Disclosures pursuant to the EU Taxonomy Regulation

Sustainable business is an important element in achieving the climate and energy goals of the European Union (EU). The EU Taxonomy Regulation¹ created a common classification system to identify sustainable economic activities in order for the EU to target investments in companies that operate sustainably. The EU Taxonomy defines which economic activities are considered environmentally sustainable.

The EU Taxonomy includes the following 6 environmental objectives:

1. climate change mitigation,
2. climate change adaptation,
3. sustainable use and protection of water and marine resources,
4. transition to a circular economy,
5. pollution prevention and control,
6. protection and restoration of biodiversity and ecosystems.

Companies that publish a non-financial statement must report on the extent to which their economic activities are environmentally sustainable. The assessment criteria of the 2 objectives ‘climate change mitigation’ and ‘climate change adaptation’ are specified by Annex I and Annex II of Commission Delegated Regulation (EU) 2021/2139. Economic activities which have been described in delegated acts are per se taxonomy-eligible. If the economic activities contribute substantially to the environmental objectives set out in the EU Taxonomy, do no significant harm to the other environmental objectives, meet requirements for minimum safeguards and fulfil the technical screening criteria set out in specific delegated acts, they are also taxonomy-aligned. The Commission Delegated Regulation (EU) 2022/1214 of 9 March 2022 amending Delegated Regulation [EU] 2021/2139 as regards economic activities in certain energy sectors and Delegated Regulation [EU] 2021/2178 as regards specific public disclosures for those economic activities was published in July 2022. Under the adopted amendment, certain atomic energy and natural gas activities are now, under certain conditions, classified as environmentally sustainable economic activities in accordance with the EU Taxonomy. The METRO group itself does not carry out any activities in the fields of nuclear energy and fossil gas generation.

METRO taxonomy reporting

In general terms, METRO’s activities within the sustainability priority climate and carbon contribute to the achievement of the EU climate and energy targets at European as well as global level. METRO’s climate protection target particularly addresses both climate change mitigation and climate change adaptation.

• Further information can be found in the section on environmental matters.

Once again in this financial year, METRO is reporting based on the requirements of Article 8 (1) and (2) of the EU Taxonomy and Article 10 (1) of the Commission Delegated Regulation (EU) 2021/2178 of 6 July 2021 supplementing Regulation (EU) 2020/852 (‘Delegated Act to Article 8 on the content and presentation of information to be disclosed’). Accordingly, METRO, as a non-financial company, is required to disclose the share of taxonomy-eligible and taxonomy-non-eligible as well as taxonomy-aligned and not-taxonomy-aligned economic activities in total turnover, capital expenditure (CapEx) and operating expenditure (OpEx) for the 2 environmental objectives ‘climate change mitigation’ and ‘climate change adaptation’ in financial year 2022/23. This is the first financial year in which taxonomy-aligned and not-taxonomy-aligned values have to be reported. The determination of the values is based on the figures reported in the consolidated financial statements, which means that the corresponding accounting and measurement methods are applied here.

Turnover

The shares of taxonomy-eligible and taxonomy-aligned net turnover are determined as follows: net turnover from products or services related to taxonomy-eligible and taxonomy-aligned economic activities divided by total net turnover. Total net turnover for financial year 2022/23 forms the denominator of the turnover ratio and can be derived from the consolidated income statement. Allocation of the respective turnover to the taxonomy-eligible and taxonomy-aligned economic activities was examined through a detailed analysis of the items included in the turnover. The sums of the identified turnover revenues of the taxonomy-eligible and taxonomy-aligned economic activities for financial year 2022/23 form the numerator of the 2 key figures.

Based on the activities defined in Annex I and Annex II of the Delegated Act on the Climate Targets of the EU Taxonomy, the economic activities related to METRO’s core business do not fall under the specific criteria. Accordingly, the turnover is taxonomy-non-eligible. Correspondingly, the ratio of the sales from taxonomy-eligible and taxonomy-aligned economic activities of a financial year to the turnover of that financial year is 0.

Capital expenditure and operating expenditure

The share of capital or operating expenditure on assets or processes associated with economic activities that are classified as taxonomy-eligible and taxonomy-aligned is determined as follows:

Capital expenditure KPI = share of total capital expenditure that is taxonomy-eligible or taxonomy-aligned divided by total capital expenditure according to the EU Taxonomy Regulation.

Operating expenditure KPI = share of total operating expenditure that is taxonomy-eligible or taxonomy-aligned divided by total operating expenditure according to the EU Taxonomy Regulation.

Capital expenditure is based on the additions to tangible and intangible assets during the relevant financial year before depreciation, amortisation and any remeasurements; this also includes additions resulting from revaluation and impairments for the relevant financial year and excludes fair value changes. The denominator must also include additions to tangible and intangible assets resulting from business combinations (application of IFRS [IAS 16, 38, 40, IFRS 16]). Allocation of capital expenditure to the taxonomy-eligible and taxonomy-aligned economic activities was examined through a detailed analysis of the items included in capital expenditure. The sums of the identified capital expenditure of the taxonomy-eligible and taxonomy-aligned economic activities for financial year 2022/23 form the 2 numerators of the respective key figure.

The basis for operating expenses includes direct, non-capitalised costs related to research and development, building renovation measures, short-term leasing, maintenance and repair. It also includes any other direct expenses related to the day-to-day servicing of property, plant and equipment assets by the company or third parties to whom activities are outsourced that are necessary to ensure the continued and effective functioning of those assets. Allocation of the respective operating expenditures to the taxonomy-eligible and taxonomy-aligned economic activities was examined through an analysis of the items included in the operating expenditures.

The taxonomy distinguishes between 3 different types of taxonomy-aligned capital and operating expenditures (numerator) respectively. The numerator corresponds to the part of the capital expenditures or operating expenditures included in the denominator that

• relates to assets or processes associated with taxonomy-aligned economic activities, or
• is part of a plan to expand taxonomy-aligned economic activities or enables the transformation of taxonomy-eligible economic activities into taxonomy-aligned economic activities within a predefined period, or
• relates to the purchase of output from taxonomy-aligned economic activities or individual measures enabling the target activities to become low carbon or to lead to greenhouse gas reductions provided that these measures are implemented and operational within 18 months.

As explained in relation to turnover, METRO’s core business and all related economic activities currently fall outside the scope of the EU Taxonomy with regard to the first 2 environmental targets. Accordingly, it is not possible to invest in assets or processes to expand taxonomy-aligned economic activities or to enable taxonomy-eligible economic activities within the core business. Therefore, only capital and operating expenditures which relate to the acquisition of products and services from taxonomy-eligible and taxonomy-aligned economic activities or to individual measures that lead to the target activity being carried out in a low-carbon manner or in a manner which reduces greenhouse gas emissions are considered for taxonomy eligibility or taxonomy alignment.

Taxonomy-eligible share of METRO’s total operating expenditures: Currently, METRO’s total operating expenses according to the EU Taxonomy definition amount to €273 million. With respect to METRO’s total operating expenditure, only a small share of the expenditure can be attributed to the EU Taxonomy operating expenditure KPI. The main parts of the expenses included in the operating expenditure denominator, such as building maintenance and other maintenance expenses, are not related to METRO’s core business activities. Therefore, we do not consider the operating expenses according to EU Taxonomy to be material to METRO’s business model. Hence, we make use of the exemption clause in Annex I of the Commission Delegated Regulation (EU) 2021/2178 of 6 July 2021 supplementing Regulation (EU) 2020/852 by reporting the numerator of the operating expenditure KPI as 0.

Substantial contribution

For the identification of taxonomy-aligned capital expenditures, the economic activities must make a substantial contribution, as defined in the delegated acts on the environmental objectives of climate change mitigation and climate change adaptation. The environmental objective of climate change mitigation is relevant to the taxonomy-eligible economic activities of METRO in this regard, as these economic activities are aimed at reducing CO₂ emissions.

No significant harm to other environmental objectives

For all economic activities that contribute substantially to climate change mitigation, a further analysis reviews the ‘do no significant harm’ (DNSH) criteria. These criteria stipulate that an economic activity that fulfils the criterion of making a substantial contribution may not do significant harm to the other environmental objectives. A range of measures or analyses are to be carried out for the review, which generally begins with a consideration of the relevant locations at which the respective economic activity is performed.

A prerequisite for taxonomy alignment is to ensure that no significant harm is done to other environmental objectives. Because METRO’s economic activities contribute exclusively to the first environmental objective of climate change mitigation, environmental objectives 2 to 6 are to be reviewed regarding any significant harm.

Environmental objective 2: climate change adaptation

To achieve this objective, the physical climate risks which are material to the respective activity and which could impact it in the medium to long term must be identified. Identifying these risks requires the performance of a climate risk and vulnerability assessment pursuant to Appendix A of Annex I on climate change mitigation. The criteria and the scope of the analysis are defined in Annex I. If acute risks are determined, adaptation solutions need to be developed in the next step to minimise the climate risk.

Environmental objective 3: sustainable use and protection of water and marine resources

To achieve this objective, an environmental impact assessment pursuant to Directive 2011/92/EU of the European Parliament and of the Council must be performed. This includes the assessment of effects on bodies of water pursuant to Directive 2000/60/EC. No additional assessment of the effects on bodies of water is required if the risks identified have been remediated.

Environmental objective 4: transition to a circular economy

The transition to a circular economy requires a waste management plan, among other things. A waste management plan exists if contractual agreements with partners in waste management, reflection in financial projections and official project documents ensure that maximum reuse or recycling is carried out at the end of useful life in accordance with the waste hierarchy.

Environmental objective 5: pollution prevention and control

The DNSH criterion with respect to the objective of pollution prevention and control requires that the activity does not lead to the manufacture, placing on the market or use of substances listed in Appendix C of the Delegated Act on the Climate Targets of the EU Taxonomy.

Environmental objective 6: protection and restoration of biodiversity and ecosystems

Appendix D requires that an environmental impact assessment or a screening pursuant to Directive 2011/92/EU is performed.

Minimum safeguards

The final step to achieving alignment within the meaning of the EU Taxonomy consists of complying with the minimum safeguards. Minimum safeguards include all procedures which ensure that the economic activities comply with:

• the OECD Guidelines for Multinational Enterprises (OECD MNE Guidelines);
• the UN Guiding Principles on Business and Human Rights (UNGPs), including the principles and rights set out in the 8 fundamental conventions of the Declaration on Fundamental Principles and Rights at Work of the International Labour Organization; and
• the International Bill of Human Rights.

In the absence of further guidelines of the European Commission, we rely on the Final Report on Minimum Safeguards, which was published by the Platform on Sustainable Finance (PSF) in October 2022, for our assessment of human rights criteria.

The scope of minimum safeguards comprises the following 4 topics: human rights (including labour and consumer rights), corruption and bribery, taxation and fair competition.

We pursue a 2-dimensional assessment approach to evaluate compliance with the minimum safeguards. On the one hand, processes have been implemented to prevent negative impacts (process dimension). On the other hand, the results are monitored to review whether our processes are effective (results dimension).

A further investigation as to compliance with the minimum safeguards must only then be performed if the requirements for taxonomy alignment can already be demonstrated as part of the review of the technical screening criteria for one of METRO’s taxonomy-eligible economic activities.

At METRO AG, we are aware that the conduct of all employees and other actors along our value chain plays a central role in compliance with the minimum safeguards. As a globally active wholesale company, we take our responsibility seriously. We therefore set great store by ensuring that the principles of ethical conduct are adhered to within our business activities. These are set out in the business principles of the group, the code of conduct for business partners and METRO’s internal guidelines on human rights and environmental matters, as well as, with regard to our tax strategy, publicly available on the METRO website. Among other topics, they cover all 4 subjects of the minimum safeguards. The group-wide compliance management system (CMS) is the superordinate organisational tool for ensuring compliance with statutory obligations vis-à-vis the minimum safeguards.

Identification of taxonomy-eligible and taxonomy-aligned economic activities

Taxonomy eligibility

We have identified the following activities as taxonomy-eligible economic activities and thus as environmentally sustainable:

• Manufacturing
• 3.6 Manufacture of other low-carbon technologies²
• Energy
• 4.25 Production of heat/cool using waste heat
• Water supply, sewerage, waste management and remediation
• 5.5 Collection and transport of non-hazardous waste in source segregated fractions
• Transport
• 6.5 Transport by motorbikes, passenger cars and light commercial vehicles
• 6.6 Freight transport services by road
• Construction and real estate activities
• 7.2 Renovation of existing buildings
• 7.3 Installation, maintenance and repair of energy efficiency equipment
• 7.4 Installation, maintenance and repair of charging stations for electric vehicles in buildings (and parking spaces attached to buildings)
• 7.5 Installation, maintenance and repair of instruments and devices for measuring, regulation and controlling energy performance of buildings
• 7.6 Installation, maintenance and repair of renewable energy technologies
• 7.7 Acquisition and ownership of buildings

Currently, 54% of METRO’s capital expenditure is associated with taxonomy-eligible economic activities and 0% of METRO’s capital expenditure is associated with taxonomy-aligned economic activities.

The analysis of the technical screening criteria shows that, due to the sometimes demanding requirements, not all activities that are taxonomy-eligible meet the technical screening standards to allow them to be recognised as taxonomy-aligned. In the following, the activities are first examined individually with regard to their substantial contribution.

Taxonomy alignment

3.6 Manufacture of other low-carbon technologies

As part of the F-Gas Exit Programme, METRO acquires new cooling systems on an ongoing basis to meet the targets of the climate strategy. Although this activity aims to significantly reduce greenhouse gas emissions, the savings in GHG emissions over the entire life cycle cannot be compared with the most powerful alternative technologies or solutions available on the market. This is because the cooling systems are comprised of several components which are specific to the location and therefore no direct comparison with other systems is possible. Additionally, it was not possible to obtain corresponding documentation regarding the savings in life cycle GHG emissions from the manufacturers of the cooling systems in the financial year. For these reasons, the analysis already results in an impediment to achieving a substantial contribution here and the analysis can be concluded. Thus, no further investigation regarding the avoidance of significant harm to the other environmental objectives for activity 3.6 is carried out.

6.5 Transport by motorbikes, passenger cars and light commercial vehicles

The passenger cars leased by METRO partially fulfil the requirements of a substantial contribution to low-emission and emission-free light commercial vehicles. Because METRO interprets activity 6.5 as ‘acquisition of production’, only the manufacturer or the lessor of the vehicles can provide evidence of compliance with the avoidance of significant harm to the other environmental objectives. The primary lessors of METRO were therefore contacted and asked to provide a response as well as evidence to fulfil the technical screening criteria. Unfortunately, the lessors did not consider themselves in a position to provide the necessary information or were not able to make suitable evidence available in the financial year. For this reason, activity 6.5 cannot be classified as taxonomy-aligned.

6.6 Freight transport services by road

The internal analysis of the composition of our logistics fleet did show that, although there had been isolated investments in electric vehicles for goods transport, the proportion was so low in financial year 2022/23 that an examination of the technical screening criteria was dispensed with for reasons of materiality.

7.2 Renovation of existing buildings

For the renovation of existing buildings, neither the requirements of larger renovations in accordance with the applicable national and regional construction regulations are met, nor do the renovation measures reduce the primary energy need of the buildings by at least 30%. No substantial contribution to climate change mitigation can therefore be demonstrated for this activity.

7.3 Installation, maintenance and repair of energy efficiency equipment

The refurbishment measures to improve the energy efficiency of equipment, be it in the form of installation, maintenance or repair, were chiefly realised through the replacement of old light sources with energy-efficient light-emitting diodes (LEDs). The LEDs were reviewed via random sampling of METRO stores in various countries to ensure a comprehensive examination of different manufacturers and models. Our examination determined that the LEDs fall into lower efficiency classes than the classes A and B necessary to fulfil the requirement of substantial contribution, thus resulting in no substantial contribution to an environmental objective.

7.6 Installation, maintenance and repair of renewable energy technologies

The majority of capital expenditure in the field of renewable energy technologies falls into the categories of on-site installation, maintenance and repair of photovoltaic systems. The capital expenditure amount in this financial year is classified as immaterial relative to total capital expenditure.

A further consideration of the technical screening criteria has been dispensed with. A materiality review will be carried out again in the next financial year.

7.7 Acquisition and ownership of buildings

Activity 7.7 is relevant to both our stores and other properties such as warehouses and office buildings. As part of our review of the technical screening criteria pursuant to the requirements of the EU Taxonomy, we focused on 2 significant aspects: the Class A energy performance certificate (EPC) and the evaluation of energy efficiency.

First, we divided the stores and other buildings into clusters. Then an exclusion procedure – in consideration of renovations and the years their construction was completed – reviewed the newest and most modern properties in accordance with the aforementioned criteria. Due to the years their construction was completed and the other characteristics of the buildings, neither our stores nor other properties meet the strict energy standards of the EU Taxonomy. As a result of this, we are unable to report them as taxonomy-aligned in this reporting period and have dispensed with any further consideration of the DNSH criteria.

No more detailed investigation into the remaining taxonomy-eligible economic activities was carried out, as the corresponding capital expenditures are immaterial, both individually and as a whole.