Human Rights and Environmental Protection Due Diligence System for the sourcing of Commercial Goods

Version 2020 https://corporate.lidl.com.mt/sustainability

A bettertomorrow.

As a socially responsible company, it is our entre-preneurial duty to respect, safeguard and pro-mote human rights and protect the environment. Our due diligence business system for respecting human rights and the environment in our sourcing policies is an ever-evolving, dynamic process that we are committed to developing and reviewing on a continual basis.

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The due diligence process

Contents

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1. Introduction ................................................................................ 4

2. Our approach .............................................................................. 5

3. Management approach for the implementation of social and environmental due diligence ............................................ 73.1 Identifyingrisksandopportunities ............................................ 83.2 Definingpoliciesandprocedures..............................................113.3 Implementingandchecking...................................................... 14 3.3.1 Livingwagesandincomes ............................................... 18 3.3.2 Sustainablecocoasupplychain ..................................... 20 3.3.3 Sustainablefishsupplychain .......................................... 21

3.4 Improving .................................................................................... 223.5 Communicating .......................................................................... 23

4. Organisation and responsibility ........................................... 25

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1. IntroductionEnvironmentalprotectionandrespect forhumanrightsareat theheartofLidl’sbusinessandarethereforestrategiccornerstonesofourwork,especiallywhenitcomestosourcingourgoods. Looking aheadwithdetermination,we are committed to implementing socialandenvironmentalduediligencealongtheentirevaluechain.

Ensuringtransparencyiscrucialinthisrespect.WethereforeprovideregularupdatesonourresultsandtheprogressofourmeasuresinourSustainabilityReport.Wehaveimplementedaperiodicriskanalysistocontinuallyassessrisks.Thisenablesustoidentifyriskswithinoursupplychainmoreaccurately,includingfuturerisks,andtoreactaccordingly.Onthisbasis,wecontinuallyreviewourmeasuresanddevelopthemasaresult,takingintoaccounttheever-changingsocialandenvironmentalissuesatplayintheareaofbuying.

Dialogue with our stakeholders also helps us. Our stakeholders include our suppliers,experts, civil society organisations and trade unions. Lidl will be organising regular trai-ningcourseswithourcollaboratorsandbusinesspartnerstoraiseawarenessofsocialandenvironmentalconcerns.Wealsostrivetobuildonexistingpartnershipsandinitiativesandestablishnewcollaborations.

Weaimtocontinuesuccessfullyimprovingthelivingconditionsofourpartnersalongthesupplychainthroughourmeasuresandmanagementapproach.

ThisPositionPaperhasbeenapprovedbytheBoardofDirectorsofLidlMalta.

Eduardo Tursi

Chief Commercial Officer (CCO) Lidl Malta Contact details

Lidl Malta Ltd.TRIQILKARMNU,LUQALQA1311MALTApress@lidl.com.mt

For more information about CSR

https://corporate.lidl.com.mt/sustainability

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2. Our approachAsaretaileroperatingworldwide,Lidlisatthecuttingedgewhenitcomestosustaina-bility,whichiscrucialalsoforsecuringfuturebusiness.Theworldisfacinghugechallen-ges: theenvironmentandhumanrightscanonlybeprotectedsuccessfullyonagloballevel.Fromanecologicalperspective,mankindiscurrentlylivingbeyonditsmeans.Andtwo out of three people living in conditions of extreme poverty still rely on agricultu-ralwork to survive. Lidl intends toplay anactive role inovercoming these challenges,andothers,throughsustainableimprovementsandlong-termsolutionsthatwehopewillmakeourproductrangemoresustainable,fairerandhealthier.

Todefinewhat“sustainability”meansforLidl,wehavedevelopedavision,amission,keypointsandconcretemeasuresaspartofastrategicanalysis,andhavemadethembin-ding.Whendevelopingthisstrategy,wenotonlydiscusseditcarefullyinternally,butwealsotookintoaccounttheexpectationsofourcustomersandthesociety,NGOpriorities,regulatorydevelopmentsandprogressinscientificknowledge.Onselectingthemeasu-res,wealsotookintoaccountourpotentialimpactwhenplanningandinfluencingsupplychains.

Indoingso,weidentifiedthekeyareas,whichareimportantforourbusiness,wherecur-rentandfuturechallengesarise.ThefocusareasattheheartofLidl’ssustainablesourcingstrategyare:climatechange,water,circulareconomy,humanrights,rawmaterials,biodi-versityandresponsibleproducts.

Themajorhumanrightsandenvironmentalchallengesfacingtoday’sretailersstemfromincreasinglyglobalisedsupplychains.This is a resultof thevery structureof the retailindustry’svaluechainandoftheintrinsiccharacteristicsofproduction.Risksarisingfromtheabuseofhumanrightsoftenhavecomplexcausesandcanaffectentire industrial sectors. For this reason, social risks concerning workplace health andsafety, working hours, wages, freedom of association and of assembly, discrimination,child labouror forced labour canonlybecounteractedbyadopting systemic solutionsacrossthewholesector.Lidlthereforealsocollaborateswithgovernments,othercompa-nies,suppliersandcivilsocietyorganisationsandplaysanactiveroleincreatingafutureofvalueanddignity. Atthesametime,foodproductionishighlyresource-intensive.Forthisreason,facedwithaconstantlygrowingglobalpopulation,responsiblegrowing,harvestingandprocessingmethodsneedtostriketheperfectbalancebetweenincreasedyieldontheonehandandprotectionofthesoil,air,waterresourcesandbiodiversityontheother.That iswhyweintend to bring our consumption increasingly into line with planetary boundaries andmakeanactivecontributiontotheconservationofecosystems.

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Thissummarydocumentoutlinesourapproaches,inordertominimiserisksinourfocusareas,includingbothourcommitmentsandtheconcretemeasuresweareimplementing.

Declarations, standards and guidelinesAsaleadingcompanyintheretailsector,webelieveitisourresponsibilitytorespecthuman rights, protect the environment and prevent potential risks. Lidl’s social andenvironmentaldiligenceisbasedoninternationallyrecognisedguidelines,including:

Moreover,since2006,ourCodeofConducthasformedthebasisandbeenanessentialpartofcontractualrelationshipswithoursuppliers,whichundertaketocomplywithitsrequirementswithintheirownsupplychains,too.Lidltakesazero-toleranceapproachtowardsinactionintheeventofforcedand/orchildlabourand,asaresult,towardsanyviolationsofitsduediligence.

• Universal Declaration of Human Rights• United Nations Guiding Principles on Business and Human Rights (UNGP)• United Nations Sustainable Development Goals (SDG)• UN Convention on the Rights of the Child• UN Convention on the Elimination of all Forms of Discrimination Against Women• Women’s Empowerment Principles (WEP)• International Labour Organisation (ILO) conventions, core labour standards

and recommendations on social and labour standards• OECD Guidelines for Multinational Enterprises• Dhaka Principles for migration with dignity

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Ongoing dialogue with our stakeholders

3. Management approach for the implementation of social and environmental due diligenceThroughourmanagementapproach,weguaranteethattheCSR(CorporateSocialResponsi-bility)strategyisimplementedinastructuredwayandrespected.Wesystematicallyanalysethepotential risksofhumanrightsviolationsandenvironmental impacts inourcorporateprocessesandintheproductionofourown-brandproducts.Weusethefindingstoestablishconcrete,effectivemeasuresthatcancombat,avoidandmitigatetheimpactsofouractions.

• Materialityassessmentbasedonproductrange

• Identifyingrelatedrisksandopportunities

• Identifyingandassessingimpactsandimplementationmethods

• Requestingandmonitoringimplementationinthe supplychain

• Auditing,assessinganddevelopingsupplychainsandplayers

• Reviewingandimprovingpoliciesandprocedures

• Preventing,removingand mitigatinganynegativeeffects

• Accesstoeffectivereportingmechanisms

• Interventionsintheeventof anyviolations

• Reportingtransparentlyonprogressandsetbackstointernalandexternalstakeholders

• DefiningcommitmentsCSR,goalsandKPIs

• Establishingaudit processes

• Guaranteeingmeasurability • Definingrolesand responsibilities

Due diligence process

Defining policies and procedures

Identifying risksand opportunities

Communicating

ImprovingImplementing And checking

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3.1 Identifying risks and opportunities

Wecontinuallyexamine thecurrentorpotential risks involved in theproductionofourproducts inour strategic focusareas.Ouraim is tomake theeconomic,environmentalandsocial risksmeasurable,so thatwecanassessnotonlydirect risks toourbusinessactivities,butalsoriskswithinoursupplychain,andtakeappropriatemeasures.

Weassess thepotential risks forourown-brandproducts throughasystematicprocessbasedonindicessuchastheITUCGlobalRightsIndexortheGlobalSlaveryIndex,com-bined with data from the United Nations Food and Agriculture Organisation and theEnvironmentalPerformanceIndex.Thecompanyalsoengagesinongoingdialoguewithexternalstakeholdersandbenefitsfromtheirexperience.Forexample,welearnfromtheexperienceofcivilsocietyorganisations,tradeunionsandotherspecialists.Weworkwiththeseexpertstoidentifyanydifficultiesinrespectinghumanrights,includingfreedomofassociation.

We also aim to systematically identify potential risks within our supply chain. In thisregard,weconductanadditionalriskassessmentonourproductrange.Weexaminethedirect negative effects that our company could have, taking into account both humanrights and environmental risks, such as water pollution or greenhouse gas emissions,which,inturn,canhaveanegativeimpactonhumanrights.Ouranalysisobviouslycon-siders all stages of the value chain, from rawmaterial extraction through to final pro-duction.

Wehavedecidedoncriteria and indicators for all focusareas inorder toquantifyexi-stingrisksorpotentialimpacts.Thesefactorsenableustomeasurerisksinacomparablemanner:climate-related risks, forexample,aremeasuredby theamountofgreenhousegasesemittedthroughouttheentiresupplychain;theriskofbiodiversitylossismeasuredagainst the likelihoodofspeciesbecomingextinctasaresultof theproductionofpro-ducts.Basedonthefactorsandourbuyingvolumes,weareabletoidentifywhichsupplychainsarehigh-risk,what levelof thevaluechainposes thehighest risks for labourersandsmallholdersandwherewehavethegreatestimpact.

Intheoverallriskassessmentofourproductrange,wehaveidentifiedthefollowingspe-cificsocialandenvironmentalrisksforcertainrawmaterials:

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Lidl risk analysis – Raw materials, Risks and Countries

BANANAS

SocialrisksChildlabour:Brazil,Ecuador,PhilippinesForcedlabour:India,IndonesiaWorkers’rights:Brazil,China,PhilippinesDiscrimination:India,Indonesia

EnvironmentalrisksBiodiversity:Ecuador,IndiaClimate:India,PhilippinesLanduseanddeforestation:Brazil,Ecuador,IndonesiaWater:Brazil,India

COTTON

SocialrisksChildlabour:India,Turkmenistan,UzbekistanForcedlabour:India,Pakistan,UzbekistanWorkers’rights:India,Pakistan,UzbekistanDiscrimination:India,Pakistan

EnvironmentalrisksBiodiversity:India,Turkey,UnitedStatesofAmericaClimate:India,Pakistan,UnitedStatesLanduseanddeforestation:Brazil,China,IndiaWater:China,India,UnitedStatesofAmerica

FLOWERS & PLANTS

SocialrisksChildlabour:Ethiopia,KenyaForcedlabour:Ethiopia,Kenya,ThailandWorkers’rights:Ethiopia,China,MalaysiaDiscrimination:Ethiopia,Kenya

EnvironmentalrisksBiodiversity:Ethiopia,Ecuador,KenyaClimate:Kenya,ThailandLanduseanddeforestation:Ecuador,Colombia,MalaysiaWater:Ethiopia,China,Kenya

TEA

SocialrisksChildlabour:India,Kenya,SriLankaForcedlabour:China,India,SriLankaWorkers’rights:China,India,KenyaDiscrimination:India,Kenya,Turkey

EnvironmentalrisksBiodiversity:China,India,KenyaClimate:India,Kenya,VietnamLanduseanddeforestation:China,India,IndonesiaWater:China,India,Vietnam

CELLULOSE

SocialrisksChildlabour:China,Indonesia,RussiaForcedlabour:China,Indonesia,RussiaWorkers’rights:Brazil,China,IndonesiaDiscrimination:Brazil,Indonesia

EnvironmentalrisksBiodiversity:Indonesia,Canada,RussiaClimate:Japan,Canada,UnitedStatesofAmericaLanduseanddeforestation:Brazil,China,IndonesiaWater:Brazil,China,UnitedStatesofAmerica

RICE

SocialrisksChildlabour:Bangladesh,India,VietnamForcedlabour:India,Thailand,VietnamWorkers’rights:China,Thailand,VietnamDiscrimination:India,Indonesia,Myanmar

EnvironmentalrisksBiodiversity:China,India,VietnamClimate:India,Myanmar,VietnamLanduseanddeforestation:China,India,VietnamWater:China,India,Vietnam

SOYA

SocialrisksChildlabour:India,Nigeria,ParaguayForcedlabour:China,India,UkraineWorkers’rights:Brazil,India,UkraineDiscrimination:Bolivia,India

EnvironmentalrisksBiodiversity:Argentina,China,IndiaClimate:India,Canada,UnitedStatesofAmericaLanduseanddeforestation:Bolivia,Brazil,ParaguayWater:Brazil,China,India

COCOA

SocialrisksChildlabour:IvoryCoast,Ghana,NigeriaForcedlabour:IvoryCoast,Ghana,IndonesiaWorkers’rights:Brazil,IvoryCoast,IndonesiaDiscrimination:IvoryCoast,Ghana,Indonesia

EnvironmentalrisksBiodiversity:IvoryCoast,Ghana,IndonesiaClimate:DominicanRepublic,NigeriaLanduseanddeforestation:Brazil,Ecuador,IvoryCoast,GhanaWater:Brazil,Ghana,Nigeria

PALM OIL

SocialrisksChildlabour:IvoryCoast,NigeriaForcedlabour:Indonesia,Malaysia,ThailandWorkers’rights:Indonesia,Colombia,MalaysiaDiscrimination:Guatemala,Indonesia,PapuaNewGuinea

EnvironmentalrisksBiodiversity:Ecuador,Indonesia,PapuaNewGuineaClimate:Indonesia,Malaysia,ThailandLanduseanddeforestation:Indonesia,Malaysia,ThailandWater:Indonesia,Nigeria,Thailand

FISH

SocialrisksChildlabour:Philippines,Thailand,VietnamForcedlabour:China,Thailand,VietnamWorkers’rights:Indonesia,Thailand,VietnamDiscrimination:Morocco,Mexico,Indonesia

EnvironmentalrisksBiodiversity:China,India,UnitedStatesofAmericaClimate:India,UnitedStatesLanduseanddeforestation:Brazil,Malaysia,VietnamWaterrisk:Chile,China,India

HAZELNUTS

SocialrisksChildlabour:Azerbaijan,Georgia,TurkeyForcedlabour:China,GeorgiaWorkers’rights:China,Iran,Turkey Discrimination:Azerbaijan,Iran

EnvironmentalrisksBiodiversity:Georgia,Turkey,UnitedStatesofAmericaClimate:UnitedStatesofAmericaLanduseanddeforestation:Azerbaijan,China,GeorgiaWater:Azerbaijan,China,Iran

COFFEE

SocialrisksChildlabour:Ethiopia,ColombiaForcedlabour:Ethiopia,Indonesia,ColombiaWorkers’rights:Brazil,Guatemala,IndonesiaDiscrimination:Ethiopia,Honduras,India

EnvironmentalrisksBiodiversity:Indonesia,Honduras,VietnamClimate:Brazil,India,VietnamLanduseanddeforestation:Ethiopia,Indonesia,ColombiaWater:Brazil,Indonesia,Vietnam

The map shows the raw materials that are strategicallysignificantforLidlintermsofbuyingvolumes.Themajorsocialandenvironmentalrisksinrelationtothepotentialcountriesoforiginaremodelledon thebasisofinternationalriskindices.

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Wehaveidentifiedthefollowingkeyriskstomanandtheenvironmentasanintegralpartofourmanagementapproach.Wehavethereforepreparedeffectivemeasurestofurthermitigatetheserisksandregularlyreportontheresults.

Social risks

Child labour: theemploymentofschool-agechildrenindangerousworkingconditions

Forced labour: humantrafficking,coercion,threats,retentionofwages(orapartthereof)atthesourceorfinancialpressure,suchasthroughhighagencycommissionfor labourcontracts

Workers’ rights: wagesbelowthelivingwage,damagedhealthduetolackofworkplacesafety, restrictions on freedomof association, inhumaneworking hours, discrimination,workplaceharassmentorabuse

Discrimination: abuse or unequal treatment on the grounds of gender, sexual orientation,ethnic/nationaloriginorreligion,resultinginunequaltreatmentordamage

Environmental risks Biodiversity: lossofecosystemservicesandbiodiversity

Climate: vulnerabilityduetotheadverseimpactsofclimatechange

Land use and deforestation: theclearingofforestareasforotherlandusepurposes,lossofhabitats

Water risks: waterscarcity,lackofaccesstothewatersupplysystem,waterpollution.

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Identified risks to man and the environment

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3.2 Defining policies and procedures

The incorporationofCSR requirements andprocesses intobusinessprocesses is a keyfactorofcorporateduediligence.Itistheonlywaytoensurethatthedesiredprogressisachieved.

Whenspecificrisksrelatingtorawmaterialshavebeenidentifiedandassessed,thesearediscussedwiththeBuyingDepartmentsinthevariouscountriesintheLidlGroup,aswellaswithkeysuppliersandtheNGOsinvolved.Thisconsultationprocessresultsinbindingpositionpapersthatcanbereadonourwebsite.ThepositionpapersarecontinuallyupdatedandsetoutthegoalsandmeasuresthatLidlintendstousetoavoidandmitigatethespecificrisksforeachrawmaterial.

The position papers are an integral part of our buying practices as a binding require-ment.Ourbuyersarealsosystematicallytrainedonthesustainabilitygoalsrelatingtoraw materials,sothattheytakethemintoconsiderationintheirdecision-making.

Lidl regularlycheckstomakesurethat itsbuyersareadoptingtheserequirements.ThecompanyalsopromotesactivedialoguewiththeNGOsandtradeunionswithaviewtoimprovingworking conditions alongour supply chain and ensuring respect for humanrights.

FLOWERS AND PLANTS

from 2020 on,ourplantsandflowersarecertifiedto,

GLOBALG.A.P. and GLOBALG.A.P. GRASP

environmentalandsocialstandards

allourfruitandvegetablesarecertifiedtoenvironmentaland

socialstandards,suchasGLOBALG.A.P. and GLOBALG.A.P.

GRASP. SomearealsocertifiedtoFairtradestandards

FRUIT AND VEGETABLES

2020

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FISH

PALM OIL

CELLULOSE

TEXTILES

From 2021 on,alargepartofthepermanentown-brandassort-

mentoffishandshellfish(fresh,frozenandcannedfish)offered

byLidlMaltawillbecertified and sustainably caught (e.g.MSC

/ASC/FriendoftheSea,etc.).

From 2021 on,inourpermanentown-brandfoodproducts,

wewillbeusingonly RSPO-certified palm oil following the

Segregated supply chain model

From 2021 on,weintendtoswitchallournon-foodproducts,

suchastextiles,footwear,garden/camping,furniture,toys,

decorativeitems,electronics,stationeryandDIYitemscontai-

ningcelluloseparts,torecycled material(e.g.BlauerEngel-certi-

fied)orFSC- or PEFC-certifiedvirginfibre

Since 2014,wehaveendeavouredtoremovealldangerousche-

micalsfromourtextileproductsaspartoftheGreenpeaceDetox

campaign

innon-foodproducts,ontheotherhand(e.g.healthandbeauty),

we will use only RSPO-certified palm oil following the Mass

Balance supply chain model

COFFEE

From 2021 on, 50% ofourown-brandandpermanent-range

coffeeproductswillbecertified,subjecttoacertification

standardexistinginthecountryoforiginandthosegoodsbeing

available

2021

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2026

2023

By the end of 2025,wewillbeusing100%cottonfromsustainable

sourcesfornon-foodproducts(Cotton Made in Africa, Organic,

Global Organic Textile Standard or Fairtrade)

Bytheendof2025,allfoodandhealthandbeautyitemscontaining

cellulose(includingintheirpackaging)willbeswitchedto recycled

or FSC or PEFC-certifiedvirginfibre

From 2023 onourown-brandandpermanent-rangeteaswillbe

Fairtrade,RainforestAlliance,OrganicorUTZ-certified,asfollows:

- 50% ofinfusions(fruitandherbal)

- 100%ofteas(green,black,rooibos)

subjecttoacertificationstandardexistinginthecountryoforigin

andthosegoodsbeingavailable

COTTON

CELLULOSE

TEA

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3.3 Implementing and checking

For Lidl, applyingduediligence is a dynamicprocess that is continually reviewed andupdatedwiththehelpofexternalstakeholdersandpartners (e.g.civilsocietyorganisa-tionsandtradeunions).

Ourapproachinvolvesaninitialfocusonmitigatingandavoidingsocialandenvironmen-talrisksintheproductionofourown-brandproducts,notonlybecausetheyaccountformost of our product range, but also becausewe are directly responsible for them.Weincorporatetheknow-howfromoursupplychainanalysisintoourinternalprocessesandsourcingpolicies.Atthesametime,wealsoprovideourbusinesspartnerswithguidelinesthatspecifyhowmanagementsystemsmustbesetuptosupportaduediligenceappro-achalongtheentiresupplychain.Wealsocontribute towardsmoresustainablesupplychainplanninginthetradeofbrandedproducts.Andweexpecttheindustrytolistentoourrecommendations,too.

Inordertosuccessfullyreducepotentialnegativeimpactsandensurerespectforhumanrightswithinoursupplychain,alltheplayersinvolvedmustbeactivelyengagedinmee-tingthegoal.Tothisend,wehavetakenstepstobuildawarenessamongcollaboratorsandrelevantbusinesspartnersinrelationtothefocusareasdefinedbyLidl,forexamplebyofferingspecifictrainingcourses.TheCSRmanagersregularlyorganiseinternalsemi-nars for allbuyers, inaddition to the specific trainingcoursesprovidedbyLidl foroursuppliers,promotedbyorganisationslikeSavetheChildren,GIZ(theGermanagencyforinternationalcooperationfordevelopment),CAREandFairtrade.

Asanintegralpartofourmanagementapproach,werequireourpartnerstoconsistentlyimplementall themandatorymeasures.Thisalso includesdirectlycontrollingandeva-luatingoursuppliersinaccordancewithCSRcriteriaandorganisingauditsbyindepen-dentthird-partybodies.

In addition to gaining certifications in the food sector, we also actively campaign foramore sustainable production of rawmaterials:we support a number of projects thataddressissuesattheoriginofoursupplychains.Inparticular,Lidlpromotesthetrainingofsmallholdersonsustainablegrowingpractices.

Weareconsciousofthefactthattherearemanywomenworkingwithinoursupplychainsandthattheyareatparticularriskfromthepotentialabuseofhumanrights,forvariousreasons,someofwhicharecountry-orsector-specific.ThatiswhyLidlMaltahassignedtheUnitedNationsWomen’sEmpowermentPrinciples.

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Wealsoaimtosupportwomen’sempowermentwithinthesupplychain.AprojectinGua-temala, for instance, focuses on strengthening the role of women in coffee production.MeanwhileinBolivia,thespotlightisonpromotingcoffeegrowingforsmallholderswithincooperatives. Yet another project, in the Ivory Coast, is dedicated to using sustainablegrowingmethods in cocoa production.We reached 18,000 smallholders with this singlecampaign(seealso3.3.2Sustainablecocoasupplychain).

All theseprojectsaim tobolster rawmaterialproducersandexpand theirknow-howandskillssothattheycangeneratehigherincomesandadaptintimefortheeffectsofclimatechange.Lidlissupportedbyrecognisedpartners,likeFairtrade,CARE,UTZ,RTRSandGIZ(theGermanagencyforinternationalcooperationfordevelopment).

The United Nations Women’s Empowerment Principles

Mainrisks:discrimination

Lidl signed the United Nations (UN) Women’s Empowerment Principles (WEP) inApril2020.TheWEPisajointinitiativeofUNWomenandUNGlobalCompact.Itisthefirstglobalinitiativetospecificallytacklethethemeofwomen’sempowermentandpromotionwithinsupplychainsandcompanies.Itaddressescompaniesandincludesthefollowingsevenprinciplestopromotetheroleofwomenintheworldofwork:1. Establishhigh-levelcorporateleadershipforgenderequality.2.Treatallwomenandmenfairlyatwork–respectandsupporthumanrightsand

non-discrimination.3.Ensurethehealth,safetyandwell-beingofallwomenandmenworkers.4.Promoteeducation,trainingandprofessionaldevelopmentforwomen.5. Implement enterprise development, supply chain andmarketing practices that

empower women.6.Promoteequalitythroughcommunityinitiativesandadvocacy.7. Measureandpubliclyreportonprogresstoachievegenderequality.

Wewholeheartedlywelcomethefactthatthethemeofnon-discriminationandgenderequality,ofgreatimportancetous,arebecomingmoreandmoreprominent.

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Webelievethateffective,long-termimprovementsinthesupplychaincanonlybeachievedbyworkingwithcivilsocietyorganisations,expertsandothercompanies.ThatiswhyLidlcollabo-rateswithimportantplayers,formsmulti-stakeholderpartnershipsandjoinsmulti-stakeholderinitiatives.Forexample,LidlisanRTRSboardmember,anactivememberoftheWorldBananaForumandanactivefoundingboardmemberoftheSustainableCocoaForum.ItalsositsontheGLOBALG.A.P.GRASPtechnicaladvisorycommitteeandispartoftaskforceswithintheBangladeshAccord,ACTInitiativeandRSPO.

Anotheressentialaspectofourmanagementapproachliesinchecksperformedthroughindependentaudits,forexampleaspartofourcertificationsorinrelationtosocialaudits.Werealisethattheseinstrumentsareof limitedvaluewhenitcomestoimprovingwor-kingconditionsordetectinghiddenviolations,suchastheprohibitionofforcedlabour.However,auditsbyindependentinstitutionsareanimportantwayofidentifyingpotentialrisk indicatorsandverifyingthesituationwithinthesupplychaininatargetedmanner.Forexample,SEDEXrisk-basedsocialauditsareconductedwithinthesupplychainofourfood segment, to verifyworking conditions and continually improve themaccordingly.Duringtheaudits,someofwhichlastseveraldays,independentinspectorsattendthesitetoassesscompliancewithrulesonhealthprotection,workinghoursandworkers’rightsandtoverifywhetherotherrequirementsarebeingmet.

WeworkwithGLOBALG.A.P.GRASPinourfruitandvegetablesupplychains.Theanalysisbyexternal auditors enablesus to evaluate all our farmers according to specific socialindicators.

Our partners

productcertifications: multi-stakeholderinitiatives: Partners:

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Wealso regularly reviewhuman rights standards for the buyingof non-foodproducts,through annual independent amfori BSCI-conducted social audits at allmanufacturersofourown-brandnon-foodproductsincountriesoutsideEurope.Wesystematicallyeva-luatethefindingsoftheseauditsandtakethemintoconsiderationinourdecision-ma-kingprocesses.

Wenaturallyalsoinformoursuppliersofourexpectationsinthisbusinessarea:amongotherthings,weaskthemtotakeproactivestepstoavoidchildlabourandforcedlabour(forexampleintheResponsiblerecruitmentpolicy).

We also take part in various support projects and initiatives in the non-food sector totackle environmental and social challenges, especially in textile production, such asinsufficientlabourandenvironmentalstandardsandthehighconsumptionofrawmate-rials,chemicals,energyandwater.

Between2009and2019,togetherwithourpartner,GIZ,theGermanagencyforinterna-tionalcooperationfordevelopment,wecreatedfundingprojectsforapproximately200suppliers in Bangladesh and China, through which we divulged environmental, labourandsafetystandards.ThisenabledustomeetsomeofthegoalsoftheGreenpeaceDetoxcampaign,whichLidlsigneduptoin2014.LidlhassignedtheinternationalBangladeshAccordon Fire andBuilding Safetywith a view to achievingbetter fire protection andsafetystandardsinthelong-termfortextileproducersinBangladesh.

Lidlendeavourstocooperatewithitsbusinesspartnerstointerveneintheeventoflabourlawviolationswithinthesupplychain.Abusinessrelationshipwillonlyeverbeinterrup-tedonthegroundsofabuseofhumanrightsafterconsideringalltheoptionsavailable.Besides the social audits, we also conduct threeHuman Rights ImpactAssessments ayear,togainabetterunderstandingoftheeffectsofhumanrightsviolationswithinoursupplychain.Theseassessmentsarethenpublished.

Aselectionofspecificcasestudiesarepresentedbywayofanexampleonthefollowingpages,togetherwithapresentationofthemeasurestakenintheaffectedsupplychainsinresponsetotherisksidentified.

18The due diligence process

3.3.1 Living wages and incomes

Mainrisks:discrimination,lowwages

Lidlisawarethatearninganincomeenablingabasiclevelofsubsistenceisafundamentalhumanright.Thisistheonlywaythatworkerscanachieveadecentstandardoflivingforthemselvesandtheirfamilies.However,hundredsofmillionsofpeopleworldwidestillliveinpoverty.Thesepeopleoften receivewagesor incomeswaybelow theminimumsubsistence level. Farmers inemergingeconomies anddeveloping countries, in particular, struggle to earn a sufficient income, despitecontributingsignificantlytoglobaladdedvalue.

Lidlwasclearlycommittedtoworkingtowardsthelivingwageinasfarbackas2006,withitsCodeof Conduct. Ever since, it has campaigned for equal wages, as in the case of Fairtrade-certified products.

Tothisday,thegreatestchallengeremainsthefollowing:howcanwecollaboratewithotherplayerstohelpmoreandmorepeopleinoursupplychainsearnawageorincomethatallowsthemtohaveadecentstandardofliving?Tothisend,Lidlandothercompanieshavevoluntarilycommittedtoensuring livingwages forworkers.Wework together in the followingkeyactivitiesand trainourpartnersandbuyerstofacilitateimplementation: • Raising awareness at company level

Wemakesurethateveryoneinvolvedinthecompanyunderstandshowcrucialitistobeabletoreceivealivingwage

• An integral part of the sustainability guidelines Theaimofourguidelinesistoguaranteelivingincomesandwagesinour

globalsupplychains,asexpresslystatedinourCodeofConduct,whichcameintoeffectin2006.

• Increasing transparency in the supply chains Weaimtocreategreatertransparency,toallowbetterassessmentoftheimpactourown-brandproductshaveonwagesandincomes.Formoreinformationonourconcreteplansfor

greatertransparency,see3.5Communicating(ourcommitments).

A living wage (or income) should cover food, water, housing, education, healthcare, transportation,clothingandotherbasicneeds.Itshouldgivetheopportunitytoputsavingsasideforunexpectedevents.

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• Identifying risks Wewillfurtherimproveouranalysisaimedatidentifyingwhichrawmaterialsandregionsandfacilitiesinthesupplychaincarryaparticularlyhighriskforincomesandwages.

• Identifying and reducing income and wage gaps Weanalysetheincome/wagedifferencesforproducersinourhigh-riskglobalsupplychains.

• Promoting responsible sourcing practices Weanalysetheconsequencesofincome/salarygapsinthesupplychainsatrisk.Usingthefin-dings,wewill thenworkcloselywithourbuyersandsuppliers todevelopresponsiblesourcingpracticesandcorrespondingimplementationstrategies.

• Assessing the effect Weidentifyandtestmethodsthatcanbeusedtoeffectivelyanalyseandassesstheimpactsofourapproachonproducers’incomeandwages.

AsamemberoftheFruitJuicePlatform,wearecurrentlysupportingastudyinBrazilthataimstopinpointgapsinincomeandwagesinorange-growing.

With the development of WayToGo chocolate, created in 2019, Lidl has a direct impact onincreasingthe incomesofcocoagrowers inGhana.In2018, the incomeofcocoagrowers inGhanawasonlyaround52%ofwhatisconsideredabasicincome.Aspartofthepartnershipwith Fairtrade, theKuapaKokoo farmers’ cooperative and theNGORikolto, Lidl pays apre-miumforeverytonneofcocoausedinWayToGochocolate,ontopoftheFairtradepremium.Thismoneywillbe fed intoprojects thatwill further improve the incomeof smallholders inasustainableway.Theprojectisabletoreach440smallholdersinthefirstyear,aquarterofwhomarewomen.

Lidlisnowamemberofthe“ActionCollaborationTransformation”(ACT)initiative.ACTisthefirst global agreement aspiring to the implementation of collective bargaining agreementsforthetextileindustryinproducercountries.Wagesestablishedinthiscontextaresupportedby the responsible sourcingpractices of themember companies.ACT has also developed amechanismtoassesstheeffectsoftheinitiative:textileproducersandtradeunionsevaluatehoweffectivecompaniesareatfulfillingtheirobligationsandtherebyenablinghigherwages.TheinitialfocuscountriesofACTareCambodia,Myanmar,BangladeshandTurkey.

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3.3.2 Sustainable cocoa supply chainMainrisks:childlabour,forcedlabour,lowwages,climatechange,biodiversityloss,deforestation

Cocoaisanimportantrawmaterialforourproductrange.Ourriskanalysisshowedthattherearebothhumanrightsandenvironmentalrisksinthesupplychain,especiallyinthegrowingphase. In themaincountries inWestAfrica,cocoa production is often linked to human rights viola-tions, suchaschild labour, forced labourand remunera-tion below theminimum livingwage. Fluctuating pricesalsojeopardisetheincomesofsmallholders,whoproduce90%oftheglobalcocoaharvest.Theenvironmentalriskslieinthedeforestationoftropicalrainforestsandinotherchangesinlanduse:inWestAfrica,theareaoflandusedforcocoagrowingincreasedbymorethan107%between1961and2011andisoneofthemainreasonsbehindthelossofrainforestareasinthisregion.Deforestationresultsinhighgreenhousegasemissionsandthreatensnotonlythefunctioningoftheecosystems,butalsothelivelihoodsofthelocalpopulation.

To counteract these effects in the cocoa supply chain,wefirstlyrequirealloursupplierstocomplywiththeLidlCode of Conduct. We also rely on cocoa sourcing fromcertifiedgrowers,forexampleinlinewithFairtradeprin-ciples. These principles guarantee better prices for thefamilies of smallholders and decent working conditionsfor plantation labourers in developing countries andemerging economies. At the same time, they also helpprotect forestsandecosystems.Bytheendof2020,LidlMaltawillsource100%ofthecocoainitspermanentown-brandproductsfromcertifiedgrowers.

Lidl also sells organic cocoa. This helps protect the cli-mateandthesurroundingecosystems.Manyorganicfar-mingstandardsalsoincludesocialcriteria.

Between 2012 and 2019, Lidl funded the creation of atrainingcentreforcocoagrowersandsmallholdercocoafarmersintheIvoryCoast,incollaborationwithGIZ(theGerman agency for international cooperation for deve-lopment),toactivelysupportresponsiblegrowingonanenvironmentalandsociallevel.Thetrainingandrefreshercourseson sustainableandprofitablegrowingmethodsreachedaround18,000farmers.

Thesituationofthesmallholders’incomesremainsakeychallenge.In2019,Lidlwasthefirstretailerintheworldtolaunch,underitsownlabel,theWayToGochocolate,tohaveadirect impacton increasingthe incomeofcocoagrowersinGhana.Todothis,Lidlworkedinpartnershipwith Fairtrade, the Kuapa Kokoo cooperative and theNGORikolto.Theprojectaimstoimprovethesituationofcocoagrowers’wages inGhana:Lidlpaysanadditionalfair-trade premium to increase growers’ revenues.Whatismore, theoriginof thecocoacanbe individually tra-cedbacktothegrowingcooperativesthatproduceditinGhana.Wehavevisitedthesecooperativeswithourbusi-nesspartnersandexperiencedaninsightintotheirwork.WayToGochocolatehasalreadybeenintroducedinBel-gium and the Netherlands. It will be available in thefuture in all European countries where Lidl operates.Ourcommitment to fair trade ishighlightedonceagainthroughthisproject.

See the relatedCocoaPositionPaper formore informa-tiononouractionsinthecocoasupplychain.

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3.3.3 Sustainable fish supply chain

Mainrisks:forcedlabour,wastageofresources,biodiversityloss

Our risk analysis showed that safeguar-ding fish stocks and supporting vulne-rableworkersarevitallyimportantinthefishsector.Theseasregulatetheclimateandactasahabitatformanyanimalandplantspecies.Fish isan important food-stuffformillionsofpeople.Anditiseventhemost important source of protein inmany developing countries. However,according to the United Nations Foodand Agriculture Organisation (FAO), 33%offishstocksusedcommerciallyareove-rexploited and 60% are fully exploited(data from July 2018). Overfishing notonly threatens the basic food source ofmillionsofpeople,but itendangersbio-diversity,too.

Lidlactivelystrivestoactmoreresponsi-blyintheseafoodandfishsupplychain.We therefore place great emphasis onconserving and protecting the world’smarine ecosystems. We have also seta binding target to protect people andsafeguard their rights during the pro-ductionoftheseproducts.

TheMSClabelguaranteesthatfishstocksremainatasustainablelevel.Thecriteriaforapplyingthisfishinglabelincludetheresponsibleuseoffishinggear,minimisa-tionofby-catchand,asaresult,thelong-term conservation of the habitat of fishandothermarineanimals.

The MSC standard also guarantees thatall suppliers have been checked withrespect to their forced labour and childlabourpolicies.

TheASC label, on the other hand, iden-tifies fish and seafood from aquacultureestablishmentsusingresponsiblefarmingpracticestominimisetheimpactonmanandtheenvironment.

Lidl promotes these organisations, butasks them to continue developing withitssupport.Wethereforeparticularlywel-comethe fact thatMSChasmadesocialaudits (SMETA,BSCIorSA8000)manda-toryfrom2020forallMSC-certifiedpro-ducersinhigh-riskcountries.

Lidlavoidsillegal,unregulatedandunre-ported fishing (IUU fishing) completely,as well as illegal fishing methods. Lidlrequires its fish suppliers to ensure thatthe products can be traced back alongthe entire supply chain. It is thereforenecessary to rely on low-risk processand avoid using rawmaterials from IUUfishing. See the related Fish Position Paper formoreinformation.

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3.4 Improving

We check the effectiveness of our measures continually and adjust them accordingly,includingthroughongoingdialoguewithourstakeholdersandthankstotheexperienceofourpartners,suppliersandNGOs.The relevantoffice in theBuyingdepartmentalsoconductsmonitoringandreportingactivitiesalongsidethisprocess.Theknowledgegai-nedisincorporatedintotheimplementationofourcorporateduediligence.

Effective grievancemechanisms and correctivemeasures play a key role in the imple-mentationofourapproach:anyoneobservingorimpactedbyanyhumanrightsviolationsmusthaveaccesstoadedicatedcontactpoint.Webelievethateffectivegrievancemana-gementcanhelpuspromptlyidentifyandtargetproblemsforinvestigation.ThatiswhyLidlfollowstheUnitedNationsGuidingPrinciplesonBusinessandHumanRights(UNGP)andhasadoptedalegitimate,freelyaccessible,legallycompliant,transparent,clearandbalancedgrievancemechanismbasedonexchangeanddialogue,whichisalsoasourceofcontinuouslearningforthecompany.ThesegrievancemechanismsareincludedintheCodeofConduct.

Lidloffersthepossibilitytoreportanyhumanrights,socialorenvironmentalviolationsand has set up a dedicated online system.All data received ismanaged by the Com-plianceOfficer. The reporting system is an application that can be accessed from anydeviceconnectedtotheInternet,usingthelinktotheonlinesystem.

Lidl will introduce additional, specific reporting mechanisms for very high-risk supplychains.Forexample,Lidl isanactivememberofataskforceoftheBangladeshAccord,which also focuses on developing a suitable reporting system for the country’s textileworkers.

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3.5 Communicating

ThroughourSustainabilityReport,weendeavourtokeepinternalandexternalstakehol-dersfullyupdatedonallourchallenges,progressandlatestresults.Aspartofourtransparentreporting:

Weregularlyconductriskanalysesonthesupplychainsofourproductrange.Wewillcontinuallyassessthefindingsandpublishthemfrom2020onwards,discussingthemwithourstakeholdersonayearlybasis,too.

In 2020wewilldevelopanactionplantopromotelivingwagesandincomeswithinourglobalsupplychainsandfurtherreducewageinequality.Wehavealreadystartedtakingmeasuresinthisregardinthefollowingsupplychains:•OrangesupplychaininBrazil(aspartoftheCSRJuicePlatform)•CocoasupplychaininGhana(aspartoftheWayToGoproject)•BananasupplychaininEcuador(aspartofthepartnershipwithFairtrade)•TextilessupplychaininCambodia,Myanmar,BangladeshandTurkey(withinthecon-textofACT)

Inaddition to these largeprojects,wealsocontinually implementprogrammes thatdirectlysupportwomen,smallholdersandlabourersinthekeysupplychains,impro-vingtheirchancesofreceivingalivingincomeorwage.Tothisend,weaimtosupportthedevelopmentofawagebenchmark/livingwage.

FromMay2020,wewillincreasethetransparencyofoursupplychainsandprovidemoreinformationaboutourtier1suppliers.Thisincludesthenamesandaddressesofthepro-ducersofourfoodandnon-foodown-brandproducts.

Bytheendof2021,wewillconductthreeHumanRightsImpactAssessmentsinourhigh-risksupplychains.Wewillfocusontheimpactourcorporateactivitieshaveonhumanrightsaffectingwomen,smallholdersandlabourersinparticular.Wearestar-tingwithstudiesonteainKenya,bananasinSouthAmericaandberriesinSpain.Aspartofthisprocess,wewillworkwiththestakeholdersinvolved,includingcivilsocietyorganisations,tradeunionsandthecommunities.Wewillpublishthefindingsoftherelevantactionplans.

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From 2021,wewillconductthemthreetimesayear(until2025).Wewillcontinuallyreviewourapproachandfurtherdevelopitusinginternationallyrecognisedmethods.

By theendof2021,weplan toprovideanyonepotentially involved in thehigh-risksupply chains with easy access to transparent reporting mechanisms and effectivehelp.

By the endof2021,wewill publish apositionpaper ongender equalitywithin thesupplychain.

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4. Organisation and responsibilityTheLidlMaltaBoardofDirectorsisresponsibleforduediligence,withoperationalresponsibi-litiesentrustedtotheBuyingDepartment.Inallcountries,thereisongoingdialoguebetweenthevariouscorporatedepartments,withtheinvolvementofexternaladvisersforthecontinualdevelopmentofmeasuresandgoalsthatareusefulfortheapplicationofcorporateduedili-gence

Lidl International

CCOResponsible for implementing thecorporateduediligenceapproachatanationallevel

CCOResponsible for implementing thecorporateduediligenceapproachataninternationallevel

CEOResponsibleforensuringcompliancewith corporate due diligence(including respect forhuman rightsandenvironmentalimpact)

CEOResponsible for ensuringcompliance with corporate duediligence (including respect forhuman rights and environmentalimpact)atanationallevel

CSR & Buying DepartmentEnables strategy implementationand incorporation into buyingdecisionsataninternationallevel

CSR & Ufficio AcquistiEnables strategy implementationandincorporationintobuyingdecisionsatanationallevel

Lidl Malta