Sustainability Report. Sonae Distribuição, SGPS, S.A.

Transcription

1 Sustainability Report 2007 Sonae Distribuição, SGPS, S.A.

2 Food Retail Hypermarket Hypermarket Supermarket Non Food Retail White Goods and Consumer Electronics Clothing Açores Sports Equipment and Clothing Sustainability Report 2007 Computer Equipment This is the 2nd Sustainability Report of Sonae Distribuição (1) Giving continuity to the report published last year, we have tried to provide information about our challenges, risks and best practices in a balanced manner. This report covers activities carried out in 2007 in Portugal. Madeira Construction, DIY, and Garden Baby and Children s Clothing To prepare this document, we have followed the guidelines defined in the Global Reporting Initiative G3, best market practices, and our policies and internal practices. Travel Agency Health Area In the closing pages of this report, the reader will find a summary table with the indicators considered by the company to be relevant, and for which we have collected data over the years. The report is based on our internal methodologies for gathering information, and has not been subjected to formal third party verification. Mobile telecommunications Garden For more information concerning this report and the subjects dealt with, please contact, investor.relations@modelocontinente.pt Company name: Sonae Distribuição, S.G.P.S., S.A. Fiscal number: Registered Office: Rua João Mendonça, nº. 529, Senhora da Hora, Matosinhos Share Capital: 1,100,000,000 euros 1 In 2007, the company name was changed from Modelo Continente S.G.P.S. to Sonae Distribuição S.G.P.S.

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4 Index 1. CEO Statement A Story of Value Creation A Vocation for Growth The Environment Constantly Present Promoting Community Economic and Social Development Corporate Social Responsibility Strategy and Commitments Stakeholder Relationships Governance Model A Dynamic and Centralised Management Sustainability in the Management Model Risk Management The Future Our Value Chain Customers: Safe, Healthy and Environmentally Friendly Products Suppliers: Partnership Relationships Employees: Valuing Human Capital Environment: Improving Management, Measuring and Reducing our Environmental Impacts Community: Sharing with Society Showing the Information Glossary... 58

5 1. CEO Statement The Present and the Future 2007 was an excellent year for Sonae Distribuição in all areas of corporate social responsibility and in terms of our contribution towards sustainable development. In effect, we carried out strong and sustained expansion of our businesses, consolidating our position of leader of the retail market in Portugal and stimulating the Portuguese economy. We created more than 3,000 new jobs and continued to intensify actions to provide professional training for our employees. We invested strongly in our environmental performance and broadened and deepened interaction with the communities among which we operate. Our contribution towards encouraging more healthy eating habits should also be noted. To highlight some of the achievements in 2007, I would point out: - Growth of 10% in turnover, 18% in EBITDA and 15% in net profit per share; - The opening of 130 new stores spread among the different brands, broadening our presence and value proposal in Portugal; - The acquisition of Carrefour (Portugal); - Net investment of 972 million Euros; - An average figure of 46 hours of training per employee; - The award of Corporate Environmental Management System Certification for the Company; - The launch of the Oxo-Biodegradable Shopping Bag; - The start of the use of renewable energies in our stores solar and wind power; - The launch of new initiatives of involvement with the community, such as Hipernatura and Modelo Family Parks, in addition to maintaining and strengthening landmark initiatives among the Portuguese people such as Mission Smile and Batteries for Books ; - The strengthening of the offer of more healthy products and improvement of information; - The exchange, free of charge, of 400,000 high energy for low energy consumption light bulbs. 2 Sonae Distribuição, SGPS, S.A.

6 Based on a set of highly ethical criteria, which are well rooted in the company, the path that we have followed up to now in terms of sustainable development gives us today a legitimate sense of pride and satisfaction, and at the same time allow us to face the future with great optimism, reflected in an ambitious range of short and medium term objectives. I am convinced that our achievements have in fact significantly contributed towards the economic and social development of Portugal and of the communities among which we operate, and that we have established true relationships of confidence with all those with whom we interact. With that in mind, I would like to express my thanks to our customers, suppliers, government entities, shareholders and employees. Nuno Jordão Sonae Distribuição, SGPS, S.A. 3

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8 A Story of Value Creation Sonae Distribuição, SGPS, S.A. 31 December 2007 Contributing towards Social and Economic Development Sonae Distribuição, SGPS, S.A. 5

9 2. A Story of Value Creation In 2007, we invested 972 million Euros Trend of business turnover in Portugal (thousand Euros) 1990 to ,5-4,0-3,5-3,0-2,5-2,0-1,5-1,0-0,5-0, A Vocation for Growth Sonae Distribuição is the Sonae Group sub-holding in the retail sector, and began business in the 1980s. With the opening of the first Continente hypermarket in 1985, we introduced a new concept of food retail in the country, combining low prices with quality and variety. Ten years later we moved forward into non food retail. At the end of 2007, we were operating with a balanced portfolio of food and non food brands. Our growth has been characterised by leadership and an innovative attitude, establishing the company as a pioneer in the manner which it approaches the markets in which it operates. Today we have 31,714 employees and 5,376 suppliers, with 88% of the total payments that we make made to suppliers with business in Portugal. The constant broadening of our presence to different regions of the country has contributed towards most of the population of Portugal having access to a new range of goods and services which bring modernity and are accessible in terms of price, thus being a driving force towards making consumption more democratic. The dynamic and catalyst role of the company in encouraging the economic development of Portugal s regions also results from maintaining partnership relationships with our suppliers and by creating regional direct and indirect employment. The year 2007 was marked by strong growth in all business indicators, by the launch of the biggest customer loyalty card in Portugal and by the acquisition of Carrefour (Portugal) on 31 December. Key Numbers Turnover (millions of Euro) 3,385 3,091 10% Net Investment (millions of Euro) % Stores % Sales Area (m 2 ) % Portfolio of sales items 215, ,000 5% Suppliers with business activity in Portugal 3,589 3,248 10% Suppliers with no business activity in Portugal 1,787 1,348 33% Weekly Customers 2,800,000 2,400,000 17% Employees 31,714 25,255 26% Training hours per employee (*) % CO 2 emissions (direct and indirect) (tons) (**) 182, ,484 19% Total energy consumption (10^12 Joules) 1, % Waste recovered 73% 69% 4% (*) Excludes the 2,895 employees from Carrefour (Portugal) (**) The figure for 2007 includes 3,851 tons for the car fleet used by employees, a figure that was not calculated for Sonae Distribuição, SGPS, S.A.

10 2.2. The Environment Constantly Present The environmental performance of Sonae Distribuição was integrated very early on into the overall management of the Company, with eco-efficiency established as a management benchmark. In addition to being the retail business leader in Portugal, Sonae Distribuição also aims at leading the sector in issues concerning the environment, implementing and encouraging others through its example to adopt environmental management best practices. Our track record shows clearly the importance given by the company to Environmental performance. In 1995, we set up the Environmental Office. In 1998, we were the first Retail chain in Portugal to implement an Environmental Policy. In 2000, we set up the Environment Department, reporting directly to the Corporate Management Committee. Since 2004, we have worked on a programme of Environmental Certification of stores and warehouses according to the international standard ISO In 2005, we were the first company in the sector to win such environmental certification for our premises at the Continente Cascais and the Azambuja Warehouse. Main Milestones in Environmental Management 1995 First company in the sector with a small office wholly dedicated to environmental issues: we set up the Environmental Office First company in the sector with a formally approved Environmental Policy 2000 We set up the Environment Department 2005 First company in the sector with environmental certifications for its premises, according to the ISO standard: 1 st Hypermarket: Continente Cascais 1 st Logistics Warehouse: Azambuja Warehouse 2007 Continuing to innovate in the sector: We published the first Sustainability Report We won Corporate Environmental Management System Certification according to ISO We built an environmentally innovative Hypermarket in Estremoz We began making Oxo-biodegradable shopping bags available to our customers Sonae Distribuição, SGPS, S.A. 7

11 In 2007 we invested 10 million Euros in the community Promoting Community Economic and Social Development The wealth created by Sonae Distribuição through its sales is re-distributed among its stakeholders, in particular Employees, Suppliers, the State, the Community and Shareholders, thus contributing to the social and economic development of the country. Wealth Creation by Sonae Distribuição Wealth Generated Net Sales (million Euro) Turnover (million Euro) 3,239 2,960 3,385 3,091 GVA EBIT EBITDA GVA (Gross Value Added) = Turnover + Change in Stocks + Own Work Capitalised + Supplementary Income Cost of Goods Sold Third Party Supplies and Services Sonae Distribuição s influence in the Portuguese economy (*) Hours of Training (2005) 6% GVA (2006**) 0.8% Employment (2007) 0.6% (*) In view of the inexistence of information for Portugal for 2007 and 2006, we show Sonae Distribuição s share in different years. (**) The GVA of Sonae Distribuição is compared with the total GVA of non financial companies. 8 Sonae Distribuição, SGPS, S.A.

12 Support towards acquiring paediatric hospital equipment, encouraging reading and knowledge among children, promoting sport, culture and good alimentary and environmental habits, are day to day practice, which aim at helping Portugal to overcome some of its structural problems. Distribution of Wealth among stakeholders, ,658 million to Suppliers with business activity in Portugal 362 million to Suppliers with no business activity in Portugal 376 million to Employees 130 million to Shareholders 10 million to the Community 7 million to the Portuguese State (Corporation Tax) Main recipients of wealth distributed in % Other operational costs 11% Employees (salaries and benefits) 4% Shareholders 13% Suppliers-Services 72 % Suppliers-Goods 10 million Euros spent on involvement in the community Health Sport Environment Involvement in the Community Education Culture Entertainment Sonae Distribuição, SGPS, S.A. 9

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14 Corporate Social Responsibility Sonae Distribuição, SGPS, S.A. 31 December 2007 Generating Value with Ethical Management Sonae Distribuição, SGPS, S.A. 11

15 3. Corporate Social Responsibility Generating Value with Ethical Management 3.1. Strategy and Commitments Sonae Distribuição understands Corporate Social Responsibility to be a way of generating value for all of its stakeholders through partnerships based on confidence and ethical principles. Strategic guidelines for 2007: Corporate Social Responsibility Innovation Growth Shareholders Value creation Transparency Rigour and professionalism Community Environmental awareness Interaction with society Independence and transparency Customers Maintain confidence levels Contribute towards making customer better informed Vocation for service Wealth creation based on ethical principles Employees Rewards based on merit, straightforwardness and justice Ensure good and safe working conditions Encourage personal and career development Competitive remuneration Suppliers Cooperation, rigour and demanding standards Fair treatment Relationship integrated into a global economy 12 Sonae Distribuição, SGPS, S.A.

16 Strategic Commitments of Corporate Social Responsibility Stakeholder Commitments Facts in 2007 Shareholders Adequately reward investment EBITDA = 299 million Euros Return on Equity = 22% 15% growth in net profits per share Equity attributable to shareholders = 839 million Euros Equity attributable to minority interests =12 million Euros Economic Suppliers Develop relationships capable of generating mutual growth 10% growth in supplier purchases compared to 2006 Customers Build relationships/brands of confidence 17% increase in customer visits compared to 2006 Continente elected as Confidence Brand for the 6 th successive year (*) Environmental Environment Be a sector benchmark 1 st Company in the sector to win Corporate Environmental Management System Certification according to the ISO standard 1 st Company in the sector to provide Oxo-Biodegradable shopping bags 1 st Company in the sector to build an experimental hypermarket with 28 measures taken relating to environmental performance improvement The only Company in the sector with hypermarkets certified in Portugal according to ISO (5 hypermarkets) Community To be exceptionally dynamic in interactions with the community In 2007 social investment totalled 10 million Euros New projects: Hipernatura, Modelo Family Park, Causa Maior and support to Senior Citizen Universities Social We created 3,564 new jobs in 2007, an increase of 14% over 2006 (**) Employees To be a benchmark employer both quantitatively and qualitatively We are the biggest private sector employer in Portugal, making up 0.6% of people employed in the country in 2007 An average of 46 hours of training per employee, up 9% on % of Supervisory and Management posts are held by female employees (*) Independent European Study carried out by Readers Digest (**) Excludes employees from Carrefour (Portugal) Sonae Distribuição, SGPS, S.A. 13

17 3.2. Stakeholder Relationships In our business, we relate to a wide range of stakeholders using different means of interaction and consultation as the following examples demonstrate: In 2007, we listened to around 125,000 customers. Stakeholder Customers Community How we get their feedback Promoting active listening to around 125,000 customers Promoting partnerships with high profile organisations that are representative of different community interest groups Suggestions and complaints management system Employees Annual and periodic performance evaluations Attitude survey every three years Employee web portal Internal news magazine Dialogue with supervisors Suppliers Transparent negotiation procedures Partnerships developed Reciprocal training actions Shareholders Annual Shareholders General Meeting Quarterly result presentations Other strategic analysis events Articulating the strategic agenda 14 Sonae Distribuição, SGPS, S.A.

18 1. Listening to Our Customers Sonae Distribuição puts the customer at the centre of its strategic direction, and has perfected over the years different means of listening to and evaluating consumer needs. We attach special importance to managing complaints as a vehicle for improving our value proposal. In 2007 and for all brands, we received 35,753 suggestions and complaints, equal to an increase of 32% over 2006, which reflects growth of 17% in the number of weekly customers. Complaints/100,000 transactions 2007 Evaluating the process of dealing with complaints also tells us the degree of customer satisfaction after resolution of the complaint made. Customers felt that: it was easy to make a complaint -97.2% they were treated courteously -92.7% they were treated professionally -90.8% response time was normal or quick -90.8% they continue to have confidence in the brand -90.5% Continente Modelo 11.4 Bonjour Worten 1.4 Worten Mobile Vobis Modalfa Zippy Sportzone Área Saúde Interacting with Suppliers I think that Sonae Distribuição has sought to build its business in line with sustainable management principles. Sonae Distribuição was the 1 st company, in 1996, to promote meetings with its suppliers, in order to encourage the idea of working in partnership, and this at a time when supplier/customer relationships in the market were completely dichotomous. Today, the role that Sonae Distribuição can have in promoting eco-efficient products and thus in changing consumer standards among Portuguese families is extremely important. Sony, as part of its policy of sustainability, is ready to work with Sonae Distribuição to find solutions which make it easier for the Portuguese consumer to find the necessary information so that he/she can make choices to shop in an increasingly responsible manner. José Quintã, Sony Portugal Country Manager 3. Sharing with Society I want to express our gratitude to Modelo Continente which supported the Portuguese National Reading Plan since its launch, and has been an important partner in carrying out the project. I would highlight among Modelo Continente s actions the significant donation of books to schools of varying educational levels through its campaigns Everything to Read and Books for Batteries, and the display on its premises of messages of support towards encouraging reading, in its promotional material and in the media, all of which has undoubtedly contributed towards creating greater awareness among the public concerning the objectives of the National Reading Plan. Isabel Alçada, Commissioner for the National Reading Plan Sonae Distribuição, SGPS, S.A. 15

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20 Governance Model Sonae Distribuição, SGPS, S.A. 31 December 2007 Sustainability ever Present Sonae Distribuição, SGPS, S.A. 17

21 4. Governance Model 4.1. A Dynamic and Centralised Management Sonae Distribuição is run by a Management Committee, which establishes strategic guidelines, policies and procedures, ensuring the appropriate development of the company and maintaining an exceptional dialogue with its stakeholders. The Board of Directors has coordination and management duties and the management of supervisory functions, acting collegially. BOARD OF DIRECTORS MANAGEMENT COMMITTEE The Management Committee defines and communicates the strategic business guidelines, including sustainability and environmental issues FUNCTIONAL AREAS The planning and execution of activities relating to each functional area are attributed to those responsible for each, these activities being previously validated by the Management Committee in accordance with strategic guidelines established. Sonae SGPS owns 100% of Sonae Distribuição. The Chairman of the Executive Committee of Sonae SGPS is also Chairman of the Board of Directors of Sonae Distribuição Sustainability in the Management Model Issues concerning sustainability are part of the culture of the company. The maximum responsibility in this area of Governance lies with the Management Committee, which defines strategic guidelines and monitors results achieved. It is up to each manager to identify, evaluate and manage issues related to this subject, taking into account the strategic guidelines previously defined. For detailed information concerning the governance model, remuneration, and rights of shareholders among others, please see the Report and Accounts on the company s website at: 18 Sonae Distribuição, SGPS, S.A.

22 Board of Directors Management Committee Duarte Paulo Teixeira de Azevedo Chairman Nuno Jordão Adriano Ribeiro CEO Finance Nuno Manuel Moniz Trigoso Jordão CEO Diogo Mendes Isabel Dias da Costa Real Estate and Expansion Commercial Hypermarkets and Supermarkets Ângelo Gabriel Ribeirinho dos Santos Paupério Álvaro Carmona e Costa Portela Non Executive Non Executive José Côrte-Real José Fortunato José Martins Jesus Luís Moutinho Luís Vicente Dias Human Resources Marketing Travel Logistics Environment and Store Development Manuel Fontoura Hypermarket and Supermarket Operations Miguel Mota Freitas Non Food Retail Paulo Magalhães Innovation and Information Systems Rui Almeida Planning, Management Control and Business Development From left to right: Adriano Ribeiro - Finance; Rui Almeida - Planning, management control and business development; Isabel Dias Costa - Commercial hypermarkets and supermarkets; Manuel Fontoura - Hypermarket and supermarket operations; Diogo Mendes - Real estate and expansion; Paulo Magalhães - Innovation and Information Systems; Nuno Jordão - Executive Chairman of Sonae Distribuição; Luís Moutinho - Logistics; Luís Vicente Dias - Environment and store development; José Corte Real - Human Resources; Miguel Mota Freitas - Non food retail; José Martins Jesus - Travel; José Fortunato - Marketing. Sonae Distribuição, SGPS, S.A. 19

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24 Risk Management Sonae Distribuição, SGPS, S.A. 31 December 2007 Contributing towards the Safety of the Businesses, Customers and Employees Sonae Distribuição, SGPS, S.A. 21

25 5. Risk Management Contributing towards the Safety of the Businesses, Customers and Employees Managing Safety Promotes Value Creation Risk Management is a fundamental part of the sustainable development of companies, achieved through knowledge and effective management of the risks that can affect organisations. Sonae Distribuição carries out Risk Management in the entire management cycle: from strategic planning to operational execution. Risk Management is thus present in the day to day activity of the Company. To support Risk Management activity, the company uses an international methodology called Enterprise Risk Management Integrated Framework (COSO). Methodology used to identify risks Risk management is carried out with the goal of creating value, through the management and control of uncertainties and threats that can impact the businesses of Sonae Distribuição, with a view of the continuity of operations, and taking advantage of business opportunities. Identify Check Causes Measure Identify relevant risks Identify drivers of critical risks Determine risk indicators Prioritise Risks Define key drivers of critical risks Measure current value of indicators Evaluate Decide on the basic strategy of risk management options Identify alternative risk management options Manage Establish risk management action plans Implement risk management actions Monitor Monitor progress of execution plan Monitor changes in indicators values Report progress on risk management 22 Sonae Distribuição, SGPS, S.A.

26 Risk Matrix at Sonae Distribuição Sonae Distribuição periodically carries out the evaluation and ranking of risks that can impact its business activity. The Risk Model includes the following categories: Business environment risks Politics and Regulations Financial Risks Governance Competition Social Responsibility Losses from a catastrophe Process Risks Operations Contractual obligations Supply chain Pricing Efficiency Service Quality Customer satisfaction Brand Value Loss Planning and Budgeting Organisational Structure Coordination and Alignment Health and Safety Environment Business Interruption Food Safety Human Resources Human Resources Leadership Authority Limits Outsourcing Retaining Key Resources Integrity Illegal Acts Fraud Reputation Information Technologies and Procedures Confidentiality Availability Integrity Non-repudiation Relevance Financial Liquidity Credit Interest Rates Exchange Rates Taxes Financial Information After periodic analysis of the risks of Sonae Distribuição, mitigation plans are developed and implemented with the involvement of the different organisational units of the company. We highlight in 2007 the following control and minimisation measures relating to some of the main risks of the company: Examples of Risk Reduction Actions Risk Actions taken in 2007 Customer satisfaction Food Safety Climate Change Safe Customer Project physical safety risk analysis from the customer s point of view Audits of Customer Service Commitments. Kaizen Project a place for everything; everything in its place. Continuous audits of key customer satisfaction factors. Food safety audits carried out in stores, warehouses and manufacturing centres. Analysis of cold chain risks and implementation of corrective measures. Traceability. Implementation of the Environmental Policy. Corporate Environmental Management System Certification. Constant action to improve the energy efficiency of premises and contracted vehicle fleet. Monitoring of electricity consumption and CO 2 emissions. Business Interruption Crisis Management Manual for Store, Warehouse and Computer Centre Operations. CRSA (Control Risk Self Assessment) extension to non food retail brands (project awarded a prize by the European Risk Management Awards). Sonae Distribuição, SGPS, S.A. 23

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28 The Future Sonae Distribuição, SGPS, S.A. 31 December 2007 Our Commitments Sonae Distribuição, SGPS, S.A. 25

29 6. The Future: Our Commitments 2008 Stakeholder Main Aims Short Term Commitments Customers Focus on more healthy food habits and products Expansion of - Equilibrio Range - Organic Product range - Viva Area Availability of: - Products based on organic cotton - Ecological Detergents - New nutritional labels for food and beverage products Reduction of packaging materials Increase in awareness of customers and the community for issues relating to healthy consumption Customer safety Suppliers Extend our commitments relating to quality, the environment and society along the value chain. Support suppliers to comply with market demands. Extend the environmental and social check list in supplier audits to new areas Have the Producers Club certification for all club members done by external and independent entities in the Fruit and Vegetable area. Reduce electrical energy consumption by more than 1% on a like for like store basis Environment Reduce our environmental footprint, thus complying with our Environmental Policy. Replace use of electrical energy from the Portuguese national grid with our own production of energy from renewable sources: - In existing stores: Install 3.5 kwp renewable energy power sources in 30 stores - In new stores: All stores equipped with 3.5 kwp renewable energy sources Ensure that at least 15% of the contracted vehicle fleet comply with the EURO 4 Standard. Replace older cold production equipment, circuits and cold furniture (R22) in 20 stores with new cold production systems Provide Oxo-biodegradable shopping bags to customers of non food retail brands Increase waste recovery by 1% Provide 80% of existing stores (and 100% of new ones) which have gardens with automatic watering systems Fit 100% of taps in all stores with flow meters or similar equipment Test out rainwater recovery systems for use in toilets, for floor washing and watering Increase the number of premises certified according to ISO Community Contribute towards community citizenship awareness and social cohesion Partnership with the High Commissioner for Health as part of the Portuguese plan to combat child obesity Continue the wide ranging social projects that we have undertaken such as Mission Smile, Causa Maior and Hipernatura Continue the School Support Programme, namely through initiatives such as Batteries for Books, Everything to Read and Computers for Schools. Employees Be a benchmark company Formalise the Ethical Code and Human Resources Policy 26 Sonae Distribuição, SGPS, S.A.

30 Stakeholder Main Aims Medium / Long Term Commitments Customers Focus on more healthy food habits and products Promote information with the aim of: - encouraging healthier eating habits - encouraging sustainable consumption habits Suppliers Extend our commitments relating to quality, the environment and society along the value chain. Support suppliers to comply with market demands. Increase in the number of audit visits to supplier factories Progressively implement more demanding eco-efficiency requirements in all areas covered by the Producers Club Reduce electrical energy consumption by 6% on a like for like basis Ensure 100% of Continente and Modelo stores have autonomous energy production systems from renewable energy sources Progressively reduce the potential for greenhouse gas (GHG) emissions Environment Reduce our environmental footprint, thus complying with our Environmental Policy. Reduce the environmental impact of waste generation Reduce potential consumption of water in stores Extend environmental certification and increase awareness among the general population for best environmental practices Community Contribute towards community citizenship awareness and social cohesion Invest in social awareness in order to encourage good citizenship, social cohesion and sustainable behaviour Employees Be a benchmark company Strengthen the company continuously, as a place for career and personal fulfilment Sonae Distribuição, SGPS, S.A. 27

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32 Our Value Chain Sonae Distribuição, SGPS, S.A. 31 December 2007 Acting Responsibly Sonae Distribuição, SGPS, S.A. 29

33 7. Our Value Chain Acting Responsibly 30 Sonae Distribuição, SGPS, S.A.

34 Sonae Distribuição s value chain is complex, and it is important to understand how far our responsibility can be extended. We are aware that we cannot embrace all of this complexity, but that a number of areas exist where we have the duty to act and contribute towards the social and environmental well being of the society in which we live. The aim of the following pages is to explain how Sonae Distribuição has incorporated environmental and social issues into its interactions with Customers, Suppliers, Employees and the Community in general. Sonae Distribuição, SGPS, S.A. 31

35 7.1. Customers: Safe, Healthy and Environmentally Friendly Products More Healthy Food Viva Area We have installed a separate area in our stores, the Viva Area, in which we provide 1,096 separate products, the goal of which is to satisfy very specific consumer requirements. It offers a range of sugar and gluten free foods, and also those aimed at controlling excess weight and obesity, as well as a wide range of products for unconventional food standards. Equilíbrio Range Viva Area In 2007, we launched the Equilíbrio Range, made up of foods that have an optimised nutritional profile (reduced salt, fat and sugar content), which make them a more healthy alternative compared to equivalent conventional products. These products are marked with a blue symbol. Fighting Obesity Sonae Distribuição s concerns in this area are reflected in offering products with an optimised nutritional profile ( Equilíbrio Range), as well as the set up of a partnership with the Portuguese National Health Plan, whose aim is to reduce the level of child obesity in Portugal. Allergies We have created an alert symbol on which all potential allergies are mentioned, thus improving information provided to consumers. Organic Products and Integrated Protection We promote organic products and those produced in integrated protection, under which the use of pesticides is minimised. In this way, we manage to provide foodstuffs without residues that can potentially be harmful to health, encouraging the implementation of more environmentally friendly agricultural practices. During 2007, the launch of a range of Own Brand Organic Products was begun. Exclusion of GMOs It is Sonae Distribuição s policy to exclude GMOs from its food products i.e. products that are not made up of or include genetically modified organisms. Compliance with this policy is assured through Contractual Technical Specifications which suppliers must comply with. 32 Sonae Distribuição, SGPS, S.A.

36 Sustainable Products Organic Cotton In 2007, we put on sale the first Own Brand organic cotton products: bath robes and baby clothes. The bathroom range was part of the Hipernatura project, and was sold under the brand name KASA MODELO NATURA. The baby clothing was the first experience in this segment and sold under the brand name Zippy Baby. Products with greater energy efficiency We have focused on making our customers aware of the advantages of products which have greater energy efficiency. In 2007: We exchanged free of charge 400 thousand high for low consumption bulbs in a joint project with EDP. 58% of white goods sold (fridges, dish and clothes washing machines and air conditioning equipment) were class A and around 8% class A+ 26% of electric light bulbs sold were low consumption ones 6% of batteries sold were rechargeable Sustainable cleaning products Sonae Distribuição signed the Letter for Sustainable Cleaning written by the AISE, the aim of which is to promote the sustainability of the production and use of detergents. Specific symbols on the packaging gives better information to consumers. First Oxo-Biodegradable Shopping Bag In March 2007, Continente, Modelo and Modelo Bonjour hyper and supermarkets swapped, free of charge for its customers, traditional shopping bags for Oxo-biodegradable ones, which naturally break down and degrade in a few months after exposure to sunlight. They are made using an innovative technological process, which ensure their degradation without human intervention. The Green Shopping Bag In addition to the innovatory Oxo-biodegradable shopping bag, we continue to encourage our customers to use the reusable APED shopping bag. Since 2000, we have already distributed 2.7 million Green Shopping Bags. Sustainable Cleaning symbols Trend of sale of reusable green shopping bags (thousands) Sonae Distribuição, SGPS, S.A. 33

37 Food Area Number of sensory analyses done on Own Brand products Food Area Number of laboratory tests on Own Brand products Product Safety Sonae Distribuição pursues high standards of quality, exercising active control over its stores and carrying out each year a range of tests and analyses on its products and suppliers in food and non food areas. Food Area Complying with Good Hygiene Practices We have in place a Food Safety Management System in all our food stores, based on the HACCP principles. We continued in 2007 the programme of store audits, which led to 4,404 audits being carried out. We also continued to carry out laboratory and sensory tests on Own Brand products as a way of ensuring their quality. 20,000-15,000-10,000-14,745 21,253 18,198 Non Food Area In accordance with our needs, we carried out quality and safety tests on various Own Brand articles. An example of this practice is the care taken in relation to attaching accessories to all children s clothing. 5, ,888 2, In House Labs External Labs 4,923 Also in the textile area for example, we demand that suppliers outside Europe comply with the quality and safety requirements of the European Union, such as the ban on the use of azoic colourings, nickel, heavy metals, phthalate or formaldehyde, products which are controlled through laboratory tests. We have also developed audit processes for manufacturing units in order to control issues relating to quality. Non Food Area Number of audits carried out in factories by the textile commercial department After a period of higher incidence of audits in units located in Portugal, we began auditing units abroad Portugal Rest of the World 34 Sonae Distribuição, SGPS, S.A.

38 7.2. Suppliers: Partnership Relationships Promoting Economic Development in Portugal Our Suppliers, % In 2007, Sonae Distribuição worked with 5,376 suppliers, up 17% on 2006, continuing its strong involvement with suppliers operating in Portugal. This positioning extends to all commercial areas, and even in non food areas (Textile and Bazaar products) more than half of our suppliers are Portuguese. In addition to being the biggest private Portuguese employer, Sonae Distribuição also has a key role in stimulating local development, using heavily suppliers with business in Portugal. 67 % Suppliers with no business activity in Portugal Suppliers with business activity in Portugal Payments made to our suppliers in % 88 % Payments made to suppliers with no business activity in Portugal Payments made to suppliers with business activity in Portugal Sonae Distribuição, SGPS, S.A. 35

39 Partnerships, encouraging good production management practices Sonae Distribuição regards its suppliers as business partnerships, in which efforts are made to provide reciprocal training courses. We also carried out awareness sessions with suppliers concerning Sonae Distribuição s requirements in relation to quality, information, labelling, among others. Clear specifications in contracts and the carrying out of audits are factors which encourage our suppliers to adopt sustainable practices. Contracts with Portuguese suppliers Clauses included in general supply contracts: Adopt and comply at all times with standards that are aimed at protecting the rights of final consumers, environmental, tax and labour law Textile Area 33% of our suppliers in the rest of Europe were visited by Sonae Distribuição. In 2007, we began sending exhaustive questionnaires to suppliers on an experimental basis in relation to their environmental and social practices. The questionnaire was based on the SA8000 standard principles. Here are some of the aspects analysed: - Certifications won - Compliance with requirements about social responsibility in the areas of child and forced labour, type of contracts, freedom of association, among others - Work environment/health and Safety requirements Food Area Foreign Suppliers Audited 73% 88% % Note: Foreign suppliers certified by the IFS, BRC or according to ISO were not included in the audit programmes carried out up to Food Area We carried out audits on Portuguese suppliers of Own Brand products, through our technical team from the Quality Department, and on suppliers outside Portugal through multi national audit Groups (such as SGS, Bureau Veritas or Applus). The audits carried out on foreign suppliers, that began in 2005, include among others the following areas: - Environmental licensing - Control of Liquid and Gaseous Effluents - Waste Management - Existence of Health and Safety programmes - Existence of social responsibility policies - Absence of child or forced labour The International Trade Department, set up in 2004, opened the China Office in Its main objective is to ensure product sourcing with high quality production standards, while respecting environmental and social standards. In 2007, as a result of 82 audits carried out on suppliers abroad, 2 were rejected since they did not attain satisfactory product quality standards, and 1 other was immediately rejected because of the existence of child labour. 36 Sonae Distribuição, SGPS, S.A.

40 Producers Club Supporting Portuguese National Production in a global context Market share of Producers Club products for sale to our customers, 2007 The Producers Club, set up in 1998, has 198 members today % In 2007, purchases totalled 90 million Euros, equal to an increase of 3% compared to We believe that the contribution of Sonae Distribuição to this project is fundamental for the Portuguese agricultural and livestock sector, in view of the fact that the Company guarantees the purchase of previously agreed quantities, promotes specialist training actions and the exchange of international experiences with producers, in order to help them to provide products with high environmental and food quality levels, and which are compatible with consumer preferences % Cured meats and cheeses Butcher 30% Fruit and Vegetables Members of the Producers Club are required to comply with a set of requirements concerning product quality and the production process. As a means of promoting continuous improvement in production processes and product quality, we have followed a policy of progressively and sustainably strengthening the requirements demanded, year after year. Examples of Requirements for Fruit and Vegetables Environmental requirements for members of the Producers Club - Procedures for the disposal of empty pesticide packages - Warehouse conditions for fertilisers and pesticides - Fertilisers: planning and recording use - Recommendation of Biological Control methods with a view to replacing the use of pesticides - Agricultural waste and pollutants (identification, recording and clean up in the production area and surrounding areas involved) - Producers Club Certification - HACCP (Hazard Analysis Critical Control Points) For more information about the Producers Club, please go the following web site: Sonae Distribuição, SGPS, S.A. 37

41 Total number of employees by year 7.3. Employees: Valuing Human Capital 1 30,000-20,000-10, ,819 23,806 25, Growing a professional and dynamic team In 2007, we created 3,564 jobs, an increase of 14% over Around 52% of employees of corporate functions are educated to Baccalaureate, University or higher level. The average overall age of our employees is 31 years. Our employees have access to a range of benefits agreed with certain entities, namely banks, private doctors, telecommunications, health and fitness clubs and insurance. They also enjoy the benefits of Health insurance. All employees have access to the company s Intranet portal which provides a range of information about recruitment and selection, labour relations, training, health and safety, occupational medicine and benefits. Educational qualifications for all employees in Figures shown in this section do not include the 2,895 employees integrated into the company through the acquisition of Carrefour (Portugal) on 31 December Primary Education 2nd Cycle (11.7%) Primary Education 1st Cycle (3.7%) University Degree or Higher level (6.5%) Baccalaureate (1.3%) Primary Education 3rd Cycle (44.6%) Secondary Education (32.1%) Less than Primary Education (0.1%) Type of work contract in % Term contract 66 % Permanent contract 38 Sonae Distribuição, SGPS, S.A.

42 Adding value to human capital Training and the professional development of our employees are a fundamental part of our policy. The Training and Development Department of Sonae Distribuição is accredited by the IQF for all training procedures, thus ensuring training quality. Training hours per employee has grown by an annual average of 27% since In 2007, we reached an average figure of 46 hours per employee. Given the growing importance of environmental and social factors in the company s strategy, the number of persons trained in the environmental and sustainability areas totalled 6% of total staff numbers on Staff by sex in % Female 31 % Male Managers and Supervisors by sex in 2007 The Human Resources Policy is based on respect for the individual, focusing on the professional and personal development of our employees. 49 % Male 51 % Female Average training hours by employee Sonae Distribuição, SGPS, S.A. 39

43 Health and Safety Continente de Cascais The 1 st Hypermarket in Portugal to win Health and Safety certification according to the international standard OHSAS Sonae Distribuição s Commitments Protect the health of all those who work in Sonae Distribuição Contribute decisively towards preventing and reducing risks in all locations under its responsibility Reduce accidents at work as well as their related costs, thus contributing towards reducing social costs Promote awareness among all staff in their attitude towards risk Promote the appropriate qualifications for staff given their tasks and functions Comply with legal and regulatory requirements Strengthen confidence of customers in relation to safety Position the company as an organisation which sets an example for society and among the business community In 2007: - We carried out 740 health and safety audits in all units, an increase of 16% compared to the 637 carried out in We carried out 175 training drills, standing at the same level as the last two years Over the last 3 years, we have seen a fall in: - The work accident frequency index (-32,5%) - The work accident severity index (-29,3%) In each operational unit, there is a coordinator for Health and Safety, who stimulates and consolidates the safety culture of Sonae Distribuição. The company also carries out actions to prevent illnesses and to encourage healthy ways of living, in areas such as ergonomics, nutrition, heart health, obesity and flu, among other specific preventive and social support actions (diabetes, and cholesterol checks and bone marrow donations). 40 Sonae Distribuição, SGPS, S.A.

44 Performance management Sonae Distribuição is focused on the importance of individual, team and results performance, with the goal of identifying the best performances and motivating and aligning people and teams with its strategic objectives. Performance management is thus a key process in our company. The entire process of professional and career progress of the employee is based on a structured system of performance evaluation applicable to all employees. Absenteeism rate Work Accidents Severity Index (SI) % 4.3% 5.6% 3.9% 5.3% 3.8% % % % Total absenteeism rate Total absenteeism rate (excluding maternity and family support) Absenteeism rate per work accident SI= Days Lost Hours Worked x 1000 Health and Safety Certification at Continente Cascais Sonae Distribuição, SGPS, S.A. 41

45 7.4. Environment: improving management, measuring and reducing our Environmental Impacts In our Environmental Policy, we commit to reconcile economic and social development with respect for the environment, contributing towards the global and national sustainable development and that of the communities among which we operate Main highlights of was again another year of real and very often innovative actions undertaken in the environmental management area, among which we highlight: Corporate Environmental Management System Certificate - Corporate Environmental Management System Certification for the Company according to the international standard ISO (1 st company in the retail sector) - Launch of Oxo-biodegradable Shopping Bags (1 st company in the retail sector) Oxo-Biodegradable Shopping Bag - Construction of an experimental Hypermarket dedicated to the environment Modelo de Estremoz (1 st experiment in the retail sector) - Environmental Certification of another four premises according to the ISO standard: Continente Colombo, Continente Antas, Modelo de Felgueiras and the Alverca A5 Warehouse. We finished 2007 with 7 certified premises 5 Hypermarkets and 2 Warehouses being the only Company in the Retail sector with certified hypermarkets Photovoltaic panels at the Modelo de Estremoz - 73% of waste generated was sent for recovery, up 4% on 2006 Wind turbine at the Modelo de Estremoz 42 Sonae Distribuição, SGPS, S.A.

46 The Modelo de Estremoz strengthening sustainable construction Putting into practice our constant search for improvement, leveraged by innovation, we have built the Modelo de Estremoz, an innovative store in environmental terms. We have integrated into this hypermarket 28 measures with the objective of improving the environmental performance of our units, 12 of which are innovative in the retail sector in Portugal. All the systems installed have been thought out in detail in order to maximise savings of natural resources. The innovative solutions which are integrated into this project are divided into three areas of action: 1. Energy Consumption Savings 2. Water Consumption Savings 3. Waste Management Modelo de Estremoz Some examples of the innovative solutions implemented in the Modelo de Estremoz. Photovoltaic panels Wind turbine Solar water heating panel in the cafeteria Use of LED bulbs Use of autoctone plant species which need less watering A special Eco-Modelo area for customer use for the selective collection of 11 kinds of waste Eco-Modelo area at Modelo de Estremoz Sonae Distribuição, SGPS, S.A. 43

47 Electrical energy consumption (GWh) The Ecological Footprint of Sonae Distribuição Energy Energy consumption is one of the main impacts of our business activity with electrical energy consumption accounting for almost all of energy consumed on Sonae Distribuição premises. In 2007, electrical energy consumption was 319 GWh (1,146 TJ), which corresponds to a CO 2 equivalent emissions of 155,234 tons. Electrical energy consumption by type of unit in 2007 The trend of electrical energy consumption over the last four years reflects the cycle of expansion of the company and the growing requirements for its use to improve lighting and heating comfort in stores as well as for cold production to conserve food products. 1 % Corporate centres 4 % Warehouses Despite these factors either of a legal or market nature, we have managed to offset the trend of growth of consumption in the last years, with consumption per m 2 remaining stable. 17 % Non Food stores 78 % Food stores Measures to reduce energy consumption introduced in 2007: Solar tube type skylights Automatic control of light flow from bulbs GWh/1000 m 2 Sales Area Photovoltaic panels Solar water heating panels LED technology bulbs Refrigeration Gases Sonae Distribuição has consistently taken action in relation to issues concerning the reduction in the ozone layer, as well as those relating to global warming, resulting from the accidental losses of refrigeration gases to the atmosphere. The trend in the use of refrigeration gases shows: Trend of refrigeration gas use the continuation of the process of eliminating of R22 100% - 75% - 50% - 10% 60% 17% 56% 17% 62% in 2005 and 2006, positive cold systems testing using a water based Glycol solution in 2007, as a result of tests carried out over the previous two years,, the use of Glycol solution in positive cold systems was stopped, and use was again made of R404 after having reached the conclusion that the Glycol based systems involve a big increase in electrical energy consumption. 25% % % % 2007 R22 R414 GLICOL + R404 Sonae Distribuição keeps abreast of technological developments in this area, opportunely choosing solutions that can bring gains in environmental and energy efficiency. 44 Sonae Distribuição, SGPS, S.A.