Selection and monitoring of suppliers

Our business relationships with suppliers and service providers are based on compliance with ethical, social and environmental principles¹. We seek out partners who share with us the values inherent in this way of working and who, like us, have the ambition to contribute to the achievement of the United Nations’ 2030 Agenda.

To ensure compliance with these principles, set out in our Corporate Responsibility policies², and to monitor process management, systems management and product formulation, regular audits are carried out of our perishables and Private Brand suppliers³. Three types of audits are conducted: food safety and quality, environmental and social audits.

Measures are taken when suppliers fail to comply with and/or when they are unwilling to implement a corrective action plan, such as suspending the partnership until confirmation that the identified nonconformity has been remedied or even terminating business relations between the parties.

Food safety and quality audits

We conduct food safety and quality audits both in our selection processes of new perishables and Private Brand suppliers⁴ and to monitor current suppliers in the development and production stages. These audits assess several aspects, such as hygiene and food safety conditions, traceability and labour-related aspects⁵. Audit frequency is defined based on criteria that determine the performance of the supplier, taking into account:

• the level of perishability of the product and/or the history of risk assessments per supplier;
• the results of analytical checks, rejections and complaints;
• the previous audit results;
• the existence of food safety system certification, under the schemes approved by the Global Food Safety Initiative.

Based on the outcome of this assessment, suppliers are monitored, in the form of a new audit or visit, with a frequency that usually varies between 6 and 12 months. Suppliers with a “Basic” score are audited/visited at intervals of no more than 6 months, those evaluated with a “High” score are audited/visited at least every 12 months, and for those that achieve a score of “Excellent” a longer monitoring window is allowed, which may be up to 36 months.

Whenever necessary, corrective action plans are drawn up, the progress of which we monitor together with the suppliers.

These audits also include animal welfare criteria for the slaughterhouses⁶ of perishable meat suppliers who own primary farms. The criteria assessed are based on the Global G.A.P. (Global Good Agricultural Practices) framework and on laws in force. General aspects are adapted for different meat categories⁷, such as conditions on the farm, feed, transport and stunning.

Animal welfare audit performance

(2022-2023)

In 2023, we extended these audits to Colombia (primary production and slaughterhouses), which joined Portugal (primary production and slaughterhouses) and Poland (slaughterhouses). In the year, 54 audits were carried out, 35% less than in 2022. This decrease is a result of the good performance of previous years, which reduces the need for new follow-up audits compared to assessments with a lower score, such as “Basic”, which require more frequent auditing.

The total number of audits increased 10% compared to 2022. The increase in the number of audits registered in Colombia is due to audits carried out on new potential Private Brand and perishable suppliers, with a similar situation occurring in Poland under the Private Brand category. In Portugal and Poland, the slight reduction in the number of audits in the perishables category is due to the results obtained, as previous better classifications determined a lower frequency of follow-up audits in 2023.

Environmental audits

We also assess the environmental performance⁸ of our perishables and Private Brand suppliers as well as of our service providers, both at the time of selection and during the course of the business relationship. The environmental criteria assessed at the time of selection are given the same weighting as the audit components of food safety and quality, which are equally important at the time of supplier approval. In 2023, 120 new suppliers were assessed and approved after meeting both criteria.

The follow-up environmental audits of our perishables and Private Brand suppliers and service providers are carried out by an external entity. Approximately 100 requirements are assessed, and suppliers’ performance⁹ is categorised into four levels: Excellent, Good, Satisfactory and Inadequate.

Among the criteria for selecting suppliers and service providers to submit to these audits are the volume of purchases made by the Companies and the significance of the environmental impacts resulting from their activities.

In 2023, a total of 85 perishables and Private Brand suppliers were audited, 10 more than in 2022, including re-audits¹⁰. Between 2021 and 2023, a total of 194 suppliers were assessed for the first time, corresponding to 21% of perishables and Private Brand suppliers with a purchase volume of more than 1.1 million euros, thus achieving the goal of ensuring that at least 20% of these suppliers were audited during this period. In 2023, we also audited 64 service providers (22 in Portugal, 26 in Poland, and 16 in Colombia) whose activities have relevant environmental impacts¹¹.

Performance of environmental audits of perishables, private brand and exclusive brand suppliers

Performance of environmental audits of service providers

The increase in the number of suppliers with “Satisfactory” performance is related to the number of suppliers that have shown an improvement in performance, following re-audits. There has also been an increase in the number of audits of suppliers with environmental management systems, hence the increase in the number of cases with an “Excellent” performance level. In 2023, it was found that in most cases, the environmental management systems of the audited service providers were poorly developed, leading to performance levels of mainly “Satisfactory” and “Inadequate”.

Suppliers and service providers with a score of “Inadequate” are given a corrective action plan that requires a response within a maximum of six months and the status of implementation is measured in a second audit carried out the following year. We reserve the right to suspend cooperation in cases where the corrective action plan is not complied with. Improvement plans are presented in cases where there are nonconformities or partial conformities.

Social audits

We are committed to eradicating forced labour¹² from supply chains and promoting dignified working conditions, in line with the Priority Principles of The Consumer Goods Forum (an organisation of which we are members): “Every worker should have freedom of movement, no worker should pay for a job and/or be indebted or coerced to work”.

In this regard, since 2019 we have fully supported a social audit programme. This is how we carry out due diligence on our perishables and Private Brand business partners from whom we purchase more than 1.1 million euros, aiming to get to know them in order to assess their procedures and prevent and mitigate potential human and labour rights risks, in line with the principles of our Sustainable Sourcing Policy. We believe that this social audit programme can help our partners to gain a better understanding of social issues, minimise risks and leverage their capacity to expand to countries with more demanding labour requirements.

These audits, carried out by an external and independent entity and which are preceded by an explanatory session with our partners, analyse compliance with national and international laws and take into account the best practices shared by The Consumer Goods Forum’s Sustainable Supply Chain Initiative. There are three audit schemes to incorporate aspects related to high-risk sectors: primary production, operations at sea and the processing industry.

The audits assess over 125 requirements across 12 dimensions – preventing child labour; preventing forced labour; preventing of discrimination; safeguarding the right of association; contractual terms; working hours; salaries and benefits; health and safety at work; emergency preparedness; compliance monitoring; business ethics; protecting human rights – including criteria we consider to be of ‘“zero tolerance”. We have defined five levels of compliance¹³ on the basis of the overall score obtained: Excellent, Very Good, Good, Satisfactory and Inadequate.

Overall performance of social audits of perishables, private brand and exclusive brand suppliers

(2022-2023)

In-person audits of 45 direct suppliers were carried out based on their turnover associated with our purchases, specifically of the production units of perishables and Private Brand food and non-food products. Local suppliers in Portugal, Poland and Colombia were audited. Seven suppliers classified as “Inadequate” in previous cycles were audited again, and all maintained a score of “Inadequate”.

A personalised corrective action plan was presented to and discussed with all suppliers, irrespective of whether no critical nonconformities were identified in the assessment, requiring a mandatory response within 12 months at the most, depending on the level of severity. During this period, additional contact is established with the supplier to ascertain progress in the implementation of the plan and, when needed, to carry out subsequent audits. Suppliers classified as “Inadequate” are regularly contacted for up to six months to confirm implementation of the corrective action plan. An in loco or a remote assessment is performed the following year for further evaluation. In the absence of evidence of progress, we reserve the right to suspend the business relationship, as defined in our Sustainable Sourcing Policy.

¹ These principles are set out in the Jerónimo Martins Group’s Sustainable Sourcing Policy, Supplier Code of Conduct, Code of Conduct and Anti-Corruption Policy, available on our corporate website www.jeronimomartins.com.

² The Group’s Corporate Responsibility policies, in particular our Nutrition Policy, Product Quality and Safety Policy, Environmental Policy, Sustainable Sourcing Policy and Supplier Code of Conduct, are available on our corporate website on Responsibility.

³ Environmental audits also include our service providers.

⁴ In the case of new suppliers with food safety certification systems approved by the Global Food Safety Initiative, a selection audit is not required, except were the risk presented by a Private Brand supplier is above “Low”. The Global Food Safety Initiative is a coalition of The Consumer Goods Forum that assesses food safety management systems in supply chains with the aim of ensuring a reliable supply of safe food products to consumers. A set of schemes such as the British Retail Consortium (BRC), Global Good Agricultural Practices (Global G.A.P.), HACCP/Codex Alimentarius, International Featured Standards (IFS), Food Safety System Certification (FSSC) 22000 and ISO 22000 are recognised by this initiative.

⁵ Labour-related aspects, which account for 10% of the assessment, are related to the quality and safety of products, and the audits assess elements such as health and safety working conditions, training, the use of appropriate clothing, hand washing equipment, rules of conduct and personal hygiene, the existence of adequate social areas, changing rooms, and employee bathrooms.

⁶ Audits cover the slaughterhouses with which the Companies and their suppliers work.

⁷ Specific criteria are defined for beef, poultry, pork, rabbit, and sheep/goat meat.

⁸ We assess requirements related to environmental certification and environmental management aspects, such as water, packaging, effluents, waste, emissions, and hazardous substances, among other aspects.

⁹ Assessment scores are determined as followed: (i) Excellent: compliance with 100% of the critical requirements and compliance with more than 94% of the Satisfactory level requirements, plus a compliance of between 71% and 85% with the Good level requirements and at least 70% of the Excellent level requirements, or compliance with 100% of the critical requirements and the existence of a certified environmental management system; (ii) Good: compliance with 100% of the critical requirements and compliance with between 85% and 94% of the Satisfactory level requirements, plus compliance with 70% of the Good level requirements; (iii) Satisfactory: compliance with 100% of the critical requirements and compliance with between 70% and 84% of the Satisfactory level requirements and; (iv) Inadequate: non-compliance with one or more critical requirements and/or compliance with less than 70% of the Satisfactory level requirements.

¹⁰ Re-audits are new audits of suppliers that obtained a score of ‘Inadequate’ in the first audit. They serve to assess the extent to which the improvement plan has been implemented.

¹¹ Production and supply of equipment, transportation, refrigeration and HVAC (heating, ventilation and air conditioning), waste management operators, installation and maintenance of treatment systems, and printers.

¹² As defined by the International Labour Organization, available at www.ilo.org.

¹³ The results of each supplier are measured based on full or partial compliance or non-compliance with critical requirements, general-level requirements and, where applicable, good practice requirements. The five levels of compliance are: (i) Excellent: compliance with 100% of the critical requirements and compliance with at least 95% of the general-level and good practice requirements; (ii) Very Good: 100% compliance with the critical requirements and compliance with between 85% and 94% of the general-level and good practice requirements; (iii) Good: Compliance with 100% of the critical requirements and compliance with between 75% and 84% of the general-level and good practice requirements; (iv) Satisfactory: Compliance with 100% of the critical requirements and compliance with between 65% and 74% of the general-level and good practice requirements; (v) Inadequate: non-compliance, albeit partial, with at least one critical requirement and/or compliance with less than 65% of the general-level and good practice requirements.