 5.4 5.2 - SE 7.9 7.6 9.7 8.7 - Employee turnover Voluntary permanent staff turnover DK 33.3 28.5 27.1 29.7 - (% of total headcounts) Total staff turnover DE 13.3 12.8 10.1 9.6 - Voluntary staff turnover PL 17.0 19.6 21.4 22.2 - Voluntary permanent staff turnover SE 12.7 14.7 15.8 24.0 - Food safety Smiley 1 – Denmark only. Percentage of number one smileys 89.3 92.5 90.5 90.8 100 given by the Danish Food Authorities following a control visit. Both majority-owned or controlled entities opened and closed during the financial year are included

Inbound transport M3 per transport mode Road - - 73.2 75.1 - (own controlled) % split Rail - - 6.4 6.7 - Sea - - 20.2 18.0 - Air - - 0.2 0.2 -

3 By 2020 4 By 2017 Page 36 Page 37 Dansk Supermarked Group Dansk Supermarked Group CSR Report 2017 CSR Report 2017 OUR PERFORMANCE

REPORTING CRITERIA AND PERFORMANCE

KEY PERFORMANCE INDICATOR DATA AND CRITERIA PERFORMANCE 2014 2015 2016 2017 TARGET Outbound transport Kg CO2 per pallet (own controlled) – Denmark - - 4.83 4.77 -

Energy MWh/m2 – DSG total 0.274 0.250 0.250 0.239 -10%⁵

Water M3/m2 – DSG total - - - 0,199 -10%⁶ Waste Recycling % 57 68 73 75 90⁷ DK 53 65 71 74 90 DE 76 79 79 83 90 PL 62 70 71 72 90 SE 48 71 75 78 90 Tonnes of food intended for human consumption that ends up as waste, Food waste 42,826 35,205 33,364 30,963 -50%⁸ animal feed, bio-gas, composting etc. – Denmark only

Buyers trained in responsible % of procurement staff trained (staff in scope are people with buying 59 68 68 70 80 procurement responsibilities in Commercial, Goods Not For Resale, IT and Shop Fittings)

Employees trained in responsible % of staff trained (staff in scope are employees in buying functions - 78 88 97 85 products in Commercial, Goods Not For Resale, IT and Shop Fittings)

Revenue from responsible products Revenue from products carrying a CSR label (e.g., Keyhole, Fairtrade, - - 4.5 9.9⁹ - Organic, Animal Welfare etc.). Billion DKK – Denmark only

Supplier satisfaction rate On a scale from 1-5 based on the question “How satisfied are you - - 4 4 - with the cooperation with DSG?”

Supplier Percentage of PL and no name producers uploaded Upload - - - 82.5 10010 risk and rated green (compliant), yellow (in process) or Done - - - 62.2 - screening red (no go / suspended) respectively Green 89.1 - Yellow - - - 10.5 - Red - - - 0.4 -

5 By 2020 with baseline 2015 6 By 2022 with baseline 2017 7 By 2018 8 By 2030 with baseline 2014 9 More products, more stores and more accuracy in master data value settings 10 By 2018

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