Schwarz Sustainable Retail

Location:

Poland

Project number:

48747

Business sector:

Agribusiness

Notice type:

Private

Environmental category:

B

Target board date:

20 Jul 2016

Status:

Repaying

PSD disclosed:

19 Jan 2017

Translated version of this PSD: Polish

Project Description

Provision of EUR 200m senior loan to German retail chain, Schwarz Group (Schwarz, or the Group). The proceeds of the loan will be used to support (i) expansion of Lidl format stores in Serbia and (ii) energy efficiency improvements and refurbishment of selected Kaufland discount hypermarkets and a logistics centre in Poland, promoting Kaufland’s green store concept, and supporting deployment of best available technologies for resource efficiency.

Transition Impact

  1. Setting standards for corporate governance and business conduct, by applying advanced industry standards of energy efficiency and resource management across various operations, e.g. green building standards, logistics, and sustainable retail practices in existing and new markets. The practices apply to other sectors, so the expected demonstration impact of the project is expected beyond the retail sector.
     
  2. Market Expansion in Serbia via support of sustainable local supply chains and capacity building and improving standards in the operations of the local suppliers

Client Information

KAUFLAND POLSKA MARKETY SP ZOO SP K

EBRD Finance Summary

EUR 100,000,000.00

Total Project Cost

EUR 100,000,000.00

Environmental and Social Summary

Categorised B. The Project has been categorised B under the 2014 Environmental and Social Policy.

The environmental and social impacts associated with the construction, refurbishment and operation of retail stores and warehouses are readily identified and managed.

Environmental and social due diligence was undertaken by ESD based on information provided by Schwarz Group and Kaufland Poland during a visit to the Group's headquarters in Germany and Kaufland's Polish headquarters, as well as a visit to two retail stores in Wroclaw. Further, information was reviewed about past performance of existing Kaufland and Lidl investments in Poland, Romania and Bulgaria, related annual reporting and labour audits undertaken in 2008 (covering Poland), 2009 and 2013 (both covering Romania and Bulgaria), as well as publically available information.

Previous due diligence has demonstrated Lidl's and Kaufland's capacity and systems to manage environment, health, safety and labour issues in the development and operation of stores in compliance with the Bank's PRs. Due diligence for the proposed project further demonstrated increased corporate-level commitment and capacity to develop and roll-out Corporate Social Responsibility (CSR) measures across the Group.

The scope of the ESDD covered environmental and social management at the corporate and Polish levels, environmental and social performance of Kaufland's operations in Poland, as well as the Group's approach to rolling out new operations in Serbia. No material non-compliances were identified during the due diligence with regards to EBRD PRs, including with regards to labour and working conditions (PR2). ESD reviewed documentation provided by the Schwarz Group, mainly pertaining to environmental and resource efficiency matters. Additional information requested following the site visit was provided to ESD.

At the Group level, a CSR team was established 2 years ago and there are a number of CSR initiatives under development or being piloted in Germany and Western Europe, harmonising approaches to environmental management across the Group, especially with regards to supply chain management, climate change accounting, and CSR reporting. The Group has a "copypaste" approach to their operations globally, which means that all operations and stores have to
conform to the distinct Kaufland and Lidl 'blueprint' stipulated by the Group and by Kaufland and Lidl International respectively.

The management of social and labour risks in supply chains is well established in both Kaufland and Lidl International, with a large, centralised in-house auditing team in Kaufland, which is currently developing a fully integrated supply chain management tool, and an outsourced auditing programme carried out in partnership with the Business Social Compliance Initiative (BSCI) in Lidl. In keeping with good international practice, audits are primarily aimed at building the capacity of suppliers to correct any poor social or labour performance.

The Group's approach to environmental management and resource efficiency is well integrated in key activities such as store design and construction, and is generally in line with PR3. A majority of operations in Western Europe are ISO50001 certified and there are targets in place to get Poland and Slovakia certified to the Energy Management standard in 2017 and Bulgaria, Croatia and Romania in 2019. Additional measures to monitor environmental performance under the new corporate CSR and GHG emissions reporting frameworks are also expected to identify opportunities for improvement in the near future. Engagement with customers on environmentally sustainable products and practices (e.g. to reduce household waste) is another element of this well-integrated approach.

Findings from past labour audits in Lidl and Kaufland in Poland, Romania and Bulgaria that were reviewed for this due diligence did not identify any significant non-compliance between 2008 and 2013. Overall, conclusions pointed to adequate human resources management systems and competent management teams, with some suggestions for improvements that were taken on board by the respective country teams. Audits noted the significant improvements in people management, including a move toward SAP-based electronic time-recording systems (this is currently planned for Q1 2017 in Poland), which improves transparency in terms of wages and hours calculations. The latest audit also reported good levels of employee satisfaction in Romania and Bulgaria (2013). Staff turnover remains high in Poland, where staff is paid 10% over the minimum wage in view of reducing turnover levels. A visit to two stores in Wroclaw suggested that working conditions are adequate and facilities provided to workers in good order.

The EHSS due diligence did not identify any areas of material non-compliance but based on observations in store and gaps in the information provided, and in the context of past sensitivities around labour matters, a new independent labour audit for Kaufland Poland has been agreed with the client for 2017 and for Serbia in 2018. It is further recommended that additional efforts be undertaken to increase employees' awareness of their representation through the worker council in Kaufland Poland and that storage areas be assessed for safety risks.

Annual reporting on environment and social matters to date has been variable and improvements in the scope and content of such reports will be required. It is recommended that the development of reporting guidelines for country operations be built on to achieve such improvements and that a centralized quality assurance for reporting to EBRD be established to ensure consistency across EBRD's investments in the Schwarz Group. Predicated on such improvements, the Bank's environmental and social monitoring will continue to rely primarily on annual reporting, while reserving the possibility of undertaking site visits if necessary.

Technical Cooperation

None.

Company Contact Information

Schwarz Dienstleistung KG
Sekretariat Finanzen Stiftsbergstr. 1 D-74172 Neckarsulm Germany

Business opportunities

For business opportunities or procurement, contact the client company.

For state-sector projects, visit EBRD Procurement: Tel: +44 20 7338 6794
Email: procurement@ebrd.com

General enquiries

EBRD project enquiries not related to procurement:
Tel: +44 20 7338 7168
Email: projectenquiries@ebrd.com

Public Information Policy (PIP)

The PIP sets out how the EBRD discloses information and consults with its stakeholders so as to promote better awareness and understanding of its strategies, policies and operations. Please visit the Public Information Policy page below to find out how to request a Public Sector Board Report.
Text of the PIP

Project Complaint Mechanism (PCM)

The Project Complaint Mechanism (PCM) is the EBRD's accountability mechanism. It provides an opportunity for an independent review of complaints from individuals and organisations concerning EBRD-financed projects which are alleged to have caused, or are likely to cause, environmental and/or social harm.

Please visit the Project Complaint Mechanism page to find information about how to submit a complaint. The PCM Officer (pcm@ebrd.com) is available to answer any questions you may have regarding the submission of a complaint and criteria for registration and eligibility, in accordance with the PCM Rules of Procedure.