REWE Group Detox Program

REWE Group Detox Program Status Report 2015 December 2015

Content 1. Introduction to the Detox Program Objective and Achievements REWE Group s Detox Program - Summary of Achievements The REWE Group Detox Roadmap Scope of the REWE Group Detox Program Timeline of the REWE Group Detox Program Internal and external Communication 2. Process for Suppliers and Factories Process for Suppliers and Wet Process Factories - Overview Step 1: Information and Commitment Step 2: Status Quo and Training Step 3: Implementation Step 4: Monitoring 3. Chemical Management and Phase-Out 4. Closed Loop Project 5. Next Steps for our REWE Group Detox Program December 2015 REWE Group Detox Status Report 2015 2

Introduction to the Detox Program December 2015 REWE Group Detox Status Report 2015 3

Objective and Achievements The Detox Program Objective The objective of Detox is to enhance the use of safer chemicals in all wet production procedures of textiles such as apparel, footwear products and all home textiles by no later than 2020. Achievements Defined a roadmap to avoid hazardous chemicals in the supply chain of textiles with specific deadlines by 2020 Informed all suppliers and importers about the Detox Program with our Detox brochure Learned about supply chain partners and their wet process factories (supply chain transparency questionnaire) Obtained the commitment of nearly all of suppliers to Detox Established a monitoring process for suppliers and wet process factories Tested the waste water and sludge of 58 wet process factories that represent over 80 per cent of our textile turnover Performed three pilot projects and conducted the first supplier workshops and events Reviewed REWE Manufacturing Restricted Substance List (MRSL) and published an updated version, MRSL 1.0 Established a substitution strategy for hazardous chemicals Identified the first factories that are using APEOs Published the Detox Program and information on the corporate website Defined the concept for a capacity development program Conduct a regular discussion with the other detox-committed companies Evaluated ZDHC membership December 2015 REWE Group Detox Status Report 2015 4

REWE Group s Detox Program (1/2) Summary of Achievements In December 2014 REWE Group joined the Detox Campaign and set up its REWE Group Detox Program. With the Detox program we are dedicated to bringing transparency to the textile supply chain, promoting the use of nonhazardous chemicals in textile production and minimizing the release of hazardous substances into water by 2020. We believe that we can achieve the ambitious targets of Detox only if we collaborate with other business partners of the textile industry. Therefore, we are actively engaging in partnerships with relevant organizations and with other companies on a pre-competitive basis. Our suppliers and the wet process factories are also important partners on the path toward the safer production of textiles. Trainings, events and information material helped to start the collaboration with our suppliers. In line with the right-to-know principle in our Detox commitment, we are increasing transparency in the textile supply chain with a focus on all apparel and footwear products (including all home textiles) produced and sold ( private label / store brands ) by REWE Group. This includes all of REWE Group s contracted suppliers or facilities horizontally across all private label brands as well as vertically down our supply chains. Therefore, we began in the first half of 2015 to roll out internal and external communication measures to inform our stakeholders about the Detox Program. To ensure that our supply chain partners comply with the strict requirements, we have developed a mandatory process for all our apparel, shoes and home textile suppliers and their wet process factories and strengthen the contract language regarding the use of hazardous chemicals for our textile suppliers. December 2015 REWE Group Detox Status Report 2015 5

REWE Group s Detox Program (2/2) Summary of Achievements The regular monitoring process is the key to ensuring that our supply chain partners comply with the Detox standards. Regular waste water and sludge tests will help to monitor the progress. A chemical inventory has to be set up and needs to be continuously updated. If necessary, a Corrective Action Plan (CAP) has to be developed. To evaluate the current situation and to ensure conformity with our Detox Program, we tested the waste water and sludge of over 80 per cent (in relation to our turnover) of the textile factories within the wet processes in our supply chain. All waste water and sludge test reports will be uploaded to the platform of the Institute of Public & Environmental Affairs (IPE). In order to gain more experience and learn more about ways of phasing out non-compliant substances from the textile production, we have set up three pilot projects with different suppliers and service providers in Asia. In line with our Detox commitment, we have worked on the update of our MRSL and the process of phasing out non-compliant substances from the textile production processes. We have established a substitution strategy for hazardous chemicals and have identified factories that are using APEOs with the aim of working with them on the phase-out. To give our supply chain partners as well as our customers more information on the chemicals in our MRSL, we are developing chemical fact sheets for each chemical group that will be published on our corporate website. We are committed to setting up a closed loop project based on a take-back system as well as a consumer awareness program. We plan to start our closed loop project in 2016 and communicate this to our customers through various communication channels. December 2015 REWE Group Detox Status Report 2015 6

The REWE Group Detox Roadmap Our Detox Program is based on eight key milestones that also reflect the main requirements defined in our Detox commitment: REWE Group joins Detox: We decided to join the Detox commitment in December 2014. Awareness Raising: To implement the Detox Program, we started a continuous dialog with all of our textile suppliers. Water Testing: Waste water and sludge testing helps us to raise the status quo, which is the starting point for any phase-out strategy defined by the factory. Case Studies: In case studies, we outline examples for the substitution of hazardous chemicals. Phase-Out Strategy: For any chemical defined in our MRSL, we are developing a phase-out timeline. Publication and Reporting: We report on our progress to raise awareness about the important issue of more environmentfriendly textile production. Capacity Building and Training: We provide trainings and workshops to our suppliers and factories. Safer Textile Production: Our aim is to ensure safer textile production by the end of 2020 in order to create a safer future for humans and the environment. December 2015 REWE Group Detox Status Report 2015 7

Scope of the REWE Group Detox Program The supply chain of our private label textiles is very complex as there are many parties involved in the different stages. With our Detox Program, we focus on the crucial stages in which toxic chemicals could be used, mainly the wet processes in the textile supply chain. Our top priority is that all of our products are produced in factories that have joined our Detox Program and therefore comply with the Detox requirements or at least are working toward complying with them. The Detox Program refers only to suppliers of our private label apparel, shoes and home textiles. The Detox Program focuses on wet process factories in the supply chain of apparels, footwear and home textiles. December 2015 REWE Group Detox Status Report 2015 8

Timeline of the REWE Group Detox Program We have set ambitious targets and defined a timeline for our Detox Program which are in line with our Detox commitment 2019-2020 Substitution and Phase-Out Phase II Continue research on safer chemicals Finalize substitution and phase-out of hazardous chemicals Continuously monitor wet process factories 2018 Substitution and Phase-Out Phase I Conduct further research on safer chemicals Carry out substitution and phase-out of hazardous chemicals Continuously monitor wet process factories 2017 Establishment and Integration Phase Establish chemical management in wet process factories Integrate Detox requirements into the procurement process Continue research on safer chemicals and case studies for phase-out 2016 Status Quo and Training Phase Evaluate the status of wet process factories Create capacity and train supply chain partners Conduct research on safer chemicals and case studies for phase-out 2014-2015 Launch and Pilot Phase Raise awareness about hazardous chemicals Gain supply chain transparency Start pilot projects as well as waste water and sludge testing December 2015 REWE Group Detox Status Report 2015 9

Internal and external Communication The goal of communication activities is to disseminate information about our Detox Program and the Detox campaign to raise awareness about hazardous substances in textile supply chains. In addition to communicating with our supply chain partners, we also want to inform our customers and the public about our Detox project. After we joined the Detox campaign, we issued a press release and added our Detox Program and the Detox brochure to the REWE Group website. The Detox Program has also been a topic at our Dialogue Forum and Supplier Event. We provide full public access to our restricted-substance list and audit process, and offer full public disclosure of discharges of hazardous chemicals in our supply chain. In line with the right to know, we require our supply chain partners to upload the finalized test reports to the IPE platform. In addition, our internal stakeholders are regularly updated on the project. At the beginning of 2015, our local merchandisers for textiles received training due to their direct contact with our textile suppliers. We distribute an internal newsletter to the textile purchasing department, the buying office in Asia, the project team, the steering committee and the REWE Group sustainability department. We also published an article in our internal REWE Group magazine. Newsletter Internal Training Website Brochure Supplier Event REWE Detox Event Dialog Forum Press Release Intranet December 2015 REWE Group Detox Status Report 2015 10

Process for Suppliers and Factories December 2015 REWE Group Detox Status Report 2015 11

Process for Suppliers and Wet Process Factories Overview To help our supply chain partners comply with the Detox requirements, we have developed a four-step process which is mandatory for our suppliers and their wet process factories. The process involves 1) information and commitment, 2) status quo and training, 3) implementation and 4) monitoring. REWE Group will support its supply chain partners during the entire process with information materials, trainings and coaching. With this process, we want to promote strong environmental performance and continuous improvement throughout the supply chain. Each individual step is necessary to ensure a more sustainable and safer textile supply chain by 2020. Brochure Website Supplier event Commitment Information & Commitment Status Quo and Training First waste water tests Chemical inventory Workshops Chemical management Phase-out of hazardous chemicals Disclosure Implementation Monitoring Waste water tests Corrective Action Plan Audit December 2015 REWE Group Detox Status Report 2015 12

Step 1: Information & Commitment The first step is key as this is the step in which we raise awareness about the issue of non-compliant chemicals in the textile production. We have informed our supply chain partners about our Detox Program and its requirements. To facilitate the flow of information, we have created supporting documents such as our Detox brochure, which is available as printed publication or in digital form on our website. The brochure includes key information about the Detox campaign as well as about our Detox Program. Since our supply chain partners are located in different countries around the world, the brochure is available in four languages (German, English, Chinese and Turkish). We have also published information about our program on our corporate website. To ensure the full support and commitment of our supply chain partners, we have developed a REWE Group Detox commitment that nearly all of our current suppliers have signed. By signing our Detox commitment, the suppliers agree to accept and promote the goals and requirements defined in the commitment. As a retail company with stores in Europe, we frequently have no direct contact with the wet process factories. As the information about the wet process factories is critically important, we are collaborating with our suppliers of apparel, footwear and home textiles. We ask them to disclose their wet process factories in our Detox questionnaire and ask them to support us to communicate the Detox requirements in our supply chains. A total of 86 per cent of our suppliers have agreed to be transparent and disclosed their supply chain partners in the questionnaire. DONE Commitment to safer textile production 88 per cent of our suppliers fully support our Detox Program and have signed the Detox commitment. Questionnaire REWE Group Website December 2015 REWE Group Detox Status Report 2015 13

Step 1: Information & Commitment Detox Supplier Events and Workshops DONE To raise supplier awareness about more sustainable and safer textile production, we furthermore organized a Detox kick-off workshop and events to which we invited our suppliers. Therefore, in November 2014, selected suppliers and their wet process factories have been invited to our kick-off workshop for pilot projects. Following an introduction of the overall Detox Program and a presentation on chemicals in the textile supply chain, the service providers introduced the different project set-ups defined for our pilot phase. In-depth discussions about the pilot projects and the defined steps were held in various working groups. In August 2015 we invited all of our suppliers with factories to our supplier event in Bangkok. The event started with an introduction to REWE Group and its buying offices REWE Far East (RFE) in Asia, followed by speeches by different service providers and representatives of the chemical industry. The suppliers had the opportunity to ask questions after the speeches and exchange ideas with each other during breaks. The event concluded with a panel discussion in which representatives of the textile industry and service providers took part. December 2015 REWE Group Detox Status Report 2015 14

Step 2: Status Quo and Training In progress To evaluate the current situation in the wet process factories, together with qualified test institutes, who are responsible to ensure the sampling and the analysis we have defined a test program for waste water and sludge testing. These test reports and the chemical inventory that is requested from each factory give us a clear picture of the current situation in the factory. As the results of the waste water and sludge tests are the starting point for the substitution of chemicals, it is very important that the factories understand the results and are able to take corrective actions. For this reason, together with our service provider, we are planning to hold workshops in three different regions (China, India and Bangladesh). In these workshops, the results of the tests will be explained and further actions will be discussed. We have learned that many factories have insufficient knowledge about the input and process chemicals they use. Establishing chemical management that consists of chemical inventories and safe chemical storage as well as handling regulations are vital for factories that want to comply with the strict Detox requirements. Therefore, in addition to these workshops, further training and onsite coaching will be provided to key factories. To provide an onsite coaching we are in the process of establishing a capacity development project to create a trainer pool of chemical management experts for our suppliers in 2016. December 2015 REWE Group Detox Status Report 2015 15

Step 2: Status Quo and Training Waste Water and Sludge Testing Done The waste water and sludge test results help us to raise the status quo and to control compliance with the requirements of our Detox Program. 58 waste water and sludge tests, which represent over 80 per cent of our turnover in 2014, have already been completed. The waste water and sludge sampling and testing are carried out by an external service provider which has been paid by us. In case of unsatisfactory test results, a corrective action plan needs to be created. Continuous monitoring and regular meetings with our suppliers and their factories help us to improve the sustainability in our textile supply chain. December 2015 REWE Group Detox Status Report 2015 16

Step 3: Implementation Start in 2016 The main objective of the third step is the requirement for factories to implement and establish a chemical management system. The workshops and training courses will enable our supply chain partners to implement new measures that are necessary to create more transparency and comply with the Detox requirements. After evaluating the input chemicals based on the chemical inventory, the factory has to start searching for safer chemicals if the chemicals in use are defined as hazardous substances in REWE Group MRSL. To give our supply chain partners additional insights and background information on the different chemical groups, we are developing chemical fact sheets for each chemical group. With the help of the fact sheets, we are working to provide our supply chain partners with a better understanding of chemicals that are used during the textile production. The fact sheets will provide information on potential risks and their environmental impacts. They also offer advice on how to find compliant and safer substances. We plan to publish and communicate the first fact sheets to our customers and supply chain partners end of 2015. December 2015 REWE Group Detox Status Report 2015 17

Step 4: Monitoring Ongoing until 2020 Within the monitoring process step, we have developed a four-segment circle that helps us to ensure the usage of safer chemicals in the production of textiles. Waste water and sludge testing will also play an important role for the continuous monitoring. That is why waste water and sludge tests have to be updated regularly. After the evaluation of the waste waster and sludge test and the chemical inventory, a corrective action plan must be set up, if necessary. An on-site audit may be required to ensure and determine that all corrective actions are completed. This cycle will be an ongoing and required process for all factories that produce textiles for REWE Group. On-site audits may apply to ensure implementation of corrective actions Waste Water and Sludge Testing Regular waste water and sludge testing are required for all wet process suppliers On-Site Audit Chemical Inventory Based on the waste water and sludge testing reports and the chemical inventory, a CAP must be developed Corrective Action Plan (CAP) The factory is responsible for establishing the chemical inventory and updating this regularly December 2015 REWE Group Detox Status Report 2015 18

Step 4: Monitoring Pilot Projects Ongoing till Q1 2016 REWE Group has set up three pilot projects with wet process factories from different suppliers and with various service providers to learn more about ways to phase out unwanted substances from the textile supply chain. The service providers were commissioned and paid by REWE Group. One pilot project has been finished, and the other two are still being conducted. The first pilot project which is completed took place at a garment manufacturer in Bangladesh and its dyeing as well as washing mill. The service provider supported the garment manufacturer during the process of eliminating hazardous chemicals by establishing a chemical inventory, analysis of effluent water and by developing a substitution concept for non-compliant chemicals. All private label textile products that will be sold in any REWE Group store must undergo physical and chemical tests based on a specific testing plan. During our regular pre-production sample tests, unwanted chemicals in the fabric samples were found. The supplier determined that the chemicals were used by two sub-suppliers. As the sub-suppliers refused to find safer alternatives, our supplier immediately terminated all business relationships with them and reallocated its production to other factories that had good test results. The other two pilot projects are being conducted at textile suppliers who are based in Hong Kong and have factories in China. Both suppliers were audited, and waste water and sludge tests have been done. At the moment, our service providers together with the suppliers are working on the substitution process of phasing out non-compliant substances from their production operations. To evaluate the different service providers, we have done a benchmark to identify the ones that are suitable for our Detox Program. December 2015 REWE Group Detox Status Report 2015 19

Chemical Management and Phase-Out December 2015 REWE Group Detox Status Report 2015 20

Overview: Chemical Management and Phase-Out Summary Chemical Management and Phase-Out In line with our Detox commitment, we worked on the update of our MRSL and the process of phasing out noncompliant substances from the textile production processes. We have also established a substitution strategy for hazardous chemicals and identified factories that are using APEOs and that we can work with on the phase-out. Challenges In the future, we will have to address the challenge of integrating the new MRSL into our quality requirements and, thus, into the purchasing process. Another challenge we face is that the best-available test methods used by major testing organizations do not meet the strict detection limits defined by Detox MRSL. December 2015 REWE Group Detox Status Report 2015 21

REWE Group MRSL v 1.0 Done We have taken the following actions while updating our MRSL, including work on detection limits, tolerance levels, test methods for input chemicals, waste water, sludge and product testing: DETOX MRSL - Comparing different MRSLs - Discussing with testing institutes - Reviewing by internal experts MRSL other companies Internal experts - Considering feedback from service providers - Reviewing requirements of Öko-Tex Standard 100 and the parameters of ZDHC the Roadmap to Zero Discharge of Hazardous Chemicals The updated MRSL will include updated limit values and will be published on our REWE Group website by the end of 2015. Any new chemical that was identified in the updating process has been added to a separate list and is being internally evaluated at the moment. ZDHC parameters REWE Group MRSL 1.0 Öko-Tex Standard 100 parameters Feedback service providers December 2015 REWE Group Detox Status Report 2015 22

REWE Group MRSL v 2.0 Ongoing until end of 2016 In 2016, we will work on the MRSL v 2.0. For this reason, we are planning to conduct a research study on every chemical group. In this process, different universities and institutes have been asked to assist this work. In addition to the results of the research study, we will also take the results of the waste water and sludge tests that we have analyzed so far as well as the results of our pilot projects into consideration for the MRSL v 2.0. After our internal evaluation, we might add new substance groups to the MRSL 2.0 and define tolerance levels. The MRSL v 2.0 will be published and communicated to our supply chain partners end of 2016. On a yearly basis, we will analyze new chemical groups and update the MRSL. The following sources will be used for this update: Feedback and new information from service providers Benchmark of MRSLs and standards Research studies Internal evaluation of chemicals Other MRSL companies Research Study ZDHC parameters DETOX MRSL REWE Group MRSL 2.0 Öko-Tex Standard 100 Quality department Feedback service providers December 2015 REWE Group Detox Status Report 2015 23

Substitution of Hazardous Chemicals Ongoing until 2020 To support our suppliers and their wet process factories, we have defined a four steps for the substitution of hazardous chemicals. Wet process factories using hazardous chemicals are identified by the evaluation of test results of waste water and sludge as well as product tests. Based on an evaluation of test results and information gained from chemical inventories, further steps for substitution will be defined. Each individual step will be monitored and summarized in a case study. The purpose of the case studies is to show how to substitute hazardous chemicals and how to find better alternatives, as well as to point out the challenges and benefits. Case Study Selection of factories Based on Detox questionnaire Based on product tests Based on waste water testing results Evaluation Based on chemical inventory Based on product tests Based on waste water and sludge tests Substitution Immediate total ban if possible Support of suppliers Check for availability of safer chemicals Completion of product tests to ensure ban All measures will be summarized in a case study Case studies are published December 2015 REWE Group Detox Status Report 2015 24

Closed Loop Project December 2015 REWE Group Detox Status Report 2015 25

Our Approach to Close the Loop Our Closed Loop Project As part of its Detox Commitment, REWE Group wants to promote the reuse of textiles. We are developing a take-back program for clothes (ours as well as those of other producers). We are also determining whether recycled fibers can be used in the production for our textiles. As our supermarkets are located across Germany, customers can easily drop off their used textiles at our stores. Therefore we hope this service will increase the number of clothing donations and help to conserve resources by creating awareness about the issue and offering a convenient service to producers. We will examine the environmental impact of textiles following an analysis of the economic value of take-back and recycling systems. We also want to inform customers about the issue of reused textiles by providing information in our stores and on our website. Timeline: Q2 2016: Conduct economic analysis of environmental impact and start the pilot phase of the Closed Loop Project December 2015 REWE Group Detox Status Report 2015 26

Next Steps December 2015 REWE Group Detox Status Report 2015 27

Next Steps for our REWE Group Detox Program For 2016, we have set challenging targets to create a more sustainable and safer textile supply chain: Distribute a second questionnaire to obtain more detailed supply chain information Further upgrade IT systems to improve the mapping of the supply chain Continue waste water and sludge testing Finalize pilot projects and evaluation Update the test strategy and define audit strategy Monitor Detox compliance Set up a capacity development project Continue publishing information material and conducting trainings Roll-out further training courses in line with capacity building project Publish a guideline on sustainable textiles Start the research project on every chemical group Publish a case study on substitution of APEOs and PFCs Engage with suppliers on substitution programs Publish MRSL 2.0 and guidelines for sustainable textiles December 2015 REWE Group Detox Status Report 2015 28

Contact: REWE Far East E-mail: Detox@rewe-fareast.com Website: www.rewe-group.com December 2015 REWE Group Detox Status Report 2015 29