In 2020 we adopted the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD1), in a process of continuous improvement in the identification, assessment and management of climate-related financial risks and opportunities in our value chain. In order to reduce the impact of our business activities on the environment, we have established a Climate Transition Plan2 which reflects our ambition to contribute to limiting the increase in average global temperature to 1.5°C. This plan outlines our ambition to reduce the greenhouse gas (GHG) emissions generated in our operations and value chain through close collaboration with our suppliers. We also continue efforts to improve the assessment of short-, medium- and long-term climate risks throughout our value chain and involving our Private Brand and perishables suppliers, so as to increase the climate resilience of the supply chain and assess business opportunities in primary production and the use of low-carbon technologies. In 2023, climate-related risk assessment and management focused on (1) identifying mitigation and adaptation measures implemented by suppliers of the main commodities, such as coffee, fruit and vegetables, meat and animal feed; and (2) improving the assessment of specific risks such as the impact of rising sea levels on seaports and the places where our establishments are located, and potential water shortages in the activities carried out by Jerónimo Martins Agro-Alimentar (JMA).
Governance
Our decarbonisation and climate risk management strategy is monitored and supported by the Board of Directors, ensuring that climate-related issues are integrated into our corporate strategy, in particular the sustainability strategy, both in our own operations and in the supply chain. The Board of Directors oversees the Group’s social and environmental obligations, including climate-related matters, and is responsible for monitoring the progress of our environmental commitments.
Topics linked to climate-related risks and opportunities are discussed in regular meetings held by the Sustainability Committees of each of our Companies and by the Corporate Governance and Corporate Responsibility Committee3, which assists the Board of Directors in assessing and submitting proposals on the corporate responsibility strategy. These include climate mitigation and adaptation and the targets for reducing greenhouse gas emissions established in the Climate Transition Plan.
In addition, risks associated with climate change are also covered by the Jerónimo Martins Group’s risk management system, as referred to in “Corporate governance” and are consequently closely monitored and managed by the different bodies and functions referred to in “Subsection III – Internal Control and Risk Management”.
Climate-related issues are central to our responsibility strategy and are integrated into our corporate business strategy. The implementation of our climate commitments is underpinned by ongoing investments, with execution cycles aligned with the business plan. Examples of these investments include the installation, in 2023, of photovoltaic systems for self-consumption of renewable electricity in Poland, Portugal and Colombia, the use of natural refrigeration gases in refrigeration and freezing facilities and equipment, and the additional OpEx costs for the purchase of certified renewable electricity to power our operations in Portugal and in Poland. The achievement of climate-related and other corporate responsibility objectives are part of the incentive scheme for employees in roles that influence the definition and/or implementation of the company’s climate commitments and targets4.
Strategy
Climate-related financial risks and opportunities are identified and assessed across our entire value chain at four different stages: production, processing, logistics and establishments. The first assessment, carried out in 2020, covered the 30 most relevant product groups for our Companies in Poland, Portugal and Colombia. For each product group, the main ingredients and sources were identified and, for each of these and for each stage of the value chain, different categories of physical and transition risks were assessed for time horizons up to 2030 and 2050, based on two IPCC (Intergovernmental Panel on Climate Change) climate scenarios:
- average temperature increase between 4.0°C and 6.1°C (scenario RCP 8.5), meaning that the efforts to limit average warming failed;
- average temperature increase below 2.0°C (scenario RCP 2.6), in line with the Paris Agreement.
As a result of the collaborative work between various departments of our Companies and interaction with suppliers, the number of products covered in our risk assessment increased to 45 in 2023, with the inclusion of products that are highly dependent on weather conditions and therefore more exposed to climate changes (e.g., apples and pears).
Climate-related risks and opportunities
Among the risks assessed are rising average temperature and extreme temperatures, changing precipitation patterns, prolonged water shortages and flooding in coastal and inland regions.
As part of the strategy defined in our roadmap for managing climate-related risks and opportunities, in 2023, the main objectives of the climate risk assessment were:
- identifying and assessing the maturity level of mitigation and adaptation measures implemented by Private Brand suppliers of specific commodities, such as beef, coffee, fruit and vegetables, and other ingredients;
- identifying climate risks and business opportunities for perishable products, in particular for the production of fruit, vegetables and meat;
- assessing the impact of water shortages on Private Brand and perishable products and identifying good water management practices implemented in JMA’s operations and supply chain;
- assessing the risk of rising sea levels taking into account all the maritime ports worldwide used by the freight carriers we use;
- assessing the climate action plans for countries with seaports at risk from rising sea levels; and
- identifying more precise tools for assessing, in different time horizons, the exposure of stores and distribution centres to the risk of coastal and inland flooding.
We continued to be involved with the different departments of our Companies, suppliers and producer associations. This involvement enabled us to map implemented mitigation and adaptation measures, making it easier to assess the climate resilience of our supply chain. Although most of the suppliers we engaged with do not yet have a climate risk assessment in line with the TCFD guidelines for their activities, they have identified changes in temperature and water availability that affect production levels and the quality of some products. These same suppliers have implemented or plan to implement adaptation measures, such as increasing production storage capacity and, in some cases, investing in the development of alternative or more resilient products, such as fruit varieties that are better adapted to changes in temperature. In very specific situations, particularly for some coffee bean varieties, we have identified a transfer of production from regions with climate-related problems to other regions of the world that have more favourable climatic conditions for production.
Between 2021 and 2023, a total of 197 strategic Biedronka, Pingo Doce, Recheio and Ara perishables and Private Brand suppliers were involved, resulting in the identification of different climate mitigation and adaptation measures. The table below describes some of the measures identified in 2023.
Climate risks: Mitigation and adaptation measures identified and implemented in 2023
Ingredient |
|
Company |
|
Value chain stage |
|
Climate risk |
|
Examples of adaptation measures implemented |
|---|---|---|---|---|---|---|---|---|
Banana |
|
Pingo Doce |
|
Production |
|
|
|
|
|
Biedronka |
|
Logistics |
|
|
|
|
|
Tomato |
|
Pingo Doce |
|
Production |
|
|
|
|
Apple |
|
Pingo Doce |
|
Production |
|
|
|
|
Pear |
|
Pingo Doce |
|
Production |
|
|
|
|
Coffee |
|
Biedronka |
|
Production |
|
|
|
|
|
|
Processing |
|
|
|
|
||
Potato |
|
Biedronka |
|
Production |
|
|
|
|
Sugar |
|
Ara |
|
Production |
|
|
|
|
Pork |
|
Biedronka |
|
Production |
|
|
|
|
Beef |
|
Pingo Doce |
|
Production |
|
|
|
|
Animal feed |
|
Pingo Doce |
|
Production |
|
|
|
|
|
|
Processing |
|
|
|
|
With regard to our establishments5, we continued to respond to identified risks such as extreme weather events, refrigeration gases used for compliance with environmental legislation, and to maximise opportunities related to the energy transition. As regards the latter, we have invested in acquiring renewable energy certificates in Portugal, establishing long-term renewable energy purchase contracts in Poland, increasing the number of stores and distribution centres with photovoltaic energy production systems in all the countries where we operate, implementing energy recovery systems in industrial units, and refurbishing the store network to reduce energy consumption. The use of natural refrigerant gases or those of low global warming potential is top-of-mind when opening new stores and refurbishing existing ones, aimed at reducing emissions associated with refrigerant gas leaks from cooling and refrigeration equipment. The modernisation of this equipment has also helped to reduce energy consumption and increase the resilience of the operation on days of extreme temperatures. The main mitigation measures implemented in our operations are detailed in subsections “Water and energy consumption management” to “Management of refrigerant gases”. We also report, in detail, the climate-related risks and opportunities in our responses to CDP – Disclosure Insight Action6.
In 2023, we improved the assessment of some emerging risks associated with extreme weather phenomena, such as storms with increased wave propagation and intense rainfall leading to urban flooding and/or landslides. To this end, different databases and tools for assessing the risk of coastal and urban flooding were analysed, and more than 5,700 establishments were assessed in the three countries where we operate. This assessment helped identify the most appropriate tools to inform decision-making using risk maps that identify areas with a high or very high risk of flooding. The short- and medium-term risk assessment showed that the risk associated with rising sea levels or inland flooding is not material for the business. Having regard to the long-term projections, which indicate a rise in sea levels of between 0.5 and 1 metre by 2100, the impact of this risk on coastal areas will continue to be monitored periodically in order to identify high-risk areas for our Companies’ businesses.
In logistics processes, we have extended the scope of the assessment of risks related to rising sea levels to include more than 3,000 maritime ports, thus guaranteeing we have information on the level of risk for all the ports used by the freight carriers of the goods we purchase. We also continue to monitor the state of implementation of national climate action and adaptation plans, paying particular attention to progress made in Colombia, which has infrastructure in higher risk regions.
Our current climate strategy is guided by the analysis of climate scenarios with mitigation and adaptation actions for ingredients exposed to climate risks and is underpinned by a climate transition plan that includes actions for our value chain: own operations (distribution centres, stores, and industrial and agrifood units); logistics; sourcing (especially food products); and customers (paying close attention to trends in demand for low-carbon products). In our supply chain, of note are the public commitments related to eliminating deforestation linked to the main commodities, assisting our fruit and vegetable suppliers in adopting sustainable agricultural practices, the sustainable use of energy, reducing food waste, the ecodesign of packaging, and fighting plastic pollution. Knowledge sharing and co-operation with our Private Brand and perishables suppliers has been key to delivering on our commitments, as an integral part of our process of assessing the resilience of the supply chain and identifying new business opportunities.
With regard to business opportunities, the recent trend continued in 2023, with our suppliers investing in the local production of renewable energy for self-consumption and for the processing of raw materials (e.g., coffee bean roasting or sugar refining), and in the production of raw materials, most notably the growing use of low-carbon fuels in agricultural machinery and the recovery of waste for the production of these fuels. Our suppliers’ investment in low-carbon technologies is essential to reducing the indirect emissions associated with our purchases of goods and services. As regards production, diversification of varieties and investing in crops that are more resilient to climate change, as well as diversifying countries of origin, are some of the opportunities identified by producers. The table below indicates the main business opportunities identified in 2023.
Business opportunities identified in 2023
Ingredient |
|
Country |
|
Activity |
|
Business opportunity |
|---|---|---|---|---|---|---|
Various (fruit, sugar, meat and animal feed) |
|
Portugal |
|
Production |
|
Production of climate-resilient varieties, focusing in particular on natural selection techniques. |
Pork |
|
Colombia |
|
Production |
|
Biogas production for in-situ electricity generation. Membership of voluntary carbon markets with projects linked to waste recovery and wastewater recycling. |
Coffee |
|
Poland |
|
Production |
|
Diversification of sources, including regions with higher productivity, due to the impact of climate change on these regions with the guarantee that the flavour and aroma of the final product are preserved. |
Various (meat, fruit and vegetables) |
|
Portugal |
|
Production |
|
Production in greenhouses or covered enclosures, thus guaranteeing crop production in periods when weather conditions are less favourable. |
Animal feed |
|
Portugal |
|
Production |
|
Incorporation of alternative protein sources, such as algae and insects, to improve product formulation, with a reduction in GHG emissions associated with land use and change in the production of agricultural commodities. |
Managing risks and opportunities7
The probability of occurrence of the risks and opportunities indicated above and their level of impact, including financial, as well as the identification, assessment and management thereof, are part of our multidisciplinary approach to managing short-, medium- and long-term risks at Group level and are classified as environmental risks in our risk taxonomy, which has been aligned with the TCFD taxonomy.
Despite the high degree of uncertainty associated with assessing the impact of climate-related risks, the process for identifying and managing climate-related risks for our business is identical to that implemented for managing other risks and follows the risk management framework we established. This process covers risks and opportunities that occur at all stages of our value chain: upstream (e.g., the impact of changing precipitation patterns on global food supply chains); direct operations (e.g., the impact on Capex of early replacement of refrigeration systems); and downstream (e.g., the opportunity to increase investor confidence associated with the application of the TCFD recommendations).
Climate-related risks and opportunities are identified, assessed and managed at corporate level where they may affect the Group above the defined materiality threshold. Where they fall below the materiality threshold, risks and opportunities are identified and assessed at corporate level and managed at business/operational unit level. Identification includes the monitoring of country-specific regulations (e.g., carbon taxes in Portugal, Poland and Colombia) and a detailed assessment of the vulnerability of facilities to extreme weather events (e.g., flood risk mapping of stores and distribution centres in Portugal, Poland and Colombia).
Interactions with our supplier network have enabled us to identify not only a high level of adaptation to climate risks, but also storage capacity for long periods of time, thus ensuring the supply of our operations even during low-production periods as a result of weather events. As a food retailer with a very diverse product portfolio and a mature and efficient logistics network, we are able to ensure the supply of similar or alternative products in our stores in the event of temporary supply shortages. Food production continues to rise, particularly in Poland, where winters have been less severe, and diversification of the regions where certain food products are produced has increased, thereby increasing the availability of alternative sources for the same products.
In the short, medium and long term, the availability of water resources and the variability of precipitation present a high risk for agricultural and livestock production in southern Europe, particularly in the Iberian Peninsula. As such, and in order to classify the water risk associated with the main ingredients in our products, we identified the water footprint in the production thereof, as well as the levels of water scarcity in the countries of origin. In addition, and as part of our risk management plan, we identified good water use practices implemented by our suppliers, including rainwater harvesting, the development of water storage systems, and the use of efficient irrigation systems. In this regard, JMA’s agricultural and industrial activities, which use much more water than our distribution activities, have an efficient water management plan in place to ensure activities continue during periods of severe drought.
Reputational risk management, directly linked to the expectations of stakeholders regarding our commitment to reducing our carbon footprint, fighting deforestation and supporting biodiversity preservation and conservation projects, is a transversal concern within the scope of our Corporate Responsibility Strategy and is reflected in our Climate Transition Plan8. This plan sets GHG reduction targets aligned with a 1.5°C pathway, in particular our ambition to reach carbon neutrality by 2050 in our own operations and in the value chain, and an increased investment in renewable energy consumption. Also of note is our participation in national and international coalitions, such as our membership in the Science Based Targets initiative (SBTi) and The Consumer Goods Forum’s Forest Positive Coalition of Action. Equally relevant are the scores awarded to us by CDP – Disclosure Insight Action in 2023 (see feature box).
We are the food retailer with the best CDP score worldwide for the fourth year running
CPD once again awarded us the maximum score (A) in the “Fighting climate change” survey and leadership level (A-) in the “Managing water as a critical resource” and “Fighting deforestation” surveys. As regards the “Fighting deforestation” survey, we are the only food retailer in the world to achieve leadership level (A-) in the management of the commodities more linked to deforestation risk: palm oil, beef, soy and timber.
These results reflect the strategy and performance of the Group and its Companies, to which the assessment and management of climate risks in accordance with the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) and the publication of the Climate Transition Plan made a decisive contribution.
The assessment by CDP – Disclosure Insight Action (formerly the Carbon Disclosure Project) position us as the food retailer with the best score worldwide.
Metrics and targets
With operations in Poland, Portugal and Colombia, Biedronka expected to open its first stores in Slovakia by the end of 2024, the expansion of Hebe to Czechia and Slovakia, and JMA pursuing business in Morocco, it is important that we find solutions to counteract the inherent increase in water and energy consumption, which involves combining construction techniques and technology and adopting behaviours in line with good environmental practices.
To support our carbon neutrality journey, we have implemented the Climate Transition Plan, which establishes a set of Group-wide measures and actions to achieve our GHG emission reduction targets. This plan includes the GHG emission reduction measures implemented by the Companies, as well as the additional reduction initiatives and investments needed to ensure full compliance with a 1.5°C pathway.
In 2021 we joined the Science Based Targets initiative (SBTi) and in 2023 we submitted science-based emission reduction targets for validation by this body. In accordance with SBTi’s methodology and criteria, 2021 was selected as the base year as it is the most recent year with robust and complete data on scope 1, 2 and 3 emissions. The short- and long-term goals we have set for carbon neutrality are as follows:
Short-term targets
- By 2033, reduce our scope 1 and 2 emissions by 55%, compared to 2021.
- Ensure that, by 2030, 60% of the electricity used is from renewable sources.
- By 2033, reduce our scope 3 energy/industry emissions by 33%, compared to 2021.
- By 2033, reduce our forest, land and agriculture (FLAG) emissions by 39.4%, compared to 2021.
- By 2025, eliminate deforestation risk in the chain of the main ingredients of our products.
Long-term targets
- By 2045, reduce our scope 1 and 2 energy/industry emissions by 90% and make background emissions neutral, compared to 2021.
- By 2050, reduce our scope 3 energy/industry emissions by 90% and make background emissions neutral, compared to 2021.
- By 2050, reduce our FLAG emissions by 72%, compared to 2021.
The targets presented are expected to be validated by SBTi in the first half of 2024.
We have also made other commitments under our strategy to fight climate change, in particular the reduction of scope 3 emissions, such as fighting deforestation and converting high conservation value ecosystems, fighting food waste, encouraging the adoption of good agricultural practices, improving the efficiency of our logistic operations, packaging ecodesign, and fighting plastic pollution.
Progress
In 2024, we will continue working on assessing climate-related financial risks and opportunities to:
- increase knowledge about some emerging climate risks, such as the impact of extreme weather events;
- consider a greater number of ingredients in order to cover more of our Companies’ Private Brand and perishable products in the different countries where we do business;
- integrate in the quantification of financial risk the mitigation and adaptation measures identified in our supply chain;
- strengthen collaboration with our supply chain in order to continue assessing its climate resilience;
- improve the quantification of business opportunities, such as increasing the production of some crops, and the identification of new sources for some ingredients exposed to climate risks.
As part of the process of continuously improving the calculation of scope 3 emissions, we will incorporate more primary data on our suppliers’ products and strengthen co-operation with our supply chain to reduce the emissions associated with the purchase of products and services.
Our strengthened commitment in the science-based targets, currently pending approval by SBTi, the results of our stakeholder survey and the respective double materiality assessment, allowed us to define intermediate commitments for 2024-2026, which are reflected in the updated version of our Climate Transition Plan.
1 The TCFD is an initiative promoted by the financial sector that helps businesses quantify and disclose climate-related financial risks and opportunities, and their respective action plans.
2 More information can be found at www.jeronimomartins.com/cr-documents-2023.
3 More information can be found at www.jeronimomartins.com/en/investors/governance/specialised-committees/.
4 More information can be found at CDP Climate 2023 Question C1.3 available at www.jeronimomartins.com/cr-documents-2023.
5 Establishments are considered to be stores, distribution centres, head office buildings and manufacturing units (central kitchens and soup or fresh dough factories).
6 More information can be found at http://www.jeronimomartins.com/cr-documents-2023.
7 To learn more, see “Subsection III – Internal Control and Risk Management”.
8 More information can be found at http://www.jeronimomartins.com/cr-documents-2023.