Åhléns sustainability report 2012 English

2012 REPORT SUSTAINABILITY

1 | ÅHLÉNS SUSTAINABILITY REPORT 2012

Year in brief Our goal is that sustainability should work run like a Green Thread through everything we do at Åhléns. We want to incorporate sustainability princ­ iples, thinking, behaviour and actions in everything we do. Our work on taking responsibility and dev­el­ oping more sustainable retailing is conducted in many different areas.

Here are some of the notable acti­ vities and advances we made in 2012.

strategY

Sustainability now plays a key role in Åhléns’ new strategy.

CUSTOMER DIALOGUE

Customer survey about sustainability shows keen interest in sustainability issues.

p. 6 PRODUCT RANGE

p. 9

Sales of Bra val (Good Choice) products rose from 3.4 to 4.4% in 2012.

Quality

p. 12

New complaints system creates platform for improving quality.

SUppliers

p. 16

Working conditions were reviewed in 75% of the factories in countries at risk.

OPERATIONS & LOGISTICS

p. 19

Electricity consumption in our Swedish department stores was reduced by 15% between 2009 and 2012.

EMPLOYEES

2012

The Employee Satisfaction Index (ESI) rose further to ESI 90.

p. 27

p. 23 COOPERATION Continued cooperation with Myrorna and Stadsmissionen.

p. 31

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CEO’s statement At Åhlens, we are passionate about our mission to “förenkla, förbättra och förgylla livet varje dag”, meaning that we strive every day to make millions of peoples’ lives as easy, enjoyable and meaningful as possible. For us, sustainability is a key aspect of that mission and one of the five elements that make up Åhlens On the Way – the new Åhlens direction strategy.

It’s all about People I joined the company in August last year because I believe in the incredible potential of Åhlens to make a difference in the changing lives and changing needs of the people we serve, our customers. We are convinced that in order to do that we must start with People Focus – for us that means being compulsive about always starting with the customer.

Today our Customer Club, Åhlens Klubb, is the voice of over 1.6 million members and is one of our sources of feedback, insight and collaboration with our customers. In our 2012 customer club survey, sustainability was confirmed as very important to our customers – landing in average at 6.1 on a 7 point scale with 57% of respondents concerned with sustain­ ability questions when shopping with Åhlens.

For us, this reconfirms that what is right and good for people will always be right and good

for business. That is why sustainability is not an add-on to what we do but, rather, runs through everything we do. It’s our Green Thread running through our organization, our coworkers, our suppliers and partners all the way to our customers, and is an integral driver of our longterm growth.

Securing a solid base in 2012 I feel proud of what we have achieved in 2012, having made great progress in securing that the base of our sustainability work is properly in place. We launched a system for capturing customer feedback and complaints, updated and secured accurate Åhlens product and material specifications to our suppliers, and launched a web-based supplier portal to insure that both our buyers and suppliers have shared access to all important requirements as well as our Sustainability Buying Criteria.

I feel confident with our work with social responsibility in our supply chain, where we systematically evaluate supplier performance through audits according to the BSCI Code of Conduct. I am especially pleased that we are now members of the Better Cotton Initiative (BCI), a global partner whose aim it is to improve the growing practices of cotton throughout the world, minimizing environmental impact and improving the working conditions and life situations of growers and their families.

In Spring 2012 we launched Bra Val, our guide to more sustainable products. These products, marked clearly for our customers, take extra consideration for people and the environment.

We are committed to increasing the percentage of Bra Val products within our offer, and have set challenging goals for each of our purchasing areas as we progress toward our 2015 goals. Åhlens – On the Way We are convinced that collaboration is the key to developing a truly value-driven, sustainable and successful Åhlens. We will involve our customers, co-workers, suppliers and other stakeholders to develop and calibrate our work with the Green Thread. We will educate our co-workers and will measure and follow up our initiatives. We will report regularly on every “knot” in the Green thread communicating our challenges as well as our successes, and will increasingly guide our customers to find even more sustainable products through Bra Val. We hope that this report is a small step in conveying that Sustainability is much more than just an add-on to what we do, but rather, runs through everything we do at Åhlens. We believe that it can positively impact and improve our business and our growth potential.

It is expected of us, for sure.

More importantly, it is what we expect from ourselves.

Gregg Mowins CEO, Åhléns

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It is our ambition that this report will provide honest and relevant information about our sustainability work. We appreciate your comments and thoughts on this report, see contact information on last page.

About Åhléns Åhléns AB is part of the Axstores retail Group, which in turn is part of Axel Johnson AB, a company that is owned by Antonia Ax:son Johnson and her family. Åhléns was founded in 1899 in Insjön, Sweden.

Today, we have one of the Nordic region’s most recognized brands with more than 100 stores in Sweden and Norway, where we offer a wide range of fashionable and affordable products in the areas of Fashion, Beauty, Home and Media.

Åhléns 2012

RESPONSIBILITY THROUGHOUT Åhléns’ responsibility and sustainability efforts encompass the entire operation, with a focus on the areas and aspects in which the operation has a significant impact on people and the environment. Our greatest responsibility is for the elements of the value chain that we can control and manage. For other elements where the impact is more indirect, we aim to exert influence through active dialogue and cooperation.

SEK 4.7 billion in sales 3,249 employees Approximately 85 million visitors to our stores 1.6 million club members 76 department stores in Sweden 33 interior design stores in Norway

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Our value chain

Åhléns offers an expansive range encompassing tens of thousands of products. They come from all over the world, primarily Asia and Europe. Many products are purchased through our four production offices in Asia and shipped to Sweden. The products are sold by employees in our department stores and stores to customers in Sweden and Norway.

100 department stores and stores

1.6 million club members About 3,000 employees

480 suppliers in 38 countries Many partners and networks

RAW MATERIALS Cultivation of cotton and palm oil has a significant impact on people and the environment. To contribute to reducing the impact, Åhléns has joined the Better Cotton initiative and formulated demands concerning palm oil in products.

SUPPLIERS Åhléns is a member of BSCI, which focuses on improving working cond­ itions in the production facilities. We have also commenced work on environmental issues in the supply chain.

Transportation by boats and trucks

LOGISTICS Our transport from Asia takes the form of fully loaded container vessels.

Continuously improving distribution in Sweden and Norway are key to reducing the climate impact.

DEPARTMENT STORES & WAREHOUSES We focus on developing the sorting of waste at source and waste recycling. Transportation plastics are currently recycled into new Åhléns bags. New energy-saving lighting is continuously being installed in our de­part­ ment stores.

Raw materials from many different countries

EMPLOYEES Åhléns aims to be a committed and attractive workplace. Value-governed management, health and preventive health­ care are key elements in the work. Each dep­ artment store now has a trained sust­ainability ambassador.

CUSTOMERS According to our own customer survey, many customers are interested in sus­t­ai­nability but lack sufficient information. Åhléns’ Bra val guide shows the way to more sustainable products.

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STAKEHOLDERS Being able to contribute and resolve the major global challenges requires cooperation. Åhléns participates in several initiatives and networks and engages in dialogue with Non-Governmental Organizations.

New strategy & conditions Sustainability is one of the five areas forming the foundation for Åhléns’ efforts to become a successful and profitable company long-term. This is stated in Åhléns’ new overall strategy. Åhléns’ owner, Axel Johnson AB, also clarified its strategy for responsible enterprise during the year. All in all, this means that sustainability has been assigned a very clear position in the organization.

Åhléns. All employees must be able to relate to the Green Thread in everything we do and particularly in the four cornerstones defined as: • sustainable products and services • sustainable production • sustainable department stores and operations • social responsibility The Green Thread entails that we must use resour­ces and materials efficiently and sparingly, and that we choose materials and substances that: • comply with our specifications

THE GREEN THREAD Sustainability is one of the five areas in our new Åhléns-På-Väg strategy, which will propel the company forward and toward growth. The strategy makes it clear that sustainability work is an integral part of the operation aimed at ach­ieving a long-term, successful and profitable

• are safe, healthy and ethical • are recyclable and made of recycled or renewable material • have little or no negative impact on people and the environment.

– There is an honest ambition and major commitment to sustainability issues at Åhléns. The surveys we have conducted among employees and customers have shown the considerable potential represented by providing clear information about the responsibility we take and our sustainable range.

– To fulfill the expectations of our stakeholders, we must minimize risks, do basic activities and proactive development in parallel, but with a short-term focus on the first two areas. We will gradually increase our focus on proactive development within more areas.

– We took several important steps in 2012.

I would like to highlight the work of our sustainability ambassadors who play an important role in strengthening internal commitment and getting our added value to customers. A great deal remains to be done, but we are on our way!

Anita Falkenek, Sustainability Manager

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SYSTEMATIC WORK METHOD To be able to develop and spin the Green Thread, we want to involve and engage employees, cust­ o­­m­ers, suppliers and other stakeholders. We intend to improve, measure and follow up this work and continuously report on our progress along the thread to ensure that we are on the right track. We will communicate this both internally and externally.

Communication of our sustainability work and Bra val must improve. This became clear from the employee and customer surveys conducted in 2012. Accordingly, work has been launched to clarify Åhléns’ communication in terms of Bra val and sustainability.

RISKS AND DEVELOPMENT During 2012, we implemented activities that could be defined as risk minimizing, basic

and developmental. To minimize risks, we focused on preparing and updating product specifications and conducted social audits and training of our suppliers. We also initiated work on how to tackle negative environmental impact in the supplier chain.

Basic sustainability work includes energyefficiency enhancement, waste management and training. During the past year, we developed a template for sorting waste at source in the department stores, trained sales personnel and launched a Complaints system.

We also launched Bra val and joined the Better Cotton Initiative; we also started a training pro­ gram in value-governed management. There are many elements that we would like to develop with­in Åhléns, such as being able to recycle textiles.

Development • Bra val

Basala

• Better Cotton Initiative

• Complaints system

• Services, such as, Re-make

• Product specifications

• Employees health and commitment

• Social audits in the Supply chain

• CO2 follow-up of transport

• Environmental improvements at our suppliers

• Waste management

Risk minimization

• Value-governing management

SUSTAINABLE CORPORATE GOVERNANCE

Our owner, Axel Johnson, has adopted a strategy for sustainable enterprise comp­ rising four focus areas: Sustainable offer, Sustainable production, Good employer and Resource-efficient oper­ations.

Corporate governance is a key part. Seven important aspects will ensure that all Group companies work systematically and in a target-oriented manner to achieve sustainability.

The target is that by 2015 all companies must: 1. Have strategies and measurable targets for their sustainability work integrated into the business plan.

2. Have one person responsible for sustainability issues or who will report directly to the CEO. 3. Report KPIs on a quarterly basis.

4. Annually update the risk analysis that identifies the largest social and environmentally related risks.

• Education

5. Evaluate the sustainability perspective in the acquisition of new companies.

6. Ensure that adopted international conventions on the environment, human rights and labor law are respected by suppliers.

Communication

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7. Clearly communicate sustainability work.

90 of 100 in employee satisfaction in 2012

Outcome and goals The table specifies goals and KPIs for sustainability issues that are key to Åhléns.

DEVELOPMENT OF CONTROL DOCUMENT Within Axstores, several joint policies and guide­lines are applied to ensure responsible bus­iness practices. For example, Axstores’ env­ironmental policy, Sustainability Buying Criteria for the environment, quality and social responsibility. These frameworks are continuously being developed and improved.

During 2012, the General Purchasing Conditions and the Sustainability Buying Criteria were revised and sharpened.

ORGANIZATION AND RESPONSIBILITY Ultimate responsibility for decisions and followup of our sustainability work lies with corporate management. A steering group for sustainable procurement is responsible for formulating and regularly developing procurement criteria.

The steering group is supported by task forces that address specific sustainability aspects for various areas.

In the Purchasing department area we have Åhléns’ sustainability team, which is responsible for operating and coordinating sustainability work throughout the company. The team also supports Axstores in Group-wide sust­ain­ ability issues. When relevant, Åhléns’ Sustain­ ability Manager reports to the CEO and Group management.

Each manager is responsible for integrating sustainability issues into decisions and work methods within their sphere of responsibility.

All department stores also have trained sustainability ambassadors, tasked with disseminating commitment and information internally and to customers.

Key figures

Results for 2011

Results for 2012

Targets for 2015

Percentage of Bra val

3,4 %

4,4 %

10 %

60 %

75 %

100 %

-12 %

-15 %

-20% by 2014

23

23

Not set

87

90

Not set

–

5,97 %

5.32% by 2013

(percentage of sales measured in SEK)

Percentage of audited facilities (located in high-risk countries, with buying value > USD 150,000)

Energy consumption in department stores (percentage change from 2009, measured by kWh/m2)

Emission of carbon dioxide from transports (total g CO2/ton km)

Employee Satisfaction Index, ESI (index, where the maximum is 100)

Sickness absence (percentage of working hours)

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?!

We engage in active dialogue with our customers aimed at demonstrating our added values, identifying exp­ ectations and creating a basis for continued advancement and impr­ ove­ment. The sustainability area offers major potential to increase customers’ knowledge about our efforts and Bra val.

DIALOGUE THROUGH MANY CHANNELS Daily meetings in stores and department stores are our principal contact channels. Every year, about 85 million customers visit Åhléns. The Åhléns Club, with slightly more than 1.6 million members, is key to our customer dialogue.

We communicate with members through Åhléns’ magazine, e-mail, the Internet and text messages. We also have a club panel with about 35,000 members who we regularly question about our product range, communications,

Living customer dialogue purchasing habits and values. Additional channels for active dialogue include Facebook and our Customer Service unit. The next step is to shift the focus from postal to digital communication.

BIG INTEREST IN SUSTAINABILITY In November 2012, we conducted a customer survey about our sustainability work. A quest­ ion­naire was sent to 4,000 customers in the club panel, of whom 2,000 individuals resp­ onded. The survey showed that sustain­ability is very important to our customers – the average landed at 6.1 on a 7-point scale. However, many customers admitted that they thought more about sustainability when buying food compared with shopping at Åhléns. Meanwhile, most of the customers have very little knowledge about Åhléns’ sustainability work and what Bra val represents. At the end of the survey, facts were given about what Åhléns is already doing today and the response to this description was very positive. Customers also had many tangible and good suggestions for how Åhléns should develop its work and communication.

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MAJOR POTENTIAL A clear conclusion from the survey is that there is major potential for enhancing information to customers and promoting Bra val. We will develop our efforts in various ways based on the results. Work has commenced to develop a more distinct communication strategy in the area of sustainability.

We are also working successively to display Bra val range and to a greater extent integrate Good Choice into advertising campaigns and other marketing communication. During 2012, we implemented a Bra val campaign with television commercials and we have made it easier for customers to search for Bra val products on the Internet.

57% think about sustainability issues when shopping at Åhléns

SUSTAINABILITY AMBASSADORS It is important that our co-workers in our dep­ artment stores have the knowledge required to be able to pass on sustainability information to customers. Accordingly, each department store has a trained sustainability ambassador tasked with informing and supporting other colleagues, and to be available to respond to questions from customers.

FACTS FROM CUSTOMER SURVEY

• 57 % think about sustainability issues when shopping at Åhléns.

• Customers trust Bra val and other corresponding systems that guide them to products that are better for the environment and people.

• Customers feel that products with sustainable profiles have high quality and fashion content, but believe they are more expensive and difficult to find.

• Working conditions for those who manufacture the product, as well as product quality, are the sustainability areas that are considered most important.

FAIR MARKETING All advertising and marketing from Åhléns must be accurate and fulfill legislative and industry norms concerning ethical guidelines.

We check our messages and claims to ensure that all product information is correct. We strive to protect the customer’s integrity and therefore avoid limited segmentation or niched messages in marketing. All customer data is managed centrally; neither our department stores nor our business partners have access to this information. There have been no reports of “leaks” or lost customer data.

• 37% knew about Bra val.

• 58% would choose Bra val if they had more information about what it represented. Requests were primarily for more communication about the products and information provided close to the products in the department stores.

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Committed customer Anna-Stina Hedberg Stark from Järvsö was one of the 2,000 customers who responded to the Åhléns’ questionnaire about sustainability in autumn 2012. Anna-Stina has been a customer of Åhléns for many years and likes “her” department stores in Hudiksvall, Bollnäs and Gävle.

Anna-Stina prioritizes quality when selecting products.

– Naturally, the price is also important but not the determining factor. I would, for example, rather pay a little more for a sweater that can be washed without losing its shape. Of course, when choosing between two identical products, the environment and ethics are taken into consideration. A top made of organic cotton is an obvious choice!

Photograph: Susanna Jansson

At the end of the questionnaire, information was provided about Åhléns’ current sustainability activities. Anna-Stina was surprised by how much Åhléns was doing without her being aware of it.

– Information could be better! I even have Bra val tops and had no idea that they were organic!

Sales personnel at the cash register should take the opportunity to compliment customers on their choices. ‘Great that you purchased an organic product.’

– As a consumer, I want to feel proud about my purchases. If done correctly, there are only advantages to profiling the store as a sustainable department-store chain – that would generate customers who are more willing to buy there and satisfied!

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Earth Hour Åhléns participated in the global climate Earth Hour manifestation by switching off the lights in the display windows in the department stores wherever it was possible. We encouraged all our customerclub members to participate and also had a customer offering on ecolabeled block candles.

Road to a sustainable assortment It is Åhléns’ strategy to increase purchases of products that are more sustainable. This work is continuously in progress and the number of Bra val products will gradually increase. To contribute to more sustainable cotton cultivation, Åhléns became a member of the Better Cotton Initiative.

MANY CHALLENGES Our range is broad and comprises many different types of products and material, which can be­a challenge in terms of sustainability. For exam­ ple, raw-material manufacture of cotton and metals, and manufacturing processes such as tanning have a major impact on people and the environment. Furthermore, substances in products, particularly in the beauty range, could have undesirable effects. Continuous work is in progress in Åhléns’ purchasing organization to see whether more products could be manu­ factured from more sustainable material.

BETTER COTTON CULTIVATION Cotton is an important raw material for Åhléns, but it has a major impact on the environment.

To contribute to improvement, Åhléns joined the Better Cotton Initiative (BCI) in January 2013. The BCI is a global organization aimed at changing conventionally cultivated cotton worldwide, reducing the environmental impact and improving working conditions and living situations for growers and their families. Thro­ ugh the membership in the BCI, Åhléns will be able to contribute to increasing the volumes of sustainable cotton in the global market cor­ responding to our cotton sales. Through our partner Cotton Connect, another 100 farmers in India will be trained and will change their cult­ivation methods. The amount of insecticide could be reduced by at least 40% and water con­s­­umption could be halved in certain regions.

At the same time, farmers’ profitability will im­ prove through reduced costs (read more at www.bettercotton.org and www.cottonconnect.org).

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DID YOU KNOW THIS ABOUT Bra val?

Bra val (GOOD CHOICE) Bra val was launched in spring 2012 as our customer guide to more sustainable products.

These products are especially considerate of people and the environment and are available in five categories; see the fact box. The launch was implemented through new display material, communication in the Åhléns Club and in television commercials.

Bra val* (percentage of total sales measured in SEK)

2011 Total

2012

3,4 % 4,4 %

Targets for 2015 10 %

Share of Bra val increased from 3.4 to 4.4%. However, in women’s fashion, home textiles and the office area, sales were nearly 20%. The challenge lies primarily in beauty products, where Bra val has yet to break through. * Bra val was called “Å vad bra” in 2011.

The target was for 10% Bra val of all sales, meas­ ured in SEK by December 2012. We increa­sed sales of Bra val products from 3.4% to 4.4%, but did not achieve the target. Accordingly, we held extensive discussions about how to increase the proportion, and the target level that will be possible to achieve. The result was that we set a target for each category and purchase area to make it clearer for buyers and sales personnel to drive the operation towards the target, and the 10% target was moved to 2015.

FASHION The range of women’s fashion is continuously overseen. We strive to increase the proportion of more classic and timeless clothing. This is being done partly to contribute to more sustainable fashion and partly to reduce the amount of

products that have to be put on sale after each season. Åhléns’ new collection of extra high quality fashion, marked with a red thread, was launched in some department stores during the year. These products have higher quality and thus higher prices. The idea is that these classic garments will last longer. In other respects, work continues on efforts to offer more cotton garments made of organic cotton and more products made from recycled polyester, such as leggings and stockings.

The organic cotton tops for women are the prod­ ucts that account for the largest share of Bra val fashion purchases at Åhléns. During the year, all underwear in the basic range that is sold in twopacks, as well as several sleeping garments, were changed to being produced of organic cotton.

The objective is to use Tencel to a greater extent at Åhléns. This material is derived from FSCcertified forestry materials and manufactured with minimal environmental impact. Products in this material are offered primarily in our own Wera line. During the year, a Wera suit made of Tencel was launched. Wera entails using recycled polyester where possible.

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Bra val is available in the following five categories: RECYCLED Products that are entirely or mainly produced from recycled materials.

The raw materials derive from by-products from production or from waste.

SOCIAL RESPONSIBILITY Products that are certified by an independent org­ anization, such as Fair Trade. This means that farmers cultivating the raw materials and their employees are paid a reasonable salary and have decent work environment.

ORGANIC Products where the raw materials or ingredients were cultivated without chemical pesticides or synthetic fertilizer, and are certified by an indep­ endent organization.

TENCEL® (LYOCELL) Products comp­ rising at least 50% TENCEL®. Tencel is a textile fiber manufactured from wood cellulose in a closed system with minimal environmental impact.

ECO-LABELED Products that are app­ roved by an established environmental label, such as the Nordic Swan Ecolabel, Good Environmental Choice or the EU Ecolabel. These organizations monitor the environmental impact of the product throughout its entire lifecycle from raw material to waste.

Sales of shoes and handbags increased during 2012, but here we see many sustainability challenges. Accordingly, Åhléns is active in the new Swedish Shoe Environmental Initiative, SSEI, which involves identifying common information and methods for reducing the environmental impact in the shoe industry.

Most of our leather wallets and handbags are already made of 90% vegetable-tanned leather, which has less impact on the environment than chrome-tanned leather.

Sustainability ambassadors with ambition Zandra Juhnell is the sustainability ambassa­ dor at Åhléns in Täby Center.

She never hesitated when she was asked to be an ambassador, but viewed it as an oppor­ tunity to learn more.

Zandra is quick – she received the training in sustainability on a Thursday and on Friday she held a briefing with all personnel at the morning meeting.

– I provided the personnel with tips and advice on how they could promote Bra val. We draw our customers’ attention to Bra val and thanked them at the check-out, for example, if they have purchased organic tops. It’s been a great success,” says Zandra.

Following this, she decided to remove the plastic mugs from the staff kitchen, to recommend tap water and to promote more order in terms of waste sorting. Zandra has also initiated the “Environmental Champion of the Month.” The winner is awarded the Gold Cone. Employees are allowed to nominate a colleague who did something good or took a new initiative. The jury will comprise Zandra and the department store communication officer. She has published the Good tips on the sustainability ambassadors’ common Facebook page.

– The challenge as ambassador lies in getting everyone on board in the store. To succeed requires courage, which is one of our corporate values. You must be determined and believe in yourself,” concludes Zandra.

HOME The range and sale of Bra val products is most rapidly expanding within Home Textiles, where of everything currently being sold, measured in SEK, Bra val items account for 16% (14% in 2011).

Within kitchen textiles, the share is currently 41% and in textiles for children’s rooms it is a full 48%. Most of these products are made from organic cotton, but the trend is for more products to be made from recycled material.

New products in the range include runners and table mats of recycled rags. Rag carpets are sold in large volumes.

A broad range of FSC-certified (Forest Steward­ ship Council) products is currently available in the paper, present bags and similar product groups, which are made from paper pulp from sustainable forestry. All wooden outdoor furn­ iture is manufactured from FSC-labeled wood.

Starting in 2013, most of the solid wood kitchen equipment, for example, cutting board and wine racks, will be FSC-labeled.

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The product group that accounts for the largest sales in terms of volumes of Åhléns’ Bra val is our own napkins. During the past year, the range was expanded to also include Nordic Ecolabeled candles. All paper Easter eggs are manufactured from recycled paper, with a thin plastic coating to comply with food-safety requirements.

In the Toys department, the puzzles and sketch books are made of FSC raw materials. Prior to the year’s outdoor play activities, Åhléns will be increasing the range of Nordic Ecolabeled buckets and spades. All toys sold at Åhléns are CE-labeled, which guarantee that they are safe.

During the year, there were queries from cust­ omers about the sale of furs and leather carpets. Åhléns has signed and complies with the Fur Free Alliance, which entails that we only sell leather and fur arising from slaughter waste in meat production. The furs and rugs that we sell are from deer, sheep and cows.

Distribution of sales in 2012 Fashion (38 %) Beauty (30 %) Home (25 %) Media (7 %) Distributed in product groups (proportion of sales in SEK)

BEAUTY Beauty products (skin and facial care, hair care, fragrances and cosmetics) contain a large number of ingredients with various envir­ onmental and health-influencing prop­erties, some of which could have a negative impact on health and the environment. We continuously monitor the properties and contents of the products and carefully follow developments in both legislation and new scientific findings and consumer trends. One example of substances that were discussed during the year is paraben, which is used as a preservative. Åhléns has dec­ ided to take the same approach as the Danish legislation, entailing that certain parabens will not be permitted in our products.

Åhléns’ own Oliv series was relaunched with a new packaging design during the year. Three of the products in the range are Nordic Ecolabeled and two additional products will be launched in spring 2013 with the Nordic eco-label.

A great deal of time and resources have been invested in preparing the organization and suppliers for the Cosmetic Regulation that will gain legal force in 2013. The Regulation entail that suppliers must manufacture prod­­ ucts according to a certain standard, perform extensive safety assessments, and that manu­ facturers must register all products and their ingredients in a European database. Although this will result in increased admin­istration and costs, the objective is to improve control and thus increase safety for consumers. To more easily ensure that Åhléns complies with the new regulations, we have relocated the production of some products among our brands and limited the number of suppliers.

During 2012, UNE and Estelle & Thild were launched at Åhléns, two new brands that both

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have organic certified products and thus Bra val.

UNE launched the first certified mascara. Estelle & Thild, which is manufactured in Scandinavia, reported a good sales trend, as did Weleda, which has been sold in the department store for many years. The Body Shop and Origins brands, with sustainability focus in the business model, continue with steady sales increase at Åhléns.

A number of customers voiced their concerns during the year that the beauty products sold by Åhléns may have been tested on animals. In our updated Sustainable Buying Criteria, our earlier position, that the legislation must be followed, was clarified entailing that it is not permitted for products or ingredients to have been tested on animals.

BAGS AND RECEIPTS We also place environmental demands on pro­ ducts that we use ourselves or that we provide to customers, such as bags and wrapping paper.

All Åhléns bags and wrapping paper are made of FSC-certified pulp from sustainable forestry.

Plastic bags are 80% made of recycled plastic.

These will be manufactured partly from our own waste of non-rigid plastic from the department stores (see page 24).

Management at Åhléns and Axstores has decided to switch to phenol-free receipts, which will be available in department stores commencing in spring 2013. Bisphenol A and S are deemed to have endocrine-disrupting effects, which are not acceptable in receipts. In the long-term, we hope to be able to switch to digital receipt systems.

Safer products of better quality As a minimum requirement, the qua­ lity of the products must fulfill app­ licable legislation but mainly comply with our own demands and the expec­ tations of customers. The point of departure is that Åhléns only should sell safe, good quality products.

During the year, a number of actions were taken to further quality assure our processes.

FOUNDATION LAID DURING PURCHASING All suppliers must comply with Åhléns’ req­ uire­­­ments according to our General Purch­asing Agreement. This include statutory requirements on the product and production process, and also specific Åhléns requirements pertaining to function, quality, the environment and ethics.

During the year, we updated the document to clarify our requirements concerning product quality, among others.

SUSTAINABILITY REQUIREMENTS We have also updated and sharpened our Sust­ ain­ability Buying Criteria, which are more far­reaching than those required by law. These cri­teria are included in the General Purchasing Agreement. Changes in the criteria include, for instance, a clear schedule for the phasing out of PVC in pack­aging, that down must not be plucked from live birds nor from geese bred for foie gras. In addition to not selling children’s clothing that could be considered provocative, Åhléns must not sell make-up and perfume aimed at children. New sections were added, such as animal care and bans on animal testing of cosmetic products. In the Beauty area, there is a shared Axstores’ list of chemicals that must not be included in the products, including allergenic perfume substances and certain preservatives.

16 | ÅHLÉNS SUSTAINABILITY REPORT 2012

PRODUCT REQUIREMENTS For suppliers to be able to produce goods with the right quality clear documentation on the product’s properties and content is required, and on how they are tested to ensure that the product fulfills this quality. Accordingly, Åhléns has product and material specifications that list the requirements for chemicals, quality and testing procedures. These specifications cover, for example, the substances that are permitted or not, the durability of a product and the color and form of the product. During the year, we updated and prepared new specifications in several product groups with a focus on products that come in contact with food.

RANDOM TESTING FOR VERIFICATION Although the products are checked in con­ junction with manufacturing, to further verify that the goods meet our requirements, we con­du ­ ct random testing of the products found in the department stores. Based on the assessed risk, we perform random tests of chemicals and function. Textile products were checked for allergens and carcinogen, and leather shoes and handbags were checked for hexavelant chromium and acrylamides. The results indi­ cated that these compounds were not found in the products.

SUPERVISION AS A RESOURCE Audits by the authorities are opportune occasions for us to verify that our procedures work and for increasing our knowledge. In 2012, the environmental and public health authorities in various municipalities inspected jewelry, children’s clothes and toys. None of the products from Åhléns contained traces of compounds that did not comply with legislation. Nor did the authorities have any comments about our procedures.

17 | ÅHLÉNS SUSTAINABILITY REPORT 2012

Early in the Christmas shopping season, the local supervisory authorities and the Swedish Trade Federation launched a campaign called Dare to ask. The purpose of the campaign was to make consumers aware of their right to be informed of the existence of hazardous compounds in the product. When asked such questions, the retailer must provide the consumer with such information within 45 days. This campaign is an expression of increased requirements on traceability and communications. In con­ junction with the campaign, we received a few questions, all of which were answered on time.

COMPLAINTS SYSTEM In an organization like Åhléns, it can be difficult to gain an overview and achieve a systematic management of customer complaints. In May and June, a pilot study was conducted when four department stores made a registry of all customer complaints. The results indicated that we had received more complaints than expected, meaning that there was a need to monitor customers’ opinions more effectively than before. In September, a system was laun­ ched in which the sales representative enters each customer complaint in the cash-register system by selecting one of 12 codes. This data is subsequently used to generate monthly reports for procurement managers who can analyze how many complaints were entered for each article sold. With this foundation, a structured discussion can be taken with suppliers and the products can be improved. The system has already had a positive effect on quality as, for example, certain Åhléns’ pant models initially failed to meet our quality requirements or customers’ expectations. The next step is to develop key performance indicators for complaints so that we can continuously improve.

CUSTOMER SERVICE – AN IMPORTANT COMPONENT

Our goal is to always have satisfied customers Elisabeth Sandgren at Åhléns’ Customer Service unit, says that, along with her three colleagues, she receives four types of cases: questions about Åhléns Club, questions from the department stores, customers who require assistance with, for example, finding a product, and complaints from customers about products or poor customer service in the department stores. All cases are registered.

– If we are unable to answer directly, we receive help from others in the organization.

During weekdays, we aim to always answer customers within 24 hours.

– Naturally, it is difficult when customers are very upset or dissatisfied, which happens. We try to address these matters as professionally as possible. It is nice to have our values to lean on, not to mention colleagues to talk to, says Elisabeth.

According to Elisabeth, the best part of the job is helping customers from start to finish – from finding the right product in the department store to ensuring that the customer is satisfied, even if he/she was dissatisfied at first.

COMPLAINTS AND RECALLS During the year we reviewed our internal procedures, to ensure quick reaction and clarity if a risk-prone situation arise in which a product could cause injury to a person or property. If there is a risk that a product could cause injury, the relevant individuals in the procurement, sustainability and information departments must quickly meet and review a predetermined checklist. If the group concludes that the product is a risk, sales of the product must be stopped and, in certain cases, the product must be recalled from customers.

During the year, we stopped the sales of snow globes, a red children’s dress and two toys that failed to meet our standards. The snow globes, which were marketed as ornaments, could easily break if children played with them, despite the way they were marketed. The dye of the children’s dress bled and the toy broke far too easily. Unfortunately, we were also forced to recall three versions of a wooden toy from customers because the toys broke apart and the small components easily became dislodged due to a substandard adhesive. Using a powerful resource system within company in the form of e-mail dispatches to our customer club members and a letter to the customers who purchased the toys, we were able to effectively disseminate this vital information. As far as we know, the toys did not cause any accidents or incidents.

Suspicions that a cleaning gel could cause damage to eyes were taken very seriously, resulting in the initiation of a quick action plan and the product was withdrawn from the store shelves. However, no customer inconvenience was associated with the product. Analyses of the product did not indicate any problems with the product. The product was available to customers again after a few weeks of suspended sales.

Due to the complaints that we received conc­ erning paper baking dishes in 2011, we have improved the quality and now source them from a Swedish manufacturer.

NEW WEB PORTAL FACILITATES In 2012, Åhléns – through Axstores – devel­ oped an online supplier portal with the aim of facilitating procurement matters for supp­liers and procurement representatives. All doc­um­ ents that are related to the General Purch­asing Agreement, including Sustainability Buy­­ing Criteria and product specifications, are post­ed on this website.

The portal makes it easier for both suppliers and procurement representatives to keep abreast of requirements, which is a prerequisite for being able to sell safe products, since legislation and requirements are continuously being tightened.

18 | ÅHLÉNS SUSTAINABILITY REPORT 2012

An increasing number of customers are contacting Åhléns’ Customer Service unit with questions regarding everything from the Customer Club to chemicals in the company’s products. This reflects the rising interest and awareness among Åhléns’ customers, but is also probably due to communicating through an increasing number of channels.

During the year, Customer Service received 20,000 e-mails and nearly 24,000 telephone calls, up 28% on 2011.

Rewarding supplier relationships Åhléns’ private labels are sourced from a vast number of suppliers in Asia and Europe. In order to infl­ uence product development and responsibility for people and the envir­onment, we strive to achieve long-term relationships and close cooperation with suppliers. Thro­ ugh industry partnerships and independent controls, we work to identify risks and contribute to responsible production.

are responsible for day-to-day contact with the suppliers, perform quality control at the plants and research prospective producers.

847 FACTORIES IN 38 COUNTRIES In 2012, Åhléns private labels derived from a tot­al of 482 different suppliers. Most of the 847 factories that manufacture our goods are located in China and India.

We have enjoyed longstanding relationships with many of Åhlens’ existing suppliers – some for more than 20 years. However, we have to date never closely analyzed what makes these partnerships so successful. In 2012, we initiated an effort to better define our key suppliers and what characterizes a healthy partnership, from both Åhléns’ perspective and that of the supplier. Åhléns wants to be a strong and good business partner.

Åhléns now has four local production offices in Hong Kong, Shanghai, New Delhi and Dhaka.

The last production office, in Bangladesh, was opened in 2012. The 57 employees at our offices

PRODUCTS FROM RIGHT SUPPLIERS To increase the potential of influencing product development and responsibility, we aim to get as close to the production of our goods as possible.

Having local geographic production offices close to most of the manufacturing is a key component of this effort. We also strive to minimize the num­ber of intermediaries and limit the total number of suppliers. However, Åhléns’ wide range, which includes a variety of product cat­egories, primarily in the Home collection, requires us to have a relatively significant number of producers.

19 | ÅHLÉNS SUSTAINABILITY REPORT 2012

THE BSCI CODE OF CONDUCT Developing supplier relations Aarthi in India, from whom we have purch­ ased home textiles since 1998, is one of Åhléns’ largest suppliers. Mr. R Samanathan is a Managing Partner at Aarthi.

– The treatment of the process water has been a central issue for us. We have invested in new treatment systems so that we can re-circulate the water and prevent emissions. We now have one of the most sustainable facilities in the region!

– We take active responsibility for our em­ p­loyees by regularly overseeing the work­ place health and safety conditions. We also contribute financially to the education of our employees’ children. We are SA8000 certified, which proves our commitment to systematically improving working conditions.

Long-term and mutual commitment is important, claims Samanathan, as well as sharing joint guidelines, such as new chemical regulations.

– We started off as a small company and our partnership with Åhléns has developed the operation. We maintain an active dialogue in all areas from pricing, quality and inn­ ovation to the workplace environment. We work continuously to improve our pro­d­­uct development, particularly from a sust­ ainability perspective. We have also joined the Better Cotton Initiative recently.

RESPONSIBILITY AT ALL LEVELS Our supply chain is often complex with many different levels, making total control of the entire reverse chain difficult. At the same time, our customers want to hear this guarantee from us. In the long term, we must be able to monitor working conditions even further down the supply chain more systematically than we do today.

The challenges vary from one product area to another. In the hard furnishing area, we have identified the need for improvements in relation to workplace health and safety. This production environment is often more hazardous than working with textiles, due to the chemicals that are used and, quite often, unsafe machinery. In general, sustainability awareness is also lower than in the clothing industry.

IDENTIFIED RISKS The sustainability risks identified in the supply chain primarily entail the workplace health and safety risks associated with using chemicals.

Prioritized areas for further measures are: • Hard home products (wood, metal, glass, ceramics) • Bags and shoes (preparation of skins in tanneries) • Dyeing textiles (dye-works) • Traceability TRAINING FOR DEVELOPMENT Over the past few years, Åhléns has worked extensively, mainly by conducting a large

number of audits, to identify the risks and challenges in our supply chain. This provides a solid basis for developing initiatives in prio­ ritized areas in partnership with our suppliers.

To spread knowledge and create a shared view of what responsible production entails, we are increasing our efforts to train suppliers.

The Business Social Compliance Initiative (BSCI), of which Åhléns is a member, offers regular training courses in various locations around the world that we recommend to our suppliers. In 2012, several of our Chinese supp­ liers participated in BSCI training in workplace health and safety together with Åhléns person­ nel from the local production offices.

In 2012, Åhléns also arranged its own courses in workplace health and safety for ten key suppliers of hard home products in China.

INTEGRATED WORK METHOD To create internal synergies and develop the supplier dialogue around sustainability issues in all of our contacts, it has been our ambition that the purchasers and merchandizers at our production offices participate in social audits. In 2012, all merchandizers and several purchasers took part. We also produced a checklist with questions for suppliers during the year, making it easier for quality auditors or purchasers to app­roach responsibility issues in their supplier contacts.

20 | ÅHLÉNS SUSTAINABILITY REPORT 2012

The BSCI Code of Conduct is based on the UN’s Universal Declaration of Human Rights and the International Labour Organization (ILO) Conventions protecting workers’ rights. The Code includes the following criteria: • Legal compliance.

• Prohibition of child labor and forced labor.

• Prohibition of discrimination.

• Compensation.

• Working hours.

• Workplace health and safety.

• Freedom of association and the right to collective bargaining.

The BSCI uses three levels to mea­ sure the audit results: “Good,” “Improvements needed” or “Noncompliant.” For “Non-compliance” and “Improvments needed”, an action plan is established together with the supplier. Following a compliant re-audit, the supplier is considered approved for a period of three years (from the date of the initial audit).

Read more at www.bsci-intl.org.

Distribution of factories by country in 2012 (847 plants) ANNUAL ASSESSMENT Åhléns conducts an annual, collective asse­ ss­ment of its suppliers. Quality, prices, deli­ very precision, service and responsible pro­ duction are all taken into consideration and compiled in a report that is sent to the sup­ plier. The assessment forms the foundation for a constructive discussion and continued improvement efforts.

We prioritize audits of factories in high-risk countries, with an annual purchased value of at least USD 15,000, which corresponded to 601 facilities in 2012, which makes 70% of the total number of plants that deliver to us. We also prio­­ritize factories at which the production of a specific product is related to specific risks to employees’ health and safety, as well as to the environment.

WANTS TO IMPROVE LABOR CONDITIONS We systematically monitor labor conditions among our suppliers. We use BSCI’s Code of Conduct and adhere to a standardized process when evaluating our suppliers. The audits are conducted by accredited, independent auditors.

By cooperating within BSCI, other members can read reports of completed audits.

In 2012, follow-up audits were conducted both through BSCI and by our own auditors. The results were positive since the suppliers had implemented a number of improvements that were agreed upon in the action plan.

Åhléns also evaluates the suppliers based on the requirements in BSCI’s Code of Conduct using our own auditors. This primarily applies to new or potential suppliers, as well as smaller suppliers. Audits of labor conditions are per­ formed on all new suppliers in high-risk coun­ tries prior to placing orders.

PRIORITIZATIONS FOR OPTIMAL VALUE Our sharpest focus is on monitoring and impro­ vement efforts among the suppliers from which we make substantial purchases and among which we foresee a longstanding relationship.

ZERO TOLERANCE Åhléns applies a zero-tolerance policy conc­ erning some specific issues in the Code of Conduct. This includes child labor, forced labor, harassment, serious environmental impact, serious health and safety risks, change of sub­ contractors without our approval, a lack of willingness to cooperate or a refusal to comply with audits. If such is discovered, an immediate stop is imposed on new orders from the supplier, which must address the problem within a month and verify this through a follow-up review. If the problem recurs, Åhléns has a policy of com­ pletely ending its businesses with the supplier.

China (555)

Taiwan (25)

India (63)

Portugal (18)

Sweden (29)

Turkey (15)

Italy (26)

Other countries 31 st (116)

Production in high-risk countries: BSCI has prepared a list of what are known as high-risk countries, which all members use as the basis for prioritizing supplier controls; visit www.bsci-intl.org for more information.

In 2012, we conducted production in a total of 19 high-risk countries: China, India, Taiwan, Turkey, Bangladesh, South Korea, Indonesia, Pakistan, Cambodia, Vietnam, Uruguay, Albania, Belarus, Brazil, Moldova, Romania, Serbia, South Africa and Thailand.

Audited factories, objectives and follow-up

Percentage of audited factories

2010

2011

2012

Target in 2015

­–

60 %

75 %

100 %

59 %*

88 %

86 %

100 %

(located in high-risk countries, with a purchased value of > USD 15,000)

Percentage of total purchased value (from audited factories in high-risk countries)

21 | ÅHLÉNS SUSTAINABILITY REPORT 2012

* Only pertained to BSCI-audited plants

Results of all audits completed in 2012

SA8000 certified (4) “Good” – no deviations from requirements (41) “Improvements needed” (38) ”Non-complience” (130) Non-Tolerance (1) ICTI audits (23) No deviations (19) Improvements needed (2) Deviations (2)

In 2012, a total of 237 audits were conducted, slightly more than half of which by our own auditors. The deviations identified primarily pertained to the environment, health and safety aspects among suppliers who work with solid products made from glass, metal, wood or plastic.

SA8000 is an international social responsibility standard. A SA8000-certified supplier employs a systematic approach to

ensuring proper labor conditions and is the ultimate goal of the BSCI auditing process.

Toy suppliers are audited in accordance with a specific industry standard known as ICTI, International Council of Toy Industries. Most of our toy suppliers that were audited during the year achieved results at the upper end of the scale.

FOCUS ON THE ENVIRONMENT A particular challenge is reducing the envir­ onmental impact in the supply chain. In BSCI’s Code of Conduct, only a few environmental asp­ects are currently included. Alongside BSCI’s efforts to develop a specific environmental module, Åhléns is working on other initiatives.

We are a member of such organizations as STWI,­Sweden Textile Water Initiative, and SSEI,­Sweden Shoe Environmental Init­iative – networks that pursue sustainable environ­ mental and water consumption methods in these industries.

In 2012, based on STWI’s guidelines, we cond­ ucted a number of sample audits among colordying plants. These belong to a category of subsuppliers that we know are exposed to significant environmental and health risks, particularly through the use of chemicals. We concluded that more extensive mapping of our suppliers’ colordying plants was necessary, due, among other reasons, to the environmental risks differing depending on the scope of official supervision.

In 2012, Åhléns also conducted environmental audits among suppliers of solid home products.

The greatest challenges involves the handling of chemicals, a process in which environmental and health aspects are often substandard. The plan is to commission third-party auditors to conduct environmental audits among our key suppliers, while simultaneously assessing how to take a more systematic approach to environmental mat­ters. In parallel with these efforts, we will dev­elop the skills of our own auditors to enable them to ultimately include the environment in their audits.

22 | ÅHLÉNS SUSTAINABILITY REPORT 2012

Caroline Gunterberg and Carol Song, owner of Hangzhou Enli

Significant progress for Chinese supplier In 2012, a follow-up social audit was cond­ ucted at one of our suppliers in Hangzhou, China, which manufactures paper plates.

During the initial audit two years earlier, the factory did not comply with many aspects of BSCI’s Code of Conduct and had no form of systematic approach – shortcomings included the lack of a solid health and safety structure.

Since then, the supplier has addressed all of the items on our action plan through close cooperation with our office in Shanghai, and rose from the lowest to the highest score. Its production has also been modernized and undergone efficiency enhancements. We use this success story as a source of inspiration for other suppliers and as a lesson for ourselves that close cooperation and open lines of communication with our suppliers make a considerable difference.

Systems for operations & logistics The operation of Åhléns’ department stores and the transportation of our goods have an effect on the envir­ onment, particularly in the form of climate-impacting emissions. In 2012, improved solutions for waste management were tested and we introduced a system to monitor the climate impact of transportation.

In the Stockholm region, some of our goods are distributed using a new truck with high environmental performance.

REDUCED ENERGY CONSUMPTION The consumption of energy, primarily electri­ city, forms part of Åhléns direct environmental impact. Accordingly, we are working to reduce electricity consumption in the properties in which we operate. Our target is a 20% reduction by 2014, compared with 2009.

By switching to LED lighting, the overall energy consumption in our stores and department stores can be reduced by about 30%. In 2011, 23 | ÅHLÉNS SUSTAINABILITY REPORT 2012

the lighting fittings in Åhléns City in Stockholm were replaced, and in 2012, LED lights were installed in four new stores in Norway. The tran­ s­ition to energy efficient LED lighting is now a routine process during renovations and the opening of new stores.

RENEWABLE ELECTRICITY Proprietary electricity agreements facilitate work on governing and monitoring electricity consumption. Whenever possible, Åhléns end­ eavors to sign electricity agreements for the premises in which we operate. We only purchase hydroelectricity with a guarantee of origin. For 38 of our department stores in Sweden we have central electricity subscriptions. However, electricity often remains included as a utility in leases for department stores located in, for example, shopping malls and shopping centers.

In these cases, Åhléns recommends that the property owner use electricity from renewable sources.

In further pursuit of this issue, Åhléns sent a letter in early 2013 to all property owners of shopping centers and shopping malls, encouraging them to use renewable electricity and to ensure sustainable waste management, as well as to make it easier for customers to give used goods to charity and recycling.

ENVIRONMENTAL CONSIDERATION Åhléns’ head office was refurbished and moder­ nized in 2012. Environmental consid­erations were taken into account when making such selec­tions as lighting and materials for interior design – for instance are all new carpets made from recycled materials. Whenever possible, existing materials were reused, materials from demolished walls were used for walls in other areas of the office, furniture was donated for reuse and used interior design pieces were refurbished.

IMPROVED WASTE MANAGEMENT Since Åhléns wants the waste that arises at warehouses and department stores to be viewed as a resource, a properly functioning waste sort­­ing system is required. Waste is sorted at the distribution center and in all of our department stores in Sweden and Norway. The largest volu­mes comprise corrugated cartonboard, combustible waste and soft plastic. The comp­ leted waste charting efforts indicated that we can improve waste management by sorting better, into more categories and reviewing how the waste is managed. A practical test in four department stores that was conducted in the spring of 2012 also showed that using the right compacting equipment, we can improve our working conditions, the environment in general and our profitability. Based on these surveys, we are now launching a template for how to manage waste sorting in all of our department stores.

For example, hard plastic can be sorted since underwear often hang on plastic hangers that

would otherwise be discarded. The template will be communicated to all department stores during spring 2013. We will also cond­uct a cen­ tral tendering process for waste-manage­ment services for the department stores that are cur­rently negotiating these services locally. The aim is to reduce our environmental impact and our costs.

RECYCLED ÅHLÉNS BAGS In February 2013, a new procedure was launched for the department stores in shopping centers and shopping malls that have property-wide waste-management services. Under a partner­ ship with PostNord and Trioplast, the soft plastic from Åhléns’ department stores will be recycled.

The plastic, which is sorted in bag holders, will be collected by PostNord’s drivers when they deliver goods. The plastic is brought back by the driver to the Trioplast facility, where it is melted down and turned into new plastic raw material that is mixed into our own Åhléns bags, which are made out of 80% recycled plastic.

NEXT STEP: IMPROVED MONITORING A challenge that remains is the measurement and monitoring of waste quantities at all de­ part­ment stores. Through our partnership with PostNord and Trioplast, we will be able to monitor soft plastic from the department stores involved and the department stores, whose waste-management services will be subject to a central tendering process. Work is under way on evaluating how to best measure the overall volumes.

-15% less electricity consumption in the department stores in Sweden by 2012, compared with 2009

Energy consumption in premises (kWH/sqm) 2009

2010

2011

2012

Percentage change Target 09–12 09–14

Department stores, Sweden

214

201

189

182

-15 %

-20 %

Distribution center

134

133

128

124

-9 %

-20 %

Head office*

155

109

175

108

-30 %

-20 %

* Estimated figures based on electricity costs that are paid through rent Due to a development in the calculation basis compared with last year, the figures for 2009–2011 in this table differ from the figures listed in last year’s report.

24 | ÅHLÉNS SUSTAINABILITY REPORT 2012

23 grams of CO2 per ton-km was emitted from transportation

In Norway, the Miljöfyrtårnet Foundation can certify many different types of operations, including shopping centers, which entails imp­ osing requirements on such factors as energy consumption, waste and communications. The Åhléns stores that are encompassed comply with this certification.

GOODS ARE SHIPPED BY SEA OR TRUCK Åhléns’ goods arrive at Axstores’ distribution center in Jordbro outside Stockholm from Asia and Europe. From Asia, shipments are primarily made by sea and within Europe and the Nordic region, mostly by truck. Only in exceptional cases are goods transported by airplane – the target is to have a maximum of 2% of goods arrive by air. In 2012, 0.9% of incoming goods arrived by air (0.5 in 2011). The goods are delivered to the department stores from the distribution center.

In 2012, the department stores received an average of 2.7 deliveries per week (2.5 in 2011).

PROBLEMS WITH THE NEW SYSTEM In 2012, a new business and warehousing system was installed for the flow of goods in Axstores.

The aim is to pack more efficiently to achieve the optimal capacity level. This is required

since we are facing a challenge in the form of an increased percentage of larger and bulkier products, such as furniture. The new system has entailed a major transition for the entire organization. Start-up problems during the year resulted in lower capacity levels in terms of pallets and crates, and more deliveries per week to department stores.

This did not affect the capacity level in the in­ coming containers, which instead improved during the year to between 85% and 94%, compared with 2011 (84–92%).

MONITORING OF CARBON EMISSIONS In 2012, Axstores mapped the transportation work, both in terms of incoming and outgoing goods. Based on the results of this charting, we launched a tool for monitoring carbon emissions from transportation. A robust system is now in place, with defined grounds for calculations and established recalculation factors. We will continue working on further improvements to the tool, and establishing key performance indicators and targets.

Truck with high environmental performance in Stockholm Axstores has reached an agreement with one of its transport companies about acquiring a new eco-truck for distribution to Åhléns, Kicks and Lagerhaus in the Stockholm region.

Anders Holmqvist, Transportation Manager at Axstores has been a driving force behind the new vehicle.

– The eco-truck is fuelled by methane diesel, which results in carbon emissions that are up to 70% lower than a standard diesel vehicle, says Anders.

The eco-truck is a step toward reducing the environmental impact of transportation.

However, effective and environmentally compatible distribution requires analyzing the entire chain.

Based on the current data, we deployed the 25 | ÅHLÉNS SUSTAINABILITY REPORT 2012

– The capacity level and number of deliveries to the department stores are key indicators of how successful we are in coordinating everything from procurement to sales. We are continuously striving to eliminate any empty space in the vehicles. One problem is that freight pallets from different parts of the world have different standard measurements, which affects our ability to achieve the optimal load.

– In 2012, we also had major problems aligning our new system to the flow of goods, which had an impact on both capacity levels and the number of deliveries. Everybody at the distribution center worked hard to minimize the impact by, for example, clearing extra pallets and boxes. Without those efforts, the capacity level would have been significantly lower.

-7%

lower CO2 emissions from business travel between 2011 and 2012

tool to calculate that our transports resulted in average emissions of 23 grams of carbon per tonkilometer in 2012, based on the transport chain from the shipping terminal to the department stores. This is deemed to be a relatively favorable figure due to that we have a combination of goods that are heavy and voluminous.

REDUCTION IN AIR TRAVEL Åhléns co-workers do business travel in Scandinavia, Europe and to the countries from which we make purchases. In 2012, carbon emissions declined to 281 tons, compared with 302 tons in 2011, based on the trips that were booked through our travel agency. The many train trips that are taken by hundreds of employees only resulted in 0.68 kilograms of carbon emissions. Efforts are under way to create enhanced video conferencing equipment in Axstores, which will further facilitate the reduction of certain business trips.

Carbon emissions from the transportation of goods (incoming and outgoing goods)

2011

2012

Total CO2 (tons)

6480

6057

Relative CO2 (grams/ton-km)

23

23

Carbon emissions from business trips Total CO2 (tons)

2010

2011

2012

320

302

281

Carbon emissions from business travel by train were negligible as a result of minimal emissions from trains.

26 | ÅHLÉNS SUSTAINABILITY REPORT 2012

ENVIRON­MENT & TRANS­POR­TATION PROVIDERS

Axstores requires its forwarding agents for incoming goods and distribution agents to employ systematic environmental efforts and have ISO14001 certification.

Maximum speeds, engine type and that the transportation providers use fuel-efficient driving are examples of other aspects that are taken into consideration in the procurement of distribution providers.

A committed workplace Committed employees are the key to realizing Åhléns’ customer offer and enabling a profitable and success­ ful company. We aim to be an att­ ractive workplace that offers good opportunities for inclusion and devel­ opment. In 2012, we continued our work on corporate values by focusing on leadership development. We also concentrated on health and fitness programs.

A dynamic and value-driven organization is an important prerequisite for successfully adapting and modernizing Åhléns. Our objective is a corp­orate culture in which every employee, by assuming responsibility and taking independent initiatives, optimally contributes to profitability and customer satisfaction. Based on the values that we formulated in 2011 with the help of the entire organization, our efforts continued in 2012 with a focus on implementing these values in our leadership and customer service.

VALUE-DRIVEN LEADERSHIP Our managers play a decisive role in advancing the company from an organization governed by rules to one guided by values. Åhléns’ manage­ ment profile is to guide to what an approach and behavior that should be valued and rewarded.

Value-driven leadership requires executives who are highly confident in their employees’ ability, who have the courage to relinquish cont­rol and give greater freedom with matching responsibility. The ability to clarify, monitor and provide feedback is also pivotal. To strengthen and provide resources to executives at Åhléns, a development program in value-driven leader­ ship was launched in autumn 2012, which is geared toward all executives at the company. Åhléns’ management profile and values serve as a key basis for the program, as do the results of the employee survey. My own leadership, commitment, feedback and team development are areas of focus in the training program, which encompasses four training days during an 11-month period. The program is also based on exchanging experiences and the participants coaching each other, as well as regular discus­ sions and coaching with your manager.

27 | ÅHLÉNS SUSTAINABILITY REPORT 2012

2140 participants in the step competition in spring 2013

Two managers discuss Value-driven Leadership An interview with Adam Andersson, Store Manager in Birsta City, Sundsvall and Reine Walfridsson, Market Campaign Manager.

What benefits have you drawn from the leadership development program?

ADAM: It is based more on who I am as a pers­on and manager than on a “template” for what approach I should take to work. It is more beneficial to begin with myself and then be able to help others develop.

REINE: The exchange of experience with other Åhléns managers has been a valuable component. Having managers from the head office and department store collaborating and seeing eye to eye on challenges and opportunities is important!

What advantages do you perceive with value-driven leadership at Åhléns?

ADAM: It is more inspirational and provides greater potential for myself and others to develop. Employees who are given responsibility and allowed to make their own decisions are more creative and offer better customer service.

It makes it easier to work and shop at Åhléns!

REINE: It creates a flexible and educational organization – a necessity in our rapidly changing sector. As a manager, it provides me with a solid platform. Policies seldom comp­ letely match reality, but as long as I act in accordance with the values, I know that I am on the right track.

It also leads to greater inclusion, more enjoyment at work and fewer complications for all employees. ...and what are the challenges?

ADAM: That we have the courage to relinquish control as managers – to let go of our check lists and completely trust in the abilities of our employees.

REINE: To truly manage to live in accordance with our values – every day in all decisions.

This imposes requirements on internal com­ m­unications and on solid feedback to our employees. When we encourage employees to take their own initiatives and to actively make decisions, we must also foster a culture of compassion, in which we can learn to grow from the mistakes that are made along the way.

AN ATTRACTIVE WORKPLACE For Åhléns to progress, we must ensure that our employees are satisfied, feel involved and that their potential is being harnessed, while also successfully recruiting new talents.

Our goal is for Åhléns to be attractive for those who want to work in the retail sector.

We collaborate with selected College and University Institutions in the retail trade, inc­ luding the Stockholm School of Economics’ Center for Retailing (CFR) in Norrtälje, outside Stockholm. This partnership gives us insight into the latest research, the ability to contribute to a sector-related training course and to market Åhléns as an employer.

FOCUS ON HEALTH AND FITNESS In early 2013, Åhléns initiated a proactive health and fitness effort. The aim is primarily to contribute to increased physical activity, commitment and motivation among our emp­ loyees, which is also meant to result in less sickness absence. The fitness initiative, known as “the Wave,” includes a higher contribution paid for fitness activities and a range of exercise and inspirational activities.

28 | ÅHLÉNS SUSTAINABILITY REPORT 2012

BALANCED LIFESTYLE Enabling a balanced lifestyle, for parents of small children among others, has also become an increasingly important aspect of a workplace.

Parents on leave are also entitled to participate in the standard salary talks. Åhléns also offers a parental bonus in addition to the state parent allowance.

Employee surveys indicate positive develop­ ment in the area. The percentage of employees who responded that they feel that they have a balanced lifestyle and have a work situation free from negative stress has increased compared with the preceding year.

Sickness absence Sickness absence (as a percentage of working hours)

2012

Target in 2013

5,97 %

5,32 %

PROUD, COMMITTED EMPLOYEES An employee survey is conducted among all employees every January. A full 94% responded to the survey in 2013 (83% in 2012) and the results indicate a very high level of commitment.

The Employee Satisfaction Index (ESI) was measured at a score of 90, compared with the industry average of 85. The Net Promoter Score (NPS), an indicator of the degree to which emp­ loyees are active ambassadors for Åhléns, also rose and far exceeds the industry average. The employee survey indicates excellent awareness of our values and that many feel committed to these values at work. Better feedback and followups are still in demand, although these areas experienced a positive trend compared with last year’s survey.

As part of our work on individual development and follow-ups, annual target talks are held between each employee and their immediate superior.

EMPLOYEE SURVEY ON SUSTAINABILITY In November 2012, a special survey was conducted regarding employees’ view of Åhléns’ sustainability efforts and how these can be improved. Slightly more than 500 individuals responded to the survey. The results indicate that employee awareness of the sustainability efforts under way in our operations and in the supply chain is relatively low. Far more were aware of Bra val products and believe that they are important for Åhléns’ brand. Many made proposals for improvements moving forward, in terms of quality, packaging and internal communications as well as communications to customers.

(the survey has been conducted annually since 2012, in the month of January)

2012

2013

Industry average

87

90

85

72

74

71

26

36

8

(LSI)

Ambassadorship

OUR MANAGERS HAVE: • The will to lead.

• An enterprising approach.

• Energy and commitment.

• Trust.

OUR MANAGERS WANT TO:

• Communicate.

(ESI, Employee Satisfaction Index)

Leadership index

Åhléns’ leadership is hallmarked by managers with solid self-awareness and personal maturity, thus enabling employees to achieve the established goals.

• Provide feedback and conduct follow-ups.

Results of employee survey

Employee satisfaction

ÅHLÉNS’ MANAGEMENT PROFILE

(NPS, Net Promotor Score)

29 | ÅHLÉNS SUSTAINABILITY REPORT 2012

• Be honest and transparent.

• Create effective teams.

SUSTAINABILITY TRAINING Training in sustainable development is a feature of the introductory training for new employees, and customized training efforts in the area are conducted as necessary.

We have also trained sustainability ambassadors from the department stores, who have under­ gone a full-day of training to in turn be able to inform and inspire their colleagues in the department stores.

To further improve knowledge about which textiles can be considered more sustainable, some ten people from Purchasing attended training in 2012 provided by Made-By, a Dutch organization that helps companies in the textiles industry improve environmental and social aspects in the supply chain.

THE VALUE OF DIVERSITY Åhléns wants to contribute to a society in which each individual is considered an asset and trea­ ted equally. As a company, we want to reflect our customers and the society in which we operate.

We believe that diversity strengthens Åhléns’ competitiveness and business.

The composition of Åhléns’ employees in terms of age and gender largely resembles the company’s customer target groups. About 90% of our emp­ loyees are women, the average age of whom is 35. We strive to achieve a more even distribution among women and men at all levels and actively look for candidates of the underrepresented gender when recruiting.

The organization in figures in 2012 Number

Percentage of fulltime employees

Head quarter employees including regional managers

257

91 %

Store employees

2 992

64 %

Production office employees

56

100 %

Full-time employees

959

92 %

Part-time employees

2 290

66 %

Management group Total

100 % 3 305

73 % (243 men, 2 160 women)

Of our 3,305 employees, 8.7% are men. 2,397 work in Sweden, 312 in Norway and 56 at our local production offices in Asia. Corporate management consists of six women and two men.

30 | ÅHLÉNS SUSTAINABILITY REPORT 2012

Collaboration generates value Åhléns wants to be a good member of the society. As a result, the co-operation with Myrorna and Stadsmissionen (the City Mission) con­tinued at the same pace. A new strategy for our engagement in the society has been developed and will probably result in new collaborations.

UNSOLD PRODUCTS GIVEN A SECOND LIFE The products that Åhléns for various reasons cannot sell are donated to Stadsmissionen or to Myrorna (a second-hand chain run by The Salvation Army). Stadsmissionen mainly collects products from the three city department stores in Stockholm, Gothenburg and Malmö, and from the head office. Myrorna is located in many cities throughout Sweden and collects products from all of the other department stores. The products are stripped of their price and brand tags and either used directly in Stadsmissionen’s social operations or sold in Myrorna’s stores, in which the surplus goes to the Salvation Army’s social operations.

The proceeds from Myrorna’s sales of former Åhléns products go, for instance, to treatment centers and assisted living for adults or adol­ escents with substance abuse problems. Funds are also donated to 15 care centers that provide support to people in need of financial support, counseling, advice or home visits. The Salvation Army also has camp activities for single parents and their children.

OLD BECOMES NEW Stadsmissionen also has “Re-make” operations where they re-tailor old garments into new products. The products are made by Stads­ missionen in cooperation with people entering the labor market. In February 2013, Åhléns and Stadsmissionen initiated a joint campaign in the City department stores, where the customers are encouraged to turn in their old jeans. They will be retailored by the Stadsmissionen’s Re-make activities and the new products will be sold in the department stores. The proceeds from these sales will go to Stadsmissionen’s activities for disadvantaged individuals.

31 | ÅHLÉNS SUSTAINABILITY REPORT 2012

WE WANT TO RECYCLE TEXTILES

Stadsmissionen’s Klaragården –“beloved place” – A beloved place, I wouldn’t have survived if it weren’t for Klaragården, says Anneli.

She has just turned 45 and has lived two lives – a regular life with her family and another life as a homeless substance abuser.

Today, she has been drug-free for five years but does not have her own home. She carries what she owns.

– Thanks to Klaragården and their cooperation with Åhléns City and others, I can change underwear every day, get nice socks and have a feeling of dignity, says Anneli.

At Klaragården, Stads­missionen meet 50 women every day and just as many life stories. Klaragården is a possibility to start something new, and offers a sanctuary where homeless or substance abusing women can get food, a shower, clean clothes and rest.

625000 SEK was raised in 2012 for the Breast Cancer Foundation through Pink Ribbon sales TOWARDS NEW COLLABORATIONS In addition to the cooperation with Myrorna and Stadsmissionen, Åhléns supports several different organizations by collecting donations or through direct donations. For many years, Åhléns has sold the Breast Cancer Foundation’s Pink Ribbon and in 2012, this raised just over SEK 625,000. The sale of UNICEF’s Christmas cards resulted in SEK 30,000 to the UN organi­ zation. In conjunction with the Christmas camp of the organization Maskrosbarn for young people with parents who have physological problems or are substance abusers, the young people received gift certificates at Åhléns so they could buy their own Christmas gifts, which was much appreciated.

Based on the strategy for community involv­ ement, we have made our future collaboration concrete. It has been established that “Åhléns wants to support women in need, in Sweden and countries in which we have activities”.

This means that we will develop partnerships with one or a few organizations that fit this description. Work is under way to find the right partner who, for example, should have exper­ ience of collaborating with companies. The objective is to establish a structured, continuous partnership with an organization where both customers and employees can contribute to the organization.

32 | ÅHLÉNS SUSTAINABILITY REPORT 2012

Together with industry colleagues from Lindex, IKEA, H&M, Indiska, KappAhl and the Swedish Trade Federation, Åhléns established T4RI (Textile for Recycle Initiative) an initiative to create better conditions for the reuse and recycling of textiles.

Through T4RI, Åhléns wants to be involved and take responsibility primarily for the reuse of textiles, follo­ wed by recycling in the best way and as a final option incineration. We hope to be able to find solutions that can simplify the cooperation with various players in textile recycling, such as consumers, producers, municipalities and recycling companies.

GRI Partly reported Indicator

Global Reporting Initiative

Åhléns’ 2012 Sustainability Report is based on the Global Reporting Initiative’s guidelines, version G3.1 (for more information on GRI, please visit www.globalreporting.org). According to our assessment, the report corresponds to the GRI application level C. The aim is to continue reporting on our sustainability efforts on an annual basis and to continuously improve the report.

Fully reported

Description

FOCUS ON ESSENTIAL QUESTIONS

The content of the report reflects the questions that are essential for Åhléns, based on the operation’s impact on people and the environment and our stakeholder’s requirements and expectations. When formulating the report, significant sustainability aspects were identified through dialogs with key internal individuals at Åhléns. The results of a previous qualitative analysis of prioritized sustainability aspects conducted in 2010 also acted as a basis for the report (for a description of the materiality analysis, refer to Åhléns’ 2010 Sustainability Report at www.ahlens.se).

The contents of the report pertain to the operations of Åhléns AB. All information and key indicators are valid for 2012, if nothing else is mentioned.

Comment

Page

Strategy and Analysis 1.1

CEO’s statement.

3

Organizational Profile 2.1

Name of the organization.

35

2.2

Primary brands, products, and/or services.

4

2.3

Operational structure of the organization, including main divisions, operating companies, subsidiaries, and joint ventures.

4

2.4

Location of organization’s headquarters.

35

2.5

Number of countries where the organization operates.

4–5

2.6

Nature of ownership and legal form.

4

2.7

Markets served.

4–5

2.8

Scale of the reporting organization.

2.9

Significant changes during the reporting period.

No significant changes.

Awards received in the reporting period.

No particular prizes or commendations.

2.10

4–5

Report Parameters 3.1

Reporting period.

3.2

Date of most recent previous report.

3.3

Reporting cycle.

3.4

Contact point for questions regarding the report or its contents.

3.5

Process for defining report content.

3.6

Boundary of the report.

3.7

State any specific limitations on the scope or boundary of the report.

3.8

Basis for reporting on joint ventures, subsidiaries, etc.

33

3.10

Explanation of the effect of any re-statements of information provided in earlier reports, and the reasons for such re-statement.

24

3.11

Significant changes from previous reporting periods.

3.12

33 April 2012.

33 The content of the report was formulated through discussions with key internal individuals and based on a previously conducted materiality analysis from 2010. The report is primarily aimed at employees and interested customers but also at other players interested in our operations and sustainability work.

33

GRI content index.

33–34

Governance, Commitments, and Engagement 4.1

Governance structure of the organization.

Since year-end 2012, Åhléns’ highest operating management comprises eight individuals (six women and two men). In 2012, Åhléns’ Board of Directors comprised seven members (four women and three men). Four Board members are representatives from Axstores’ Group management, of whom three are employee representatives.

4.2

Indicate whether the Chair of the highest governance body is also an executive officer.

The Chairman of the Board in 2012 was Thomas Axén, CEO of the Parent Company Axstores.

4.3

For organizations that have a unitary board structure, state the number and gender of members of the highest governance body that are independent and/or non-executive members.

Not applicable to Åhléns.

4.4

Mechanisms for shareholders and employees to provide recommendations or direction to the highest governance body.

Åhléns’ Board includes three employee representatives. Employee surveys and performance reviews also enable us to contribute proposals and opinions.

4.14

List of stakeholder groups engaged by the organization.

Key stakeholder groups include employees, customers, owners, suppliers, union organizations, authorities, industry and interest organizations and other business partners. Åhléns maintains a continuous dialog with these stakeholders through its day-to-day operations and channels of communication. The aim is to ultimately develop a more systematic stakeholder dialog regarding sustainability matters.

4.15

Basis for identification and selection of stakeholders with whom to engage.

Åhléns’ most important stakeholder groups are those that are most impacted by our business, including employees, customers, owners, suppliers, authorities and industry and interest organizations. The identification and prioritization of stakeholders with which to maintain an active dialog is based on continuous business intelligence reports and daily operations.

33 | ÅHLÉNS SUSTAINABILITY REPORT 2012

4, 7

Indicator

Description

Comment

Status Page

Performance indicators Economy EC1

Direct economic value generated and distributed, including revenues, operating costs, employee compensation, donations and other community investments, retained earnings, and payments to capital providers and governments.

EC2

Coverage of the organization’s defined benefit plan obligations.

4 All Åhléns employees are covered by collective-bargaining agreements (with the Union of Commercial Employees, Unionen and the Union for Professionals). Benefits deriving from collective-bargaining agreements include the ITP occupational-pension agreement for salaried employees and the SAF-LO union pension for store employees.

Environment EN2

Percentage of materials used that are recycled input materials.

EN4

Indirect energy consumption by primary source.

Recycled materials are found in certain Bra val products.

13–15, 24 23–24

EN5

Energy saved due to conservation and efficiency improvements.

23–24

EN16

Total direct and indirect greenhouse gas emissions by weight.

26

EN18

Initiatives to reduce greenhouse gas emissions and reductions achieved.

23–26

EN26

Initiatives to mitigate environmental impacts of products and services, and extent of impact mitigation.

12–15

EN28

Monetary value of significant fines and total number of non-monetary sanctions for non-compliance with environmental laws and regulations.

EN 29

No fines or sanctions.

Environmental impacts of transportation.

25–26

Labor Practices and Decent Work LA1

Total workforce by employment type, employment contract, and region, broken down by gender.

LA4

Percentage of employees covered by collective bargaining agreements.

30 100 %

LA7

Rates of injury, occupational diseases, lost days, and absenteeism, and total number of work-related fatalities, by region and by gender.

28

LA12

Percentage of employees receiving regular performance and career development reviews, by gender.

29

LA13

Composition of governance bodies and breakdown of employees per employee category according to gender, age group, minority group membership, and other indicators of diversity.

See information under 4.1 above.

Human rights HR2

Percentage of significant suppliers, contractors, and other business partners that have undergone human rights screening, and actions taken.

20–22

HR4

Total number of incidents of discrimination and corrective actions taken.

HR5

Operations and significant suppliers identified in which the right to exercise freedom of association and collective bargaining may be violated or at significant risk, and actions taken to support these rights.

20–22

HR6

Operations and significant suppliers identified as having significant risk for incidents of child labor, and measures taken to contribute to the effective abolition of child labor.

20–22

HR7

Operations and significant suppliers identified as having significant risk for incidents of forced or compulsory labor, and measures to contribute to the elimination of all forms of forced or compulsory labor.

20–22

No cases have been reported.

Product Responsibility PR1

Life cycle stages in which health and safety impacts of products and services are assessed for improvement, and percentage of significant products and services categories subject to such procedures.

13–18

PR3

Type of product and service information required by procedures, and percentage of significant products and services subject to such information requirements.

Åhléns works on the basis of the prevailing legislation and industry norms/agreements in terms of product information and the labeling of products and the range.

PR4

Total number of incidents of non-compliance with regulations and voluntary codes concerning product and service information and labeling, by type of outcomes.

No cases have been reported.

PR5

Practices related to customer satisfaction, including results of surveys measuring customer satisfaction.

9–10

PR6

Programs for adherence to laws, standards, and voluntary codes related to marketing communications.

10

PR7

Total number of incidents of non-compliance with regulations and voluntary codes concerning marketing communications.

No cases have been reported.

10

PR8

Total number of substantiated complaints regarding breaches of customer privacy and losses of customer data.

No cases have been reported.

10

34 | ÅHLÉNS SUSTAINABILITY REPORT 2012

Feel free to contact us!

We eagerly receive questions and comments regarding our sustainability efforts: sustainability@ahlens.se Sustainability Manager Anita Falkenek Telephone, directory: +46 (0)8 402 80 00 Åhléns AB, Ringvägen 100, SE-118 90 STOCKHOLM, SWEDEN

35 | ÅHLÉNS SUSTAINABILITY REPORT 2012