METRO S COMMITMENT TO THE CIRCULAR ECONOMY

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1 METRO S COMMITMENT TO THE CIRCULAR ECONOMY On 16 January 2018 the Commission released the Plastics Strategy as part of the Action Plan for the Circular Economy published in December with the aim to reduce plastic waste and increase recycling and reuse. Against this background, METRO AG reiterates its commitment to the objectives of action plan, that is, the transition to a more circular economy, where the value of products, materials and resources is maintained in the economy for as long as possible, and the generation of waste minimised. We are living in times where the take, make, waste industrial model has reached its limits: Today we are using 1.6 times of the Earth s carrying capacity. Resources are already scarce and global population will further increase to 9.6 billion by The marine pollution results mainly from a mismanagement of waste and recyclable materials and calls for a radical rethinking of plastic. The principles of the circular economy affect our business model in two aspects mainly: 1. The own brands line -i.e. the production and marketing of food and non- food products- is, besides trading, part of our core business. Therefore, advancement and correlating provisions with regard to producers, such as eco-design or extended producer responsibility for a product disposal, are relevant issues for METRO; 2. Moreover, as an interface between manufacturers and professional customers (hospitality sector, trader shops, etc.) and end consumers, METRO can play an important role in driving behavioural change by raising awareness of the circular economy. For example, by encouraging customers to opt for more recyclable products and/or make use of repair and re-use services. METRO regards this aspect as one central driver to transform the European and global economy and wants to engage with its customers to this end. We are convinced that the transition to a more circular economy is the right way forward and reiterate our commitments to promote innovative production and recycling technologies. We believe that an efficient and smart use of global resources at the beginning of a product life cycle, as well as the effective reuse and recycling of resources at the end of this cycle is fundamental to transform our current system into a more sustainable, resilient and competitive economy decoupled from growth. Changing from a linear to a circular economy requires a major transformation of our business. We see the transition as an opportunity to make our business more effective and efficient and to increase the added value for our customer by re-thinking our products and services. To drive this change we think it is essential to implement a cross-value chain dialogue mechanism to ensure a close and trustful collaboration between all actors. Bringing together product designers and recycling engineers at one table and starting collaboration between different sectors of the industry have never been more important than now. Facilitating and advancing this dialogue along the supply chain has been always a fundamental part of METRO s business. 1

2 1. Product design METRO agrees that the design of a product is crucial for a longer life cycle and better recyclability. However, rigid regulation on eco-design can have a detrimental effect by limiting creative and innovative approaches which also foster competitiveness. Instead, appropriate market conditions to foster and incentivise innovation to prolong the life cycle of products are an even more significant driver for change. It is the challenge for all involved to come up with product designs that are on the one hand, more focused on re-use and recyclability and on the other hand, just as user-friendly as the less circular product. 2. Extended Producer Responsibility (EPR) For an expedient waste management framework, a balance of regulations, financial mechanisms and enforcement measures is required to promote a recycling economy, particular in the plastic economy. EPR can be a relevant instrument, for instance to encourage the reuse of packaging or improve the recyclability of plastic materials. For this purpose: EPR schemes should be pragmatic to ensure a smooth functioning of an already complex system; A level playing field for existing EPR schemes should be ensured by formulating common objectives and quality criteria for EPR schemes set up by Member States; The way how to implement an economically efficient and effective EPR scheme should be left to the discretion of Member States to consider national particularities and existing expertise; A clear limitation of costs borne by the producer needs to be indicated in order to provide producers with planning and investment security; Producers from non-eu countries should be held responsible under European EPR schemes to prevent free-riding and consequently, a competitive disadvantage for European producers. 3. Recyclability and Secondary Raw Material Market Building up a secondary market of high quality recycled raw material is crucial to achieve a close cycle economy of plastics, accompanied by an incentive system to trigger the dynamic of supply and demand, to increase the utilisation of recyclable material when designing a product or packaging, and to prevent marine litter on a large scale. Moreover, we consider that for a well -functioning secondary raw material market, the increase of transparency of the entire plastic value chain in terms of material, using of additives or the potential presence of chemicals of concern is crucial to ensure a high quality recycling. The future plastic economy must be based on harmonised and global standards. In a world of global product chains we have to end the fragmentation of systems and standards related to the proliferation of materials, formats, labelling, collection and sorting systems. Products and packaging are usually designed for international markets and cannot respond to multiple requirements of local municipalities. Therefore, a common European regulatory framework in terms of coherent legislation and harmonised standards is of utmost importance. This is also a fundamental condition to ensure the free movement of goods within the Single Market. 2

3 4. Plastic Packaging Driven by the 3R principles reduce, renew & recycle,, METRO Cash & Carry has developed detailed packaging guidelines, documentation and monitoring systems to reduce the environmental impact of its own brands packaging. For the time being we cannot afford to cast aside plastic packaging. However, in close dialogue with our suppliers we are optimising our own brand packaging by using the fewest materials, increasing efficiencies in transport and distribution, boosting the use of recycled materials and minimising post-industrial waste to reduce its environmental footprint. This has led to a total saving of 359,38 tons of material since Our technical packaging team is in a close dialogue with our suppliers and packaging industry to investigate innovative, environmental friendly and renewably sourced packaging materials and concepts that are at the same time functional and cost effective. To further encourage the usage of compostable packaging material and after-use pathway, we would welcome a clarification of the term bio based plastics and biodegradable by harmonised guidelines on the definition and marking of packaging. However, we must be also aware that many of our ambitions towards a more efficient plastic economy can cause conflict of goals in some cases, for example replacing plastics vs. food waste reduction for instance. More research in these fields is, indeed, needed. 5. Macro- and microplastics Stopping leakage of micro and macroplastics into the environment, particularly into the oceans, must be a priority for the global community. The survey of IUCN on primary microplastics in the oceans (2017) shows that personal care products and detergents, ranked at fifth place of the most common sources, are the only source where microplastics are intentionally added. This result gives us a mandate to act and start the discussion with our Own Brands suppliers to phase out microbeads, even though cosmetics and personal care sector potentially contributes between 0.01% and 1.5% of the total amount to aquatic plastic litter. However, potential alternatives also need to be tested to make sure that they are safe and economically viable. Especially, with regard to microbeads added to cosmetics and personal care products, we would welcome a twofold policy approach that first enables and promotes voluntary actions by businesses possibly backed up by legislation at a later stage. 3

4 Annex: Circular Economy in METRO has already started working on the transformation to contribute and response to the new plastics circular economy, always balancing environmental, social and cost efficiency aspects. We continue working on a more circular economy. Turning waste into a resource METRO Cash & Carry (MCC) France collects used food oil from restaurants, canteens and caterers to ensure appropriate disposal by turning it into valuable and useable biogas. In 2016, MCC France collected 1230 tons of used edible fats from customers, mostly restaurants and hotels. METRO Cash & Carry Germany also provides the take back service of used food oil and, if desired, it connects its customers and the service provider directly. Promoting the recycling economy, as one of the key targets and supporting our customers to improve their waste management process transition, by providing them a service to dispose of their own waste in an efficient manner, by turning it into a resource. Reducing Food Waste along the supply chain In September 2017 METRO Cash &Carry Germany (Berlin) started its partnership with SirPlus, the first food outlet store in Berlin, where good quality food that otherwise would have been thrown away is saved and sold to customers. The METRO Cash &Carry store in Berlin provides Sir Plus with food that cannot be sold, is still suitable for consumption but was refused by food banks due to various reasons. SirPlus sells these food products for a discounted price to end consumers. METRO AG Supply Chain Management launched a pilot project with the start up Tsenso, who provide a new real-time shelf life indicator for food, to optimize the supply chain of ultra-fresh products. The intention of this project is to develop a system (the so-called Fresh Index) that will utilise and combine various sources of supply chain data (such as temperature -, traceability and microbiological data etc.) in order to predict the remaining shelf life of products. With this index, METRO will be able to prioritise products at warehouse or store level that need to be sold first. Moreover, it supports the identification of parts of the supply chain 4 Preventing that food produced from valuable resources end up as waste and contribute to our target achievement, halving food waste in our own operations by 50% until Moreover reducing waste costs in our warehouses and stores.

5 that need to be optimised because they impact the total shelf-life and freshness of the products. Such an index can improve the quality and freshness of the products offered to our customers and optimise our logistics operations. The technical packaging team at METRO Cash & Carry already started the dialogue with suppliers who offer smart labels or innovative packaging concepts to contribute to food waste reduction and at the same time keep safety and quality of products. Prolonging product life cycle All sales divisions have a process in place to first reuse technical store equipment which is still in proper condition, such as refrigerators or lighting facilities in case of re-modelling or closure of stores, before investing in new equipment. Promoting reusing within our own operations or the repair of products helps to prolong the life cycle of products prevents waste and saves important resources. Since many years Real,- contributes to stop the throw away culture thanks to the cooperation with a non-profit company that employs people with disabilities. Electrical appliances which are returned to Real,- within the customer service process are repaired by workers of this company and sold again as second-hand Supporting a new plastics economy Driven by the principles of reduce, renew & recycle, METRO Cash &Carry has developed detailed packaging guidelines, documentation and monitoring systems to reduce the environmental impact of its own brands packaging. This includes two important targets: Achieving 100% FSC certified beverage cartons by 2018 and 100 % PVC free packaging by Improving recyclability and closing the loop of packaging material, building up of a secondary raw material market and stopping marine litter Within the Own Brand Packaging project of METRO Cash & Carry one of the targets is 5

6 100 % PVC free packaging by In the FY 2015/2016 for 311 SKU s PVC could be phased out, by replacing the material against PET METRO Cash &Carry France launched a multi stakeholder project together with the beverage industry (Coca-Cola, Nestlé and Danone), supported by Eco-Emballage, a French approved organisation to manage recycling to increase up to 80% of recycling rate for plastic bottles and aluminum cans by 2025 in France. Increasing the rate of plastic packaging (beverage bottles) collected for recycling in the French market and preventing the leakage into the environment, particularly oceans, by partnering with industry and waste disposable company In the parking area at MCC France, the store provides its customer with 2 containers to collect plastic bottles and aluminum cans. As an intermediary between producer and customer, the main role of METRO Cash &Carrier is to test how to encourage our customers first to collect and secondly to bring back used and collected packaging to METRO stores. METRO AG is a leading international specialist in wholesale and food retail. The company operates in 35 countries and employs more than 150,000 people worldwide. In financial year 2016/17, METRO generated sales of around 37 billion. The company provides custom solutions to meet the regional and international needs of its wholesale and retail customers. With its sales brands METRO/MAKRO Cash & Carry and Real as well as delivery services and digitisation initiatives METRO sets the standards for tomorrow: for customer focus, digital solutions and sustainable business models. More information at Further information: METRO AG Brussels Office Avenue des Nerviens 85 B-1040 Brussels Belgium brussels@metro.de +32 (2) EU-Transparency-Register: METRO DIGITAL OFFICE BRUSSELS - 6