2017 Sustainability Report Improving Today to Protect TomoowTomo ow 2017 SUSTAINABILITY REPORT / KROGER P / 2 Contents Letter from the Chairman and CEO p / 3 Quality and Our Brands Manufacturing Standards p / 44 SOCIAL p / 7 Animal Welfare p / 47 $ Community Engagement 115.3 Ingredient Safety p / 49 p / 8 BILLION IN TOTAL SALES Fighting Hunger Supplier Diversity p / 50 Supporting Women’s Health p / 13 The Military and Their Families p / 14 ENVIRONMENT p / 52 Supporting Local Good Works p / 15 Energy/Carbon p / 53 Helping Communities in Need p / 16 Water p / 60 Associates Zero Waste p / 61 Safety p / 17 Logistics p / 67 2,796 p / 19 135 Health, Wellness and Retirement Benefits GROCERY STORES YEARS ECONOMIC p / 70 p / IN 35 STATES IN BUSINESS Opportunity Culture 21 Economic Impact to Communities p / 71 Associate Diversity p / 22 HQ Economic Impact to Communities p / 72 SUPPLY CHAIN p / 24 Business Ethics p / 73 Our Food and Products p / 25 Corporate Governance p / 74 High-Impact Commodities p / 31 Government Involvement p / 75 Safety First—Focusing on Keeping Our 330 Awards p / 76 38 p / 42 MILLION MEALS Customers and Their Families Safe PLANTS PRODUCING GRI Content Index p / 80 DONATED OUR BRANDS PRODUCT TO FOOD BANKS 2020 Goals & Progress p / 83 Headquartered in Cincinnati, Ohio, Kroger® (NYSE: KR) is the 3rd largest retailer in the world, spanning 35 states with store formats that include grocery and multi-department stores, convenience stores and jewelry stores. We operate under nearly two dozen banners, all of which share the same belief in building strong local ties and loyalty with our customers. 443,000 ASSOCIATES WHO MAKE A DIFFERENCE This report reflects on progress for Kroger’s 2016 fiscal year (Jan. 31, 2016–Jan. 28, 2017). The report was prepared using parts of the Global Reporting Initiative’s new GRI Sustainability Reporting Standards, with the goal of transitioning to a report prepared wholly in accordance with the new standards for our next reporting cycle. Roundy’s data was included for the first time in this year’s energy, carbon and water data. 2017 SUSTAINABILITY REPORT / KROGER P / 3 Letter from the Chairman AND CEO OUR COMMITMENT FOR A BRIGHTER FUTURE world with zero hunger and zero waste. As a found­ ing member of Feeding America, the nation’s largest The Kroger Family of Companies we know today has grown domestic hunger relief organization, we are working hard over time, gradually expanding from one small store on to leverage our people, our assets, our technology and the banks of the Ohio River nearly 135 years ago. Through other resources to accelerate our work in these critical the years, we’ve added other founders’ names to the list areas. Thanks to the amazing generosity of our Customers, that starts with Barney Kroger: John S. Dillon, Chuck & Associates and partners, Kroger is focused on feeding Don Fry, Lloyd King, Fred Meyer and George Ralphs, to hungry families in our Communities and preventing food Rodney name a few. Their unique stories—and our shared legacy from going to waste. We lead our industry in fresh food McMullen of community and social responsibility—are more impor­ donations—through our Fresh Donations program— Chairman and tant today than ever. CEO rescuing fresh meat, produce, dairy and bakery items Today, our retail stores and operations stretch from coast from the waste bin. to coast. We welcome nearly 9 million Customers through We are pleased to share with you Kroger’s latest sustain­ our doors every day, and we are passionate about offer­ ability report. This is our opportunity to share with you ing a great shopping experience and a great value. the work we do to fulfill our purpose—to improve peo­ We are also committed to making the world a better place. ple’s lives, protect our planet and act responsibly as a Because we know people are hungry for more than just global citizen. food, our purpose is to Feed the Human Spirit. Our What follows are key examples of the work our more Associ ates want to make a difference in the lives of our than 443,000 Associates and our many partners accom­ Customers and Communities, to lift up others, and to plished in 2016. offer the food and inspiration we need to be our best. Throughout our history, our company has focused on making sure people have wholesome food and nourish­ ment. We know that meals matter, and we imagine a 2017 SUSTAINABILITY REPORT / KROGER P / 4 Letter from the Chairman AND CEO COMMUNITY ENGAGEMENT SUPPLY CHAIN Go Helping our Associates, Customers and Communities Our Customers and stakeholders are increasingly focused a thrive is incredibly important. Fighting hunger has been on the environmental and social impacts of the food they l our top priority since our earliest days, and in 2016 we eat. They want to know the source of their food and feel s donated more than 330 million meals in foods and funds good about their choices. As one of the world’s largest to feed the hungry. This includes 69 million pounds of food retailers, we foster sustainability and transparency fresh food—over 57 million meals—and other products in our supply chains in many ways. contributed by our stores to local food banks. We are a trusted partner to organizations such as the Go Our Associates are truly our greatest assets. Together, we World Wildlife Fund, the Rainforest Alliance and The a SOCIAL l live our purpose and serve our Customers every day. In Sustainability Consortium among others to improve our s 2016, Kroger created 12,000 new jobs, and once again sourcing practices and foster positive change across supply scored 95 out of 100 on the Human Rights Campaign’s chains. In 2016, our efforts focused on high­impact com­ Corporate Equality Index. We focus on creating a modities like seafood, cocoa, coffee and more. We’re Go supportive work environment that helps thousands of making meaningful progress on our sustainable seafood a Associates have a path to a career and brighter future. goals—86% of the wild­caught seafood we procure is We also offer many award­winning health and wellness from sustainable sources. We are also sourcing 100% l SUPPLY CHAIN s SOCIAL SUPPLY CHAIN ENVIRONMENT ECONOMIC programs and benefits. certified sustainable palm oil in manufacturing Our Brands, and 18% of the eggs we sell are now cage­free. Through company donations as well as support from our Customers and Associates, we also directed more than We continued to expand our assortment of natural and $7 million toward breast cancer research, detection and organic products, giving Customers even more choices. Go treatment to help those affected get the support they Today, 2,100 Kroger­operated stores offer Natural Foods a ENVIRONMENT need, something that our Associates and Customers care departments or sections for packaged foods, and most l deeply about. carry organic products in the produce department. Our SOCIAL SUPPLY CHAIN ECONOMIC own Simple Truth and Simple Truth Organic product lines s ENVIRONMENT Kroger also partners with the USO to help our military reached sales of $1.7 billion in 2016, confirming that our service men and women and their families. Through our Customers love these items. Honoring Our Heroes campaign, we donated nearly $4 million to the USO in 2016, including contributions from By developing and supporting more transparency in our our Customers and Associates. We also hired more than supply chain, we believe we positively affect Communities ECONOMIC SOCIAL SUPPLY CHAIN ENVIRONMENT ECONOMIC 9,500 veterans in our family of stores last year—a total far beyond the walls of our stores. of over 36,000 since 2009. SOCIAL SUPPLY CHAIN ENVIRONMENT ECONOMIC 2017 SUSTAINABILITY REPORT / KROGER P / 5 Letter from the Chairman and CEO ENVIRONMENTAL BENEFITS LOOKING FORWARD Go Protecting health and the environment is important for Kroger Associates working together with our Communities a Kroger, and our Associates care deeply about doing their have created incredibly positive social and environmental l part. One of our top priorities is to be a “zero waste” progress. However, we still want to do more and do better s company. We follow the EPA’s food recovery hierarchy for our Communities and the planet. Through partner­ for keeping waste out of landfills—including source ship, innovation and engagement, we are driving positive reduction, fresh food donations, recycling and more. In change in the lives of our Customers, Associates and 2016, we achieved an overall record 78% recycling rate Communities. Our commitment is unwavering. We invite Go in our retail, distribution, manufacturing and construc­ all of our Customers, Associates, partners and other a SOCIAL tion activities. stakeholders to join us in working toward a future with l We also offer ways for Customers to help the environ­ zero hunger and zero waste. s ment too. Together, we recycled 39 million pounds of Last year, we announced a series of bold 2020 Sustainability plastic bags and shrink wrap last year. Our Customers Goals to increase responsible sourcing and improve purchased more than 38 million reusable bags. And we eco­stewardship. These goals include expanding our 100% Go launched product packaging innovations like a new, sustainable seafood commitment in partnership with a lighter­weight one­gallon milk jug that uses 10% less the World Wildlife Fund, optimizing 100% of Our Brands l SUPPLY CHAIN plastic and will save 5 million pounds of plastic every year. packaging, transitioning toward a 100% cage­free egg s SOCIAL SUPPLY CHAIN ENVIRONMENT ECONOMIC supply chain, and achieving our zero waste goal, among We continue to be vigilant in maintaining and improving others.