Respect for human rights
The principles of METRO include respect of all human rights, as set out in the United Nations’ Universal Declaration of Human Rights, the International Bill of Human Rights, the OECD Guidelines for Multinational Enterprises, the UN Guiding Principles on Business and Human Rights and the Declaration on Fundamental Principles and Rights at Work of the International Labour Organization (ILO). This is manifested in our Principles for Human Rights, which apply to our own employees and to our business partners within our supply chain1. An attitude with similar values is also important to us on the part of our business partners. Our goal is to identify and prevent violations of human rights in our own business operations and in our supply chain. We also strive to systematically improve working conditions in our supply chain. In the reporting period, we reviewed our management approach with regard to respecting human rights. Also, to ensure that we comply with the legal requirements of the Act on Corporate Due Diligence Obligations in Supply Chains (LkSG), which will enter into force in Germany in January 2023, we developed a concept for the METRO companies that are directly affected by the LkSG. This includes the risk management system for supplier relationships with a differentiated risk analysis.
To align with the requirements of the LkSG, the content of the METRO Code of Conduct for business partners of the METRO companies falling within its scope is also being revised. From 2023 onwards, it will gradually become a binding part of the contractual business relationship with the relevant suppliers. Furthermore, after embedding our social standard process in the food own-brand manual of the European Food Sourcing (EFS) division in financial year 2020/21, we also started to revise the wine own-brand manual of EFS in the reporting period. In the future, evidence of human rights compliance will be required to be submitted as part of the tendering process. After the own brand wine manual becomes effective in 2023, the corresponding documents and proof must be available when suppliers are listed. Furthermore, all of our own-brand and framework contracts for brand suppliers as well as the international standard logistics and service provider contracts contain a social standards clause that gives us legal means to enforce our requirements.
In case of violations of our basic human rights principles, our employees can contact their supervisors or the company’s compliance officers. Using a tool that is publicly accessible via the METRO compliance page, internal and external individuals, including stakeholders of our suppliers, can report incidents and violations. It is important for us that our suppliers also provide such a reporting system. Corresponding measures to ensure that this is also implemented by our suppliers have not been established. Reported incidents affecting our company will be promptly investigated and processed by our experts to take appropriate action, if necessary. We are also committed to working with our suppliers and within the group to remedy the effects of the grievances, utilising joint initiatives and collaborating with stakeholders, and not obstructing access to other legal remedies. Therefore, we are developing a catalogue of preventive measures and remedies aligned with the requirements of the LkSG. Depending on the application, it will need to be posted and tracked during risk classification of a supplier or, at the latest, when a confirmed incident is reported.
Global labour and social standards in the supply chain
In order to contribute to ensuring socially acceptable working conditions within our procurement channels and to prevent potential infringements, the application of social standard systems in our own brands supply chain is a key part of the purchasing process. This is done in addition to the concept of compliance with the LkSG as well as contractual manifestation of our requirements. We pursue the concept of requiring our producers to be audited in accordance with the supply chain management standard set out by the amfori BSCI, the Sedex audit according to SMETA or an equivalent social standards system. This applies to all producers of certain typically human rights-critical food categories and industries, and to all producers in defined risk countries (based on the amfori BSCI assessment) in which METRO SOURCING International (MSI) and METRO Food Sourcing (MFS) have imported goods manufactured. It also applies to all above referenced risky producers who manufacture own brands or own imports for METRO. This risk assessment did not have to be adjusted in connection with the Covid-19 pandemic or the Russian war in Ukraine either, as it is universally applicable. For many years now, we have been working on the basis of a corresponding process for our non-food producers2. Since 1 June 2019, the same process was established analogously for all food and near-food producers in the own-brand sector. To date, MFS and the national subsidiary METRO Deutschland have fully implemented the process. The national subsidiaries in Pakistan, Turkey and Ukraine as well as our purchasing company Rotterdam Trading Office (RTO) have introduced the first producers to the process. Other purchasing companies and national subsidiaries are preparing for implementation. Our goal is to include our entire supply chain in this process by 2030, insofar as it is considered risky in terms of potential human rights violations. The national subsidiaries are trained and gradually integrated into the programme. During the reporting period, 6 national subsidiaries refreshed their proficiency of the programme and/or trained new colleagues via online training sessions. Despite the continued disruptive circumstances of the Covid-19 pandemic, particularly with regard to supply chain management, hardly any virtual audits took place throughout the reporting period. Under normal circumstances, we have audits regularly carried out on site by external auditors in accordance with the audit cycles of the social standards accepted by METRO. After temporarily discontinuing the process of suspending suppliers due to expired audits from mid-March 2020 to mid-October 2021, we resumed this process as usual in the reporting period. The war in Ukraine also had a significant impact on our supply chain, with a clear focus on availability of goods rather than social aspects. Taking the experience gained from these supply chain disruptions into account, we particularly consider responsible procurement practices as the key to strengthening business relationships, ensuring business continuity and protecting human rights in global value chains.
As of 30 September 2022, 515 of 624 reported active own-brand non-food producers and 95 of 156 corresponding food/near-food producers had undergone the audit process. Within this group, 100% (515) of non-food producers and 100% (95) of food/near-food producers have passed the audit successfully. Effective 1 January 2019, non-food producers who fail the audit can only be commissioned as METRO contracting parties if they achieve an acceptable audit result. In other words, they have to receive an A, B or C for the amfori BSCI assessment or successfully pass an audit that is acknowledged as equivalent3. Until further notice, all food/near-food suppliers with amfori BSCI D (and in exceptional cases also E) audit results (and corresponding equivalents of other standards recognised by METRO) also qualify to be commissioned by METRO. This procedure realistically reflects the challenging way of re-integrating suppliers into the process and gradually working towards ensuring socially acceptable (working) conditions.
The verification of compliance with our requirements is performed via an internal IT-based process management database, which provides an overview of the portfolio management of the affected suppliers and the associated producers. The database is also used to monitor compliance with contractual agreements during the initiation and suspension of business relationships. Misconduct with regard to the so-called deal-breakers specified by METRO in the course of ongoing business relations will trigger suspension of the supplier. Deal-breakers include specific findings in the areas of child labour, forced labour, occupational safety hazards with regard to fire safety and ethical behaviour. If misconduct is discovered at suppliers and their producers concerning one of these areas, they are required by METRO to develop short-term and long-term solutions to remedy the deal-breaker issue. New orders or follow-up orders are suspended until the findings in the deal-breaker process have been resolved.
In order to contribute to the improvement of the social requirements in the production facilities of our own brands and thus to further increase the proportion of valid social audits, MSI, MFS and METRO Turkey work together with our local producers and support them with training courses that serve to teach understanding and compliance with the social standards. By training our own-brand suppliers on the implementation of fair labour conditions, we sensitise them to comply with conditions and avoid violations. After an initial survey with approximately 500 MSI suppliers specifically on the topic of living wage4 in July and August 2021, the MSI training content also included this topic.
In addition to the focus on social issues, MSI continued to audit its producers with a self-assessment questionnaire on environmental compliance in financial year 2021/22.
1 For the METRO AG holding company, the aspect of human rights in the supply chain is not essential because of its business orientation, but rather only in relation to its own employees.
2 This includes merchandise producers (non-food own-brand products and own non-food imports) in high-risk countries that carry out the final value-creating production step, for example produce the final item of clothing
3 A METRO company was granted an exemption in August 2020 for the (post-) coronavirus period to continue to use individual producers with D audit results if their D audit results are attributable to coronavirus-based failure. Although the Covid–19 situation eased during the reporting period, the exemption continues to apply on a case-by-case basis until further notice. These producers will be granted a 6-month grace period after the date of the audit covered by the exemption to demonstrate a follow-up audit result A through C. The exemption was applied in 2 cases during the reporting period.
4 Measurement according to the so-called Anker Method; data taken from the database of the Global Living Wage Coalition and partly based on the information from the relevant amfori BSCI audits of the producers.