A positive future for the forest
5^th progress report

Deforestation and land use conversion are practices that may result in the significant loss of forests and biodiversity. The relation between agricultural production and deforestation is complex, which emphasises the need for more sustainable practices that balance food production, environmental conservation and socio-economic development.

According to FAO (Food and Agriculture Organisation of the United Nations), around 90% of the loss of tropical forests, particularly in South America and Africa, is due to the expansion of agricultural activities. Land-use conversion and deforestation are the second main source of greenhouse gases (GHG) emissions and at the same time one of the main threats to biodiversity conservation.

As food retailers, we know how important agricultural commodities are to our supply chains. We also recognise the importance of forests and terrestrial ecosystems with High Conservation Value (HCV) in the fight against climate change, both for their ability to sequester carbon from the atmosphere and the ecosystem services they provide.

For this reason, in 2019 we joined the Forest Positive Coalition of Action (FPCoA) of The Consumer Goods Forum and made commitments to manage the main commodities associated with deforestation in the products and packaging of our Private Brands and perishables containing palm oil, paper/timber, soy and beef. This coalition encourages its members to take collective and individual action to eliminate deforestation and the conversion of forests directly associated with the supply chains of these four commodities and to support the sustainable management, conservation and restoration of forests, while ensuring respect for human rights.

Based on this framework, we are committed to responsibly incorporating the main commodities associated with deforestation – namely palm oil, paper/timber, soy and beef – into the products and packaging of our Private Brands and perishables.

Joining the FPCoA is part of our Corporate Responsibility strategy and is supported by the following elements:

• Sustainable Sourcing Policy – aims to incorporate ethical and environmental concerns into our supply chains to gradually and sustainably mitigate the negative impacts of our activities.
• Environmental Policy – promotes the continuous improvement of the environmental performance of our activities, products, services and supply chains, prioritising the fight against climate change and the protection of water resources, the preservation of biodiversity and the acceleration of the transition to a circular economy.
• Code of Conduct for Suppliers – establishes the principles and ethical values that we believe our suppliers and business partners should share with us, namely the commitment to make every effort to promote the maintenance of ecosystem services, the rational use of natural and biological resources and the protection of habitats and species in the geographical areas where it operates or has influence, implementing all the necessary conservation measures both in its production processes and in the control and selection of its suppliers.
• Ethics Committee – the body responsible for monitoring the dissemination and fulfilment of the rules and principles contained in the Jerónimo Martins Group’s Code of Conduct and Anti-Corruption Policy in all its member companies, as well as for dealing with any potential breaches reported.
• Science Based Targets – Our short- and long-term greenhouse gas (GHG) reduction targets were approved by the Science Based Targets Initiative (SBTi) in 2024. Our plan to achieve net zero emissions includes quantified targets for emissions and removals associated with agriculture, forestry and land use (FLAG), throughout the entire value chain, including those associated with the production of the main agricultural commodities at risk of deforestation incorporated into our Private Brands and perishables. This plan also includes our commitment to zero deforestation and conversion of HCV ecosystems by the end of 2025. The commitments and actions are detailed in our Climate Transition Plan.

Through the definition of specific action plans, FPCoA focuses its activities on four commodities – palm oil, soy, paper/timber and beef – which are equally strategic for our business. For each of these commodities, roadmaps are defined which seek to:

• ensure that Private Brand and perishable products follow the coalition’s environmental and social sustainability principles;
• encourage the main traders of raw materials and suppliers in the supply chains of the Coalition members to take on the same objectives in their chains:
• contribute to the preservation of ecosystems in the main production areas through multi-stakeholder initiatives.
• define specific progress indicators and publicly disclose them.

From commitment to action: responsible ingredients

Our commitment is to ensure that, by the end of 2025, palm oil, soy, paper/timber and beef in our Private Brand and perishable products are not associated with deforestation or HCV ecosystem conversion (DCF – Deforestation and Conversion Free), especially regarding the commodities used as a direct ingredient in our chains.

The calculation of our consumption of these raw materials and the volumes considered DCF is based on specific non-conversion and deforestation cut-off dates for each of these agricultural ingredients and adopts the following criteria:

• Negligible risk – Primary production is considered DCF in countries where the risk of deforestation and conversion is classified as negligible.
• Certification – Primary production in countries identified as having a risk of deforestation and conversion but which is certified by physical certification schemes up to the Mass Balance level (excluding the purchase of credits) is considered to be DCF.
• Monitoring – In countries identified as having a risk of deforestation or conversion, verified DCF control and monitoring mechanisms (remotely or on the ground) must be in place to ensure traceability and verification of non-conversion or deforestation down to plantation level after the cut-off date established for each of the commodities.

Direct and indirect supply chains

Direct supply chains are characterised by a simple – more direct – structure involving a small number of intermediaries. In these chains, retailers buy products directly from producers or from a limited number of suppliers throughout the supply chain. With fewer steps between the origin and the retailer, traceability becomes simpler, making it possible to effectively verify the defined sustainability criteria of products. Retailers also have greater influence over production practices, which makes it easier to promote sustainability standards.

In contrast, indirect supply chains are complex and involve multiple intermediaries – such as processors, traders and manufacturers – before the product reaches the end consumer. This complexity makes it difficult to trace commodities and ensure that they are not associated with deforestation or conversion of HCV ecosystems. The involvement of various players along the chain means that information about the origin of raw materials is lost or distorted as products pass through various hands.

As food retailers, we are exposed to both direct and complex supply chains.

In the case of direct chains, we mapped each of the material commodities associated with deforestation according to the following categorisation:

Palm oil – Products containing raw or refined palm oil, or palm kernel oil, as an ingredient.

Soy – Products that include soy as an ingredient. According to the Consumer Goods Forum (CGF) Soy Measurement Ladder, this category includes:

• Tier 1 – Soy and its derivatives purchased directly (e.g. soy drinks, soy sauces, soy oils, edamame), in which the soy composition represents more than 95% of the product;
• Tier 5 – All other products that may contain soy or its derivatives in the supply chain, such as lecithin in chocolate, soy oil in margarine and soy by-products in cosmetics and personal care products, in which soy represents less than 95% of the total composition.

Paper and timber – All products that contain timber as an ingredient.

Beef – All fresh beef sold in our Companies’ stores.

Complex supply chains are categorised as follows:

Palm oil – Products containing derivatives or other fractions of palm oil as an ingredient, or where palm oil is an ingredient within an ingredient (e.g., palm oil contained in margarine where margarine is the ingredient in a bakery product).

Soy – Products containing animal protein from animals fed with soy. According to the CGF’s Soy Measurement Ladder, these include:

• Tier 2 – Soy used to feed animals such as cattle, pigs, chickens, aquaculture fish and others; includes fresh meat and fish products;
• Tier 3 – Soy used to feed laying hens, dairy cows and other dairy animals, to produce eggs and dairy products (such as yoghurts and milkshakes), in which more than 95% of the product is made up of eggs or dairy products.
• Tier 4a – soy used to feed animals whose meat is incorporated into processed food products (such as ready meals, sausages, etc.), in which meat or fish account for less than 95% of the final product;
• Tier 4b – soy used to feed animals whose meat, eggs or dairy products are used in food products (such as cakes, milkshakes, ice cream, etc.), in which eggs and dairy products account for less than 95% of the total product.

Paper and timber – Paper packaging (primary, secondary and tertiary) used by the Jerónimo Martins Group Companies to condition the products sold in their stores.

Beef – Products that contain beef as an ingredient.

We recognise that the presence of these commodities in complex supply chains, such as soy used in animal feed or palm oil derivatives, poses additional challenges, which is why the food distribution sector promotes the engagement of the different economic agents along the supply chain to collaboratively tackle these issues.

To monitor our progress and identify opportunities for improvement, we map the presence of ingredients associated with deforestation in our Private Brand and perishable products, collecting information from suppliers about their origin and sustainability certification, as well as their policies to fight deforestation.

Also, regarding the supply chain, we are part of the Human Rights Coalition of The Consumer Goods Forum (CGF). This coalition aims to ensure that, by the end of 2025, its members have their own operations covered by due diligence systems as a way of identifying, remedying and preventing risks of human rights violations.

In 2019 we initiated a programme of social audits among Private Brand and perishable suppliers using criteria based on the work carried out by the Sustainable Supply Chain Initiative, also part of the CGF. For primary production suppliers, these criteria include the protection of local and indigenous populations, namely through the following conditions:

• Suppliers must demonstrate due access to land use and access to water.
• In the event of any transfer of land ownership, this has been preceded by consultation and free, prior and informed consent (FPIC).
• In the event of any conflict over land ownership or access to water, suppliers must show evidence that the necessary parties have been involved to resolve it.
• That the supplier avoids, remedies or mitigates negative impacts that may result from its activities in protected areas and areas with high conservation value within or outside the boundaries of its production, which affect the survival of local or indigenous populations.
• That the supplier takes appropriate measures to maintain the quality and accessibility of surface or underground water for local and/or indigenous populations.