IFC’s appraisal considered the environmental and social management planning process and documentation for the Project and gaps, if any, between these and IFC’s requirements. Where necessary, corrective measures, intended to close these gaps within a reasonable period of time, are summarized in the paragraphs that follow and (if applicable) in an agreed Environmental and Social Action Plan (ESAP). Through implementation of these measures, the Project is expected to be designed and operated in accordance with Performance Standards objectives.
PS 1 - Assessment and Management of Environmental and Social Risks and Impacts
Environmental and Social Assessment and Management System and Policy
Schwarz Group has in place several group-level E&S policies, validated by the respective Executive Boards, supported by Directives and Instructions, focused on human rights and social standards, environmental protection and responsible resources consumption, defining Group values and behavior principles. E&S risks and impacts associated with companies’ operations are continuously being managed through compliance with applicable national E&S regulations and international standards, through management system aligned with IFC PS1. Lidl and Kaufland operations implemented E&S policies and E&S management systems (ESMSs) tailored to specific E&S risks. ESMS include but are not limited to Codes of Conduct, Human Rights Policy Statement. Retail business have developed Human Rights and Environmental Due Diligence Policy and set of policies for responsible sourcing of materials and products. At division and country level, companies are certified in line with international management systems requirements for quality, environment, occupational health and safety and energy efficiency. The compliance management systems are highly prioritized and established in all divisions to provide integrity across the Group.
Executive Boards of retail business are responsible for the oversight of E&S matters, with the respective Chief Executive Officers of the Schwarz Group companies. The Schwarz Group Corporate Responsibility (CR) department supports the divisions with their activities facilitating cross-divisional collaboration on global issues. The CR Round Table, formed by CR/CSR (corporate social responsibility) Managers from all divisions, coordinates in overall E&S-related matters, like materiality analysis, implementation of management programs, etc.
Schwarz Group set the basis of corporate due diligence, and retail business level risk management is an integral part of corporate management. Sustainability risks and opportunities are identified and assessed, and considerations are built-in the joint sustainability strategy. E&S considerations are discussed and validated by the Executive Boards of the divisions.
Corporate management programs are tailored for specific retail needs, like the supply chain management mechanism. Management programs are implemented at the company level, to comply with national E&S regulations e.g. water quality monitoring, waste management programs.
Emergency preparedness and response plan is commensurate to accidental and emergency situations associated with the retail assets. Roles and responsibilities for relevant personnel training needs and their frequencies are defined. Each retail building or facility has the relevant fire safety permits, obtained via a technical inspection from the relevant authority.
Monitoring and reporting framework is developed and based on key performance indicators (KPIs) on E&S compliance and performance as well as objectives and targets on sustainability set at group level. Monitoring processes such as corporate audits, internal and external audits are conducted and reported at company level. Group publishes audited Sustainability Report every two years and annual Progress Reports. The most recent sustainability reports for Schwarz Group, Lidl Serbia and Kaufland Croatia are available at the following links:
https://gruppe.schwarz/en/responsibility/sustainability-report#!/en/
https://kompanija.lidl.rs/odrzivost-u-lidlu
https://tvrtka.kaufland.hr/content/dam/kaufland/website/corporate/hr_HR/download/document/Sustainability%20report%202020.%202021.pdf
Companies of Schwarz Group have implemented compliance management systems (CMS) containing binding specifications in all divisions. CMS’ focus areas are anti-corruption, anti-fraud, antitrust law, data privacy, product compliance, and business partners. The CMS are inspected on a regular basis by the Audit department.
Similar company-level E&S Policies and practices will also apply to new companies of Lidl in the Western Balkans.
PS 2 – Labor and Working Conditions
Schwarz Group’s overall workforce is approximately 590,000 employees (approx. 90 % permanent and 10 % fixed-term employees, and 65 % female and 35 % male employees).
As of March 2023, Kaufland team counted employees approximately as follows: Bulgaria 5,750, Croatia 3,050, Romania 14,800 and Moldova 850. Lidl team counted employees as follows: Romania 10,750, Croatia 2,850, Bulgaria 3,6500, North Macedonia 100, Bosnia and Herzegovina 100, Albania 5, Kosovo 3 and Montenegro 10 employees.
Human Rights Policy Statement is in force at the Schwarz Group level. Companies have established corporate principles, policies, and procedural instructions articulating equal opportunities and non-discrimination, staff welfare, sexual harassment, hiring, induction and remuneration, ethics and discipline, gender, occupational health and safety, prohibition of forced and child labor, and minors protection. Policies and manuals are focused on host nation legislative requirements and are aligned with IFC PS2 requirements.
In retail divisions the Head of HR is responsible for workforce management at national level with the support of the corresponding HR department.
Code of Conduct (CoC) in force is based on the international guidelines and principles such as Universal Declaration of Human Rights and ILO Declaration on Fundamental Principles and Rights at Work. Implementation of CoC within the companies of Schwarz Group and throughout the value chain provides for the applicable standard under the laws of the local jurisdiction. Identification and assessment of human rights risks within own companies and at business partners is carried out through annual and ad-hoc risk assessments. CoC formalizes freedom to associate and right to form and join workers organization, engaging in collective bargaining, statutory right to strike, to resolve workplace and wage issues. Code provides ban on discrimination and supports the equal opportunities and fair treatment of employees. To date no trade union or worker organization has been set up in the Western Balkan countries.
The Project provides both long term and short term opportunities for involvement as a contractor and employee. The Group has its standard strategy to manage recruitment according to the different phases and milestones during construction and operations and committed to maximizing local recruitment and employment.
Schwarz Group has a formalized worker grievance mechanism (WGM) described within its CoC. The WGM describes the process, roles, and responsibilities for handling grievances and is open to all staff and third-party workers. Grievance mechanism for gender-based violence related complaints is designed for complaints to be handled separately by people trained to provide adequate support and protection for victims. Employee Relations Consultant is appointed for the national headquarters, stores and regional distribution centers and acts as the point of contact for personal issues, HR matters and health issues and is available to all employees.
CoC provides for basic principles on occupational health and safety (OHS), such as safe working environment and compliance with relevant safety standards, protective measures and measures to prevent excessive physical or mental exhaustion. OHS controls are in place and aligned with IFC PS2 requirements, applicable policies and procedures and their implementation are audited regularly at country level. Central Environment, Health, and Safety (EHS) department manages general OHS aspects and policies and provides support and advice to the local companies. At Lidl and Kaufland OHS and health promotion are managed by the respective HR department. Operational manuals are focused on host nation legislative requirements. In accordance with country-specific laws and regulations, OHS committees are set up in the companies across the Schwarz Group, advising on preventive and corrective measures, analyzing accidents, and coordinating OHS tasks. At all divisions, workplace risk assessments are conducted, and regularly updated in case of the procurement of new equipment or changes in processes. Training and instruction of employees as well as occupational health examinations and consultations are regularly conducted. Safety inspections are performed at regular intervals at all divisions. CoC provides that the same OHS requirements are cascaded to business partners and suppliers.
Social and environmental standards in Schwarz Group’s global supply chain are defined in CoC and Human Rights Policy Statement. Supply chain risks are monitored and reported in line with German Act on Corporate Due Diligence in Supply Chains (LkSG), which is in force from January 2023. Group has developed new supply chain management mechanism to correspond to new regulations and enhance forced and child labor risks identification and management.
Requirements are cascaded from the scope of companies’ own activities, towards direct and indirect business partners along the supply chains and service sectors. Compliance Department is responsible to oversee the implementation. Lidl requires all producers of non-food goods for Lidl to provide for a valid social audit conducted by an independent, local expert. Since 2020, Kaufland has also required its producers to undergo a social audit. Prior to the introduction of the Business Social Compliance Initiative (BSCI) workplace audit standard across the global supply chain for producers of non-food goods, Kaufland audited high-risk suppliers to verify compliance with minimum social criteria. Business partners are required to conduct due diligence on their suppliers to likewise comply with social and environmental standards. Retail companies will continue to monitor and audit primary local suppliers of food goods, especially when entering new markets.
PS 3: Resources Efficiency and Pollution Prevention
The basic resource efficiency approach of the Group established recycling loops, developed product designs and innovative material in logistics, and avoided wasting resources throughout the entire value chain.
Schwarz Group defined climate protection targets according to the Science Based Targets (SBT) methodology, and integrated them into measures to reduce, avoid, or offset CO2 emissions in their operations and the supply chain. For 2021 the Group reported direct & indirect GHG emissions (scope 1 and 2) of 2,528,702 tons of carbon dioxide (CO2) equivalent. Group target is to reduce their operational greenhouse gas emissions in total by 55 percent by 2030 compared to 2019.
Energy efficiency and use of renewable energy are one of the requirements established within procurement principles. Companies of Schwarz Group develop design criteria and implement it, for climate-friendly construction of stores, administration buildings and logistics centers and in mobility concepts. At Lidl and Kaufland over 1,800 international buildings (around 1,700 stores and 100 warehouses) have so-called compound refrigeration systems (KKV) to use waste heat from chiller equipment and refrigeration systems for heating the buildings, thus enabling fossil fuels use reduction. To further reduce CO2 emissions, the chiller equipment in over 4,500 stores, warehouses, and production sites is operated with natural refrigerants like propane or with CO2.
In the fiscal year 2021, the companies of Schwarz Group have generated some 196 million kilowatt-hours from renewable sources particularly photovoltaics.
Water supply and disposal systems at Kaufland and Lidl are designed, operated and connected to the central systems inline with national requirements.
Waste management at Schwarz Group is based on the circularity principle with specific targets and KPIs defined. Waste prevention in terms of expired products, is managed through quality assurance protocols and checks before product input to stores. Stores conduct regular checks on close-to-expired products which would become waste. At company level, in the whole value and recycling chain, waste producers, retailers and agents are obligated to be able to fully disclose tracking of waste materials. Plastics strategy REset Plastic defines the targets in recyclable packaging and reduction of plastic use in packaging and transport aids. In this framework, plastic in packaging and the waste is reduced, packaging is made more recyclable, and valuable resources are kept in circulation to a greater extent.
PS 4: Community Health, Safety, and Security
Schwarz Group design require compliance with German and local standards in the country of operation, ranging from those imposed by the EU to local bylaws. Designs are generally 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.
Corporate Directives on Life and Fire Safety design manuals apply (EU level, German as well as local legislation). The approach is consistent with Life and Fire Safety requirements defined in WBG General Environmental, Health, and Safety (EHS) Guidelines: Community Health and Safety.
There is a sign-off process from corporate technical team during commissioning. Regular internal auditing of life and fire safety provisions are conducted, and audit results are documented with the necessary corrective action. All stores have smoke and fire detectors as well as emergency exits.
Transportation of products from warehouses to the stores are mainly outsourced to third parties. Contractor management procedure applies requiring compliance with Group level policy, processes covering labor, OHS as well as national legislation related to road traffic. Relevant staff members from the Group conduct audits to monitor compliance of transportation contractors with the E&S obligations included in the contracts.
The form and level of security provided by the group is proportionate to the country and local risks. The stores in operation have physical and electronic security systems implemented by an external security services company. Each security unit undertakes compulsory training before start of work as well as additional training for work in Kaufland and Lidl. The security staff follows the CoC and has specific policies and trainings to follow adequate international human rights related requirements.
