Sustainable Procurement

Migros attaches great importance to the procurement of raw materials that have been produced with respect for people, animals and the environment. In 2014, it focused in particular on expanding its range of fish from sustainable sources and stepping up its efforts to introduce Switzerland's strict animal welfare standards for meat importers.

Migros generates around 45% of its turnover from own-brand products. As one of the biggest food producers in Switzerland, it is especially important to Migros to know that all raw materials originate from sustainable production. Migros also uses its influence as Switzerland's largest retailer to ensure that suppliers take a more responsible approach to the procurement and production of raw materials. All Migros companies may only procure raw materials and products which meet the basic ecological and social requirements that apply throughout the Group.

Fish from sustainable sources

Fish consumption is increasing worldwide, with negative consequences for the planet's oceans: According to FAO, 29% of fish stocks are overfished and a further 61% are at maximum capacity. As a member of the WWF Seafood Group, Migros takes ocean overfishing seriously and is committed to providing a range of fish products from sustainable sources.

Cooperative Retailing has set itself specific targets: By the end of 2020, it will only sell fish and seafood that either conforms to a sustainable label or which has been categorised as "recommended" or "acceptable" by WWF.

Migros is on course to achieve this target: In 2014, it became the first Swiss retailer to only In 2014, Migros became the sell fish that has been categorised as recommended or acceptable by WWF at its fresh fish first Swiss retailer to only sell counters. By the end of 2014 97% of the overall range originates from sustainable sources. fish from sustainable sources In addition, the range of certified products is also being expanded continuously. For at its fresh fish counters. example, Migros is the world's first retailer to introduce ASC-certified trout fillets. Since 2013, the entire range of own-brand tinned tuna has consisted of pink tuna caught by traditional pole and line, which causes almost no bycatch. Furthermore, a large proportion of the tuna range is MSC-certified.

The other Migros retailers and industrial companies that use fish as a raw material have also made a pledge to remove all fish species from their range that have been categorised as “hands off” by WWF. They had already replaced more than 98% by the end of 2014.

Migros' broad commitment to sustainable fishing also extends to its range of pet food, with 12 of its dog and cat food products carrying the MSC label. 98% of these species were discontinued or replaced by alternatives.

Animal protection in Switzerland and abroad

Demand is not just growing for fish but also for meat, milk and eggs. At the same time, animal-friendly husbandry is becoming increasingly important to consumers.

But animal welfare is also gaining in importance in the area of non-food. In near- and non- food, Migros recently introduced a procurement policy which aims to prohibit angora wool as well as leather acquired from endangered species, for example.

Basic animal welfare requirements apply throughout the Migros Group and are implemented by all Migros companies. Among other things, they relate to importing rabbits in accordance with the Swiss animal welfare standards as well as not selling eggs from caged hens or products containing live-plucked down.

Migros is aiming to introduce Migros is aiming to introduce Switzerland's strict animal In Cooperative Retailing, Migros predominantly sells local meat, dairy and egg products. protection standards for all These comply with the Swiss animal welfare regulations, which are very strict in international products from abroad by the comparison. Migros goes even further by promoting animal welfare with additional end of 2020. requirements as part of label and brand programmes. For example, the label programmes TerraSuisse and Migros Bio support the use of animal-friendly stable systems and regular outdoor roaming. Under the TerraSuisse label, IP-Suisse farmers produce pork, veal, beef and lamb as well as pasture milk. Other programmes that ensure a high standard of animal welfare include Bio Weide-Beef and Weide-Beef, as well as the Optigal brand for poultry and the Alplamm brand for lamb.

For some livestock, such as rabbit, horse and turkey, Migros has to rely on imports due to a lack of domestic supply. As the corresponding animal husbandry standards are not usually as high as in Switzerland, Cooperative Retailing has stepped up its efforts to ensure animal- friendly husbandry abroad. The aim is to introduce the Swiss animal protection standards for all products from abroad by the end of 2020. Together with external partners such as Swiss Animal Protection (SAP) [http://www.tierschutz.com/] , Migros implements the Swiss animal welfare requirements locally at its meat, egg and milk suppliers.

In 2014, Migros took a step closer to achieving its ambitious objective: In collaboration with its Hungarian producer, Migros adapted its requirements for turkey raising to the requirements of the Swiss animal welfare regulations. Migros also terminated its supplier contract with its horse meat supplier in Canada, after independent inspections revealed that Migros' requirements regarding the origin and care of the animals were not being met. Until a new, reliable partner is found, Migros will not offer any foreign horse meat in its range.

Migros is also in the process of adapting its requirements for chicken imports to the Swiss animal welfare standards. The aim is to switch the entire volume of imports (6'000 tonnes) to Swiss animal welfare standards over the coming years.

For its commitment to animal welfare abroad, Migros won the Swiss Ethics Award in 2014.

Boom in organic cotton

Cotton from controlled and certified organic production protects both the environment and the health of people in cultivation regions. Under the Migros-Bio-Cotton label, Migros offers its customers textiles made from sustainable cotton.

By means of independent inspections, the label helps protect the environment – from Migros' target of doubling its cultivation through to finished product – and ensures traceability along the entire value- sales of textiles made from added chain. sustainably produced cotton by 2015 could already be Migros set itself the target of doubling its sales of textiles made from organic cotton between reached in 2014. 2011 and 2015. By significantly expanding its range in 2014, it was able to achieve this goal early. Whereas organic cotton only made up 7% of clothing sales in 2011, the figure has since risen to 16%.

In addition to baby and children's clothes, the Migros-Bio-Cotton [https://www.migros.ch/de/supermarkt/migros-bio-cotton.html] range includes a large selection of clothing for adults, as well as home textiles. All textiles made from organic cotton also carry Migros' own Eco label [http://www.migros.ch/generation-m/de/labels-und- produkte/nachhaltiges-sortiment/textil.html] . The label is based on a holistic approach to product and production ecology, which must be environmentally friendly, socially acceptable and traceable.

Sustainable palm oil and soy

Global demand for palm oil, palm seed oil and soy is growing constantly, which increases the burden on the environment. As a founding member of the Roundtable on Sustainable Palmoil (RSPO), Migros has been committed to the sustainable production of palm oil for several years.

Cooperative Retailing has made it its aim to only use palm oil and palm seed oil from sustainable sources in its food products by the end of 2015. Third-party suppliers that At the end of 2014, M- deliver palm oil to Migros in processed products are also required to switch to physically Industry procured 93% of its sustainable palm oil by the end of 2015. total requirement in the food area as physically sustainable M-Industry uses around 6400 tonnes of palm oil and palm seed oil each year in its industrial palm oil from RSPO-certified food processing. At the end of 2014, M-Industry procured 93% of its total requirement in plantations. the food area as physically sustainable palm oil (supply chain type "segregated") from RSPO-certified plantations [http://www.rspo.org/] . Various products, such as margarine, were switched and furnished with the RSPO logo (a palm tree). For products such as ice cream and chips/fries, a palm oil substitute (coconut oil or sunflower oil) is predominantly used. M-Industry covered the remaining requirement with mixed products in 2014.

As a member of the Roundtable on Responsible Soy Association (RTRS) and a founding member of the Soy Network Switzerland [http://www.sojanetz.ch/] , Migros makes a national and international commitment to the sustainable production of soy. The network set itself the target of increasing the proportion of responsibly produced soy used in animal feed in particular to 90% in Switzerland by the end of 2014. At 82%, this target was narrowly missed, but is expected to be reached by the middle of 2015.

For products under the TerraSuisse label, only Network status soy may be used in animal feed from the middle of this year. This status is given to all soy purchasers that procure at least 90% of their soy from sustainable production (e.g. soy carrying the Pro Terra or Bio Suisse labels).

Migros also supports research into animal feed: It checks alternative protein sources as part of research projects conducted together with the Swiss Research Institute of Organic Culture.

Related topics

Animal welfare standards for near- and non-food products Migros is also committed to animal welfare for its near- and non-food products. For instance, together with specialists from Swiss Animal Protection (SAP), it has developed a procurement policy for near/non-food and specialist markets. Among other things, the policy prohibits the use of angora hair, real fur, and leather acquired from endangered or illegally poached animals.

Swiss meat in restaurants and takeaways All Migros restaurants and takeaways now only offer Swiss beef, veal, pork and chicken. Migros is the first restaurant and takeaway operator to switch all chicken products, such as nuggets, strips and fillets [http://www.migros.ch/generation-m/de/nachhaltigkeit-bei-der- migros/aktuelles/gastronomie.html] , to chicken of Swiss origin.

Bio Weide-Beef Migros rolled out the Bio Weide-Beef and Weide-Beef programmes [http://www.migros.ch/de/supermarkt/bio/weidebeef.html] in 2010. Weide-Beef cattle are kept on pasture during the vegetation period and predominantly fed with pasture grass and roughage. In addition, all farmers that produce under the label must adhere to a standardised set of guidelines on biodiversity and resource preservation. Transport and conditions in the slaughterhouses are monitored by Swiss Animal Protection.

Sustainable coffee, cocoa and tea Migros customers who buy coffee, cocoa or tea [http://www.migros.ch/generation- m/de/labels-und-produkte/nachhaltiges-sortiment/kaffee-kakao-tee.html] should be able to rest assured that it has been produced under environmentally friendly and socially acceptable conditions. That is why Migros works together with the label organisations UTZ Certified and Fairtrade Max Havelaar. In 2010, it became the first retailer in Switzerland to switch its entire basic coffee range to UTZ Certified. This was followed at the end of 2013 by all Frey chocolate and the entire range of own-brand black, rooibos and green tea.

Organic rice from India In a pioneering project, the M-Industry company La Riseria is having organic basmati rice [http://www.migros.ch/generation-m/de/nachhaltigkeit-bei-der-migros/aktuelles/basmati.html] cultivated in northern India. The local small-scale farmers benefit from special offtake agreements, which improves their basic financial situation. Production Conditions

Migros is committed to ensuring the implementation of binding social standards in the production of its products. In 2014, it pushed ahead with implementing various social standards and empowering its suppliers to offer socially acceptable and secure working conditions.

In the area of product procurement, Migros is an international player with supply chains that extend around the whole world. To ensure that the products come from suppliers that offer their employees safe and socially acceptable working conditions, Migros implements various social standards along its value-added chain. Migros and its partners also invest in empowering suppliers to improve working conditions themselves in factories. At the same time, Migros implements and refines international social standards as part of different committees and initiatives.

Better working conditions through social standards

The implementation of safe and socially acceptable working conditions is one of the Migros Group's basic requirements and must therefore be implemented by all Migros companies. A prerequisite for implementing safe and socially acceptable working conditions at supplier companies is a transparent supply chain. To this end, Migros uses a supplier database containing information about the different stages of the supply chain. It also contains audit reports and certificates to prove that the social standards have been implemented by the suppliers.

The systematic recording of this information makes it easier to conduct a risk analysis for each supplier and to introduce and implement the social standards. This analysis is performed on the basis of criteria such as the type of supply chain, the country of production, the industry and the sales volume. If a producer is identified as being risky, it is subjected to an audit. In the case of distributors, the first step is to make the supply chain transparent, so that the production companies can be clearly identified. Out of the 99 production countries from which Migros procures raw materials or products, 52 are high-risk countries.

In 2014, the Migros Group worked with 7705 suppliers. 4125 of these have potentially risky supply chains. This may be because there is little information about the supply chain or because production takes place in high-risk countries, for example. To check the social standards for these suppliers, Migros generally relies on the Business Social Compliance Initiative (BSCI) and gradually integrates them in the BSCI process.

BSCI – focus on Asia in 2014 The requirements imposed on suppliers in the area of social standards are based on the BSCI Code of Conduct. It must be implemented by all producers irrespective of the product category, provided that they do not already apply an equivalent standard (e.g. SA 8000).

The producers are integrated in the BSCI process on the basis of a risk assessment (e.g. country, industry, sales). During a BSCI audit, external specialists spend several days assessing the factories in question and recommending ways to remediate any deviations that are discovered. The implemented measures are then checked in a follow-up audit.

In 2014, 294 BSCI audits were conducted as part of BSCI, most of them in China. 44 The requirements imposed on companies (15%) achieved good results in the audits. Minor deviations were found at suppliers in the area of social 149 companies (51%), and 101 companies (34%) need to remediate more serious standards are based on BSCI. deviations. These figures are within the sector average.

A minor deviation may occur, for example, if not all factory workers wear a protective mask when performing tasks that generate dust, or if no protective gloves are worn for certain tasks. Examples of more serious deviations include a lack of early warning systems for factory fires or insufficient fire extinguishers. The factories must remediate the deviations with the help of Migros' social standards specialists.

Most of the deviations at Migros' supplier companies are found in the areas of occupational health and safety (OHS), working hours and remuneration. This is a common problem at factories in the Far East in particular. On the other hand, deviations in the area of child labour, forced labour and discrimination are relatively rare. In relation to discrimination, a BSCI audit found that the corporate policy of one supplier only allowed women below the age of 25 to be employed, in order to avoid pregnancies in the workforce. Migros intervened immediately upon discovering this. The discriminating practice was subsequently stopped, and compliance was confirmed by a new BSCI audit.

Alongside continuously implementing the standard at its supplier companies, Migros, as a founding member of BSCI, is actively involved in refining the standard and adapting it to the changing requirements of the companies and society as part of various BSCI committees. As part of the revision of the BSCI Code of Conduct, the entire audit system was revised in 2014 together with the BSCI Secretariat in Brussels. The work is still under way and Migros continues to be active in various working groups.

Results BSCI Audits: first audits and follow-up audits Results BSCI audits: First audits and follow-up audits (in %)

100

75

50

25

0 2011 2012 2013 2014

Good

Improvement needed

Not fulfilled

BSCI Audits: broken down into type of non-conformity

BSCI Audits: broken down into type of non-conformity (divided into non-conformities per audit chapter) 2011 [1] 2012 [1] 2013 2014

Management system 13 12 8 18

Documentation 6 19 15 21

Maximum working hours 97 92 50 65

Remuneration 84 82 54 69

Child labour 4 3 4 1

Young workers 0 0 0 0

Forced labour 3 8 1 3

Right to freedom of association and collective bargaining 2 3 1 0

Discrimination 1 5 1 2

Working conditions (cleanliness, ventilation, etc.) 3 5 1 2

Health and social facilities 2 7 15 14

Occupational health and safety (OHS) 36 27 50 59

Accommodation 0 0 0 0

Environmental requirements 16 6 3 7

Total non-conformities 267 269 203 261

Total amount of audits with Migros producers 248 [2] 246 206 294 1 Due to the new data basis, the figures differ from the previous year's

2 More than one non-conformity can be discovered per audit

GlobalGAP GRASP – fair working conditions in Europe In 2014, Migros Cooperative Retailing focused in particular on the primary production of fruit and vegetables in Spain and Italy.

In Italy and the Spanish provinces of Almería, Murcia and Huelva, Cooperative Retailing implements the GlobalGAP GRASP standard at agricultural producers. Migros initially focused on Almería in particular, where it visited two producers.

In addition to the international standard for good agricultural practices (GlobalGAP), which Migros Cooperative Retailing sets requirements relating to cultivation, food safety, occupational health and safety and implemented the Global GAP- environmental protection, the module GRASP (Global GAP Risk Assessment on Social GRASP standards for Practice) ensures good social practices and adequate working conditions in agricultural agricultural producers in Italy production (e.g. employee representatives, complaints procedures, minimum wages). and the Spanish provinces of Almería, Murcia and Huelva. In 2014, the GRASP standard was implemented at 33 supplier companies and 250 producers in Italy. This constitutes 27% of Cooperative Retailing producers in Italy. In Spain, a total of 62 suppliers were integrated in the GRASP process. 2433 producers were audited according to GRASP, representing 65 percent of all Spanish producers that supply Cooperative Retailing. The proportion of products audited according to GRASP is growing continuously and will see another sharp increase after the expansion to Greece and Israel in 2015.

In the reporting year, Migros helped organise a round table in the Almería region on the subject of GRASP and invited the company's vegetable suppliers to attend. Around a hundred representatives of suppliers, unions and retailers participated in the event. This meant that around one in two Migros suppliers were represented in Almería. The content of the training and workshops focused on the revised GRASP checklist and the corresponding Spanish interpretation (GRASP requirements such as minimum wage and working hours adapted to Spanish conditions). In the workshops, the participants discussed issues such as how to elect employee representatives in the producer companies.

Migros is also represented on the GlobalGAP GRASP Stakeholder Committee, which meets quarterly. An important topic in 2014 was the revision of the checklist for producer audits and of the GRASP standard in general.

Empowering suppliers to improve occupational health and safety

In addition to the audits, Migros also provides training, factory visits and courses to help its suppliers implement social standards in the supply chain. Cooperative Retailing had set itself the goal of improving the working conditions of 75'000 employees in supplier companies by the end of 2015.

However, this target was already exceeded at the end of 2014: 101'496 people had been reached through training, courses or empowerment programmes by the end of the reporting year.

In 2014, the focus was on Asia: For example, Migros sent its own specialists to 45 production plants and factories in China, Thailand, Vietnam, India and Bangladesh, where they inspected working conditions as well as suggesting improvement measures. The deviations were documented with photos and the possible improvement measures were described in an audit report. Best-practice examples from comparable factories were provided to help remediate the deviations. The Migros purchasing offices in India and Hong Kong play a key role in this respect and also conduct a follow-up visit to help the factories remediate the deviations, if necessary.

E-learning seminars and external workshops are other tools that Migros specialists use to help producers implement the working standards. In 2014, a total of 14 suppliers and factories were invited to complete an e-learning course. The seminars teach subjects such as fire safety, remuneration management, occupational health and safety and environmental protection in a practice-oriented way in the local language. Supplier empowerment – focus on Bangladesh In response to the Rana Plaza factory collapse in 2013, Migros also stepped up its efforts in Bangladesh during the reporting year. In addition to ensuring socially acceptable working conditions, it organised building safety inspections in the textile factories of its suppliers. Qualified engineers evaluated the safety of all factories that produce products for Migros in Bangladesh, as well as suggesting improvement measures.

No serious breaches of the building safety regulations were discovered. Instead, the In response to the Rana Plaza deviations tended to be minor, such as a lack of fire doors or broken smoke detectors. factory collapse, Migros Migros helps the factories to remediate the deviations and regularly sends out its staff to the stepped up its building safety production sites. In addition, the management staff of the factories were invited to take part efforts in textile factories in in fire safety training. To test the conveyed knowledge, the factory management of one Bangladesh during 2014 producer held a fire drill under the watch of a social standards specialist. The result: More than 1000 employees evacuated the five-storey building in less than four minutes.

Capacity Building: number of factories and employees reached Capacity Building (Number of factories and employees Betriebe und Capacity Building (Number of factories and employees Betriebe und Mitarbeiter) Mitarbeiter)

200 120 000

150 90 000

100 60 000

50 30 000

0 0 2013 2014 Total 2013 2014 Total

Factories involved Employees involved

Related Topics

Socially acceptable ECO textiles By the end of 2017 at the latest, all Migros own brand textiles will be produced fully in accordance with the strict Eco standard [http://www.migros.ch/generation-m/de/labels-und- produkte/nachhaltiges-sortiment/textil.htmlproduziert] . Eco stands for traceability, safe working conditions and environmentally friendly, pollutant-free textile production. At the end of 2014, three quarters of all Migros clothing carried the Eco label.

Migros KIDS School in southern India Around 1500 children now attend the Migros KIDS School in southern India [http://www.migros.ch/de/medien/medienmitteilungen/aktuelle-meldungen-2014/migros- kids-school-suedindien.html] , which was officially founded in 2000. This development project of Migros and the Kids Cologne Foundation, which started in a makeshift classroom in Tirupur in 1995 as a campaign against child labour, has since developed into a successful private school for low-income families. The schools are run by the local textile suppliers that supply Migros. The KIDS School became independent of Migros in 2014.

Global Social Compliance Programme (GSCP) Together with the world's four biggest retailers, Migros is a founding member of the Global Social Compliance Programme (GSCP) [http://www.migros.ch/generation- m/de/nachhaltigkeit-bei-der-migros/aktuelles/archiv/mmkw50-gscp.html] . The GSCP is a multi-stakeholder initiative that aims to make existing standards and initiatives in the areas of social acceptability and the environment comparable. Social Commitment

Social responsibility is one of Migros' main tasks and was firmly anchored in the company's values by Gottlieb Duttweiler. This is also reflected in numerous social commitments, not just Migros Culture Percentage.

Migros has always shown a high degree of social responsibility. As a key component of founder Gottlieb Duttweiler's entrepreneurial spirit, it actively shapes the company's identity. This attitude of "giving something back" to society is reflected most of all in the globally unique Migros Culture Percentage, which provides funding of around CHF 118 million each year. Migros also has a wide range of other commitments, such as the Migros Aid Fund for development aid projects as well as the Generation M sustainability initiative. The company's donation activities are also based on the principles of social responsibility.

The Migros Aid Fund

Be it organic cocoa cultivation in Peru, flood protection in the Bündner Oberland, solar power in Ethiopia or support for homeless children in Romania: The Migros Aid Fund has been supporting development aid projects in Switzerland and abroad since 1979, making CHF 1 million available each year.

The submissions are assessed by eight Migros delegates. In line with Gottlieb Duttweiler's CHF 34 million vision, Migros actively helps disadvantaged people and groups of society, especially children, adolescents and women. The supported projects have a sustainable approach and follow the principle of helping people to help themselves. They usually receive between CHF were invested in sustainable aid projects 40'000 and CHF 100'000 since 1979.

In the reporting year, around 20 projects (including several bee projects) were supported by well-known development aid organisations or private initiatives. Because honey is being used increasingly for medicinal purposes, producers in disadvantaged countries can earn a good income from cultivating bee colonies. At the same time, sustainable beekeeping also protects the environment. In 2014, the Migros Aid Fund therefore provided financial support for honey projects in the Brazilian Amazon region and in Burkina Faso. A larger donation was made to the International Project Aid (IPA) organisation for its school renovation project in Albania, which it is planning and implementing together with young people in Switzerland.

Social promises to Generation M

The Generation M sustainability programme has dedicated a separate module to social responsibility.

Generation [http://www.generation-m.ch] M was expanded in 2014, and some of the promises made to tomorrow's generation have already been fulfilled. With a total of 60 binding promises and programmes, Migros has made a commitment to society and its employees to act in a socially minded and exemplary way, protect the environment [http://m14-author.migros-report.namics.com/en/integrated-report/environment/] , promote sustainable consumption [http://m14-author.migros-report.namics.com/en/integrated- report/production-consumption/] and encourage a healthy lifestyle [http://m14-author.migros- report.namics.com/en/integrated-report/society-culture/health/] .

Migros Culture Percentage

Through Migros Culture Percentage, Migros invests around CHF 118 million in cultural and social projects each year. It thereby aims to "give something back" to Swiss society in the spirit of its founder Gottlieb Duttweiler.

Gottlieb Duttweiler specified Migros Culture Percentage [http://www.migros-kulturprozent.ch] CHF 122 million as an independent business unit in the Migros statutes in 1957 – on an equal footing as the selling of cost-effective goods and services, and independent of the Group's profits. The Federation of Migros Cooperatives and the ten regional cooperatives undertake to make an were invested by Migros Culture annual contribution, which is calculated on the basis of their sales and is also paid in the Percentage in 2014. event of a decline in business. CHF 122 million was again put towards this globally unique voluntary commitment [http://m14-author.migros-report.namics.com/en/integrated- report/society-culture/engagement-migros-development-fund/] in the reporting year.

Migros Donates

Migros regularly makes a commitment to helping disadvantaged people and the needy with various donation measures.

The most important charitable contributions in 2014 included:

CHF 2.4 million was raised by the Christmas donation campaign for people in need in Switzerland. Customers donated CHF 1'033'922, and Migros topped up the amount to CHF 1'366'078. The funds were distributed equally to the four aid organisations Caritas, Heks, Pro Juventute and Winterhilfe Schweiz. For the Christmas campaign, 23 Swiss stars recorded the song «Ensemble» composed especially for Migros.

With a CHF 500'000 donation to the Swiss Red Cross, Migros provided fast and uncomplicated help for victims of the devastating floods in Serbia, Bosnia and Croatia in May 2014.

In addition, CHF 663'462 worth of unsold goods from the non-food area was donated to the charity organisations AVC, Caritas, Rumänienhilfe and Winterhilfe Schweiz.

Food donations worth a total of CHF 791'763 went to Caritas and other aid organisations. In addition, the members of the Swiss retail stakeholder group IG DHS, including Migros, are supporting the umbrella organisation "Food Bridge" with CHF 680'000 annually over the next two years.

As part of its campaigns for World Animal Day, Migros donated CHF 60'000 to Swiss Animal Protection SAP, the Swiss Association of Therapy Dogs and the Swiss Ornithological Institute in Sempach.