Both Lidl and Kaufland have a corporate level policy and procedure to acquire land only on a willing buyer, willing seller basis and does not acquire land unless the land has clear title and no illegal land occupation. Expropriation is only the last resort and only happened on a few occasions in other countries in line with national legislation, thus within the project scope, PS5, Involuntary Resettlement, is not anticipated to be triggered. Stores are built in urban areas, close to underserved retail markets, and the very locations of these stores make issues related to PS6 to 8 unlikely.

The Group will proactively notify IFC in case PS5-PS8 related risks and impacts are identified in any of their corporate business activities in future and will manage these risks in a manner consistent with applicable PS. The Group will also report to IFC about any material non-compliances with applicable Performance Standards (PS1-PS4) and corrective actions taken and will immediately notify IFC on any significant E&S incidents in any of their operations.        

If IFC’s investment proceeds, IFC will periodically review the project’s ongoing compliance with the Performance Standards.                                  

This is category B project according to IFC’s Policy on Environmental and Social Sustainability. Key E&S aspects for this new investment are essentially the same as those identified under previous projects and comprise company’s commitment to sustainable development and its capacity to assess and manage E&S aspects, including: compliance with corporate standards and national environmental and social laws; management of impacts during construction (particularly protecting the occupational health and safety of those engaged in building the stores); life safety of visitors and personnel during emergency situations; protection of employees’ working rights; ongoing monitoring of the primary supply chain resource efficiency and waste minimization; and stakeholders engagement.

These issues may all be readily mitigated and are relatively minor and reversible.                                       

The overall responsibility for sustainability lies with the Chairs of the Board of the Schwarz Group companies. The Corporate Responsibility department of Schwarz Corporate Communications coordinates the strategic sustainability orientation of the Schwarz Group. It supports the divisions in their sustainability activities and manages cross-divisional cooperation on global issues.

In 2020 the Schwarz Group committed to the ten principles of the United Nations Global Compact (UNGC), including upholding human rights, creating fair working conditions, promoting environmental and climate protection.

With the Human Rights Policy Statement, which was published in May 2020 and applies to the entire Schwarz Group, the company underlines its commitment to ensuring that human rights are respected and strengthened in all areas of our business activities around the world.

In addition, the Schwarz Group-wide Code of Conduct for Business Partners applies to all suppliers and has replaced the individual division-specific Codes of Conduct since November 2020. It is based on the key UN Conventions and Guiding Principles for reducing negative environmental and social impacts throughout the value chain. The Schwarz Group categorically rejects any form of child and forced labor as well as breaches of human rights and labor law during the production, processing and delivery of resources and goods. By entering into a business relationship with the Schwarz Group, business partners undertake not only to comply with the standards in their own operations, but also to implement them with their subcontractors. During the virtual appraisal, it was confirmed that environmental, social and health and safety related provisions are systematically included in the contracts of contractors to ensure compliance with the Group level policies.

All divisions of the Schwarz Group (production and retail) conduct risk analyses in the context of their business activities. In doing so, the divisions pursue an individual risk classification of business partners and products, based on the analysis of recognized indices and studies regarding the risk assessment of countries of origin, raw materials and products. Based on the findings, the Schwarz Group divisions then derive specific measures for their business operations to avoid or mitigate any adverse effects of their business activities.

Starting from 2017 Schwarz Group and its divisions in each country are publishing annual sustainability reports prepared in accordance with the standards for sustainability reporting developed by the Global Reporting Initiative (GRI). The online version of 2021 Schwarz progress report is available at: https://gruppe.schwarz/assets/csr/communication-on-progress/#0

For further information on the Schwarz Group’s sustainability strategy, please see: https://gruppe.schwarz/en/responsibility/strategy

The most recent sustainability reports for Kaufland Romania and Kaufland Moldova are available at the following links: https://despre.kaufland.md/content/dam/kaufland/website/corporate/ro_MD/download/document/Kaufland%20Moldova%20raport%202021%20eng%20RGB%20(4).pdf https://media.kaufland.com/images/PPIM/AP_MarketingDocument/rum/85/74/Asset_4988574.pdf

Both Kaufland and Lidl manage E&S risks and impacts associated with their operations through compliance with the Group-wide policies, applicable national standards and E&S regulatory permits and requirements. Both divisions have implemented management systems certified as per ISO 14001 (Environment) across all its facilities, which will be extended to the project.

Stores are designed to meet applicable legislative requirements, ranging from those imposed by the EU to local bylaws, as well as EDGE requirements to achieve energy and resource efficiencies. Designs generally are standardized, though adaptations are made to account for differences in legislative requirement or site-specific conditions. These designs are defined within country-specific design manuals, which are updated as legislative requirements change or environmental technology improves.

The Group’s E&S management systems are commensurate with the scale of E&S risks and impacts of its operations; and the implementation at the division and project’s country level (Kaufland Romania and Moldova) is concluded to be robust.                                        

Schwarz’s overall workforce is approximately 500,000 employees. Kaufland Romania team counted approximately 16.019 employees; out of these 72.5% are women and 27.5% are men. Kaufland Moldova team comprised around 736 employees, out of these 73,3% are women and 26,6% are men.

Equal opportunity and non-discrimination: The Schwarz Group is committed for equal opportunities and non-discrimination principles for its on-roll staff and contractor workers and uses objective selection criteria for equality right from the recruitment phase. The Group seeks to provide their employees with a respectful work environment – regardless of gender, age, skin color, ethnic origin, intellectual and physical capabilities, sexual orientation, or religious affiliation. All employees are given the same opportunities to develop personally and professionally.

Freedom of association: Schwarz does not prohibit the freedom to associate and workers right to form and join workers organization.

Grievance mechanism: The Schwarz Group establishes processes for adequate protection of its employees’ human rights in its corporate principles, guidelines and procedural instructions. To identify any potential contraventions early on and respond accordingly, the Schwarz Group regularly carries out anonymized employee surveys. In addition, employees are given unrestricted access to internal employee relations consultants as well as fair and transparent complaints procedures. The employees could raise their labor related concerns and suggestions to management through documented gender-inclusive grievance mechanism, which allows for submission of anonymous grievances and is also available to the contractors’ workers.

Maximizing local recruitment: The Schwarz Group is committed to maximizing local employment on its operations. The new expansion brings about opportunities to create short term and long term employment for local workers and companies. The Group has a standard strategy to efficiently manage recruitment according to the different phases and milestones during construction and operations. The final number of new permanent jobs created in the new countries will be confirmed at a later stage. The Group will prioritize the employment of local labor force and the engagement of local businesses as contractors.

Kaufland Romania and Moldova: Aligned with Schwarz group-wide policies, Kaufland in Romania and Moldova have documented their HR policies and procedures that are consistent with the national labor regulations and IFC PS 2 requirements and apply to all employees. Each worker receives a written contract that describes the working conditions and terms of employment. Overtime work is electronically monitored and does not exceed national regulations. Documentation and reporting of occupational accidents, diseases and incidents, accident investigation and corrective action identification are conducted consistent with good practice. Emergency response plans are available for each store, including response measures for both internal and external emergencies. Both companies have formulated and implemented COVID-19 response strategies and management plans.

All contractor contracts, including contracts with construction contractors, logistic contractors, and personnel leasing contractors, have relevant and standard clauses that require compliance with the applicable legislation in terms of labor management and OHS protection and management. Periodic safety, security and hygiene audits are conducted for each operation by the internal auditing team.

Going forward, Kaufland Romania and Moldova will continue to promote inclusive and gender-responsive human resource policies and practices

Similar policies and practices will also apply to new employees of Lidl in the Western Balkans.                                                 

 Greenhouse gases emissions (GHG): The Schwarz Group committed itself in 2015 to the results of the Paris Climate Agreement.

Since fiscal year 2019, a full carbon footprint has been prepared annually for all divisions and countries in accordance with the Greenhouse Gas Protocol and aggregated at Group level.

Back in August 2020, the Schwarz Group officially joined the Science Based Targets initiative (SBTi) and defined climate targets based on the SBTi methodology. These science-based targets were validated and released by the SBTi in September 2021.

The Schwarz Group’s objectives are to reduce its operational greenhouse gas emissions by 55 percent by 2030 compared to 2019 levels. As part of this, Lidl and Kaufland have set themselves the target of reducing their operational greenhouse gas emissions by 80 percent over the same period. To achieve this, the entire Schwarz Group intends, among other things, to obtain 100 percent of its electricity from renewable sources from fiscal year 2022 onwards. Lidl and Kaufland are going one step further and focus on climate neutrality through carbon offset programs.

By 2021, 10.54% reduction in operational GHG emissions have been achieved on a Group’s level compared to the previous year.

Suppliers are encouraged by the Schwarz Group to set themselves climate targets in line with SBTi criteria by 2026.

Energy efficiency and resources conservation:  At the Schwarz Group, the responsible use of available resources is an important factor along the entire value chain. The goal is to use as few resources as possible and to reuse or recycle the materials used wherever possible.

Schwarz have been committed for many years to the collecting, sorting and recovering of plastics. Reset Plastic is the Schwarz Group's international, holistic plastics strategy for all company divisions and countries. It is not only about eliminating plastic, but also about creating a new awareness and fundamentally changing the way to handle the plastic.

As part of an independent strategic objective, Schwarz Produktion intends to use, on average, around 90 percent recycled PET in the bottles it sells domestically and internationally by 2023. Since June 2021, all non-refillable PET deposit bottles produced by Schwarz Produktion for Lidl and Kaufland private labels in Germany have been made of 100 percent recycled PET. These new bottles are produced entirely from old bottles and are also particularly resource-friendly due to their low weight.

Schwarz Group is continuously improving energy efficiency of its operations, also through IFC’s EDGE certification. EDGE encourages solutions to improve energy efficiency, water efficiency and the embodied energy in materials by at least 20% compared to a local baseline, which is the minimum standard for EDGE certification. This includes the most effective green technologies to adopt, such as LED lights and reduced flow water fittings in the store. For all existing stores, applying EDGE means taking stores that were built years ago and bringing them up to current building codes, before working on the 20% efficiency improvements. This makes the retrofit effort significant and underlines Schwarz sustainability strategy of focusing on constant improvements over time.                                                  

 Store Construction. Life and Fire Safety.

Schwarz design processes require that stores are designed to the minimum of both German and local standards in the country of operation, ranging from those imposed by the EU to local bylaws.

Requirements of a corporate directives on Life and Fire Safety (based on German codes and regulations) are translated into country-level design manuals. There is also a sign-off process from corporate technical team during commissioning.  In addition, there is a regular internal auditing of life and fire safety provision, and this is supplemented by unannounced audits by the insurance agency.  Audit results are documented, as is any necessary corrective action.

All stores have smoke and fire detectors and well-designed emergency exists.

This approach is consistent with IFC’s Life and Fire Safety requirements, which will also be applied by Lidl and Kaufland during planned expansion.

Transportation services

Transportation of products from warehouses to the stores are outsourced to third party contractors in Romania and Moldova. The same approach will be followed for the new Lidl operations in the Western Balkans. The contractor management procedure is implemented that requires contractors to contractually comply with Group level policies and processes related to labour and working conditions, occupational and community health and safety, as well as adhere to national legislation related to road traffic. This includes speed limits, weight and size restrictions of vehicles on certain roads, requirement to wear seatbelts, requirement to have the appropriate driver’s license for heavy goods vehicle in line with national legislation. Relevant staff members from the Group conduct audits to monitor compliance of transportation contractors with the E&S obligations included in their contracts.

Security Personnel

Shoplifting is one of the key security risks for the company The form and level of security provided by the Group in response to those risks, as described below, is evaluated as appropriate.

The stores in operation have physical, as well as electronic security systems provided by an external security services company. There are comprehensive guidelines on rules of conduct of the security services employed which explicitly define all types of compulsory, permitted and prohibited actions. Before starting to work each security unit undergoes the compulsory trainings prescribed by the law, as well as an additional training for work in Kaufland and Lidl. The completion of the internal training is followed by making a test.

The grievance mechanism for the security arrangements and acts of security personnel does not differ from the general one – complaints are being processed by the Customer Management department and are subsequently forwarded to the respective managers.

The Group hasn’t had any significant security incidents in the past.