Talking plainly. Acting sustainably. About This Report For the first time, this Sustainability Report provides an overview of the strategic basis of and management approach to sustainability 0 1 - 2 0 1 | 1 - 2 0 1 I R G in the Schwarz Group. To this end, we are providing information on how we organize and implement our financial, ecological, and social responsibility within our day-to-day activities. The Schwarz Group is made up of the Kaufland and Lidl retail divisions, the GreenCycle environmental division including its PreZero sales brand, Schwarz Produktion, and Schwarz Dienstleistungen as well as other affiliated companies and national organizations (see p. 8). The information contained in this report refers primarily to the overall Schwarz Group and overall management approaches. In order to provide a comprehensive overview of our activities, the report has also been supplemented with information from specific corporate divisions and countries. Since GreenCycle, including its subsidiaries PreZero and PreZero Polymers1, was still in the process of being built up into an independent corporate division over the course of the reporting period, the report describes its specific organizational structures and management approaches only in cases where they already existed. In report sections where GreenCycle is not mentioned explicitly, it is subsumed under the regulations, activities, and key figures of Schwarz Dienstleistungen, the central services and administration division to which it previously belonged from a corporate organization per- spective. R G 0 1 - 2 0 1 I In addition, the key figures presented in this report also generally refer to the overall Schwarz Group or to the business units specified. Individual divisions contribute to the key figures by which they are affected owing to their business activities or business model; for example, pur- chasing figures refer exclusively to retail divisions. In the case of Kaufland and Lidl, all national entities which were in operation for at least one complete fiscal year (FY) after their initial store opening contribute to results. Countries within the startup phase are not taken into consideration in results, 1 During the reporting period, PreZero Polymers operated under the name Sky Plastic Group. 2 with the exception of the key personnel figures from the annual financial statement (indicated accordingly). Countries which were undergoing a startup phase during the reporting period in- clude Lidl Serbia (in FY 2018; first store opening in fall of 2018), Kaufland Republic of Moldova (in FY 2018 and 2019; first store opening in fall of 2019), Kaufland Australia, Lidl Estonia, and Lidl Latvia (all in FY 2018 and 2019). | I R G 0 5 - 2 0 1 | 4 5 - 2 0 1 2 1 - 2 0 1 2 5 - 2 0 1 | This report was produced in accordance with the GRI standards: “core” option. Our report also shows which of our activities are contributing to the Ten Principles of the UN Global Compact (UNGC) initiative; corresponding contents are indicated with “ UNGC ”. Moreover, a corre- sponding overview appears on p. 23 and in the GRI Content Index. This report relates to the period from March 1, 2018 to February 29, 2020 and thus comprises two complete fiscal years. Unless otherwise specified, the closing dates for data collection were February 28, 2019 for the FY 2018 and February 29, 2020 for the FY 2019; the editorial deadline was August 20, 2020. Any information which was included and does not lie within the reporting period is clearly indicated. Going forward, we will release a com- prehensive Sustainability Report every two years as well as an interannual progress report on our participation in the UNGC initiative. 6 5 - 2 0 1 I R G In the summer of 2020, the auditing firm KPMG AG subjected selected information in this report to a limited assurance engage- ment of sustainability information during an independent business audit in accordance with the International Standard for Assurance Engagements (ISAE 3000 revised). This focused on the materiality analysis, selected management approaches, and a portion of the key figures presented. Audited contents and key figures are indicated in the text and the Index of GRI Content Index with “ ”. The statement of the independent auditor appears on pages 109 – 111.

Foreword Global challenges are also our challenges. We are ready to take on that responsibility and will use the special strength of our corporate group to meet these challenges. We do not intend to be part of the problem – instead, we will use our influence to be part of the solution. For us this means: Talking plainly. Acting sustainably. 4 Klaus Gehrig, General Partner, Schwarz Group

01 Approx. 110 billion euros in revenue Approx. 12,500 stores worldwide Approx. 40,000 items offered 6 CORPORATE PROFILE We are one of the leading retail companies in the world. We cover large parts of the value chain in the food retail sector, ranging from food production and retail trade to recycling. This allows us to exert influence on sustainable development, which we are actively developing further – and we also make use of our varied business models as significant leverage in that area. About the Schwarz Group | 7 - 2 0 1 The internationally active Schwarz Group primarily consists of GreenCycle (with its PreZero sales brand), Kaufland, Lidl, and Schwarz Produktion as well as a central services division under Schwarz Dienstleistungen. By the end of fiscal year 2019 the Schwarz Group was active in over 30 countries – and in 29 of these countries, Kaufland and Lidl together operate around 12,500 stores (+3 percent over the previous year). GreenCycle along with PreZero is active in five countries with waste and re- cycling management operations. The Group’s 1 - 2 0 1 4 - 2 0 1 6 - 2 0 1 R G | | I own production division, Schwarz Produktion, operates in 14 locations in Germany. Eight of these locations are responsible for producing food and beverages for Kaufland and Lidl, while plastics plants are operated at three locations. In addition, Kaufland operates five meat processing plants which produce meat and sausage products for its stores. The Kaufland Stiftung & Co. KG and Lidl Stiftung & Co. KG, whose international head- quarters are located in Heilbronn and Neckarsulm respectively, act as process and system providers | | 3 - 2 0 1 5 - 2 0 1 0 1 - 2 0 1 to support their corresponding national entities in their business activities. Apart from some activities carried out by Schwarz Dienstleistungen, the inter- national activities of the retail divisions are bundled together under the companies mentioned above, where the legal structure of each national unit must fulfill operative and regulatory require- ments. For example, Kaufland and Lidl’s German national companies are based legally on a variety of independent companies – including regional distribution centers, distri- bution companies, logistics companies, and meat processing plants for Kaufland. Lidl’s online activities are bundled together under Lidl Digital International GmbH & Co. KG. Starting with France in 1989, the Schwarz Group under- took ongoing expansion to other foreign markets, and is currently planning to enter the market in Estonia and Latvia. 2 - 2 0 1 R G | I 0 1 - 2 0 1 Schwarz Produktion companies support the retail divisions by ensuring supply, especially with products in the beverages, chocolate, ice cream, dried fruit and baked goods departments. Its headquar- ters is located in Weißenfels. GreenCycle is the environmental division of the Schwarz Group. On top of conventional disposal services, the division is testing and making ready for market a variety of cutting-edge business models in legally independent entities. 3 - 2 0 1 | 2 - 2 0 1 I R G |

01 Corporate Profile Schwarz Group Corporate Structure COMPANY MEMBERS GreenCycle GreenCycle Kaufland Group Lidl Group Dienstleistungen (Central Services) Schwarz Produktion GreenCycle Stiftung & Co. KG (international) Kaufland Stiftung & Co. KG (international) Lidl Stiftung & Co. KG (international) Schwarz Dienstleistung KG1 (administrative) Schwarz Produktion GmbH & Co. KG 7 - 2 0 1 | 5 - 2 0 1 I R G National Companies PreZero Deutschland KG (DE) PreZero US, Inc. (US) PreZero Polska sp. z o.o. (PL) PreZero Polymers AG (AT) SKYMAX S.P.A. (IT) … National Companies Kaufland Dienstleistung GmbH & Co. KG (DE) Kaufland Polska Markety Sp. z o.o. Sp. k. (PL) Kaufland Ceská republika v.o.s. (CZ) … National Companies Lidl Dienstleistung GmbH & Co. KG (DE) Lidl Sverige Komandit- bolag (SE) Lidl ITALIA S.r.l. (IT) … Schwarz Zentrale Dienste KG1 (operative) Schwarz Beschaffung GmbH Schwarz Mobility Solutions GmbH (fleet) … Schwarz IT KG … MEG (water, other beverages)2 Solent GmbH & Co. KG (chocolate, dried fruit, nuts) Bonback GmbH & Co. KG (baked goods) Bon Gelati GmbH & Co. KG (ice cream) … Regional/Logistics, Distribution Companies Regional/Warehouse, Distribution Companies Meat Processing Plants (DE, CZ) … Lidl Digital (online) … 1 These two business units form Schwarz Dienstleistungen. 2 Production at eight locations in Germany by MEG Leißling GmbH, MEG Jessen GmbH, MEG Löningen GmbH, MEG Kirkel GmbH, MEG Wörth GmbH, MEG Roßbach GmbH, MEG Neuensalz GmbH, and MEG Übach-Palenberg GmbH. Growing Responsibly From an economic point of view, the reporting period was characterized by great success for the Schwarz Group. Following record revenue in fiscal 1 - 3 0 2 | 1 - 1 0 2 | 0 1 - 2 0 1 | 7 - 2 0 1 I R G year 2018, the Schwarz Group continued in fiscal year 2019 to be able to prove itself in a challenging environment and again surpassed its results from the previous year. The invest- ment amount was similar to the previous year’s level. A large part of our investments during the reporting period went into the construction and modernization of Kaufland and Lidl stores. This makes it possible for us to take into account the demands of giving stores a contem- porary design and to ensure a sustainable local supply in the regions of our business activities. Our worldwide goal is to increase our current number of stores (roughly 12,500) even further. Since the Schwarz Group was able in fiscal year 2018 to earn more than 100 billion euros for the first time (at 105.3 billion euros), it again generated an increased level of revenue (114.3 billion euros) in fiscal year 2019. As a result, the Group was able to increase its net revenue by 31 percent over the last five years and thus steadily expanded its mar- ket position as the largest retail group in Europe. Business abroad made an above-average contri- bution to our growth. The Schwarz Group realized approximately two-thirds of its revenue abroad. In Germany, the Group generated 37.9 billion euros of revenue in 2019, mainly through its retail divisions Kaufland and Lidl together (2018: 36.6 billion euros, +3.55 percent). By now, the Group has a presence in over 30 countries in Europe and the United States. New countries added during the reporting period include Serbia, with Lidl’s entry into that country’s market, as well as the Republic of Moldova, through opening the first Kaufland stores in the fall of 2019. 8

01 Corporate Profile Compliance Economic success for the Schwarz Group is directly related to responsible corporate management. A key element to this end are the compliance management systems established in all business units, which ensure all employees throughout the Group conduct themselves with integrity. Training concepts rolled out on a large scale ensure our employees are systematically sensitized to rules of conduct and applicable guidelines. Central Corporate Principle 6 1 - 2 0 1 The corporation, including its employees, conducts itself under the principle: “We comply with applicable laws and internal guidelines”. This is a single cen- tral corporate principle which is binding for all employees. Any violations of applicable laws could bring about financial losses as well as loss of reputation for the Schwarz Group and its corporate divisions. In addition, such vio- lations could also lead to personal claims for 1 1 - 2 0 1 R G | I damages and criminal consequences for individual employees or board members of the corporation. As a result, the Schwarz Group and the divisional executive management expressly declare their commitment to compliance with this corporate principle and to ensuring its implementation. Compliance Management System as a Basis | 6 0 2 Against the background of its central corporate principle, the Schwarz Group has implemented compliance management systems (CMS) in all rele- vant business units, which establish binding CMS guidelines. These guidelines prescribe specific standards and elements for the purpose of ensuring an appropriate level of compliance within the entire Group. One essential element of these CMSs is that violations of applicable laws and internal guidelines must be avoided, and identified violations must be rigorously prosecuted and punished (“principle of zero tolerance”). CMS 5 0 2 R G I C G N U areas of focus include topics such as anti- corruption/anti-fraud, anti-trust law and data protection. CMS measures include in particular the enactment and communication of regulations (e.g. regulations on handling financial contributions 10 as well as data protection regulations), procedures for carrying out training measures, and the tracking of any internal or external indications of possible compliance-related violations of the law. Apart from support from all employees and managers, the implementation of any CMS requires a compliance organization adapted to the given business unit. The division departments responsible for compliance assess the effectiveness of the measures described above. In addition, they follow up on and resolve all internal and external indications of compliance violations. The Schwarz Compliance task force provides a platform for regular exchange on relevant group-wide compliance topics and is also respon- sible for the continued development of CMSs. The task force consists of division compliance officers and their stand-ins. Training and Whistleblower Systems for Prevention In order to reach its objective of avoiding compli- ance violations, the Group focuses on sensitization training for employees and managers in addition to the continuous identification of compliance risks. This training demonstrates possible compliance I R G 2 - 5 0 2 risks which may arise as part of business activi- ties as well as the proper conduct to take when they do arise. Employees receive appropriate training for their responsibilities on the compli- ance topics which are relevant to them. Divisions carry out mandatory in-class and online training sessions in order to systematically sensitize em- ployees to relevant compliance topics. In general, business partners and suppliers are also bound to compliance with legal regulations through an appropriate contractual clause. In addition, each corporate division maintains a whistleblower system. The system provides a number of different channels which make it possible for employees, business partners and third parties to report violations of legal regulations or internal corporate regulations; violations may also be reported anonymously to the competent compliance officers. The system thus makes it possible to identify and remedy any misconduct as well as system deficiencies at an early stage. The Auditing department established under Schwarz Dienstleistungen is responsible for regular CMS reviews.

Chemicals (SDG 12.4): We will strive for a healthy, environmentally-friendly use of chem- icals in the production of our own brands by the end of 2030. To this end, we will continue to work towards observing our Detox com- mitments on the basis of a standard restricted substances list, for the production of our textiles and shoes (MRSL4). In both the fruit and vegeta- bles as well as flower and plants range, we will define ambitious restricted substances lists by the end of 2020 and will gradually develop them further in subsequent years. Zero Waste (SDG 12.5): We will reuse, recycle or recover the volume of waste which accumu- lates in the corporation5 by a significant percent- age by the end of 2025. We will strive to limit our non-recoverable waste that accumulates within the company itself in pilot countries to a maxi- mum of 5 percent by the end of 2022. Empowerment (SDG 12.8): We will empower and support each employee to act sustainably in his area of activity by the end of 2022 and will continue to do so afterwards. We will provide our customers with greater transparency on the social, ecological, and health-related impacts of the products we sell by the end of 2025 so that they can make informed decisions. We will implement the conditions necessary for this by 2022. All corporate divisions will contribute appropriately so that we will be able to reach these group-wide objectives. Therefore, each business unit has set for itself additional division-related and country- related goals and will implement a variety of mea- sures and projects to achieve them. 02 Sustainability at Schwarz Our CSR Strategy Based on the solid foundation provided by its divi- sions’ long-standing commitment to sustainability, the Schwarz Group set forth towards developing one common group-wide CSR strategy during the reporting period – and will continue to develop this in the future. Where We Are Coming From – SDG 12 as a Common Basis Teamwork and a shared understanding of where you are headed are essential to any organization embarking on the path to sustainable develop- ment. This prompted us in the summer of 2018 to draft a group-wide CSR strategic approach based on the common standards, frameworks, and guidelines we had estab- lished up to that point. Being a multi-faceted corporate group, this was no easy task we set 2 1 - 2 0 1 R G 6 1 - 2 0 1 | I for ourselves – building on the different areas of priority and strengths of each division, which range from the long-standing experience and sustain- ability performance of Kaufland and Lidl to the innovative, green principles that guide GreenCycle. The result: a group-wide declared commitment to Sustainable Development Goals (SDGs) focusing on SDG 12, which centers on the guiding princi- ples of sustainable patterns of consumption and production. To this end, the Schwarz Group un- derwent a comprehensive process to set internal goals for achieving the business-related sub-goals of SDG 121: Sustainable Raw Materials (SDG 12.2): We will organize a more sustainable procure- ment process for the raw materials that are most essential to us. For cocoa, this will be by the end of 2022 and for flowers and plants by the end of 2023. In the case of cotton as well as fish and fish products, this will be by the end of 2025. We will carry out ongoing detailed analyses for other raw materials. Food Waste (SDG 12.3): We will reduce our food waste at the Schwarz Group by 50 percent2 by the end of 20303. We will reduce food waste in the supply chain for selected raw materials. 12

02 Sustainability at Schwarz Organizational Anchoring and Responsibilities The topic of sustainability is also anchored to the following organizational structure within the Schwarz Group on an individual division basis, with autonomous departments established in cor- porate divisions and national entities. They function as initiators and drivers for CSR topics within their given business unit and coordinate implementation of those topics. As part of the strategic process for working out group-wide objectives based on SDG 12, we established cross-division working groups during the reporting period and thus achieved a new quality for collaboration on the content of CSR topics. Appropriate teams were also established for other relevant topics going beyond SDG 12, such as the development of a climate protection strategy or a group-wide Code of Conduct. Going forward, we are also striving for content-related alignment of structures and col- laboration in cross-division teams – in the end, the entire group will profit from the pooling together of our existing strengths and technical expertise over all divisions. The Schwarz CSR Committee, to which the CSR managers of all group divisions belong, forms the basis for overall coordination of the content of sustainability topics. The CSR Committee jointly defines group-wide guidelines and framework conditions, and works continuously to develop these further. The committee meets on a monthly basis and also exchanges thoughts on a con- tinuous basis; CSR Schwarz Dienstleistungen is responsible for the corresponding management and coordination. 1 3 - 2 0 1 I R G Divisional boards of directors are kept informed on sustainability topics at regular intervals and also as needed – for example, through the presentation of current projects at executive board meetings or through monthly management reporting on current internal and external activities. Our experience shows that a sound, transparent sustainability strategy is the basis for positioning a company for future success. As a long- standing strategic partner in sustainability, we are accompanying the Schwarz Group on its path to implementing its group-wide CSR strategy. Together we are working out clear, forward-looking areas of focus, which the entire Group can work towards in a coordinated manner in order to make measurable progress. A clear strategy for the future. Dr. Axel Kölle, Director of ZNU and Executive Partner fjol GmbH Sustainability Management As diverse as the different areas in which the Schwarz Group operates – from food production to retailing up to recycling – are the requirements for effective CSR management. Our divisions therefore manage their sustainability activities in close coordination with one another but also on the basis of their given environments and business models. A joint committee in which all corporate divisions are represented makes it possible for us to provide for group-wide exchange and for the development of a common understanding and joint procedures. 14

02 Sustainability at Schwarz Corporate Responsibility The Schwarz Group takes responsibility for its actions toward people and the environment – both those carried out as part of its own activities as well as those carried out jointly with direct and indirect business partners in supply chains and service sectors. One area on which this respon- sibility focuses is compliance with ecological and social standards. We promote fair and sustainable conditions of production through our declaration of principles and our Code of Conduct, which applies group-wide, and on the basis of globally recognized principles like those established by the International Labour Organization (ILO) and the United Nations. Corporate Principles as a Basis We assume ecological, social, and economic responsibility in our daily activities. We took up this principle in 2007 through our twelve corporate principles established for the entire Schwarz Group. Our intent was to clearly show that for us, business success and corporate 6 1 - 2 0 1 I R G responsibility are inseparable cornerstones. Looking after corporate success while using our resources economically go hand in hand. We drive change and also scrutinize existing processes and structures in order to continuously develop ourselves. 16 Codes of Conduct Govern Partnerships The Schwarz Group and its corporate divisions place great importance on social and ecological sustainability in their collaborations with direct and indirect business partners in supply chains 4 0 2 | 6 1 - 2 0 1 | 2 1 - 2 0 1 I R G and service sectors. In order to address their demands in this area made on suppliers and business partners, the Schwarz Group is currently working out a group-wide Code of Conduct, which will apply to business partners and will appear as part of their contracts, and which will replace the existing Codes of Conduct that apply to the individual divisions. In it, the Schwarz Group will require compliance with established standards for reducing negative ecological and social effects in the supply chain and also assurance of environmental standards in production. In this context, the Schwarz Group will also commit its direct and indirect suppliers to respect human dignity, comply with legal regula- tions, and observe the internationally recog- nized principles of the UN Global Compact and the United Nations Universal Declaration of Human Rights. The current Codes of Conduct of the divisions will remain in effect until that time. C G N U | 9 0 4 3 - 2 1 4 The Schwarz Group will also require compliance with additional standards – these include the princi- ples and core labor standards of the ILO as well as the OECD Guidelines for Multinational Enterprises. Among other things, these standards cover the right to freedom of peaceful assembly and association as well as collective bargaining. Human rights in the workplace are defined group-wide as minimum requirements: The Schwarz Group categorically rejects any form of child labor, compulsory labor and forced labor as well as violations of human rights and labor laws during the production and delivery of resources and goods. In addition, Kaufland and Lidl will define, through topic-related guidelines and position papers, their requirements for the responsible purchasing of merchandise, in observance of corporate due diligence (see C G N U | 7 0 4 I R G | 8 0 4 chapter “Sustainable Assortment Policy”, p. 58).

02 Sustainability at Schwarz sustainability topics in International Purchasing and does its work in coordination with its corresponding colleagues in the national entities. A risk analysis carried out in 2019 and updated continuously represents the central starting point C G N U for a sustainable purchasing policy. Using that analysis as a basis, Lidl systematically analyzes what potential risks related to human rights violations and environmental impacts exist or could arise in business processes and in the production of own brand products. It then uses its findings to derive concrete measures to effectively counter any adverse effects on business activity which need to be avoided and reduced. In order to further increase transparency over its own supply chain, in early 2020 Lidl published a list of primary suppliers of its own brand products in the hardware department and of its own brand and other brand-named products in Lidl’s food assortment in Germany, the Netherlands, and Great 2 - 4 1 4 | 2 1 - 2 0 1 | 1 1 - 2 0 1 I R G Britain. In 2017 Lidl was the first retailer to publish a list of textile and shoe manufacturers involved in its own brand assortment. In order to ensure compliance with applicable social standards, Lidl already established, as early as 2010, the requirement that all manufacturers producing non-food merchandise for Lidl must first be verified by an independent auditor in accordance with the internationally recognized standard Business Social Compliance Initiative (BSCI) for social auditing. Going forward (already beginning in fiscal year 2020), Kaufland will also require BSCI certification from its respective pro- ducers. This requirement will be implemented as part of the process of converting Kaufland’s own social auditing system, which has already been in systematic use for years, to the BSCI system. The CSR department at Kaufland manages the company’s strategic sustainability commitment policy as its central authority. The strategic and corporation-wide importance of the theme of sustainability is underscored by the fact that the CSR department reports directly to the chair of the board. In the process the CSR department supports, as initiator and advisor, all national organizations and international departments through the joint establishment of strategic goals and their operationalization through the stipulation of uniform international standards 2 - 4 1 4 | 8 0 3 | 4 0 2 | 1 3 - 2 0 1 I R G 18 and guidelines for all corporate areas that focus on the area of sustainability. In the process, intense collaboration with International Purchasing ensures that the measures implemented will have the great- est possible leverage for ensuring food retailers meet their responsibilities. A key tool in managing ecological and social standards in the supply chain is the risk classifi- cation of producers. The department makes use of internationally recognized studies, indices and developments – including those from Transparency International and the Failed State Index – to deter- mine the producer countries in which human rights are the most likely to be violated. Prior to its introduction of binding BSCI standards for C G N U producers of non-food items (see above), Kaufland carried out audits of high-risk suppliers in order to determine their compliance with minimum social criteria. Suppliers are also required to carry out social audits within their own companies and for their own subcontractors when Kaufland requires such audits to be carried out. These audits are carried out primarily for the purpose of developing suppliers over the long term in order to ensure that minimum ecological and social standards are being met. However, Kaufland will terminate sup- plier relationships in cases where the supplier does not show any evidence of further development and violates fundamental social and environmental standards and laws. | 3 0 4 | R G 8 0 4 2 1 - 2 0 1 I In order to provide for and support a complaint procedure for all participants along the supply chain, Kaufland and Lidl established complaint mecha- nisms such as the European Supply Chain Initiative. In addition, the corporate divisions have developed a joint online reporting system which has been available in a number of different languages since November 2019. Complaints can also be brought directly to the respective compliance officer responsible. Lidl has also committed itself to greater transparency in this area by re-signing the international Accord for Fire and Safety in Bangladesh. Retail divisions rely on sensitization and the development of competencies in order to actively improve the situation on site in advance. Lidl has committed itself to a number of projects as part of a multi-year collaboration with the Gesellschaft für Internationale Zusammenar- beit GmbH, a German organization that promotes

02 Sustainability at Schwarz Stakeholder Management As a globally active retail company, the Schwarz Group has numerous stakeholders and a variety of channels through which it makes contact and maintains a dialogue with them. The primary channel is our millions of customer contacts which occur each day in our stores, but just as important are our cooperations with direct and indirect busi- ness partners, our contacts with politicians, banks and non-governmental organizations (NGOs), our membership organizations, and our commitment to associations and initiatives. These channels make it possible for us not only to maintain trans- parency but also to gain inspiration for our con- tinued business and sustainable development. Maintaining Dialogue with Our Stakeholder Groups 3 4 - 2 0 1 | I A continuous exchange with our stakeholder groups is an essential part of the day-to-day activities of the Sustainability and Communications de- partments in the Schwarz Group, its divisions and national entities. They carry out regular analyses – e.g. in the form of surveys and topic monitoring – of relevant stakeholders and their interests and areas of focus. Other departments in the divisions and countries also have direct contact 1 2 - 2 0 1 R G with stakeholders on occasions when this makes sense because of topic-related points of refer- ence. We keep our stakeholder groups informed both through various formats such as sustainability reports and press releases, and in the case of our customers and employees, through customer brochures and the Group’s internal intranet portals. In addition, we also facilitate and encourage direct exchange through event series and face-to-face meetings. One example of this is our dialogues with neighborhoods and local residents which we maintain to accompany major construction proj- ects. On top of this, the corporate group is involved in a wide range of cooperations and networks, and it also takes part in dialogue and information exchange formats organized by third parties. For example, our retail divisions Kaufland and Lidl regularly maintain a constructive dialogue with NGOs, which makes it possible for them not only to pick up on ideas for further sustainable development, but also to position themselves with respect to a number of business-related topics. Stakeholders at the Group Level 2 4 - 2 0 1 | 0 4 - 2 0 1 I R G In addition to division-specific stakeholder dia- logues, the Schwarz Group has identified key stakeholders both over the course of prepar- ing the initial group-wide Sustainability Report and while it carried out a materiality analysis (see p. 24). SCHWARZ GROUP STAKEHOLDERS Banks Management Business Partners Customers Employees Non-Governmental Organizations Associations and Political Contacts Science 20

Accession to UN Global Compact UNGC As a globally active enterprise, the Schwarz Group 2 1 - 2 0 1 I R G is aware of its special responsibility for sus- tainable development. We want to declare our clear commitment to sustainable corporate management to the public as well, and we have committed ourselves to acting accordingly in our day-to-day business. For this reason, the Schwarz Group acceded to the United Nations Global Compact (UNGC) initiative in early 2020, and thus declared its commitment to the observance and promotion of the UNGC’s ten principles. In the past the Schwarz Group had already made a substantial effort in this area and implemented a number of measures toward sup- porting those principles. Since our accession, we have continued to drive forward our commitment in this area in recent months. The chart below makes reference to appropriate information and content in this report which is relevant to our im- plementation of the UNGC’s principles. In addition, p. 112 of the GRI Content Index contains a corre- sponding assignment to the relevant indicators of the standard. 02 Sustainability at Schwarz Food and Product Quality In addition, Kaufland and Lidl participate in a variety of organizations responsible for food and product standards: ƒ British Retail Consortium – BRC (Kaufland, Lidl) ƒ International Featured Standard – IFS (Kaufland, Lidl) ƒ Prüfsystem QS (Kaufland, Lidl) ƒ Global G.A.P. Quality Standard (Kaufland, Lidl) Environment, Logistics, Recyclable Materials and Packaging When it comes to the environment, logistics, recyclable materials, and packaging, the Schwarz Group divisions are committed to a variety of initiatives and associations, either as a member or acting in close cooperation: ƒ Alliance for Water Stewardship – AWS (Lidl) ƒ Arbeitsgemeinschaft Verpackung + Umwelt e.V. – AGVU (Schwarz Produktion) ƒ Bundesverband der Deutschen Entsorgungs-, Wasser- und Rohstoffwirtschaft e.V. – BDE ƒ Bund Getränkeverpackungen der Zukunft – BGVZ (Schwarz Produktion) ƒ Ellen MacArthur Foundation (Schwarz Group) ƒ Lean & Green (Kaufland, Lidl) ƒ WWF Deutschland (GreenCycle/PreZero) (GreenCycle, Schwarz Produktion) 22

02 Sustainability at Schwarz Materiality Analysis and Report Contents Methodology for the Schwarz Materiality Analysis ) ( In order to be able to determine the rele- – vance of individual CSR topics for stakeholders as well as the impacts of the corporation on the economic climate, on people and on the environment, the Schwarz Group carried out a two-part materiality analysis and superim- posed the results over one another. 6 4 - 2 0 1 I R G Step 1 – Impact Analysis Based on Sustainable Development Goals The basis used for the impact analysis (impact measurement) comprised the 17 Sustainable Development Goals (SDGs) of the United Na- ) ( 6 4 - 2 0 1 | 9 2 - 2 0 1 I R G tions, including their 169 targets (sub-goals). Together with experts from Systain Consulting, these goals and targets were first reduced to 80 corporation and industry-specific goals and then divided into 17 categories. Added to these were the two categories of animal wel- fare and product quality and safety which were relevant in the view of the Group, resulting in 19 categories and a total of 45 individual topics which were available for the impact analysis. In order to analyze the impact of the Schwarz Group on its environment, the current degree to which SDGs achieved objectives was compared to the added value of the Schwarz Group over the entire value chain: Using the SDG Index established by the Bertelsmann Foundation as a basis, the sub-goals relevant for the Group were analyzed according to their state of implementation and on a country-specific basis. As a next step, those sub-goals whose state of implementation was de- termined to be below average were compared to the added value or revenue of the Schwarz Group in the countries concerned. As a result, it was possible to determine the areas where improve- ments made by the Schwarz Group potentially had the greatest impact through its core business – including the value chain stages of relevance here, i.e. raw materials and supply chain, trade and logistics, and use and recycling. For the first time ever, the Schwarz Group prepared a materiality analysis over the course of the reporting period in order to determine what content would be relevant for this report; in addition to a detailed analysis of our own impacts as a corporation, the analysis also contained a stakeholder survey. The ten essential topics that resulted from the analysis form the basis for this Sustainability Report. A conscientious materiality analysis reveals what topics have the greatest relevance for a business with respect to sustainability. Because of their multiple areas of business – and in turn equally varied sustainability topics – preparing this analysis was a challenging yet exciting undertaking for the Schwarz Group. By working together, we succeeded in working out a clear group-wide sustainability profile. Hubertus Drinkuth, Managing Director, Systain Consulting GmbH 24

02 Sustainability at Schwarz Materiality of Topics by Value Chain Stage Value Chain Stage Raw Materials and Supply Chain Value Chain Stage Retail Trade and Logistics Resource Efficiency Waste & Chemicals Ocean Health Management Economic Development Reducing Poverty Climate Protection Country Partnerships Compliance Education for Sustainable Development Animal Welfare Human Rights and Working Conditions Water Forest Climate Adaption Improving Educational Opportunities Equal Opportunities Human Rights and Working Conditions Partnerships Reducing Poverty Water Climate Adaption Compliance Education for Sustainable Development Economic Development Country Ocean Equal Opportunities Resource Efficiency Waste & Chemicals Climate Protection Health Management Improving Educational Opportunities h g H i Ecological, Social, and Economic Impact by the Schwarz Group w o L w o L w o L h g H i h g H i Improving Educational Opportunities Equal Opportunities Essential topic Non-essential topic Relevance for Stakeholders Water Product Safety & Quality Education for Sustainable Development Ocean Health Management Climate Protection Resource Efficiency Waste & Chemicals Country Value Chain Stage Use and Recovery ) ( 6 4 - 2 0 1 | 4 4 - 2 0 1 I R G 26

02 Sustainability at Schwarz social and societal consequences. At the same time, this responsibility of the Schwarz Group also offers great possibilities for shaping a more sus- tainable development – whether this be through a sustainable assortment policy or a steady improvement of energy efficiency in the areas of production and logistics. – Country Water & Oceans The Schwarz Group is committed to protecting the world’s oceans and freshwater resources – for 2 - 8 0 3 | 6 0 3 | 3 0 3 I R G example from overfishing, pollution, and ex- cessive use, including negative impacts which result from rising food and textile production – through initiatives such as a sustainable fish and seafood assortment policy, water conser- vation measures at its own locations, and the REset Plastic strategy. In terms of the topics of land use and biodiversity, the sustainable management of natural eco- systems as well as extracting raw materials and Economic Development As a globally active corporate group and reliable 2 - 3 0 2 | 1 - 3 0 2 | 3 0 2 I R G economic partner, we invest in long-term business relationships and stable cooperations in producer countries, and in this way, we are making on-site contributions to economic development – for example, by securing jobs or strengthening the infrastructure. 2 - 8 0 3 | 2 - 4 0 3 | 4 0 3 I R G producing goods in a manner that conserves resources as best as possible are priorities of special importance to us. The Schwarz Group is committed to positive development in this topic area through its sustainable assortment policy – for example, by rearranging agricul- tural practices or requiring our suppliers to undertake proper chemical disposal – and through the sensitization of its consumers. Resource Efficiency 6 0 3 | 3 0 3 | 1 0 3 I R G C G N U Managing available resources responsibly is a key factor for the Schwarz Group along its entire value chain. We provide positive stimuli in this area through a sustainable assortment policy, efficiency measures at our locations, sensitization of our employees and consum- ers, and corporate-wide initiatives like our group-wide REset Plastic strategy. Animal Welfare Schwarz Group divisions which process or sell animal products are committed to promoting more 2 P F responsible husbandry conditions for live- stock, especially species-appropriate animal husbandry, and the development of ecological farming. 28

Through our actions we are making an active contribution to a future worth living for people. 30

03 Life Quality DIVERSITY & EQUAL OPPORTUNITIES Our business is inter- national, our employees come from all over the world – diversity is not only part of the Schwarz Group, diversity enriches the Schwarz Group! A commitment to diversity and equality opportunities is therefore a basic prin- ciple of our company. We believe in mixed teams, which help us to create an environment that enables and values different mindsets and cultures. Melanie Köhler, Chair of the Board, Schwarz Dienstleistungen 32

03 Life Quality 122,109 Total new hires (2019) 70,027 thereof female new hires 65.4 % thereof new hires younger than 30 34 Organization and Management UNGC Structure and Responsibilities The Chief Human Resources Officers at our Kaufland and Lidl retail divisions and at Schwarz Dienstleistungen are directly responsible for ( I R G | ) 6 0 4 5 0 4 issues in this area, and the Human Resources departments, along with line managers, are responsible for operative implementation. In addition, the national Chief Executive Officers at Kaufland and at Lidl, together with the Human Resources Managers in the respective countries, have corresponding responsibility at the national level. General management is handled by the International Human Resources departments, while the national companies implement the de- fined framework conditions and any additional country-specific measures in accordance with the defined areas of focus. These national entities also collect key figures for the purpose of con- trolling and evaluating measures for diversity and equal opportunities. Diversity and equal oppor- tunities are likewise managed at a high level at Schwarz Produktion – here, executive manage- ment, the Human Resources department, the Compliance department, and line managers are all responsible for these issues. Respect for diversity and variety, as well as treating each other fairly and with respect, affect all employees, regardless of the division to which they belong or their work level. Kaufland, Lidl, Schwarz Dienstleistungen and Schwarz Produktion have also established these topics within their management guidelines, not only to implement corporate principles and values but also to under- score the special importance of a respectful management. 2 1 - 2 0 1 Up to now, no quantifiable objectives in the area of equal opportunities have existed at the Group or division level. For example, Lidl Netherlands, as a national entity, set for itself the goal of increasing the percentage of women in man- agement positions to at least 30 percent within three years (base year 2017) as part of its external “Talent to the Top” commitment. A corresponding R G I

03 Life Quality Implementation and Measures UNGC Commitment to Equal Rights Integrating Persons with Disabilities Increasing the number of women in manage- ment – this was the goal Lidl had in mind in 2020 when it became a partner of the international LEAD network (Leading Executives Advance Diversity), which is committed to diversity and to increasing the percentage of women in man- agement positions in retail and in the consumer goods industry. Lidl also proved its commitment in this area by signing the Women’s Empower- ment Principles (WEP) of the United Nations. WEP was the first global initiative to systematically promote and increase the proportion of women in business – on the basis of a management culture which promotes gender equality. In addition, Lidl Stiftung implemented a mentor- ing program available to both genders which is intended to promote gender equality. Kaufland is also currently experiencing a balanced ratio in its management structure – as a result, half of its management positions across all coun- tries are held by women. Kaufland also started a mentoring program in 2019 to support women. Schwarz Produktion is likewise actively committed to equal rights for all employees. In order to exclude discrimination, in 2019 the division went through the gender equality check established by the Ger- man Federal Anti-Discrimination Agency and was awarded a certificate in early 2020. These analyses confirm that Schwarz Produktion maintains a high level of gender equality, and they provide an excel- lent basis for further commitments by the division in this area. On the basis of the analysis results of the gender equality check, Schwarz Produktion established an extensive program with additional measures which have already begun to be implemented. Lidl had already taken part in the pilot of the gender equality check in 2016/2017. Since 2019 Kaufland in Romania has been running a program to facilitate the hiring of persons with disabilities. Taking into consideration its different employment needs, Kaufland has developed a number of job positions at each of its locations that are also available to persons with disabili- ties. Following the pilot program in 2019, efforts were then extended to all Kaufland stores and facilities in Romania – the program has made more than 500 such jobs available throughout the country. Through this program, Kaufland Romania is pursuing its objective of an employ- ment rate of 4 percent for people with disabilities. In addition, Kaufland Croatia has been working since June 2019 with Ozalj, an association for people with intellectual disabilities. Kaufland Croatia employs members of the association in its Logistics department. Kaufland Czech Republic also supports a number of charitable organiza- tions, including Centrum Paraple, which cares for people who have suffered severe spinal injuries, the Světluška relief organization for the blind, and Helppes, which is a non-profit organization that provides training for assistance dogs. Lidl France has also committed itself to a variety of causes: In addition to sensitization campaigns for its own employees and holding events for the occasion of the European Week of Persons with Disabilities in the Workplace (2018 and 2019) and the International Day of Disabled Persons 2019, Lidl France also carries out initiatives in its own business operations. This national com- pany works consciously with organizations and businesses that employ people with disabilities and also targets such candidates when hiring. Kaufland in the Czech Republic supports charitable organizations such as “Centrum Paraple” Additional measures and details on projects are available online at: https://gruppe.schwarz/en/responsibility/people 1 - 3 1 4 | 1 - 6 0 4 | 6 0 4 | 5 0 4 | 2 1 - 2 0 1 I R G 36

03 Life Quality Materiality and Objectives 3 - 3 0 4 | Safety in the workplace and promoting the health of each employee play a key role in the Schwarz Group. We are committed to creating a safe working environment, to supporting the well-being of our employees, and to pre- venting lengthy absences – and to this end, we have implemented a wide range of ser- vices for promoting health in the workplace as well as measures for preventing work- related accidents. There are no indications of employees who show a high rate or risk of disease due to their work activities at the 1 1 - 2 0 1 2 - 3 0 4 | 3 0 4 | I R G Schwarz Group. Prevention plays a crucial role at the Schwarz Group and touches on all occupa- tional safety activities across all divisions, ranging from risk assessments to how information and guidelines are presented and effectiveness checks are carried out. The topic of occupational safety is especially relevant in our production facilities. Schwarz Produktion has therefore set for itself the goal of reducing the accidents reported each year by an average of 10 percent in compari- son to the previous year. In 2019 the division was able to reduce its accident rate by 20 percent compared to 2018, and this accomplishment was achieved after it had already reduced the rate by 11 percent in 2018 compared to 2017. In order to promote employee health awareness as well as appropriate behavior in this regard, attractive services and programs are offered in all divisions as part of the operational health man- agement program (BGM), such as programs offered in the areas of movement, nutrition, and balance. These types of programs are available at many central locations and take the form of fitness rooms, sports classes, health days, and lectures. For example, employees of stores and warehouse centers can take advantage of company discounts for membership of fitness studios or recreational facilities like sports clubs. 38 10 % Fewer Work-Related Accidents – Schwarz Produktion has set this target as its annual goal 2018 2019 -0.2 Sick leave Lidl 6.8 % Sick leave 2018 6.6 % Sick leave 2019

03 Life Quality checks of its managers as well as periodic checks by the Occupational Safety department as part of their inspections. Applicable guidelines and pro- cesses as well as their implementation are audited on a regular basis. Audits of occupational safety systems are carried out at the country level by Schwarz Dienstleistungen’s Internal Auditing department; in the case of Kaufland, these audits are supplemented with Kaufland’s own audits carried out by Corporate Security. Internal and ex- ternal audits are also carried out for the production facilities at regular intervals. The latter are carried out by an external service provider every two years. An internal evaluation is provided through a monthly EHS (Environment, Health, Safety) report on relevant key figures. Occupational Safety Committees Moreover, occupational safety committees have been set up for all divisions in accordance with country-specific laws, and the composition of each committee is dictated by the laws of the re- 1 - 3 0 4 I R G spective country. For example, the occupa- tional safety committee at Schwarz Produktion meets on a quarterly basis and is composed of the operational officer, works council, com- pany physician, an occupational safety special- ist, and the safety officer. A representative from the Human Resources department also takes part in meetings. In accordance with legal regula- tions, all committees act in an advisory capacity. Training and Continuing Education In order to ensure our occupational safety organiza- tion remains functional and to actively involve our workforce, selected employees are trained and serve as fire safety officers, first responders, etc. In general, all employees receive regular training on possible hazards in the work environment. This is carried out primarily through online training or in-class training when necessary. 2 - 4 0 4 R G I All employees in Germany must participate in these training programs on a yearly basis. In the case of employees working in the central administrative facilities for GreenCycle, Kaufland, Lidl and Schwarz Dienstleistungen, occupational safety training is handled centrally 40 by Schwarz Dienstleistungen’s Occupational Safety and Fire Protection department. The fre- quency of this training at national companies is dictated by the regulations of the given country and/or the results of risk assessments. For example, Kaufland has implemented division-wide online training for general instruction on occupational safety for all employees of its stores and main facilities in all countries. Occupational Health Service and Corporate Integration Management 2 - 4 0 4 In order to support the continued health of all em- ployees and to prevent work-related health prob- lems, the Schwarz Group, in accordance with le- gal regulations, provides a corporate health service in all countries and business units, which is responsible for matters like risk as- sessments and mandatory examinations. In addition, many locations provide additional health services, coordinated by the Human Resources departments. The administrative 1 1 - 2 0 1 3 0 4 R G I | | locations of GreenCycle, Kaufland, Lidl and Schwarz Dienstleistungen in the Heilbronn/ Neckarsulm region offer an occupational medical service which operates across those divisions. In addition to general hours for consulting the company physician, this service provides em- ployees with eye examinations and flu shots. Moreover, employee relations consultants are available for specific questions on inclusion, severe disabilities, and chronic illnesses. In accordance with legal regulations, the Schwarz Group divisions in Germany have set up an operational integration management ser- vice (BEM). Due to legal regulations, a BEM or comparable service also exists at the individual national entities of Kaufland and Lidl. In essence, this type of service involves coming to a common understanding on help, services or measures for avoiding the inability to work in the future and for supporting the employees concerned in all as- pects of their integration back into the workforce.

03 Life Quality EMPOWERMENT & FURTHER TRAINING The current labor market is characterized by constant change – new requirements, new qualifications and new forms of employment. We are used to these constantly changing conditions and have the means to adapt to them. We invest in lifelong learning and thus in the development of our employees as well as in a dynamic future for the Schwarz Group. By opening up prospects of training and continued education, we seek to motivate our employees and develop their potential – and with our more than 400,000 employees, we have got plenty of that. Ignazio Paternò, Chair of the Board, Lidl 42

03 Life Quality Organization and Management Structure and Responsibilities The division-specific development and implemen- tation of concepts for training and continuing ed- ucation are also reflected in our organizational | 2 - 4 0 4 | I R G 3 - 4 0 4 6 1 - 2 0 1 structure. This topic is managed locally in all Schwarz Group divisions by each Human Re- sources department. Responsibility for contin- ued development of an individual employee lies primarily with the employee’s managers and the employee himself/herself – the two parties agree on individual needs for further training and appropriate measures while tak- ing the employee’s current and future tasks into consideration. Managerial responsibilities in this area are clearly governed – the Group has de- fined corporation-wide competencies and man- agement guidelines, which are based on com- mon corporate values and principles and are adapted to the specific needs of each division. At Kaufland and Lidl the Human Resources depart- ments at the national level and the regional distribution centers support managers and departments through targeted processes, programs, and seminars. Kaufland and Lidl countries also receive support from the Central Talent Management department, which was established in recent years. This de- partment uses a sustainable talent management approach to prepare individual development plans for employees. Schwarz Dienstleistungen likewise makes use of this approach with the support of the Human Resources department as part of a systematic process. Further Education of Employees and Managers The Schwarz Group offers a wide variety of pro- grams for further training which are geared to the individual employee. As a result, the Schwarz Group 2 - 4 0 4 I R G offers a comprehensive set of programs for continuing education for all employees in all divisions in order to meet their individual needs and foster the range of skills of the workforce. In addition to in-person events, Kaufland, 5,312 trainees in the Schwarz Group (2019) 44 Lidl, and Schwarz Dienstleistungen also rely on e-learning concepts to train their employees in areas such as occupational safety, health protec- tion and data protection. Our group also focuses on development for man- agers. Kaufland makes use of a modular system of qualification to impart its business values and management tools to junior employees and to fa- cilitate a comprehensive understanding of their new tasks. The division also provides a cross- national development program for staff at the director level. Lidl has likewise established stan- dardized development programs for all manage- ment levels, which support employees with managerial responsibilities in their new tasks. In the case of Schwarz Dienstleistungen, new managers go through a job-related management program in their first year of work, which com- bines practical workshops with training sessions. Vocational Training The Schwarz Group also places great importance on the professional training of its junior staff and has established training programs in all of its divisions. Divisions offer a variety of training occupations de- pending on the needs and focus of their business activities. With roughly 20 different areas of focus, ranging from retailer and operational logis- tics specialist to specialist in food technology, Kaufland and Lidl provide a number of different ways for employees to start careers along the value chain. Dual training is also offered in coun- tries where local conditions make this possible. For example, Lidl offers these types of programs in eleven countries. Schwarz Produktion offered training for eleven skilled occupations over the course of the reporting period, while Schwarz Dienstleistungen offered training for six skilled occupations. In addition, Schwarz IT and Schwarz Dienstleistungen offer a joint turbo IT program, which targets, wins, and promotes trainees in relevant IT professions, thereby meet- ing the increasing demand of skilled workers in this field. As a subsidiary of GreenCycle, PreZero has trained junior employees in nine different professions at its German locations; GreenCycle itself took part in vocational training within the Schwarz Group through a pool system.

03 Life Quality Implementation and Measures UNGC Sensitization for Resource Protection Of the approximately 2.7 million tons of waste that the Schwarz Group accumulates each year, three-quarters can be reused or converted into other products. Apart from an appropriate infra- structure, exploiting the ecological and economic potential of this recyclable material requires the comprehensive sensitization of our employees. In addition to providing standard collection points for Schwarz Group stores, warehouses, and ad- ministrative buildings, the GreenCycle environmen- tal division has also developed a training program on this topic. Through the training, brochures, and explanatory videos provided as part of its “Appreciation of Recyclable Materials” concept, GreenCycle makes Kaufland and Lidl employees worldwide aware of the proper separation of waste and its potential for reuse. This program has made it possible for retail division stores and logistics centers to significantly increase their rate of recycling over the past few years. Sensitization to sustainable behavior is also an integral component in the orientation training of all new employees at Kaufland stores worldwide. This type of training focuses on themes such as the conscientious use of energy at the workplace and the proper disposal of waste. The specific content required by each employee is conveyed during tours of the store, in online training and explanatory videos. The “Be(e) IT” project provides students and trainees with an opportunity to try out new technologies on beehives Some national companies also carry out indepen- dent campaigns for sensitizing employees and customers to the responsible use of resources. In 2019, for example, Lidl Italy focused on the topic of reducing food waste and organized a competition for employees, who were given an opportunity to present their favorite recipes for using leftover food at home. The best video recipes for dealing with food waste were then published on social media. Nature Conservation and Technology Since early 2020, Schwarz IT has been holding an unusual idea competition for its employees and trainees: Employees at its Weinsberg site in the district of Heilbronn have the opportunity to active- ly participate in the weekly care of beehives that were set up there in early 2019. The competition gives students and trainees the opportunity to test various IT technologies on beehives, such as GPS trackers and camera technology. Junior employ- ees taking part in the “Be(e) IT” project can submit their ideas, the best of which will be presented to Schwarz IT management and implemented. In this way, the project promotes exchanging ideas between trainees and associates at the executive board level. In addition, the employees taking part in the project will learn how to work with nature in a positive way. A guidance system makes it easier for employees in central warehouses to properly separate recyclable materials 2 - 4 0 4 | 6 0 3 | 4 0 3 I R G 46

Schwarz Group donations in thousand euros 2019 2018 32,977 29,162 1 - 1 0 2 I R G 03 Life Quality Materiality and Objectives | 3 1 4 | 1 - 3 1 4 3 4 - 2 0 1 As an internationally active company, the Schwarz Group assumes responsibility for sustain- able development beyond just its core business. We are actively committed to ecological and social issues, especially in the regions where we do business. Together with our employ- ees, customers, and partner organizations, we provide effective support at a local level, primarily in the areas of our locations and stores. Our activities and funding priorities in this area are specifically adapted to the needs of individual regions and countries so that we can meet the specific needs of the people who live there and thus improve their ecological and social development in the regions concerned. I R G Schwarz Group divisions support charitable goals mainly through monetary donations and donations in kind in addition to sponsoring and partnering with schools, NGOs, and other organizations. 6 1 - 2 0 1 I R G Whenever we talk of our commitment as a corporate citizen, we mean all CSR-related projects, measures, and donations that we carry out voluntarily and which go beyond our immediate core business. It is our understand- ing that sponsoring activities can also be based on the promotion of social or ecological issues. On the basis of these principles, in 2019 the Schwarz Group worked out group-wide guidelines for handling donations and sponsoring, and rolled them out to the countries in which it operates. The purpose of these guidelines is to ensure that we manage contributions in a responsible, transpar- ent, and comprehensible manner. The guidelines are further supplemented by additional division- specific regulations. These include the Kaufland guidelines titled “Donations and Sponsoring”, which among other things govern its principles of corporate citizenship, the Lidl guidelines governing the topics of donations and sponsoring, and the Schwarz Produktion guidelines titled “Donations, Sponsoring and Memberships”. 48

03 Life Quality Implementation and Measures Passing on Food The retail divisions of the Schwarz Group are actively committed to avoiding food waste and give food away as a measure for reaching its re- duction target in this area (see p. 77). Our stores and logistics centers around the world regularly give charitable organizations food which can no longer be sold but is still suitable for consump- tion. In Germany, for example, local food banks regularly receive food and other items from Kaufland and Lidl stores, then pass it on to people affected by poverty in return for a token payment. Lidl Sweden donates its surplus food to charitable organizations such as Allwin as well as city missions. Lidl Italy partners with an Italian food bank “Banco Alimentare”, which picks up food in stores about four times a week and distributes it to the needy through a network of local charities. Lidl’s national entities in France, Belgium, Ireland, and the Netherlands have also established simi- lar concepts for distributing food as well as other initiatives. Lidl Romania not only donates food but also invests in starting up food banks and setting up a corresponding network. Three new food banks were established in the 2019 report- ing year alone and three more are in planning, with Lidl Romania bearing all costs involved. Numerous national entities of Kaufland likewise donate food to charitable organizations and even have a legal requirement to do so in several countries. In Croatia, for example, Caritas visits 18 stores twice a week to collect unsold baked goods, fruit, and vegetables. The organization also picks up food from the central warehouse on a weekly basis, such as food which is about to expire or which has damaged packaging. In addition to working with food banks, 80 Kaufland Germany locations partner with the “foodsharing” initiative to prepare leftover food for collection. Similar ini- tiatives and concepts for food donation also exist at Kaufland in Poland, the Czech Republic, Romania, and other countries. Donating Deposits Apart from food donations, Lidl has also been working together with its own customers since 2008 to support food banks across Germany through deposit donations. Roughly 6,100 bottle/ can return machines in 3,200 stores have a but- ton which lets customers donate all or part of their deposit return to food banks. By the end of fiscal year 2019, over 18 million euros had been col- lected in this way, allowing food banks to finance not only items like refrigerated vehicles, hygiene products, and new furnishings but also cooking classes for their clients. A total of about 2,500 such projects had been implemented by the end of 2019. Other countries also make use of the concept of deposit donations – for example, since 2017 Lidl Lithuania has been using this concept to support a national donation project which sup- ports daycare centers, and it even goes a step further by doubling customer donations. Kaufland likewise organizes deposit donation campaigns at the local level, which support not only food banks but other charitable organizations. In addition, all German stores are working on setting up deposit donation boxes to support charitable organiza- tions in their regions during fiscal year 2020. “Learning by Doing” – Inspiring Children C G N U Since 2004, Kaufland has been committed to environmental education and to bringing children closer to nature and the environment in playful ways. Its “Learning by Doing” (“Machen macht Schule”) program organizes environmental Lidl in Italy regularly donates food to Italian food banks 1 - 3 1 4 | 1 - 1 0 2 | 3 4 - 2 0 1 | 2 1 - 2 0 1 I R G 50 50

03 Life Quality KEY FIGURES Total Workforce Based on year-end financial statement Total Number of Employees (based on year-end financial statement)1 thereof full-time employees thereof part-time employees2 thereof trainees Newspaper carriers Kaufland Schwarz Dienstleistungen Lidl Schwarz Produktion Schwarz Group 132,246 314,141 131,666 61,409 60,669 69,486 69,473 1,351 1,524 15,956 14,891 287,350 112,573 100,392 197,912 183,524 3,656 3,434 – – 8,342 6,166 7,066 5,366 1,049 613 227 187 – – 3,626 3,417 3,429 3,221 119 122 78 74 – – 458,355 428,599 184,477 169,648 268,566 253,732 5,312 5,219 15,956 14,891 8 - 2 0 1 | 7 - 2 0 1 I R G Fiscal year 2019 Fiscal year 2018 Collective Agreements Percentage of employees to whom collective agreements apply3 69.1 % 70.4 % 2 0 1 9 2 0 1 8 C G N U 1 4 - 2 0 1 I R G 1 The employee definition used for the Group’s year-end financial statement was used as the basis for collecting and reporting all the figures which appear above. These include full-time/ part-time employees, marginal employees, apprentices, dual students, trainees, participants in the Kaufland Management Program, posted workers from abroad, employees in the active phase of sabbaticals and partial retirement, working students, interns, undergraduates and temporary employees (provided they worked during the reporting period) as well as employees on extended sick leave, and employees taking maternity leave. Excluded are employees who were on leave of absence for more than 90 days, employees on parental leave, employees in partial retirement programs (passive phase), employees on sabbatical (passive phase claims), and employees being reintegrated following an illness. 2 Part-time employees are considered employees whose percentage of working time is less than 100 percent. In cases where no national regulation exists, employees are considered part-time if they work less than 163 contract hours per month. 3 Figures include the percentage of both tariff employees and non-tariff employees with collective agreements. 52

03 Life Quality Diversity in Management Bodies Percentage of personnel in management bodies1, 2 23.8 % > 50 years old 4.8 % < 30 years old 19.0 % Female By age By gender 71.4 % 30 – 50 years old 81.0 % Male Employment Diversity Personnel by employee category in FY 2019 ( ) 2, 3, 4, 5 Employees without managerial functions Management Higher management Top management Number Share in % Number Share in % Number Share in % Number Share in % Number Total workforce 412,438 33,573 762 324 447,097 By age Age group < 30 years old Age group 30 – 50 years old Age group > 50 years old By gender Female Male 139,496 33.8 5,569 16.6 10 1.3 0 0.0 145,075 214,052 51.9 25,135 74.9 633 83.1 272 84.0 240,092 58,890 14.3 2,869 8.5 119 15.6 52 16.0 61,930 13.9 280,114 132,324 67.9 32.1 13,680 19,893 40.7 59.3 137 625 18.0 82.0 40 284 12.3 87.7 293,971 153,126 65.8 34.2 Total Share in % 32.4 53.7 Average age of employees: 2019 36.1 2018 36.0 1 - 5 0 4 I R G 1 - 5 0 4 I R G 2 - 3 0 4 I R G Employee Health Sick leave in percent 6, 7, 8 6.8 % 6.5 % 2 0 1 9 8 2 0 1 8 1 Management bodies are considered the divisional boards of directors. The figures reflect the status by the end of FY 2019. 2 For reasons of safeguarding personal rights, information on minority affiliation was not collected. 3 For reasons of control relevance, the employee definition used in internal management reporting, and not the definition contained in the year-end financial statement, was used as the basis for collecting and reporting all figures which appear above. This includes full-time/part-time employees, marginal employees, apprentices, dual students, trainees, participants in the Kaufland Management Program, posted workers from abroad, employees in the active phase of sabbaticals and partial retirement, working students, interns, undergraduates, and temporary employees (provided they worked during the reporting period). Long-term absentees are excluded from this group for the following reasons for example: illness / inability to work / private accident / work accident / quarantine / family care leave for more than 90 days / maternity or parental leave including employment prohibition / reintegration following illness. 4 In accordance with the internal definition, employee categories are broken down as follows: top management = management levels I-II, higher management = management level III, management = managers starting from management levels IV-VI with no deputy / no specialist level, employees without managerial functions = other employees. 5 As these key figures were collected for the first time in FY 2019; figures from the previous year are not available. 6 For reasons of relevance to internal control, we only collect and report information on sick leave. 7 This key figure indicates the ratio of sick hours to the planned hours of work to be performed by employees (sick hours divided by planned hours x 100). Included are the sick hours of all em- ployees who are normally entitled to continued remuneration in the event of illness (e.g. excluding temporary employees). The method used for counting sick hours varies from country to country and is based on national conditions and/or laws. The development of a standard, group-wide method of counting is currently in planning. 8 In contrast to the survey for FY 2019, employees on long-term sick leave were not included in the FY 2018 survey. This also explains the increase in numbers in FY 2019. 54

We work to provide a product assortment that is healthy and sustainable. 56

04 Product Quality SUSTAINABLE ASSORTMENT POLICY It is a challenge, especially for the food retail industry, to reconcile issues of sustainability with consumer expectations of low prices. Sustainable agriculture is essential if we intend to leave behind a good future for our children. As a result, we are very pleased that the Schwarz Group approached us early on and offered fairly traded products throughout the country. Close cooperations like ours will make important steps for a more sustain- able range of products – in the retail area as well – and will also open up new customer groups. Dieter Overath, Chair of the Board, TransFair e.V. 58

is clearly labeled with appropriate product seals. These advantages are also made clear to consum- ers through information on sustainability charac- teristics which appears in product brochures and on packaging. Kaufland labels such products in its own brand assortment in a variety of ways, includ- ing the “Our actions do the talking” initiative tied to relevant, popular sustainability seals like Fairtrade. Commitment to More Responsible Livestock Farming The observance and promotion of more respon- sible husbandry conditions for livestock on land and in water play an important role in the countries in which we do business, and some national companies have even set goals in this area. We pay special attention to labeling products of animal origin so we can transparently show the 2 P F conditions in which they are kept and can provide consumers with the information they need to make a conscious purchase decision. For example, in Germany Kaufland and Lidl have been making use of a four-level model to transparently label husbandry conditions for all their fresh meat products since 2018 (1 = indoor livestock farming, 4 = premium). The retail divisions are aiming over the long term to convert their entire assortments of fresh meat products in Germany to at least level 2. With approximately every other fresh meat product at level 2 (“indoor livestock farming plus”) or higher, Lidl has already achieved its interim goal. Through its pork quality meat program, Kaufland promotes species-appropriate livestock husbandry in Ger- many, for example, in the form of humane stables or giving swine a larger amount of space, which far surpasses legal requirements and meets level 3 husbandry conditions. 04 Product Quality 414 Average number of organic items in Lidl’s product range (own brands, 2019) 1,762 Average number of organic items in Kaufland’s product range (own brands and named brands, 2019) 60 Organization and Management Structure and Responsibilities In the cases of Kaufland and Lidl, the respective Purchasing departments are responsible for as- sortment policies and ensuring the implementation of guidelines and principles. National entities are primarily responsible for expanding the regionality and local sourcing of products in the two divisions. Schwarz Beschaffung is responsible for procuring non-merchandise items such as employee uni- forms (see Implementation and Measures section, p. 62). Additional division-specific organizational structures and management approaches are described in the Corporate Responsibility chapter on p. 16. Defined Guidelines and Standards for Responsible Purchasing Kaufland and Lidl, along with the support of their CSR points of contact in Purchasing, define their requirements for the responsible purchasing 7 1 4 | 4 1 4 | 8 0 3 | 6 1 - 2 0 1 I R G of merchandise by means of topic-specific guidelines and position papers – for example, in guidelines for raw materials like palm oil and coffee, the principles of responsible animal husbandry, or the position paper on corporate due diligence at Lidl. The extent to which re- quirements apply at the country level can vary depending on the topic and is clearly defined in the given policy document or position paper. With the goal of having one uniform standard for all its national entities, Kaufland has adopted a coordinated raw materials program for coffee, palm oil, tea, fruit tea, eggs, and cocoa. Lidl has pre- pared and published position papers on the raw materials relevant to its business – these include fruit, vegetables, fish, shellfish, and other products in addition to those mentioned for Kaufland. Both retail divisions carry out programs and projects for pesticide reduction. Additional information on this topic can be found in the chapter on Land Use and Biodiversity on p. 103. Any merchandise at Kaufland and Lidl which is manufactured in accordance with ecological and social standards

04 Product Quality Implementation and Measures Acting Ecologically with Strong Partners UNGC Kaufland and Lidl, in cooperation with renowned or- ganic associations, are increasingly offering their cus- tomers local organic food produced according to the highest standards. Lidl Germany has been partnering with Bioland, the leading associa- tion for organic farming in Germany and Southern Tyrol, since Novem- ber 2018. In total, over 80 perma- nently-established food items in Lidl Germany’s product assortment have already been produced in accordance with Bioland’s strict criteria, including apples, garden herbs, and wheat flour, as well as almost all dairy products under its own BioOrganic brand. In addition, Lidl has also been supporting the Bioland Stiftung since January 2020. Through investments in research and development, this foundation promotes forward- looking projects which ensure the principles of or- ganic farming over the long term and make it possi- ble to measure their impact. The foundation began as a training initiative for farmers and was intend- ed to support them by increasing the fertility of their soils by building up humus. Another foundation pro- ject actively uses humus for the purpose of climate protection, since humus buildup is an effective tool for enabling soil to retain CO2 and at the same time it makes the soil more fertile and rich in nutrients. Kaufland has been offering numerous quality food prod- ucts through its Demeter line, which was established in Feb- ruary 2019. By now, the assortment has grown to over 250 products and includes juices, dairy prod- ucts, canned vegetables, pasta products, baby food, and cereals as well as fruits and vegetables. Espe- cially stringent guidelines in terms of biodynamic agriculture, which go far beyond the minimum stan- dards of the EU organic label, are imposed on prod- ucts with the Demeter brand. As Kaufland’s part- nership with Demeter is intended for the long term, the product assortment will be gradually expanded. Improving Husbandry Conditions Together with Farmers In 2018 Kaufland, together with over 60 contract farmers, launched the “Qualitätsfleischprogramm Schwein”, which goes far beyond the legal re- quirements for husbandry conditions. Among other things, the program provides for 40 per- cent more space for livestock in so-called open front stables, which provide plenty of daylight and fresh air in addition to feed produced without ge- netic engineering. Through these and other crite- ria, the products under the program also fulfill the high standards of the “Level 3 Farming Method – Outside Climate”. Kaufland is currently the only re- tailer in Germany which can offer pork produced with a level 3 farming method. The entire process chain is in Kaufland’s own hands – Kaufland’s meat processing plants maintain a direct contractual relationship with every farmer taking part in the pro- gram and regularly sends its trained animal welfare officers to audit farms and slaughterhouses. Making Regional Products Visible In order to promote its sales of regional products, in 2010 Lidl Germany began to offer regionally pro- duced dairy products and eggs from Bavaria as well as other products under its own brand “Ein gutes Stück Heimat” (A Good Piece of Home). The core elements of the concept include species-appropri- ate animal husbandry, the use of GMO-free feed and supporting participating farmers through addi- tional transparent proceeds. The farmers were thus able to earn nearly 20 million euros more by the end of the reporting period. In addition, since 2012 2 P F | 2 - 4 1 4 | 7 1 3 | 2 - 8 0 3 | 2 - 4 0 3 | 1 - 4 0 2 | 2 1 - 2 0 1 I R G 62

04 Product Quality PRODUCT SAFETY & QUALITY Product safety and quality is what we do each day. As experts, we know that defect-free products and clear indications of origin are essential, especially in connection with food products – it’s about nothing less than consumer health and protection from deception. In order to be able to ensure both of these, it is essential for retail companies like the Schwarz Group to be rigorously committed to providing systematic quality assurance at all stages along the food chain. Dr. Katrin Hoenicke, Managing Director, Eurofins Analytik GmbH 64

04 Product Quality 31 % fewer product recalls than in the previous year for Kaufland and Lidl (2019) 66 In addition, we implement comprehensive quality management in the textile segment through our compliance with the ÖkoTex 100 standard, which makes it possible for us to ensure the sizing is precise and the textile products have undergone various quality tests. Assurance/Quality Management department is also responsible for food safety at Schwarz Produktion, while the Marketing department, in close cooper- ation with Quality Management, has responsibility for product labeling. A separate Procurement department exists in Schwarz Beschaffung for assuring the quality of non-merchandise items. | I R G 2 - 6 1 4 6 1 - 2 0 1 As manufacturers for our Kaufland and Lidl retail divisions, the manufacturing facilities of Schwarz Produktion and Kaufland’s meat processing plants directly impact the product quality of our own brands. As a result, the topic of “quality” is also reflected in their cor- porate values accordingly. The raw materials and production conditions they use are subject to the highest demands, like those of the International Featured Standard (IFS), and as a result, they pass through numerous quality controls. Our fundamen- tal approach is to only bring to the market food that is safe, to ensure consistent high quality, and to avoid potential health risks. No product recalls occurred within Schwarz Produktion’s own plants over the course of the reporting period. There was one recall at Kaufland’s meat processing plants during fiscal year 2019, which was handled com- pletely internally. Organization and Management Structure and Responsibilities The Schwarz Group governs responsibilities in the area of product and food safety on a division-spe- cific basis. In the case of our Kaufland and Lidl 7 1 4 | 6 1 4 I R G retail divisions, the Purchasing department is responsible – in close coordination with the Quality Management or Quality Assurance departments – for purchasing safe products at the national or international level, depend- ing on the scope of the negotiations. Their core processes and strategic development projects are in turn defined, together with Purchasing, by the Quality Management department (Kaufland) or the Quality Assurance department (Lidl). The Quality Comprehensive Quality Management Processes In order to systematically control product safety, legality, and high quality, Lidl operates according to a recognized quality management system that is certified in accordance with ISO 9001. The system has product safety as its highest priority. All related processes are implemented on the basis of this system, which regulates quality goals and guide- lines as well as clear process specifications and responsibilities. All processes are reviewed by a law firm specializing in food law and also undergo an annual internal audit. Employees receive regular training in these processes. Kaufland has also defined quality standards for ingredients, contaminants and sustainable raw materials for its food and drug own brands, which go beyond those imposed by law. It also has extensive quality requirements for its own brands and own non-food imports, which are continuously being developed. Both retail divisions have defined and implemented essential steps for ensuring food safety. These include: Certification in accordance with the Interna- tional Featured Standard (IFS) and British Retail Consortium (BRC) for all production facilities that supply divisions with food and drug store products as part of their own brand product range1 Regular, unannounced risk-oriented audits of production sites by selected external certifica- tion bodies Risk-oriented review of all own brand articles in the food and drugstore area by accredited institutes (e.g. Fresenius, Eurofins) to check their marketability

04 Product Quality Implementation and Measures Fresh Fruits and Vegetables Hundreds of tons of fresh fruit and vegetables are delivered each day to our roughly 12,500 Kaufland and Lidl stores around the world. In order to ensure these remain at a consistently high quality, all deliveries are carefully inspected in accordance with standardized processes. We support our pesticide management process by carrying out roughly 86,000 independent chemical product tests each year. We arrange for most tests to be carried out before products are harvested or loaded. In addition to the results of test reports by neutral samplers and externally accredited laboratories, we also make use of evaluations of the general conditions in our cultivation areas. The following are just a few more examples of quality assurance measures at our Kaufland and Lidl retail divisions: Defining internal specification values for pesti- cides which go beyond legal requirements (also see p. 105) Requiring certification in accordance with Global GAP or QS quality standards from all agricultural providers who supply Kaufland and Lidl Requiring implementation of the additional GRASP module (for social concerns of workers) by all producers of fruits and vegetable for Kaufland and Lidl Additional information on division-specific ap- proaches and measures can be found in Lidl’s Position Paper on Fresh Fruits and Vegetables and in Kaufland’s Transparency Report on Fruit and Vegetables. Country-Specific Quality Management Kaufland and Lidl national entities rigorously main- tain the quality and safety of the products they sell. For example, Lidl Spain’s quality management sys- tem is certified in accordance with ISO 9001:2015 by the AENOR and iQNET standardization and certification companies. Moreover, national com- panies also carry out regular supplier audits and extensive laboratory testing of their own brand product-lines as well as fruits and vegetables – this also applies to nationally procured own brand products in all Kaufland countries. Lidl Romania also conducts internal audits in its production units which are responsible for food for its own brand product range. 63 audits were carried out over the course of the reporting period. These were in addition to the audits which were carried out by external organizations for the purpose of obtaining IFS or BRC certification required by Kaufland and Lidl by standard for their production plants respon- sible for food own brand items. For years, Lidl Austria has been relying on the AMA seal of approval (Agrarmarkt Austria) and related stan- dards for its assortment of fresh meats. The aim of AMA certification is to promote food quality and quality assurance across all stages of production, processing, and retail trade. The concept provides for evaluations on a regular basis. Since 2017 Lidl Austria has been stocking fresh pork with the additional AMA+ modules “better animal welfare”, “special feed”, and “regional origin”. In order to be able to provide its customers with regional products with outstanding, guaranteed quality and in turn make it possible for smaller producers to sell their products as well, Kaufland Germany also carries out partial audits of its regional suppliers. These audits are carried out before products are listed and then are repeated at regular intervals. Laboratory testing is also pro- vided for in order to monitor these suppliers even more closely. Additional measures and details on projects are available online at: https://gruppe.schwarz/en/responsibility/people 2 P F | 1 - 7 1 4 | 1 - 6 1 4 | 1 - 4 0 2 | 6 1 - 2 0 1 I R G 68

04 Product Quality Materiality and Objectives 1 l a o g d n a fl u a K 2 l a o g l d L i 7 1 4 | | Through its 12,500 stores around the world, the Schwarz Group reaches a large number of cus- tomers who purchase food, drugstore items and non-food products for their daily needs from Kaufland or Lidl. In this way, we not only make a significant contribution to supplying local areas, but we also impact the health and sustainable behavior of our customers – not just through the products we sell but 1 1 - 2 0 1 6 1 4 I R G also through the associated communication with consumers. In addition to the central aspect of product safety and quality (see p. 64), the selection and composition of the food we offer are a key tool for customer health and conscious nutrition. One area of focus for the Schwarz Group in this regard is the reduction of sugar, salt, and fat. In order to counteract these substances, our retail divisions as well as Schwarz Produktion have adopted appropriate reduction strategies which significantly reduce the share of those ingredients. Kaufland in Germany has set itself the goal of reducing the sugar, salt, and fat content in more than 300 own brand items by an average of 20 percent by 2021. This goal is well on its way to being reached, with Kaufland Germany reaching an average content reduction of 19 percent in over 190 products up to and including 2019. One focus in this area is on products that are frequently consumed by children, such as soft drinks and cereals. Lidl has set for itself the goal of reducing the weighted average content of added sugar and salt in its own brand assortment by 20 percent by 2025. In addition to Germany, this goal also applies to 17 Lidl countries, and four other countries have also adopted similar reduction strategies. To this end, the corporation has defined product groups to focus on for reducing sugar (including yogurt and sweet pastries) and for reducing salt (including bread, bread rolls, and pizza), which have nutri- tional profiles that can potentially be improved and/or have the potential to do without additives altogether. The corporation is currently reviewing all relevant own brand products which fall under 70 By 2021 -20 % reduction of sugar, salt, and fat content on average in more than 300 own brand items 1 In Germany 2 In 18 countries By 2025 -20 % reduction of sales-weighted average content of added sugar and salt in the own brand assortment

04 Product Quality Implementation and Measures Promoting Healthy Nutrition Kaufland and Lidl initiate and support projects and initiatives around the world which make children and adults aware of making responsible food choices and conscious nutrition. To show con- sumers that it is also easy for anyone to reduce sugar in their everyday lives, Lidl Germany invent- ed the Lidl spoon. The Lidl spoon is intended to raise awareness that it is still possible to enjoy food without giving up taste. Lidl also supports the “5 a Day” campaign through the Lidl Fruit School program. This program uses games under the guidance of qualified nutrition consultants to teach elementary school students in the third and fourth grades how to incorporate fruits and vegetables into their daily diets. Together with the children, the nutritionists prepare simple dishes that prove they will actually enjoy having fruit and vegetables five times a day. In the 2018/19 school year, the program also included a segment on biodiversity. Roughly 200 elementary school classes across Germany were sensitized in this way in the 2019/20 school year alone, with a total of about 600 school classes and 15,000 students over the past three years. The concept was also implemented in a similar form in Italy, Greece, Cyprus, and Spain. Within the past three years, Lidl Spain alone has succeeded in reaching over 190,000 schoolchildren along with their teachers and families through a fruit & vegetable roadshow staged in more than 230 cities and municipalities. And Kaufland in Poland is currently planning or has already implemented a number of measures such as awareness programs In Poland, Kaufland organizes a painting competition in elementary schools to promote a healthy diet and campaigns based on its product range in order to raise awareness about healthy eating. These measures also include a number of extensive campaigns in print and digital media. Kaufland carries out such campaigns using products from its own brand product range, in particular the ‘‘K-Bio’’, ‘‘K-free’’, and “K-take it veggie’’ lines, to provide tips for a balanced diet – for example through product presentations or recipe ideas. In this way, Kaufland is promoting a healthier lifestyle. To this end, Kaufland in Germany also initiates nutritional action days for schoolchildren as part of its “Learning by Doing” (“Machen macht Schule”) program (see p. 51). Fresh Fruits and Vegetables for Schools and Kindergartens As part of the EU school program, Kaufland provides schools and day care centers throughout Europe with fresh fruit and vegetables once a week. In Germany, more than 4,000 children in the greater Heilbronn area alone have been benefiting from a healthier, more varied diet since 2010. And in Croatia, roughly 40 stores each provide regional fruit and vegetables once a week to a school in the store’s immediate vicinity. As a result, approx- imately 19,000 schoolchildren received a total of 94 tons of fruit and vegetables in the 2019/20 school year. Slovakia also began to take part in the program in 2019. The over 60 Kaufland stores in this country have distributed more than 4.5 tons of fruits and vegetables each week to nearby elementary schools since the beginning of the new school year. Moreover, in 2019 Kaufland Poland tied a painting competition for healthy eating to financial aid for renovating school cafeterias. As a result, ten schools received financial con- tributions totaling 600,000 PLN (approximately 133,000 euros) from Kaufland. 6 1 4 | 1 - 3 1 4 | 3 4 - 2 0 1 I R G Together with former national soccer coach Vicente del Bosque and basketball players Rudy and Marta Fernández, Lidl employees are promoting healthier eating habits at Spanish schools 7272

We think and act in cycles. 74

05 Circulatory Systems RECYCLABLE MATERIALS & RECYCLING Waste is just recyclable material that is in the wrong place – this fact is our mission at GreenCycle. A large share of worldwide waste is not disposed right or reused properly – and that is a huge problem for the environ- ment. This is why we focus on a closed loop, which starts by having a completely reusable product from retail and disposal up to sustainable recycling and repro cessing into new products. Our goal: zero resource waste across our entire value chain. Thomas Kyriakis, Board Member, GreenCycle 76

05 Circulatory Systems Kaufland and Lidl rely on optimized schedul- ing, short transport routes, innovative logistics systems, and a continuous cold chain to avoid food waste. Starting with the production of the food for our own brands, we seek to ensure that raw materials are exploited to the greatest extent possible through resource-efficient manufactur- ing techniques and modern production facilities. For example, with the help of our price reduction processes, food which is about to reach its sell-by date can still be sold. Stores take items that can still be consumed but can no longer be sold and distribute them to charitable organizations like local food banks in accordance with applicable regulations. Organization and Management UNGC Structure and Responsibilities GreenCycle ) Within GreenCycle there are a number of areas which reflect the Group’s self-image as a driver of innovation in the areas of resource management, energy and environment innovations, and logis- tics solutions (pallet pools). With approximately 3,500 employees, recycling management is GreenCycle’s largest department and it covers the PreZero sales brand in three countries and 1 0 3 6 0 3 R G ( | I GreenCycle with its PreZero sales brand is the Schwarz Group’s own waste disposal and recycling company the PreZero Polymers subsidiary as well as the departments for divisional support, services, pur- chasing and sales. All in all, PreZero operates more than 80 facilities in Germany and Europe and also has a presence in the U.S. market. The goal of GreenCycle’s recycling management operations within the Schwarz Group is to reduce the volume of waste and to collect waste by type for further recovery. The corporation coordinates all procedures in this area through the GreenCycle management system and thus provides for a recov- ery and disposal system which is legally compliant, economical, and ecological. 78 The close cooperation of the Schwarz Group’s oth- er divisions with GreenCycle is organized differently for each division, with differing responsibilities. In the case of the two retail divisions, the Logistics and Supply Chain Management departments rep- resent the main points of contact for GreenCycle. In addition, each retail division’s Sales department is responsible for managing waste that accumulates within stores. All processes and activities starting from the store’s ramp are coordinated at Lidl by the responsible employee in Logistics; at Kaufland this role is assumed by a so-called reusable material and waste manager who is assigned to the Supply Chain Management department. At the national level as well, reusable material managers also exist in some national entities and are responsible for recycling management in their own country and the related cooperation with GreenCycle. In the case of the Kaufland’s meat processing plants, the Environmental Management department is respon- sible for issues related to recyclable materials and recycling. At Schwarz Produktion, each company management is responsible for cooperation with GreenCycle, while the internal Recycling Manage- ment department is responsible for operational coordination. In addition, all aspects identified by Schwarz Produktion as relevant are coordinated with the departments responsible for the area, such as the Environment, Health and Safety (EHS), Quality Assurance, Resource Management, and Legal departments. All Schwarz Dienstleistungen processes and measures relating to recyclable materials and recycling are managed through GreenCycle. Apart from this, no separate orga- nizational structure exists which is responsible for recyclable materials and recycling. Employee Sensitization and Training | | ) ( 6 0 3 2 - 4 0 4 A crucial element for ensuring high recycling rates is the proper collection of all waste via separation systems. In order to be able to determine what kinds of waste accumulate at what points with- in the company and how collection and sep- aration can be designed to be as intuitive as possible, GreenCycle carried out a small-scale analysis of its own waste generation during the reporting period. As part of its “Appreciation of Recyclable Materials” concept, GreenCycle plans in the future to sensitize store and production | 6 1 - 2 0 1 I 1 0 3 R G

05 Circulatory Systems Implementation and Measures UNGC Education on Proper Waste Separation Counteracting Food Waste Recyclable material loops are only truly effective if all steps in the cycle are carried out properly. They start with consumers, for example, when they sort waste after the checkout area, but they also include stages which go far beyond this. The better waste is separated, the easier it is to extract new, valuable recycled raw materials from it. Together with its subsidiary PreZero, GreenCycle has been a member of the German “Gelbe Tonne” (Yellow Waste Bin) initiative alliance since 2019. PreZero and the initiative work together to educate consumers in Germany about prop- erly separating waste in the yellow bins. As its first step towards better separation quality, the initiative – with the active support of PreZero, Kaufland, and Lidl – held a promotional tour across Germany. The initiative held campaigns in front of Kaufland and Lidl stores in Germany to sensitize more than 20,000 people in a playful and informative manner to the proper separa- tion of waste so that they can do it at home. Our measures for avoiding food waste are geared to the entire value chain – from production and transport to discounting products which are nearing the end of their shelf life. Our approach for giving away food that can no longer be sold but is still suitable for consumption to charitable organizations such as food banks plays a central part (see p. 50). Our customers can make a signifi- cantly greater contribution to avoiding food waste by storing food properly and by trusting their own judgment when dealing with best-by dates. For this reason, Kaufland and Lidl in Germany have joined the “Too Good To Go” organization as one of the many measures in their “Usually Good for Even Longer” initiative. The organization labels appropriate products to encourage consumers to use their own judgment when assessing the shelf life of food. Its goal is to avoid throwing away certain types of food which can often be eaten beyond the best-by date.Through the program, the retail divisions of the Schwarz Group are laying In Romania, Kaufland raises awareness of waste separation with the “Recicleta” project Together with the initiative alliance ‘‘Gelbe Tonne’’, PreZero, Kaufland and Lidl inform consumers in Germany about good separation quality 7 1 4 | 3 1 4 | 3 - 1 0 3 | 3 4 - 2 0 1 | 2 1 - 2 0 1 I R G 80 80

05 Circulatory Systems MATERIALS & PACKAGING Whether it is drinks, ice cream or nuts, it is not just the content that counts, but also the packaging. Before you can assess how environmentally friendly a piece of packaging is, you need to consider its full life cycle. We, in beverage production, rely on disposable PET bottles with high recycled content and low weight. As a result, we only transport our water in Germany over short distances. Our bottles are light, hygienic, and safe – and the environment wins as well. After the bottles are returned to stores, they are pretreated in our recycling plants and then processed into new bottles. In this way, everyone can work together to contribute to conserving resources and protecting the climate. Jörg Aldenkott, Board Member, Schwarz Produktion 82

05 Circulatory Systems Our Closed Loop Products Colored plastic film Transparent film Paper Cardboard PET Organization and Management Structure and Responsibilities The Schwarz Group, through its REset Plastic strategy, seeks to manage plastic in a holistic manner across all its divisions – and has set up a corresponding organizational structure, which involves all relevant areas of the Group, and at the same time defines clear responsibilities for implementing and achieving its objectives in this area. Responsibility for overall manage- 6 1 - 2 0 1 R G 1 0 3 | I ment of the project is assigned to a separate Plastic Strategy department, which reports directly to the executive board of the GreenCycle environ- mental division. Cross-divisional teams, each with a responsible project leader, work together on the five defined areas of action (see p. 85). Team members are assembled with employees coming from all departments in the company depending on their business backgrounds and knowledge, and they also act as multipliers for employee sensitization in their own divisions. Responsibilities for the purchasing of merchan- dise and product packaging are established in the Purchasing departments of the retail divisions 84 and production plants – this is in contrast to non-merchandise, such as consumables and office supplies, which are purchased centrally by the Group’s procurement division Schwarz Beschaffung (see chapter on Corporate Responsibility, p. 16). As a result, implementation of the corporation’s own guidelines as well as legal regulations related to ma- terials and packaging affect different departments at the Kaufland and Lidl retail division level, depending on the specific issue. For example, the Logistics department establishes guidelines regarding the use of plastic film in order picking by optimizing its use through special winding technology. The Sales department establishes guidelines for receipts The Vision of REset Plastic: “Less Plastic – Closed Loops” is also systematically pursued against an economic backdrop. In this context, we are the first retail group to commit to use up to 20% less plastic and to make 100% of our private label packaging maximum recyclable by 2025 in all countries and business units – starting from production, procurement, and logistics and ending with disposal and waste management.

05 Circulatory Systems Implementation and Measures UNGC Bottles in Circulation Replacing Disposable Bags – Establishing Alternatives The Schwarz Group makes a major contribution to a sustainable circular economy with its unique recyclable material loop for deposit PET bottles, which Schwarz Produktion developed in 2010 to- gether with Lidl and operates for the retail divisions with the support of GreenCycle. Every bottle that passes through a Lidl return machine in Germany is subsequently brought into Lidl’s recycling sys- tem. Bottles taken back to Kaufland are likewise processed in this cycle. The Schwarz Group has succeeded in incorporating all the steps of the PET recyclable material loop under one roof. This makes it possible for us to use our available resources optimally and ensure that we will be able to continue to use as much food-grade recycled PET as possible to manufacture new PET bottles. The success of its commitment is best demon- strated by the 1.5 liter PET bottle for the still mineral water of Lidl’s “Saskia”1 own brand. Except for its lid and label, the bottle has been made exclusively out of recycled PET since fiscal year 2019, and new plastic is not required for its production. PET bottles are collected in stores and then sorted, recycled, and processed into new bottle bodies by Schwarz Produktion. They are subsequently filled in the corporation’s own beverage plants and delivered back to stores. The remaining PET bottles under our beverage own brands, which are manufactured in Schwarz Produktion plants, consist on average of more than 50 percent of recycled PET material. In addition to the use of recycled PET, Schwarz Produktion is also continuously working on reducing the weight of the PET bottles it pro- duces and thus has saved as much as 30 percent of plastic per bottle since 2008. All in all, this weight reduction and use of recycled material has made it possible for us to save more than 60,000 tons of new PET material in fiscal year 2019 alone and thus more than 110,000 tons of CO2. The Schwarz Group has set itself the goal of exam- ining its use of plastic in all areas of the Group and reducing its use whenever this makes sense and contributes to sustainability. This goal also applies to our packaging. By 2017, Lidl had already listed standard plastic bags with a thickness between 15 and 50 micrometers for use in all of its 3,200 German stores. Kaufland likewise implemented this measure in all its countries in 2019, making it the first retailer in Poland, Slovakia, and other coun- tries to do so. At this point, no Kaufland or Lidl store in the world offers any kind of disposable Recyclable Material Loop for Deposit PET Bottles Lidl store Lidl central warehouse Lidl central warehouse Filling plant Recycling plant Plastic processing 1 Available in Lidl stores in Germany, Austria, Denmark, and Switzerland during the reporting period. 2 Without cap and label. 1 - 7 1 4 | 5 - 5 0 3 | 3 - 1 0 3 | 2 - 1 0 3 I R G 86

05 Circulatory Systems KEY FIGURES Recyclable Materials and Waste by Type and Disposal Method e s u e R g n i l c y c e R n o i t a t n e m r e F 1 g n i t s o p m o C - a z i l i t u l a m r e h T h t i w n o i t y r e v o c e r y g r e n e n o i t s u b m o C g n i l l fi d n a L 2 s u o e n a l l e c s M i 6 l a t o T 6,219 1,970,060 275,845 8,554 201,198 46,362 127,994 60,910 2,697,142 2,840 1,664,729 305,529 6,150 2,840 – – – – – – – – – – – – – – – – 3,956 2,840 2,194 – 69 – 1,962,703 1,664,729 1,526,943 1,364,286 78,260 72,359 – – 158,067 163,273 77,163 64,693 58,842 – 31,836 – 24,988 – 84 118 6,520 – 7,356 – 275,845 305,529 – – 275,845 305,529 – – – – – – – – – – – – – – – – – – 1,591 8,554 1,591 – – 8,554 1,591 – – – – – – – – – – – – – – – – – – 4,125 8,031 12,536 503,224 2,502,605 200,821 46,051 127,940 59,877 2,687,942 12,536 503,224 2,502,605 4 1,529,077 64,147 1,428,480 4,125 790 47 54,955 2,978 8,031 1,339 – 8,376 8,027 – – 16,585 12,453 135,198 35,346 105,103 231 6,467 47,654 291,994 – 2 102 1,396 4,527 – – – – – – – 15 637 68 84 2,344 – – – – – 12 4 894 – 310 – – 55,065 1,296 974 – – – 57 – 1,918 – 54 – – – – – 321 6,385 83,832 1,033 – 442,806 409,404 323,300 291,994 158,067 163,291 80,581 67,250 71,364 55,065 34,106 – 24,988 – 4,571 3,290 19,082 83,832 9,199 – 2 – 6 0 3 I R G Fiscal year 2019 Fiscal year 2018 – – – 2,679 1,093 5,567 – – – – – 462 7 1,170 – 377 – Total weight of reusable material in tons thereof non- hazardous waste Paper/card- board/cartons Organic Residual waste3 PET Plastics Wood3 Scrap4 Glass4 Textiles Miscellaneous thereof hazardous waste4, 5 1 The composting disposal method was newly implemented for the collection of key figures in FY 2019. The fermentation/composting collection item was used for FY 2018 figures and was included in the fermentation category for FY 2018. 2 The “miscellaneous” category is a compound item which also includes quantities that were transferred with an unknown method. 3 No disposal processes were recorded for the reusable material fractions of residual waste or wood for FY 2018; as a result, these values are generally included under the “miscellaneous” disposal process. 4 Glass, scrap, and hazardous waste reusable material fractions were collected separately for the first time in FY 2019. These fractions are included in the miscellaneous category for FY 2018. 5 These include, for example, used paints/varnishes, household/industrial batteries, energy-saving light bulbs, electronic waste, hazardous goods, cleaning agents, and special waste. 6 Deviations between the last digits of the totals for individual items and grand totals are due to rounding of decimal places. 88

Through our actions, we are making a positive contribution to preserving ecosystems. 90

06 Ecosystems ENERGY & EMISSIONS The threat to the world’s food supply caused by climate-related droughts, floods and harvest failures only can be overcome if we keep global warming under 2 degrees Celsius. This means we need to bring our production of greenhouse gases down to zero by 2050. As a vital part of our economy, the food retail business also bears responsibility for achieving this goal. The Schwarz Group should therefore make an appropriate contribution to the stabilization of our climate. To do this, it needs a solid plan for rapidly reducing its emissions resulting from the cooling, lighting, distribution, and of course the production of its goods. This will make it possible for our grandchildren to also live safely and eat well. Professor Hans Joachim Schellnhuber CBE, Director Emeritus of the Potsdam Institute for Climate Impact Research (PIK) 92

06 Ecosystems 94 This strategic target is broken down into separate energy targets for each plant and was achieved to approximately 50 percent by the end of fiscal year 2019. Kaufland’s meat processing plants have set the goal of saving 7.8 million kWh of their total energy consumption at all facilities by 2022 (base year 2018); the division had ready achieved 70 percent of this goal by the beginning of 2020. The area of logistics also is a key tool for the Schwarz Group for reducing its internal generation of energy and emissions. As the environmental division, GreenCycle is also heavily invested in lo- gistics processes in addition to the retail divisions and Schwarz Produktion. As part of a group-wide logistics strategy, the divisions are rigorously working on developing future-oriented, innova- tive, and efficient solutions and processes which cover the entire supply chain and make efficient use of resources, especially by consistently linking them and bundling them together. For example, the efficiency of our logistics processes is already being measured today by key figures. In particular, capacity utilization of trucks and optimal routes are calculated in order to reduce the distance they travel. The Group is also looking into linking all the transport operations of the divisions together in order to discover further potentials for synergy and to make the use of transport capacities even more efficient. Organization and Management UNGC Structure and Responsibilities Responsibilities in the area of energy and emissions are structured and assigned differently within each division. However, one uniform approach exists when it comes to energy – The Energy Management department in each division is responsible for its area and for recording energy consumption in co- operation with the respective Controlling depart- ments responsible. In the case of the administrative locations of Schwarz Dienstleistungen in Neck- ) ( | ) ( I R G 5 0 3 2 0 3 arsulm and GreenCycle, energy management is bundled together under a corresponding depart- ment of the property management company Schwarz Immobilien Service, which is oper- ationally responsible for the system and op- erates it. In the case of PreZero in Germany, energy management is handled by the HSEQ (Health, Environment, Safety, Quality) department based in the Porta Westfalica facility. Schwarz Beschaffung organizes overall energy purchasing for nearly 20 national division entities, although the respective countries have the final say on choosing providers. In addition, Kaufland underscores its holistic approach to increased energy efficiency by appointing energy managers in all of its national entities. They are responsible for optimizing energy management on a regular basis and for its strategic control on the basis of key figures. Other areas of energy are likewise structured and assigned differently within each division. At Kaufland, for example, the Real Estate Projects department is responsible for implementing projects at a national level in accordance with the International Construction department’s guidelines in the areas of heating, ventilation, refrigeration, refrigerated shelves, re- frigerated cabinets, air-conditioning systems, light, energy, and emissions. In the case of Lidl, the Real Estate department is responsible for air-conditioning and refrigeration systems as well as heating and lighting in stores, logistics centers, and the ad- ministration building. The procurement division Schwarz Beschaffung is then responsible for issues related to refrigerated shelves and cold storage cells. In the case of Schwarz Produktion, climate protection and emissions are the responsibility of Central Energy Management in cooperation with the Public Relations and Sustainability departments, while at Kaufland’s meat processing plants the Environmental Management department has this responsibility. For GreenCycle, any issues related to environmental and CO2 management as well as the quality management system are the responsibility of the Energy and Environmental Innovations department. The group-wide logistics strategy comes from a separate department, which reports directly to the Schwarz Dienstleistungen board of directors, while coordination of any matters related to this topic is the responsibility of the Logistics department at

06 Ecosystems Implementation and Measures UNGC Driving Forward the Energy and Mobility Revolution Energy Efficiency in Production Plants and Stores During the reporting period, the Schwarz Group further extended the availability of e-charging sta- tions in Kaufland and Lidl store parking lots. By the end of fiscal year 2019, 308 stores in Germany were each provided with at least one e-charging station, whose electricity comes exclusively from renewable energies. A total of 1,184 stores exist throughout the Group. Lidl is currently constructing an additional 72 stores in Germany, with roughly 200 in planning. Kaufland is aiming to equip 20 of its own facilities as well as selected rental locations with e-charging stations each year until 2028 and to reach a number of 136 e-charging stations oper- ating on green electricity by the end of 2020 alone. Kaufland and Lidl’s common goal over the medium term is to have an e-charging station available at each of their stores in Germany. In cooperation with the e-mobility partner WeShare, the retail divisions are also making their stations available for charging at night – which has been the case at their Berlin stores up until now. The cooperation is to be ex- tended to other major cities in Germany. Because of this massive expansion, the Schwarz Group is becoming the operator of the largest e-charging network in the German food retail sector. In addi- tion, Kaufland has also provided e-charging sta- tions to almost 60 stores of other national enti- ties, including the Czech Republic and Romania. Schwarz Produktion and Kaufland’s meat pro- cessing plants have implemented a wide variety of measures intended to provide climate protection through energy efficiency. These measures range from the large-scale rollout of illumination measures using LED bulbs and compressed air measures using so-called air leader control, to the designing of complex energy networks at the Übach-Palen- berg facility. During the fiscal years 2018 and 2019, Schwarz Produktion implemented measures for improving energy efficiency, which resulted in a to- tal savings of more than 17,000 megawatts – this corresponds to the annual power consumption of roughly 7,000 two-person households. Energy efficiency also plays a key role in the store con- cepts of the retail divisions, for example, exploiting the heat loss from refrigeration systems. Kaufland and Lidl are making increasing use of the heat lost from their refrigeration cabinets and systems to heat buildings. One example of the realization of this long-term commitment can be found at Kaufland, where a total of 241 stores throughout the world have already been equipped with so-called compound refrigeration/climate systems (KKV). In order to reduce CO2 emissions even further, refriger- ation cabinets in many locations are being operated with natural refrigerants like propane or with CO2. Kaufland and Lidl plan to expand the range of e-charging stations at Standards for Sustainable Building their own stores in Germany The Schwarz Group places great value on de- signing its stores, administrative buildings, and logistics centers to be sustainable and energy- efficient, and it incorporates relevant national and international standards on sustainable construc- tion into these designs. Lidl takes into account the requirements established for the DGNB’s gold certifi- cate for the construction of its new stores in Germany. 5 - 5 0 3 | 5 - 2 0 3 | 4 - 2 0 3 | 6 1 - 2 0 1 | 2 1 - 2 0 1 I R G 96

06 Ecosystems WATER & OCEANS At One Earth – One Ocean e.V., we are concerned about our waters. Pollution of our oceans, rivers, and seas endangers the organisms which live in them and represents one of the biggest challenges for our global community. Our oceans already contain an estimated 150 million tons of plastic, and every year this figure increases by more than ten million tons. A number of different factors are often at play with the issue of water pollution – and the retail trade is responsible for some of them because of its enormous consumption of plastic. As a result, the Schwarz Group is a key partner in the fight for cleaner oceans – and one with enormous potential. Günther Bonin, Board, One Earth – One Ocean e.V. 98

06 Ecosystems 100 of the REset Plastic strategy, also established the common goal of eliminating microplastics on an even larger scale by promising to remove them from the formulations of laundry detergents, polishers, and cleaning agents as well as cosmetic products in their own brand assortment by the end of 2021, provided the elimination of synthetic polymers does not result in significant limitations to product performance and/or safety. In order to sensitize customers to this issue as they shop, the divisions have been labeling their products with the appropriate “without microplastics” logos since the second quarter of 2020. As a scientific competence partner, the Fraunhofer Institute UM- SICHT is supporting the Schwarz Group with its implementation of its formulated goals. In addition to protecting waters from pollution and contamination through waste and chemi- 3 0 3 I R G cals, Schwarz Group is keeping an eye on the efficient use of water resources. As a result, we consider it important to use water-efficient systems in production processes and for construction work at our own facilities. In addition, Kaufland’s meat processing plants and to some extent Schwarz Produktion have set for them- selves the goal of continuously monitoring and reducing specific water consumption at their own plants. As part of this goal, Kaufland’s meat pro- cessing plants are working on saving 20 percent of average water consumption at all its locations by 2022. By the end of the fiscal year, the division had already succeeded in achieving water savings of 11 percent compared to the 2017 base year. Schwarz Produktion has defined the key figure “specific water consumption” for some of its loca- tions. An ambitious target is established each year for these facilities, where every improvement must be ensured by taking concrete measures (e.g. in cooperation with the operational excellence team). Organization and Management UNGC Structure and Responsibilities In the case of Kaufland, the Construction depart- ment has responsibility for water-related issues in operational management; at Lidl this responsibility is divided over several departments. For example, the Real Estate/Construction department is re- sponsible for designing water supply and disposal systems. In the case of Schwarz Produktion, responsibility for implementing efficiency measures and determining water consumption is shared by Central Engineering and the respective production plants. At Kaufland’s meat processing plants it is the responsibility of the Environmental Manage- ment department. Moreover, plant managers and local water protection officers are responsible for compliance with wastewater regulations. Respon- sibilities for all activities related to microplastics and protecting waters and seas from pollution by waste are established under the group-wide REset Plastic strategy. In these cases, the responsible department reports directly to the executive board of the GreenCycle environmental division. In both retail divisions and at Schwarz Dienstleistungen, the Purchasing and/or Procurement department is responsible for compliance with guidelines related to the supply chain. Supplier Requirements and Review Businesses involved in the Kaufland and Lidl sup- ply chain that are entrusted with producing textiles 2 - 4 1 4 | 4 1 4 | 2 - 8 0 3 | 8 0 3 | 2 1 - 2 0 1 I R G for the retail divisions’ assortment of promo- tional goods, or for Kaufland’s permanent product range, are subjected to a detailed review. In addition, the textiles themselves are tested separately for predominantly harmful substances on the basis of various legal requirements and voluntary commitments. All textile suppliers are bound to compliance with the targets established within the scope of the detox commitment. Kaufland and Lidl use annual waste water tests to review compliance with the respective limit values and bans.

06 Ecosystems Implementation and Measures UNGC Resource Conservation in Textile Production Our retail divisions as well as Schwarz Beschaffung are committed to the responsible management of water, waste, and chemicals in our textile manufac- turing plants in Asia. We use on-site training to de- velop and sensitize our suppliers and producers in targeted areas. Kaufland started a project in 2019 which focuses primarily on studying chemicals in wastewater and developing solutions to optimize chemical management at our production facilities. The Kaufland textile sustainability initiative was carried out in close cooperation with a university in Bangladesh as well as suppliers and test insti- tutes, and this initiative is also aimed at students. The innovative PURE project was initiated by Lidl together with the German Society for International Cooperation for the purpose of having employ- ees of Lidl textile suppliers be trained by local experts. The project also systematically recorded local resource consumption, defined performance indicators and developed specific plans for saving resources. Expanding Global Marine and Water Protection As part of its REset Plastic strategy, the Schwarz Group has launched a river cleaning project in Bekasi, Indonesia. This project is also headed by the environmental organization One Earth – One Ocean and PT Wasteforchange Alam Indonesia, a local specialist for waste and recycling management. Intense preparations for the project were carried out over the course of the report- ing period, with the project expected to go into implementation later in fiscal year 2020 and to run initially for three years. With the help of small boats called “sea hamsters”, rivers and bank areas are freed of waste so that it does not reach the sea and instead can be returned to the recyclable material loop. As part Together with WWF, PreZero retrieves so-called ghost nets from the Baltic Sea of its plastics strategy, the Schwarz Group has also been taking part in “Project STOP” since 2019, which is the leading initiative for preventing plastic waste in oceans. “Project STOP” develops effective material management systems and contributes to their realization through funding and expertise. The first project started in the Indonesian coastal region of Muncar in April 2018, and two other partner cities were added in late 2019. The PreZero subsidiary of our GreenCycle environmental division is likewise committed to global marine protection. PreZero works in coop- eration with WWF to recover and reuse so-called “ghost nets” from the Baltic Sea. Additionally, the company supports the WWF marine protection program in preventing and disposing of plastic waste in Southeast Asia. Active Against Pollution of the Black Sea and the Atlantic In 2018, Kaufland supported the first WIND2WIN maritime windsurfing challenge in Bulgaria as its main sponsor in order to raise awareness of plastic pollution in the Black Sea through various campaigns. As part of a follow-up campaign in 2019, volunteers from Kaufland Bulgaria collected almost 700 kilograms of waste while working to- gether with local surfers. Additionally, Lidl Portugal, as part of the TransforMAR project, is showing its commitment to cleaner Atlantic beaches and to raising public awareness on reducing plastic and recycling. By placing plastic waste collection con- tainers on beaches and by rewarding environmen- tally conscious behavior, the project succeeded in collecting and recycling more than 267,000 pieces of plastic waste in 2019. Additional measures and details on projects are available online at: https://gruppe.schwarz/en/responsibility/ecosystems 2 - 4 1 4 | 1 - 3 1 4 | 2 - 8 0 3 | 2 1 - 2 0 1 I R G 102

06 Ecosystems Materiality and Objectives UNGC As part of the ecosystem, biodiversity, also known 2 - 8 0 3 | 2 - 4 0 3 | 4 0 3 I R G as species diversity or biological diversity, is a necessary prerequisite for agriculture and thus for human nourishment. Biodiversity is endangered in many places by the effects of climate change and industrial agriculture. The Schwarz Group not only takes measures at the corporate level to maintain biodiversity, but it also initiates activities and projects along the supply chain. The Schwarz Group directly impacts biodiversity and land use through various activities, for example through the way it seals surfaces when it builds 2 - 4 0 3 I R G new stores, logistics centers, and production facilities. Building specifications exist at Kaufland and Lidl which also include general rules for the details on planting trees and plants, and they must be taken into consideration when building new facilities. However, we have still not defined any concrete topics related to biodiversity or established any appropriate group- wide regulations. In order to keep environmental impacts related to biodiversity and land use to a minimum in the supply chain and production processes, the Schwarz Group pays special attention to such topics in its CSR strategy. For example, is our de- clared goal to strive for a healthy and environmen- tally friendly use of chemicals in the production of our own brands by the end of 2030. As a result, we can influence the use of pesticides and fertilizers in agriculture for example. In the textile supply chain, one of the issues involves avoiding the use of specific chemicals banned under the Greenpeace Detox campaign (see Water & Oceans, p. 98). In the area of sustainable raw materials, we are addressing the methods of cultivation, extraction and production in detail and want to reduce their potentially negative effects on biodiversity (see Sustainable Assortment Policy, p. 58). random audits of its non-food suppliers, which include analyzing individual environmental aspects as well as social aspects. Our divisions also make 2 - 4 1 4 | 2 - 8 0 3 | 6 1 - 2 0 1 | 2 1 - 2 0 1 I R G use of recognized product seals and labels (see Sustainable Assortment Policy p. 58). Kaufland and Lidl are also Fairtrade partners. In addition to social standards, the Fairtrade seal also imposes ecological standards such as standards related to the use of pesticides and to the encouragement of organic farming. The retail divisions also promote ecological agriculture through their strategic partnerships with Bioland (Lidl) and Demeter (Kaufland). Their goal here is to bring high-quality and premium local organic products into mainstream society and to drive forward the expansion of organically cultivated areas (see p. 62). Organization and Management UNGC Structure and Responsibilities 8 0 3 | R G 4 0 3 I Issues of land use and biodiversity at Kaufland and Lidl are the responsibility of and are implemented by the Real Estate/Construction and Purchasing departments. The Real Estate/Construction department is responsible for environmental protection during the construction of stores, logistics centers and administrative buildings. Purchasing is responsible for compliance with and implementation of ecological standards in the supply chain. In the case of Lidl, Purchasing is also responsible for controlling raw material targets, while the quality assurance team in Purchasing is responsible for pesticides management. The divi- sions’ CSR departments support this process and act as both initiators and internal advisors. Through their codes of conduct, our divisions commit their business partners to environmental protection as well. Kaufland carries out its own In the case of Schwarz Dienstleistungen, Schwarz Beschaffung is responsible for communi- cating the Code of Conduct to business partners 104

06 Ecosystems Implementation and Measures UNGC Systematically Developing Biodiversity In order to promote the protection and expansion of biodiversity in food cultivation together with pro- ducers, Kaufland is a cooperation partner of the Bodensee-Stiftung and Global Nature Fund and is also involved in the EU-wide initiative “Biodiversity in Standards and Labels for the Food Industry”. Kaufland works together with various producers for conducting on-site tests. Together with some initial farmers, Kaufland implemented concrete measures such as the expansion of flower strips or the increased cultivation of more resistant crops. Kaufland’s focus here is on adapting measures to local conditions such as soil type or the size of the crop and area. Actively Promoting Biodiversity in Germany As part of the Lidl Habitat Initiative established in 2018, Lidl Germany is raising customer and sup- plier awareness of the threats to biodiversity and is also contributing to the protection of wild bees and other beneficial insects. In January 2019, the program was recognized by the United Nations as an official project of the UN Decade on Biodiversity. Just as one example of successful implementa- tion, Lidl installed over 140,000 m² of flowered areas in 30 logistics centers in Germany over the course of 2018 and 2019. Schwarz Produktion also targets and promotes on-site biodiversity at its plant premises in Roßbach (in the Burgenland district). A total area of 275,000 m² is either being managed sustainably through concrete measures like flower and natural grazing areas or is being left completely alone and up to nature. An area of 22,000 m2 of this land is laid out as a space for wildflowers, and a permanent habitat for insects Schwarz Produktion promotes the population of domestic honey bees by establishing their own beehives with ideal areas for nesting and feeding has been created on another part of the grounds by main- taining the land appropriately without regular mow- ing (so-called three-field mowing). In addition, a small herd of alpacas is responsible for maintaining an additional section of 12,000 m², which enables this part of the land to be maintained through per- manent, natural, climate-neutral grazing. There are currently plans to also use the fire protection strip around the plant as a wildflower area, which would create an additional living space of approx. 11,500 m² for insects. Sustainable Cultivation of Soy As a high-protein feed, soy is used as the central component of animal feed for the production of a great number of products. Lidl is therefore working intensely with a number of Lidl national entities to promote a more sustainable global soy production as part of the “Lidl Soy Initiative”. Together with the non-profit organizations ProTerra Foundation, Roundtable on Responsible Soy, and Donau Soja, Lidl has been working on encouraging a move to more sustainable soy cultivation in Brazil (the main production country) and in Europe for a number of years. By the end of 2019, Lidl had over 700,000 tons of soybeans certified for origin being sold in Germany, Austria, Switzerland, Great Britain, France, the Netherlands, Belgium, Finland, Sweden, and Denmark. In addition, the Schwarz Group’s retail divisions will rely increasingly on soy grown in the European Union in the future. In order to gradually promote the cultivation of certified, more sustainable and GMO-free soy, Kaufland and Lidl entered into a partnership with Donau Soja in 2019. The orga- nization provides long-term support for small and medium-sized producers who grow their products according to a more sustainable, GMO-free stan- dard and can show shorter transport routes. 2 - 8 0 3 | 2 - 4 0 3 | 3 4 - 2 0 1 | 2 1 - 2 0 1 I R G 106

06 Ecosystems Volume of Greenhouse Gas (GHG) Emissions Gross volume of GHG emissions in tons CO2 equivalent1, 2, 6, 7 Direct GHG emissions (Scope 1) in tons CO2 equivalent Volatile gases/coolants3 Mobile combustion Company cars Logistics (internal) Stationary combustion Natural gas Heating oil Kaufland 1,996,822 2,016,661 406,529 387,913 271,390 262,111 30,757 29,619 30,757 29,619 0 0 104,381 96,184 96,020 87,547 8,361 8,637 Indirect GHG emissions (Scope 2) in tons CO2 equivalent Incl. electricity per market-based approach Incl. electricity per location-based approach District heating Electricity per market-oriented approach Electricity per location-oriented approach Indirect GHG emissions (Scope 3) in tons CO2 equivalent 4 Purchased goods/consumables Fuel-/energy-related emissions Transport (store logistics, procurement logistics KL) Operational waste 775,808 794,229 988,314 1,039,106 19,972 19,525 755,836 774,704 968,341 1,019,581 814,484 834,519 275,702 283,533 307,900 317,139 141,204 143,767 89,679 90,079 1 E P O C S 2 E P O C S 3 E P O C S Lidl Dienstleistungen Schwarz Schwarz Produktion 3,540,431 3,614,358 139,852 19,302 304,765 319,150 497,656 520,420 173,379 220,957 216,962 193,836 137,671 119,409 79,290 74,426 107,315 105,627 107,315 105,627 –5 –5 888,055 1,035,209 1,605,924 1,540,386 15,734 17,177 872,322 1,018,032 1,590,190 1,523,209 2,154,720 2,058,728 730,504 686,503 566,353 540,589 602,315 570,297 255,548 261,340 47,428 5,656 0 0 44,664 5,467 9,276 5,467 35,388 0 2,764 190 2,764 190 – – 65,916 9,261 49,703 12,773 405 291 65,512 8,970 49,298 12,483 26,508 4,386 604 0 22,051 4,386 3,853 0 0 0 32,280 31,840 946 297 4,376 4,394 2,277 2,203 2,099 2,191 26,958 27,149 26,958 27,149 – – 142,370 162,116 122,170 132,198 0 0 142,370 162,116 122,170 132,198 130,115 125,195 4,618 4,782 43,336 45,841 70,269 63,619 11,893 10,953 Schwarz Group 5,981,870 5,969,471 983,8935 945,829 445,715 483,365 296,759 233,315 179,982 156,698 116,778 76,617 241,419 229,149 233,058 220,512 8,361 8,637 1,872,150 2,000,814 2,766,110 2,724,463 36,111 36,992 1,836,039 1,963,822 2,729,999 2,687,470 3,125,826 3,022,827 1,011,427 974,818 939,639 907,955 817,640 777,684 357,120 362,372 Emission Intensity Kaufland Lidl Dienstleistungen Schwarz Schwarz Produktion Schwarz Group Total emissions in t CO2 equivalent per employee Total emissions in t CO2 equivalent per m2 of sales area 15.90 16.08 0.42 0.43 11.44 12.77 0.30 0.32 16.29 6.41 87.85 94.06 13.38 14.39 Fiscal year 2019 Fiscal year 2018 3 - 5 0 3 | 2 - 5 0 3 | 1 - 5 0 3 I R G 4 - 5 0 3 I R G 1 Scope 2 emissions from the market-based approach were used to calculate total gross GHG emissions. 2 Sources for conversion factors: Greenhouse gas potentials (GWPs): IPCC 2013; Scope 1: Fuels IPCC 2006; volatile gases composition in accordance with ASHRAE 34; Scope 2: fuel disclosure of suppliers of IEA 2018; district heating standardized ifeu model across all countries + IPCC 2006; Scope 3: purchased goods ifeu calculation based, among other systems, on Ecoinvent, Plasticseurope and UBA; fuel- and energy-related emissions ifeu calculations based on IEA World Statistics + IPCC 2006, transports IPCC 2006, Ecoinvent and IEA 2018/2019 (electromobility); operational waste ifeu models and Ecoinvent; shuttle service DEFRA and Ecoinvent. 3 Emissions from evaporated coolants from cooling units. Refill quantities were generally collected. Figures may also include initial filling quantities following a switch to new cooling units. 4 The values above in part cover categories 1, 3, 4, and 5 under the GHG protocol. 5 Heating oil consumption by Lidl is not included. 6 Liquid gas consumption is not included in group-wide figures. 7 Deviations between the last digits of the totals for individual items and grand totals are due to rounding of decimal places. 108

ƒ Analytical evaluation of data and trends of quantitative information which are reported by all sites for consolidation on corporate level ƒ Evaluation of local data collection, validation and reporting processes as well as the reliability of reported data based on a sample of the sites Kaufland Germany, Kaufland Romania, Lidl Germany and Lidl France ƒ Assessment of the overall presentation of the disclosures. Conclusion Based on the procedures performed and the evi- dence obtained, nothing has come to our attention that causes us to believe that the information pub- lished in the sustainability report of Schwarz for the period from March 1, 2019 to February 29, 2020 marked in the text and the GRI-index with the symbol “ spects, in accordance with the Reporting Criteria. ” are not prepared, in all material re- Statement of Independent Auditor and Assurance Standards Board (IAASB). This Standard requires that we plan and perform the assurance engagement to obtain limited assur- ance of whether any matters have come to our attention that cause us to believe that the above mentioned disclosures for the reporting period from March 1, 2019 to February 29, 2020 has not been prepared, in all material respects in accordance with the aforementioned Reporting Criteria. In a limited assurance engagement the evidence gathering procedures are more limited than in a reasonable assurance engagement and therefore significantly less assurance is obtained than in a reasonable assurance engagement. The choice of audit procedures is left to the auditor’s own judgement. Within the scope of our engagement, we performed amongst others the following assurance procedures: ƒ Inquiries of personnel on corporate level, who are responsible for the materiality analysis, in order to gain an understanding of the process- es for determining material sustainability topics and respective reporting boundaries of Schwarz ƒ A risk analysis, including a media search, to identify relevant information on Schwarz sus- tainability performance in the reporting period ƒ Reviewing the suitability of internally developed Reporting Criteria ƒ Evaluation of the design and implementation of the systems and processes for the collection, processing and monitoring of the disclosures and information included in the scope of the assurance engagement, including the consoli- dation of the data ƒ Inquiries of personnel on corporate level respon- sible for determining disclosures on concepts, due diligence processes, results and risks, for conducting internal controls and carrying out internal control procedures and consolidating the data and information ƒ Evaluation of selected internal and external documents 110

For the Materiality Disclosures Service, GRI Services reviewed that the GRI content index is clearly presented and the references for Disclosures 102-40 to 102-49 align with ap- propriate sections in the body of the report. This service was performed on the German version of the report. 5 5 - 2 0 1 I R G UNGC UNGC UNGC UNGC GRI Content Index GRI Content Index GRI Standard and Specifications Page/Online Omissions/Remarks GRI 101: Foundation 2016 GRI 102: General Disclosures 2016 Organizational profile 102-1 102-2 102-3 102-4 102-5 102-6 102-7 102-8 102-9 102-10 Name of the organization Activities, brands, products, and services Location of headquarters Location of operations Ownership and legal form Markets served Scale of the organization Information on employees and other workers Supply chain Significant changes to the organization and its supply chain 2, 6, 8 6–7 6 6, 9 6–8 6–7 6, 8–9, 52 52–53 17–19 2, 6 –8, 17 102-11 102-12 Precautionary Principle or approach External initiatives 102-13 Membership of associations 10, 12–13, 18, 38–41, 70–71 2, 12, 16–23, 33–36, 52–53, 59–63, 67, 80–83, 93, 96, 99–104, 106 21–22, 61 Strategy 102-14 102-15 Statement from senior decision-maker Key impacts, risks, and opportunities 4–5 17–19, 28, 43, 59, 93, 99 Ethics and integrity 102-16 Values, principles, standards, and norms of behavior 10–13, 16, 32, 39–40, 44, 48, 60, 66–68, 71, 78–79, 83–84, 93, 96–97, 104 Governance 102-18 102-21 102-29 102-31 Governance structure Consulting stakeholders on economic, environmental, and social topics Identifying and managing economic, environmental, and social impacts Review of economic, environmental, and social topics 7 20, 25 17–18, 24 14, 18 Stakeholder engagement 102-40 102-41 102-42 102-43 List of stakeholder groups Collective bargaining agreements Identifying and selecting stakeholders Approach to stakeholder engagement 102-44 Key topics and concerns raised Reporting practice 102-45 102-46 Entities included in the consolidated financial statements Defining report content and topic Boundaries List of material topics Restatements of information Changes in reporting Reporting period Date of most recent report Reporting cycle Contact point for questions regarding the report Claims of reporting in accordance with the GRI Standards GRI content index External assurance 102-47 102-48 102-49 102-50 102-51 102-52 102-53 102-54 102-55 102-56 112 20 52 20 20, 25, 48, 50, 67, 71–72, 80, 85, 106 25–26 7 24–26 27 2 2 2 2 2 115 2 112–114 2, 109–111 Not applicable, since first report Not applicable, since first report Not applicable, since first report

GRI Content Index GRI Standard and Specifications Page/Online Omissions/Remarks GRI 401: Employment 2016 GRI 103: Management approach 2016 (incl. 103-1, 103-2, 103-3) 401-1 New employee hires and employee turnover 33 53 GRI 403: Occupational Health and Safety 2016 GRI 103: Management approach 2016 (incl. 103-1, 103-2, 103-3) 403-1 Workers representation in formal joint management–worker health and safety committees Types of injury and rates of injury, occupational diseases, lost days, and absenteeism, and number of work-related fatalities Workers with high incidence or high risk of diseases related to their occupation 403-2 403-3 GRI 404: Training and Education 2016 GRI 103: Management approach 2016 (incl. 103-1, 103-2, 103-3) 404-2 Programs for upgrading employee skills and transition assistance programs Percentage of employees receiving regular performance and career development reviews 404-3 GRI 405: Diversity and Equal Opportunity 2016 GRI 103: Management approach 2016 (incl. 103-1, 103-2, 103-3) 405-1 Diversity of governance bodies and employees 18 –19, 27, 37–41 40 38, 54 38–39 42–45 35, 40, 43–46, 78–79 44 27, 32–36 34–35, 54 405-2 Ratio of basic salary and remuneration of women to men 33 GRI 406: Non-discrimination 2016 GRI 103: Management approach 2016 (incl. 103-1, 103-2, 103-3) 406-1 Incidents of discrimination and corrective actions taken GRI 412: Human Rights Assessment 2016 GRI 103: Management approach 2016 (incl. 103-1, 103-2, 103-3) 412-3 Significant investment agreements and contracts that include human rights clauses or that underwent human rights screening 27, 32–36 36, online 17–19 16 GRI 413: Local Communities 2016 GRI 103: MManagement approach 2016 (incl. 103-1, 103-2, 103-3) Operations with local community engagement, impact 413-1 assessments, and development programs 27, 48 –49, 81–82 36, 48–51, 72, 102 For reasons of surveyability, only overall turnover can be reported, and not turnover by age group, gender or region. We will review the feasibility of reporting this information in the future. For reasons of internal control relevance, we only collect and report sick leave. For reasons of safeguarding personal rights, information on minority affiliation is generally not collected or reported. Compensation is based on an employee's position and independent of gender. The ratio of basic salaries is therefore not reported. https://gruppe.schwarz/en/responsibility/people We report on social engagement, commitment to local communities, etc. across the entire Group also with the aid of division/country best practices. Corresponding activities exist in all divisions and operational national entities. GRI 414: Supplier Social Assessment 2016 GRI 103: Management approach 2016 (incl. 103-1, 103-2, 103-3) 414-2 Negative social impacts in the supply chain and actions taken 17–18, 59–60, 100 –101 18, 27, 62–63, 100, 102, 104 We report on impacts that generally arise in the supply chain and corresponding actions; the number/percentage of suppliers checked with regard to their impacts cannot currently be reported across the Group. GRI 416: Customer Health and Safety 2016 GRI 103: Management approach 2016 (incl. 103-1, 103-2, 103-3) 416-1 Assessment of the health and safety impacts of product and service categories 27, 65–67, 70–72 67– 68 416-2 Incidents of non-compliance concerning the health and safety impacts of products and services 65–66 Animal welfare GRI 103: Management approach 2016 (incl. 103-1, 103-2, 103-3) FP 2 Share of purchasing volume which is certified according to recognized standards 28, 60 59 –60, 62, 68, 73 For reasons of relevance to internal control, we report in detail on the number of product analyses carried out for our own brands. For reasons of relevance to internal control, we report on the number of recalled sales items affected by public product/merchandise recalls for our own brands. Content reviewed by independent auditor UNGC Relevant contents for implementing the UNGC principles 114 UNGC UNGC UNGC UNGC UNGC UNGC UNGC UNGC

From Soccer Stadium to Sustainability Report – How Grass Clippings are Turned into Reusable Material PreZero, which is part of the Schwarz Group, has been the official sustainability partner of the national German TSG Hoffenheim soccer club since 2019. One of the most important elements of this cooperation is actually the stadium’s turf. Because while other people are watching the ball, we are interested instead in the grass underneath. Optimal stadium turf must be maintained regularly and most importantly, it has to be mowed. We reuse the generated green waste for our grass paper, thus making a contribution to environ- mental protection. Because in contrast to con- ventional paper, whose production takes up a lot of energy, water and chemicals, grass paper is more ecological – the energy-saving production process saves up to 75 percent of CO2. The ma- terials in this process are not chemically treated, and producing a ton of paper requires around just two liters of water instead of 6,000 liters. Our grass paper containing original stadium turf has since been used successfully as a popular autograph card. We distribute roughly 200,000 of these cards to TSG fans each season. This is a pilot project which makes a strong statement, including for our Sustainability Report. www.gruppe.schwarz