Åhléns Sustainability Report 2014

SUSTAINABILITY REPORT 2014

2014 in brief We continued to develop our sustainability efforts with new products, partnerships and, in particular, more communication.

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CEO’s statement A new brand platform will guide our product development and communication.

About Åhléns More than 3,000 employees in just over 100 department stores and stores.

Strategy New business and purchasing system and a new business model.

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Customer dialog Bra val (Good Choice) campaign raised awareness of Åhléns’ sustainability efforts.

Employees New organization and a new Code of Business Ethics.

Offering New collection and many other new Bra val products.

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Production Increased environmental focus in the supply chain, including tanneries.

Operation Reduced electricity consumption in department stores.

Collaboration Collaboration with Myrorna, the City Mission and Doctors without Borders.

We value your opinions and thoughts. Please write to us at sustainability@ahlens.se. Text: Åhléns and Trossa, Design: Futerra. Translation: The Bugli Company. Please consider the environment and read this report electronically. If you decide to print the report, please use Swan-ecolabeled and/or FSC-certified paper.

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From the CEO Welcome to the 5th annual Åhléns Sustainability Report, where we dive into the most important sustainability developments and challenges from the past year and chart our progress moving toward a number of important long-term sustainability goals and ambitions.

It is our ambition to offer carefully selected, price worthy and sustainable solutions to people's needs in a simple, inspiring and accessible way.

One of the most well-received ways we do this is through our Bra Val offer. We are very pleased to see that in our latest customer survey the awareness of our Bra Val offer has increased significantly and that more and more of our customers share a preference for sustainable choices.

We are committed to increasing the number of sustainable choices for our customers in the coming years

both through Bra Val and the selection of even more sustainable brands.

Striving to ensure decent working conditions as well as environmental progress through our complex supply chain is a top priority for us as well as for our stakeholders. We have also addressed a number of key issues together with our partners in the areas of sustainable operations and social responsibility. I hope you will find many worthwhile steps forward in this years’ report within each of these focus areas.

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Our brand platform states that with people as our focus, we search for the possibilities that make a difference in everyday life, and we hope that our sustainability approach makes a difference to our customers, co-workers and partners around the globe. In dialogue and partnership with them, we are committed to continue to develop Åhléns in a positive, and sustainable direction.

Gregg Mowins, CEO Åhlens AB

About Åhléns Åhléns was founded in 1899 in Insjön, Sweden. Today, we are proud to be one of the best-known brands in the Nordic region and want to continue managing our brand in a responsible and sustainable manner.

In more than 100 department stores and stores throughout Sweden and Norway, we offer a wide range of carefully selected products in beauty, womenswear, children,

menswear, entertainment, home and food. While most are private label products, we also sell other brands. Åhléns is part of the Axstores retail group, which also includes Kicks and

Lagerhaus. Axstores, in turn, is part of the family company Axel Johnson AB, which is owned by Antonia Ax:son Johnson and family.

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2014 in numbers

We want to simplify, improve and brighten the lives of our customers every day!

• SEK 4.9 billion in sales

• 2.1 million Club members

• 3,330 employees

• 77 department stores in Sweden

• About 80 million visitors

• 32 interior-design stores in Norway

Sustainability-related targets and key data

The following table presents targets and key data for the sustainability issues that are important to Åhléns.

Key data

2011

2012

2013

2014

Target

Percentage of sustainable products

3,4 %

4,4 %

4,9 %

6,0 %

10 % 2015

-15 %

-19 %

-20 % to 2014 compared to 2009 100 % 2015

(share of sales measured in SEK)

Energy consumption in

-12 %

-15 %

department stores (percentage change from 2009, based on kWh/m2)

Percentage of audited production facilities

60 %*

75 %*

70 %*

77 %*

87

90

90

Not meas- Not set ured**

No data available

6,0 %

5,7 %

6,4 %

(located in high-risk countries that manu­facture private label products)

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

Sickness absence (percentage of working hours)

* As of 2014, all facilities are included in the key data, including those with a purchase value of less than USD 15,000, which were not previously included.

The figure for 2013 has been restated, but not for 2011 and 2012.

5,7 % to 2015

**Will be conducted in autumn 2015.

Our value chain We aim to generate value and take responsibility for our impact on people and the environment in all aspects and areas of our business – from design and manufacturing, to sales and end-of-life management.

Together with our employees, supp­ liers, customers, owner and other business partners, we work to manage risk, minimize negative impacts and seize opportunities across the entire value chain. This work covers many different issues, and focuses on

DESIGN AND PRODUCT DEV­ELOPMENT

Choice of materials Product quality and use lifespan

Åhléns’ range consists of tens of thousands of products manu­ factured by suppliers in various

Access to raw materials

Efficient logistics

Use of water and chemicals

Delivery quality PRODUCTION

Sustainability requirements on raw materials and ingredients

Range and product development Resource efficiency

those with the greatest impact and those that enable us to really make a difference.

Climate and environmental impact

DEPARTMENT STORES AND SALES

Safety

Occupational health and safety and human rights Use of water, energy and chemicals

Product quality, complaints management Product and customer information

Customer relationships

Supplier relationships RAW MATERIALS

parts of the world, mainly Asia and Europe. Many of Åhléns’ private label products are purchased by our local production offices in Asia and then shipped by boat to Sweden.

TRANSPOR­ TATION

Employee engagement Marketing Energy consumption Waste management

REUSE, RECYCLING AND WASTE

End-of-life management USE

Materials recycling

Strategy and development Sustainability is one of five main areas of Åhléns’ strategy, Åhléns På Väg.

This is reflected in our business plan by including Bra val (Good Choice) and product quality as key components. During the year, we introduced a new business model and a new purchasing and business system.

ANITA FALKENEK , SUSTAINABILIT Y MANAGER What was the most important event during the year?

We started working with LWG and BEPI, two organizations that promote sustainable environmental practices at tanneries and facilities.

What are you most proud of?

Our Bra val (Good Choice) advertising campaign! The outcome was very positive, and we raised awareness of both our sustainability efforts and Bra val.

What was most challenging?

The company introduced a new retail and business system, which required a lot of extra work from many employees.

What is next on Åhléns’ agenda?

We will now communicate and implement the new BSCI Code of Conduct. This will require a lot of dedication from our employees and suppliers.

ÅHLÉNS ON THE WAY Customers and people are key in our strategy, Åhléns På Väg, which defines how our offering, availability, culture and sustainability efforts should be developed. The sustainability strategy comprises four parts: Range, Production, Operation and Social Responsibility. Targets and action plans have been determined for each area. The strategy has been harmonized with the sustainability strategy of our owner Axel Johnson, which is available here: http://www. axeljohnson.se/en/lets-make-adifference/ DIALOG WITH STAKEHOLDERS As part of our efforts to develop the sustainability strategy, we initiated a stakeholder dialog with sustainability experts in 2012. Supply chain responsibility, the development of more sustainable products and promoting changes in consumer behavior emerged as the most critical issues for Åhléns to focus on. More ambitious targets for sustainable con­sumption, and a continued focus on partnerships and collaboration in key issues were also requested (read more in the 2013 Sustainability Report).

NEW BUSINESS MODEL To streamline Åhléns’ internal work and generate synergies between bus­iness areas, a new business model, ÅSOM (Åhléns Strategic Operating Model), has been introduced. The business model consists of five parts: processes, organization, management systems, supporting systems, and roles and responsibilities.

When the new purchasing processes came into effect, product quality and sustainability were well-integrated into all processes. The management system also includes sustainability KPIs at various organizational levels.

ORGANIZATION Åhléns’ company management has overall responsibility for processes related to product quality and sustainability. The Sustainable Purchasing Council is responsible for issues related to purchasing, and makes decisions on purchasing criteria and Bra val (Good Choice).

The role of the sustainability department, with four employees, is to support the company’s sustainability initiatives. The Sustainability Manager is a member of Åhléns’ Management Group, and reports to the CEO. All

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managers are responsible for pursuing the sustainability issues relevant to their own area of responsibility. At department stores, the store manager has overall responsibility. The role of sustainability ambassadors is to promote sales of Bra val products, and to inspire their colleagues to work actively with sustainability issues.

GOVERNING DOCUMENTS Within the framework of ÅSOM, Åhléns’ three-year business plans are established and updated every year, and cover both sustainability and product quality. There are also several Axstore-wide policies and guidelines in place to ensure responsible business practices. These include an environmental policy and joint purchasing requirements for the environment, quality and social accountability.

During the year, a new Code of Business Ethics was adopted as well as two new policies – Confidential Information, and Bribery and Corruption. The Code and policies were launched in February 2015. All employees are required to sign the Code of Business Ethics, which is a new practice for Åhléns.

Customer dialog By engaging in dialog with our customers, we can tell them more about our added value, identify their expectations and continue to develop Åhléns. Daily interaction in our department stores, and the Åhléns loyalty program with more than two million members, are our most important channels of communication.

PAT TIE SUWAN, SUSTAINABILIT Y AMBASSADOR AT ÅHLÉNS, FRIDHEMSPL AN How well do Åhléns’ sustainability efforts meet customer expectations?

It’s fantastic that Åhléns is investing in a sustainable range.

The requirements are mainly related to various environmental and ethical certifications, and Bra val has met their expectations. But obviously we can improve!

What was your experience of the Bra val campaign?

We conducted the campaign enthusiastically, and were very well prepared. All media and displays in the department store increased curiosity about Bra val.

How can more customers be encouraged to buy Bra val?

The creativity of the department stores sets the limit! This spring, we are planning to promote Bra val with internal sales contests and in-store events for customers.

THE ÅHLÉNS CLUB IS GROWING We have many loyal customers who make frequent purchases. The Åhléns Club, our loyalty program, has more than two million members – 55% of all women in Sweden between 16 and 65 are members of our club! We communicate with our members and customers in several ways – in our department stores, via the Åhléns magazine, by e-mail, the website and text messages.

Facebook, Instagram and Customer Service are other key channels for dialogue. The Åhléns Club also includes a consumer panel with about 35,000 members. ÅHLÉNS’ CUSTOMER SERVICE In 2014, Customer Service received about 37,000 calls and 36,000 emails from customers and department stores, a 22% increase compared with 2013. Many questions were related to loyalty program offers, but increasingly about product origin, animal welfare, quality and the chemicals in, primarily, toys and other children’s products.

NEW CUSTOMER SURVEY At the end of 2014, a customer survey on attitudes toward sustain-

ability was conducted, as a follow-up to the survey in 2012.

The results show that while most respondents consider sustainability important, fewer respondents actively choose sustainable alternatives when shopping at Åhléns compared when they are buying food. While most respondents claim they know that Åhléns works with sustainability, many do not know what this actually involves.

Awareness of Bra val (Good Choice) has increased, which confirms that our initiatives since 2012 to expand the range, inform customers and integrate Bra val with our marketing communication have yielded results. However, only about half of our customers know about our Bra val range.

A SUCCESSFUL CAMPAIGN During autumn, we conducted an extensive Bra val campaign in several channels, aimed at raising awareness of Bra val and encouraging customers to make sustainable choices. The campaign used TV, the Internet, department stores and communication with members to promote Bra val.

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As part of the campaign, we also decorated an entire apartment in Stockholm with sustainable products (kitchen equipment, bathroom accessories, textiles and other interior fittings) and listed it on the Airbnb rental website. The aim was to show the width of the Bra val range, and to find out what we could improve. For several weeks, the apartment was available for overnight stays, which proved highly successful. Go to www.youtube. com/watch?v=BLC-zUVKe1I to see a video of the apartment.

A follow-up shows that the campaign made a real difference to awareness of Bra val. Although there was no significant increase in total sales for the period, sales of Bra val products in the Home range rose slightly more than 6%.

A new promotional feature in 2014 was that Åhléns Club members who purchased at least three Bra val products over a three-month period would receive 5,000 bonus points and a thank you message by e-mail.

This activity was aimed at encouraging customers to continue purchasing Bra val products.

Committed employees We are all Åhléns – our success depends on our employees. In 2014, we continued to develop our organization and how we work.

NINA LINDVALL , BUSINESS AREA MANAGER, MENSWEAR AND CHILDREN What attracted you to Åhléns as a workplace?

I was looking for a commercial, design-driven company that focused on sustainability. Åhléns is also a company undergoing change, and I love change!

As a manager and employee, what is your perception of Åhléns so far?

An open and modern organizational culture, where everyone can influence and contribute knowledge, regardless of their role. The challenge ahead is to build a truly sustainable and inspiring range.

That is the bottom line for winning customer trust.

What is your view of efforts to achieve social responsibility and sustainable development?

This is a vital issue that really permeates our work with range, production decisions and communication.

SHARED VALUES In 2014, some 3,330 people worked at Åhléns, most of them in our department stores and stores. Our organizational culture is based on shared values, where each employee is expected to take responsibility and initiatives to best contribute to customer satisfaction and sustainable profitability.

NEW ORGANIZATION In 2013, extensive work was carried out to renew and revise Åhléns’ organization and processes. The aim was to create a business-oriented organization that could adapt to increasing demands for efficient workflows and increased profit­ ability. In 2014, our implementation of this new organization continued.

In July 2014, our new purchasing and business system, Vanilla, was introduced. The transition entailed major workflow changes, and many employees worked intensively to ensure accurate order entries, deliveries and monitoring to safeguard our sales.

CUSTOMER UNDERSTANDING As a result of the organizational change, we have produced new job descriptions for all roles, to define every employee’s responsibilities.

The job descriptions provide a basis for the annual performance appraisals between managers and employees, and provide clearer information for constructing skills and career development. At Åhléns, we strive to be a learning organization, where willingness, knowledge and ability rate higher than titles and hierarchy.

In recent years, we have maintained a clear focus on sustainable leadership at Åhléns, with initiatives such as training programs in values-driven leadership for all managers.

COMMITTED EMPLOYEES Every year, we conduct a survey among all employees. The most recent survey was in January 2014.

The response rate was 91% in 2014 (93% in 2013), and the results show a very high level of commitment.

The Employee Satisfaction Index (ESI) score was 90, compared with

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the industry average of 84. The Net Promoter Score (NPS), a tool for measuring the extent to which employees are active ambassadors for Åhléns, also increased and was far higher than the industry average.

The employee survey shows that our employees have very good knowledge of Åhléns’ values and feel involved in efforts to realize them.

Better feedback and follow-up is still being requested, which has led to a greater focus on this aspect. The 2014 employee survey showed a higher level of stress in the company, which is something we are trying to change. In the employee survey, the vast majority of our employees (77%) claim they have confidence in Åhléns’ sustainability efforts and consider what we do in this area to be good, or very good.

FOCUS ON HEALTH Åhléns works actively with health and wellness. We want to contribute to, and promote, increased physical activity and a balanced lifestyle, so that our employees feel good and

Sickness absence 2012

2013

2014

Target 2015

6,0 % Sickness absence as a percentage of working hours

5,7 %

6,4 %

5,7 %

stay motivated, and to reduce sickness absence. The wellness initiative “Vågen” comprises four perspectives: Health, Exercise, Balance and Feel Good, and is designed for all employees. The initiative includes a wellness allowance of SEK 2,000 per employee per year, and a range of activities for exercise and inspiration. In 2014, a number of “Vågen Days” were held at various workplaces, with different themes. We also have agreements with fitness and wellness providers, enabling our employees to take advantage of special offers.

However, sickness absence rose during the year, from 5.7% of total working hours in 2013 to 6.4% in 2014, mainly due to an increase in

long-term sickness absence. The target for 2015 is that sickness absence will return to a maximum of 5.7%.

DIVERSITY ENRICHES We value workplace diversity. Different perspectives enrich us and improve our performance. We also welcome customer diversity – we believe that everyone is unique and should be treated as an individual.

We have zero tolerance of discrimination.

The composition of Åhléns’ employees is now largely equivalent to the company’s target market. More than 90% are women, and the average age of our employees is 35. We strive for gender balance when recruiting.

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DIVERSITY TARGETS FOR 2020 In early 2014, we formulated new diversity targets (gender balance, average age and international background) to be achieved by 2020: 25% with an international background, 15% men in department stores, 20% men in the head office and a slightly lower average age of about 40 for managers. Some of the measures to achieve these targets include development of our recruitment processes, and inclusion of the diversity perspective in our communication and leadership training courses. In the next employee survey, we will also focus on how employees perceive Åhléns as a workplace in terms of diversity and inclusion.

Diversity status and targets, 2014 The figures for 2013 are in parentheses.

Head office

Department stores and stores

Production offices

No. of employees

266 (265)

3003 (3060)

61 (57)

Distribution of women/men, %

88/12 (89/11)

92/8** (92/8)

69/31 (64/36)

Target 2020: 80/20

Target 2020: 85/15

Target 2020: 60/40

Percentage with an international background*

14 (14)

23 (23)

20 (20)

Target 2020: 25

Target 2020: 25

Target 2020: 25

Average age (women/men)

42/43

35/35

40/43 (39/42)

*Percentage who answered “Yes” to the following question in the employee survey: Were both of your parents born in a country other than the one you are working in? **Åhléns Sweden only.

Of our total 3,330 employees, 3,008 work in Sweden, 261 in Norway and 61 at our production offices in Asia. Åhléns’ company management team comprises ten individuals, of whom eight are women and two men.

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Increasingly sustainable homes and closets Although the number and sales of our products labeled Bra val has increased, our target of 10% by the end of 2015 will be difficult to achieve. We also continue to focus on product quality.

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PERNILL A SCHÖNBÄCK , DESIGN MANAGER, WOMEN’S FASHION What was the objective for a new, sustainable collection?

The objective was to increase the focus on sustainability, both internally and among our customers. We have designed a trend-setting collection with mix-and-match pieces using 100% sustainable materials. The collection includes for example, a kaftan and short culottes. Sustainability doesn’t have to be boring!

What are the challenges when designing sustainable fashion?

Finding interesting variations of sustainable fabrics has not been easy. It required some extra work, but we’ve now compiled a much larger file of fabrics to work with in the future, so we see it as an investment.

What is the next step for Women’s Fashion?

To produce a sustainable mix-and-match collection every season.

PURCHASING FUNDAMENTALS All of Åhléns’s suppliers must sign, and comply with, our general purchasing agreement. These include both legal requirements on the product and production process, and Åhléns-specific requirements regarding function, quality, environment and ethics. A key component of the general purchasing agreement is our own Sustainability Buying Criteria, which are more stringent than those required by law.

There are Product Quality Specifications (PQS) for most product categories. Our PQSs define a product’s requirements in terms of characteristics and content, and how it should be tested to verify quality compliance. During the year, we revised and produced PQSs for several product categories, including sunglasses, cotton products for beauty and children’s clothing.

SUSTAINABLE PALM OIL We have identified palm oil as a raw material risk, since palm oil plantations contribute to rainforest destruction. Palm oil is a common ingredient in block candles, and in beauty products – which may

contain up to 30%. We recommend that our suppliers use organic or RSPO-certified palm oil. A minimun requirement is GreenPalm certificates. (read more about sustainable palm oil at www.rspo.org). We have been purchasing Green Palm certificates for the pure palm oil used in candles and beauty products since 2014. In partnership with Kicks, we are engaged in dialog with beauty industry stakeholders regarding how all palm oil in derivatives could be traceable.

ANIMAL WELFARE Our Sustainability Buying Criteria have since many years included animal welfare requirements. For example, down must not come from birds that are live-plucked or forcefed, and we only sell furs and pelts that are by-products from the food industry. Our purchasing agreement also state that all animals should be handled in accordance with “The Five Freedoms,” a compact of rights for animals welfare. However, monitoring compliance with animal welfare requirements has proved challenging, which is why we are engaged in an industry dialogue on this topic.

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Until a global standard is issued for the breeding of angora rabbits, we will not be selling any products containing angora wool.

TIMBER REGULATION The aim of the EU Timber Regulation is to prevent the import of illegally harvested wood into the European market. For every product made of wood or pulp covered by the regulation, we are required to gather information and there must be records available to show what type of wood the product comprises, where the wood was grown and evidence that the forest was legally harvested.

During the year, we developed a process whereby we specify requirements through our general purchasing agreement, and compile documentation in a structured manner. Each product is subject to a risk assessment pertaining to origin and legality. In January 2015, the Swedish Forest Agency conducted an inspection in accordance with the regulation, and found no significant cases of non-compliance for Åhléns (Axstores).

FOCUS ON PRODUCT QUALITY It is important for us that our range exceeds, or at least meets, customer expectations. By logging all customer complaints in our point-of-sale system, we obtain good knowledge of the products that do not meet expectations.

During the year, we continued to focus on improving product quality, and increasingly tested our products against PQSs. Despite this, we were forced to stop selling a number of products due to poor quality – an armchair, a duvet cover and a lamp.

When Testfakta, an independent testing laboratory, revealed that the balloons sold by Åhléns contained prohibited substances, the balloons were replaced.

Despite changing our supplier, we were once again forced to suspend sales of Åhléns’ children’s outerwear overalls because they failed to meet functional requirements and exceeded heavy metal limits. The

overalls plus an outerwear hoodie were withdrawn from sale. Extensive efforts are now underway to ensure high-quality outerwear for children in coming seasons.

SUPERVISION Supervision provide opportunities for external parties to review our internal systems. During the year, regulatory agencies examined the substances in our jewelry and pencil cases. None of our jewelry received any remarks, but sales of one of our pencil cases were banned due to elevated levels of a prohibited substance. Inspections by Electrical Safety Authorities in Sweden and Norway led to sales bans on a hand blender and a lighting chain. Our cafés have undergone both self-assess­ ments and inspections without any remarks.

NEW CAFÉS AND FOOD STORE During the year, we opened our own juicebar – StrÅ – at the City department store in Stockholm. The

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juicebar serves cold-pressed juices, healthy wraps, gluten-free porridge and raw-food ice cream. The juices mainly contain organically grown fruit and vegetables. The wheatgrass in the juices is grown in the greenhouse. StrÅ uses the same type of compostable disposables as Cafe Å Lait.

Four new Café Å Lait restaurants opened during the year. All ingredients and products served at Café Å Lait are carefully selected. Where possible, they should be locally produced to support local farming and create jobs, be healthy, not contain unnecessary additives and, as far as possible, be organically grown. Many of the products are purchased from Swedish suppliers, such as Bergstrands Kaffe and Sänkdalens glass, and beverages from Kulla Must and Kivik. Å Skafferi was launched in October, with 65 new or relaunched food products bearing the new Åhléns design. A specially designed cupboard

Shopping for the future.

Making the right choice should be easy.

That’s why we have introduced Bra val (Good Choice) – our guide to more sustainable products. But not any product can carry our green label. They have to meet our stringent requirements. They must be made from recycled materials, Tencel or organically grown produce. Bra val also includes products approved under the following schemes: the Swan, the EU Ecolabel, Good Environmental Choice, FSC, Fair Trade and the Swallow (Swedish Asthma and Allergy Foundation).

All of these products take extra care of the environment and human beings.

in the Home department features products that are predominantly Swedish, and Bra val products such as organic tea and Fair Trade sweets.

If the products contain palm oil, the oil is always RSPO-certified. Read more at www.rspo.org.

BRA VAL TARGET Despite the positive trend whereby Bra val products accounted for 6% (4.9% in 2013) of total sales, our target of 10% in 2015 will be difficult to achieve. In 2014, we focused on raising awareness and will now continue with various activities to drive the trend forward.

A SUSTAINABLE HOME In the Home department, the share of Bra val continues to increase in several product categories, in terms of both sales and the number of products. For example, the range was expanded with additional variants of chopping boards made from FSC-certified* beech and oak from Poland. While all wooden garden

furniture is made from FSC-certified wood, finding other small pieces of furniture with the FSC label has proved challenging. We now sell many paperbacks, and some hardcover children’s books, with paper from FSC-certified mills, but would like to see more publishers that offer books printed on FSC paper. We already have a wide range of gift bags, gift boxes and office supplies made from FSC-certified wood. The target is that all gift-wrapping paper will be Bra val in 2015. Our hooks and shoe horns are also made from recycled aluminum.

Wooden kitchen accessories, such as trays and coasters, are increasingly made from FSC-certified wood.

All napkins are Swan-labeled, as are most of our candles. Our new detergent is Good Environmental Choice-labeled.

TOWARDS BETTER COTTON In January 2013, Åhléns became a member of the Better Cotton Initia-

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tive (BCI), a global organization that helps farmers to grow cotton in a way that reduces stress on the local environment and improves the livelihoods and welfare of farming communities. Through our member­ship in BCI, Åhléns is contributing to higher volumes of sustainable cotton in the global market, which cor­ respond to our own sales of cotton.

* The Forestry Stewardship Council (FSC) is an independent label for products that come from sustainably managed forests, see www.fsc.org.

Bra val (Good Choice) (percentage of total sales measured in SEK)

2013

2014

Target 2015

4,9 %

6%

10 %

Through our business partner Cotton­Connect, farmers in India are being trained to bring about new farming practices. The amount of used water and pesticides is decreasing, while crop yields and profitability are increasing for those farmers who receive training. Read more at www.bettercotton.org and www.cottonconnect.org.

COTTON IN HOME TEXTILES We work proactively to increase the proportion of Better Cotton in our home-textile products. All bedding products, curtains and fabrics from Bangladesh are now Better Cotton products.

All towels in the Vide, Aqua and Line lines are made from organic materials, which means that most of Åhléns’ towels are Bra val. Vide bedding is 100% Bra val. Some new products in organic cotton will soon be added to the range, including a new line of bedding products, more variants of Vide toweling bath robes, curtains and table textiles in the Fina line.

Åhléns has decided to broaden its range of mats, with a large proportion made from recycled materials.

NEW BRA VAL COLLECTION A totally new collection of Bra val garments, called Green Collection, was launched in April 2015. In 2014, our designers and product developers produced pants, tops, dresses, a kaftan, blouse and a scarf. The products are made from organic cotton, Tencel or recycled polyester.

Overall, the number of Bra val garments in both Å and Wera increased in 2015, including blouses, dresses from recycled polyester, and more knits and woven garments made from Tencel. The range also includes coats made from Tencel or recycled wool. Knitted garments included Å sweaters from recycled polyester and organic cotton. All basic cotton tops will continue to be made from organic materials.

More socks became Bra val during the year, and the proportion now corresponds to 12% of our private labeled socks. The share of sales for

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lingerie and nightwear also increased, from 21% to 23%.

We see a general trend whereby Tencel is growing for several types of products in Women’s Fashion, including lingerie. Tencel is made from FSC-certified pulp in an environmentally sound, closed-loop process.

MORE BRA VAL FOR CHILDREN Åhléns has a wide range of sustain­ able clothing for babies and children. Many basic garments in the Å range, and all Mini garments for the tiniest babies, are Bra val. The clothing is made from organic cotton or recycled polyester. Our product developers have generally increased the number of sustainable garments.

A line of Green Collection garments was also launched for babies, boys and girls in spring 2015.

Bra val products are also available for children’s bedrooms, including several bed sets, pillows and duvets.

The new storage boxes in the range are made from recycled cardboard.

When it comes to toys, our top priority is that they are safe, but preferably also that they are made from sustainable materials. A growing proportion of our wood and paper products is made from FSC-certified wood, including sketch pads and knot puzzles.

During the year, we opened Children’s World on the fourth floor of our City store in Stockholm, with about 1,000 square meters of children’s clothing, toys and bedroom accessories. A number of brands are included in Children’s World, including Mini Rodini with several organic products, Kavat with the Ecolabel and are thereby Bra val.

MENSWEAR In 2014, Menswear became a new business area, and product development for an Å Menswear range has now commenced. In 2015, we plan to launch new lines of men’s underwear, mostly in organic cotton.

BEAUTY PRODUCTS In 2014, sales of Bra val beauty products rose from 1.6% to 2.1%, which is a positive trend, albeit from a low level. Many of our best-selling beauty products are Bra val, including our make-up brushes with an FSC-certified handle. Efforts are ongoing to develop more brushes made from FSC-certified wood. The number of Bra val alternatives in our own Oliv line will increase as existing items are re-launched to meet, for example, the Swedish Asthma and Allergy Foundation’s Swallow requirements.

In addition to beauty products complying with cosmetics legislation, we have an Axstore-wide list of chemicals that must not be used in beauty products. This list is more stringent than the legal requirements. In 2014, the Swedish Medical Products Agency banned sales of Depend quick-drying gel nail polish due to allergic reactions.

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BRANDS Many of the brands we sell at Åhléns also offer sustainable products.

Nudie, which is now available at several department stores, and Knowledge Cotton are two brands that only work with organic fibers.

In the Beauty department, there are several brands with a clear sustainability profile, including Estelle & Thilde, Une, Origin and The Body Shop. There are also brands in the Children’s department with ranges that are partly or 100% sustainable.

These include Green Toys made from recycled plastic, Brio toys made from FSC-certified wood and Dantoy with Swan-labeled toys.

ECO-FRIENDLY CARRY BAGS All receipts from Åhléns are made from FSC-certified paper and are BPA-free. Åhléns’ carrier bags are made from FSC-certified pulp. The plastic bags are made from 80% recycled plastic, and 20% oyster shells.

Continued environmental focus in the supply chain Ensuring good working conditions and reduced environmental impact in a complex supply chain requires long-term input. We have continued to focus on improved working conditions and the environmental performance of the facilities.

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LISA LEE , OPERATION MANAGER AND SENIOR MERCHANDISER AT THE PRODUCTION OFFICE IN SHANGHAI How do you notice that Åhléns has increased its focus on sustainability?

Sustainability has been given more weight in discussions and negotiations, and is included in our annual strategic plan. It has become a more natural part of my daily work.

What are the challenges for improvement processes in the facilities?

It takes time to train and negotiate with suppliers in order to drive their development, but at the end of the day it’s a win-win situation for everyone. Our investment in 15+ (a focus on facilities with many deviations) is moving us in the right direction.

What has introduction of the timber regulation entailed?

That we have to compile documentation for the entire supply chain from all of our wood and paper product suppliers. A huge and challenging process!

GLOBAL PRODUCTION Åhléns’ wide range means that we have many different suppliers and facilities that manufacture products for us, most of them in Asia. In order to influence product development and our responsibility for people and the environment, we strive for long-term relationships and close dialog with suppliers. Our four local production offices, with about 60 employees, in Hong Kong, Shanghai, New Delhi and Dhaka are central to this efforts. They are responsible for maintaining regular contact with suppliers, verifying quality at the facilities and identifying new, potential producers.

SUPPLIER MONITORING Åhléns has been a member of the BSCI (Business Social Compliance Initiative) for several years, and we work systematically to monitor, train and improve the processes of our suppliers based on the BSCI Code of Conduct. The BSCI system aims to improve working conditions in high-risk countries. All new suppliers and facilities in high-risk countries are audited before partnerships are initiated. Subsequent

inspections are then based on the results. When the supplier has achieved positive results in an audit, the next inspection is performed after two years. If there are any deviations, the facility is audited within 6-12 months. We prioritize improvement processes at facilities from which we purchase large volumes, and at facilities with production associated with particular risks for workers’ health and safety, or for the environment.

The inspections are performed by accredited, third-party BSCI auditors. We also perform our own inspections of Chinese suppliers that are not BSCI-affiliated. Our longterm goal is to reduce the number of our own inspections and invest more in the training and proactive initiatives of our key suppliers.

BSCI CODE OF CONDUCT The BSCI Code of Conduct is based on the UN Declaration of Human Rights and the labor standards of the International Labor Organization (ILO). The Code of Conduct was recently revised and the new version came into effect on May 1, 2015.

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The new Code places more responsibility on all parts of a supply chain – companies, suppliers, factories and sub-contractors – for making risk assessments in their operations and for their business partners, and to a higher degree, ensuring that working conditions are compliant throughout the entire chain. More about BSCI: www.bsci-intl.org.

STRICTER REQUIREMENTS Despite several years of systematic efforts to monitor suppliers, the continuous improvement process of some of our suppliers is moving too slowly. As a result, we focused on raising the minimum level during the year through stricter requirements, dialog and training. Facilities with 15 or more deviations at repeated inspections are given one month to show corrective measures.

Otherwise, new orders are sus­ pended indefinitely.

In 2014, this applied to 63 facilities, of which 16 managed to achieve a satisfactory result, and we have therefore continued our partnership with these facilities. To support their continuous improvement process,

Global production

China 64 % (563)

Taiwan 3 % (26)

India 7 % (59)

Italy 3 % (26)

Sweden 4 % (39)

Other countries 19 % (164)

In 2014, we had 455 (470 in 2013) suppliers and 877 (895 in 2013) facilities, in a total of 38 countries, that manufactured private labeled products for Åhléns, slightly fewer than in 2013. Most of the facilities, 563 or about 64%, were located in China. Some 705 of the fa-

the facilities were offered training programs to achieve the BSCI standard for working conditions. A total of 11 facilities participated in the training programs.

The other 47 facilities did not achieve a satisfactory improvement, and we terminated our partnership with them. Most of these were facilities from which we purchased small quantities, and we were able to transfer production to another existing supplier.

SERIOUS DEVIATIONS For particularly severe deviations such as child labor, serious health and safety risks, change of subcontractor without our approval and refusing to allow audits, Åhléns has a zero tolerance policy. In such cases, new orders are immediately suspended. The supplier is then given one month to show corrective measures, but if the deviation is repeated, Åhléns severs the partnership.

In 2014, two cases of minors (15 and 12 years old) working in Chinese facilities were revealed. In China, young people are allowed to leave

cilities were located in 16 high-risk countries according to the BSCI definition: China, India, Turkey, Indonesia, Pakistan, Cambodia, Vietnam, Albania, Romania, Brazil, Moldavia, Serbia, South Africa, Thailand, Belarus and Bangladesh.

school at 15, but are not permitted to work until they turn 16. We also found cases of parents who took their children with them to the facilities during school holidays.

We have demanded, and monitored, improvements at these facilities.

GOAL: APPROVED FACILITIES Åhléns’ ambition is that all facilities in high-risk countries have been audited and achieved the result “No deviations from the standard/­ Improvements required” as a minimum. The outcome for 2014 was 77% audited facilities, half of which achieved acceptable results.

ACCORD IN BANGLADESH Following the tragedy in Bangladesh in 2013 when a building collapsed and more than 1,000 textile workers were killed, Åhléns became a signatory to the Accord of Fire and Building Safety in Bangladesh to contribute to faster health and safety improvements for workers.

The Accord conducts independent inspections of fire, electrical and structural safety in some 1,500 textile factories across the country. In

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2014, all facilities that manufacture on behalf of Åhléns were audited in accordance with the Accord protocol, with no serious findings.

ENVIRONMENTAL FOCUS In recent years, we have increasingly focused our efforts on environmental aspects in the supply chain. In 2014, as a step in that direction, we became a signatory to the new Business Environmental Performance Initiative (BEPI), a sister organization to the BSCI. BEPI aims to reduce environmental impact during the production phase by setting and monitoring key target areas for systematic environmental performance. A facility audited

by BEPI must meet targets for, for example, environmental management systems, energy and water use, chemicals or waste management depending on the production process and the specific environmental impact of the producer.

For many suppliers, proactive environmental work with energy and resource efficiency, for example, also reduces their production costs. The

Results of all facility audits in 2014 SA8000-certified, 2%

ICTI A/B/C levels, 4%

No deviations from the standard, 19%

ICTI – severe deviations, 2%

Improvements required, 28%

Not inspected, 23%

Deviations from the standard, 22%

A total of 549 facilities were audited, of which 541 were located in high-risk countries (corresponding to 77%).

Deviations applied primarily to working standards in terms of salary, working hours, insurance policies and lack of documentation.

From 2014, all facilities in high-risk countries are to be inspected, as well as facilities with an annual purchase value of less than USD 15,000. This entails an additional 100 facilities, of which several have not yet been audited.

SA 8000 is an international standard for systematic work with social accountability. ICTI is an industry standard for auditing toy suppliers.

aim is that this argument will encourage more producers to become affiliated with the BEPI system. Four of Åhléns’ suppliers in China are now BEPI-affiliated. The aim is that we will work together to learn how BEPI can best be used throughout the rest of our supply chain.

TANNERY REQUIREMENTS We have previously identified that tanneries and leather production involve considerable environmental and health risks. In leather production, environmentally hazardous

and harmful chemicals, including chrome, are often used. In addition, knowledge and control are often inadequate in the tanneries. In 2014, we began setting requirements for tanneries in India, where most of our leather products are manufactured. We are now a member of the Leather Working Group (LWG), an organization that works to improve environmental business practices in the leather industry, and specifically in the tanning industry. Visit www. leatherworkinggroup.com for more

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information. The aim is that the tanneries used by our suppliers will be inspected and meet certain levels according to the LWG protocol. By participating in such partnerships as the LWG, we see opportunities for impacting on a larger scale together with other companies, for greater transparency and long-term environmental performance in the industry. Our goal is that all tanneries used by our suppliers will have undergone LWG audits by 2017, and that their leather will be traceable.

Refined measurement and monitoring During the year, we introduced systems for measuring and monitoring waste management and the energy used by our department stores. We can now implement changes to reduce electricity consumption and the amount of unsorted waste. We also reduced our CO2 emissions from distribution transport.

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DANIEL ARSUNAN, DEPARTMENT STORE MANAGER AT ÅHLÉNS IN VÄ X JÖ How did you reduce your electricity consumption by 15%?

We turned off lights in the back rooms and reducing the number of spotlights. We also reduced the amount of lighting when the department store was closed.

How did you use the energy reports?

We presented the new quarterly reports at joint meetings. We discussed together the simplest way to reduce our electricity consumption. I also read through the report to see what part of the day most energy was used – in many department stores, an unreasonable amount of energy is used at night.

What are your best tips for other department store managers?

Get your employees involved! Listen to them and use their ideas.

Encourage everyone to think the same way as at home.

MONITORING ELECTRICITY 60 of our 77 department stores in Sweden have been using a joint monitoring system for electricity consumption since 2014. The objective is that all department stores will be involved, whether or not their electricity costs are included in the lease. Every quarter, a summary is sent to the manager of each department store, who can see the store’s consumption during the period compared with preceding quarters, targets, and the distribution throughout the day. They also receive tips for reducing their consumption. The monitoring has been effective. In 2014, electricity consumption in comparable department stores declined 3.1%. However, in our largest department store – Stockholm City – consumption rose 2.4% due to extensive renovations.

TARGET ACHIEVED The target to reduce our electricity use by 20% in 2014 compared with 2009 was almost met by the department stores. The reduction

was based on the 38 department stores where we have had central power supplies for several years, and where the electricity is generated by Guarantee-of-Origin hydropower.

The new target from 2015 is to reduce our electricity consumption by 5% per year by 2018.

By introducing energy-efficient LED lighting, it should be possible to reduce our overall energy consumption in stores and department stores by up to 30%. Since 2011, we have been installing LED lighting in all new stores or when existing stores are refurbished.

MONITORING WASTE Åhléns wants the waste generated by warehouses and department stores to be considered a resource.

The largest volumes comprise corrugated cardboard, soft plastics and combustible waste. For the 22 department stores that previously purchased their own waste collection services, we procured them centrally in 2014. This led to lower

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costs, improved sorting and better control and monitoring of volumes, collection intervals, expenses and revenue. Via the waste collection contract, we can now develop key performance indicators for measuring the amount of unsorted waste.

During the year, we evaluated the contracts and the waste management guidelines that were launched in 2013. The outcome was positive, and we see continued potential for improved waste sorting.

SOFT PLASTICS RECYCLED As of 2014, all department stores in malls and shopping centers have been able to return their soft plastics to Axstores’ distribution center (DC) in Jordbro with our distribution trucks. The plastics are baled at the center and then sent to a recycling facility to produce plastic bags. In 2014, the DC sent 1,100 m3 of soft plastics to a recycling facility. In addition to the environmental benefits, we are also paid for the plastic.

Electricity consumption in premises (kWh/m2) 2009

2010

2011

2012

2013

2014

Outcome 09–14

Target 09–14

Department stores, Sweden

214

201

189

182

181

175

-19 %

-20 %

Distribution center

134

133

128

124

125

121

-10 %

-20 %

Head office

155

109

175

108

131

131

-15 %

-20 %

ECO-LIGHTHOUSE IN NORWAY In Norway, the Eco-Lighthouse Foundation certifies many different types of operations, including shopping centers, and sets requirements for such criteria as energy consumption, waste and communication. The relevant Åhléns stores comply with this certification.

EFFICIENT TRANSPORTATION Efficient logistics with minimum climate impact are largely a result of optimized route planning and high fill rates throughout the entire transport chain. This requires effective coordination and partnership at all levels, from purchasing to sales.

All private label products, and a large proportion of branded products, are transported to department stores and stores via Axstores’ distribution center in Jordbro. Åhléns’ private label products arrive at the distribution center from Asia and Europe.

Transport is mainly by boat from Asia, and by truck within Europe and the Nordic region. Goods are only transported by air in exceptional cases. In 2014, 0.13% of inbound goods were transported by air, measured as a percentage of the volume of Åhléns’ paid transportation (0.5 in 2013). We use a system to manage the entire flow of goods, and work continuously to improve compaction and increase the fill rate. At

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the same time, the rising volume of larger and bulkier products, such as furniture, poses a challenge. In 2014, the fill rate for inbound containers was 82-88%. In collaboration with Åhléns’ Supply Chain organization, efforts to achieve a fill rate of at least 90% are now underway.

CO2 MONITORING In 2014, CO2 emissions from the transport of goods from supplier to department stores via the DC in Jordbro amounted to 7,013 tons (7,760 tons in 2013), broken down into 4,968 tons for inbound transport (5,458 tons), and 2,045 tons for distribution (2,302 tons). The developed model for calculating CO2

Photo: Tage Olsin

emissions is based on the Network for Transport and Environment’s (NTM) guidelines for calculating the environmental effects of transport.

The model was revised in 2014, and the numbers are recalculated so that 2014 and 2013 numbers are comparable.

REDUCED EMISSIONS Between 2013 and 2014, CO2 emissions from transport declined 11%. This was partly due to lower volumes since Lagerhaus products are no longer stored and transported via Axstores’ DC, but also because the adverse impact of the new data system launched in 2012 continued in 2013. In 2014, Axstores worked to improve compaction and thus achieve a higher fill rate on the pallets. During the year, every department store in Sweden received an average of 2.7 deliveries per week.

TRANSPORT REQUIREMENTS Axstores demands proactive work with the environment, occupa-

tional health and safety, from both the shippers of inbound goods and distribution carriers. These include systematic environmental management in line with the ISO 14001 standard, drug testing, maximum speed limits, engine class and that carriers train their drivers in safe and economical driving. Axstores also encourages the use of renewable or fuels. Another environmental truck was acquired by the local carrier for distribution in Stockholm.

The two trucks run on methane diesel, which cuts CO2 emissions by up to 70% compared with conventional diesel trucks.

BUSINESS TRAVEL Every year, Åhléns employees make a number of business trips, both domestic and international, including trips to our purchasing countries. It has been possible to replace some trips, including those to our purchasing office in Asia, with video conferencing. In 2014, the number

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of business trips by air, and therefore CO2 emissions, declined compared with 2013. Emissions from the 1,250 train trips made during the year contributed to less than 1 kg CO2 and were therefore negligible compared with the impact of air travel.

The purchasing policy for company cars in Axstores was updated during the year. The new requirements specify that CO2 emissions from newly purchased cars must not exceed 120 g/km.

CO2 emissions

(in tons from business travel by air*)

2012

2013

2014

281

291

263

*Based on the trips booked via our travel agent.

Enhanced partnerships that generate value At Ă…hlĂŠns, we believe that partnerships with various organizations and companies are often advantageous when tackling social and environmental challenges.

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SANNA FIRULOVIC, DEPARTMENT STORE MANAGER IN HELSINGBORG Why did you start the initiative to donate products to the Balkans?

My own roots are in Serbia, and the devastation caused by the Balkan floods had a big effect on me. I realized early that many people whose homes had been washed away would need clothing, blankets and other products.

What did you do?

I arranged so that unsold products from my department store and another three department stores in Skåne could be sent to Serbia and Bosnia. I contacted the Serbian Orthodox Church in Helsingborg, which transported the products to those people who needed them.

Did you ever hear whether the products arrived?

Yes, we received photos and thank you letters from the church and it feels really good that we were able to help so quickly.

TEXTILE RECYCLING During the year, the Swedish Ministry of the Environment assigned the Environmental Protection Agency to propose how producer responsibility for textiles in Sweden could be designed. The result will be presented in September 2016. Åhléns would like to see a national, shared responsibility for the collection and recycling of textiles, rather than a system where customers can only leave used textiles in stores. It is our belief that we can create a more efficient collection system together, and that this will lead to higher collection volumes. We have therefore remained active in the Textile for Recycle Initiative (T4RI), which aims to promote recycling of textiles and to create access to recycled fiber for making new products.

UNSOLD PRODUCTS DONATED Åhléns has been donating unsold products to the City Mission and Myrorna in Sweden for many years, and also to Fretex in Norway since 2014.

The products are used in their social activities, or sold in second-hand stores. Used store fittings are also donated, and employees at the head office can donate textiles to Myrorna.

CHRISTMAS IS FOR GIVING In the weeks before Christmas, Åhléns sold a CD “A beautiful Christmas – the year’s slowest Christmas album” with emotive Christmas carols to benefit City Missions around Sweden. Altogether, Åhléns’ customers contributed SEK 650,000 from sales of the CD. The money was used to fund the City Mission’s programs for people who are homeless and vulnerable. For the second consecutive year, Åhléns’ employees decorated the Stockholm City Mission’s premises.

This added some extra Christmas spirit for needy people celebrating Christmas.

COLLECTION FOR EBOLA Ebola is a virus that causes fever and has a high mortality rate. During the year, Ebola affected multiple countries in West Africa, including Sierra Leone and Liberia. To contribute to the fight against the disease, Åhléns started a collection called “En tia till.” In just over one month, Åhléns’ customers contributed more than SEK 900,000, which was donated to Doctors without Borders who were on location in West Africa. Although more money could have been col-

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lected, the organization could not accept any more at that time.

OTHER CONTRIBUTIONS During the year, Åhléns sold Christmas cards to benefit the Children’s Cancer Foundation. Altogether, card sales raised about SEK 94,000 for the organization. As usual, Åhléns and our customers continued to support the Swedish Breast Cancer Foundation in its fight against breast cancer.

In 2014, sales of the Pink Ribbon and reflectors raised SEK 670,000 for the Foundation.

When Åhléns City in Stockholm opened the new “Children’s World” department on the fourth floor, customers were invited to donate money to the Children’s Cancer Foundation. Åhléns is a corporate sponsor of both the WWF and the Swedish Society for Nature Conservation (SSNC).

These partnerships are very valuable, since they raise our knowledge of, for example, chemicals.

About GRI and the Sustainability Report Åhléns strives for credible and relevant reporting of our sustainability efforts, and therefore applies the Global Reporting Initiative’s Sustainable Reporting Guidelines.

G4 REPORTING GUIDELINES For this 2014 Sustainability Report, we have applied the latest version of the GRI framework – G4. Although more work and data collection is required in some areas before we meet the criteria for full disclosure, our aim is to continuously develop and improve both our sustainability efforts and our reporting.

expectations. The selection and prioritization of the report content and the most significant issues have been made on the basis of customer surveys and other stakeholder dialogs, and through dialog with internal key employees at Åhléns.

to where the information can be found in our Sustainability Report and additional comments.

The reported data and KPIs pertain to Åhléns AB’s operations in 2014, unless otherwise specified.

Contact our Sustainability Manager, Anita Falkenek, by e-mail, phone or regular mail:

MATERIALITY ANALYSIS The report content reflects the material aspects for Åhléns, based on the impact of our operations on people and the environment throughout the entire value chain, and on our stakeholders’ requirements and

GRI INDEX ON THE WEBSITE The GRI Index has been published in Swedish at www.ahlens.se/vartansvar. This contains a list of the GRI aspects and indicators that we have chosen to report on the basis of the materiality analysis, references

sustainability@ahlens.se

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FEEL FREE TO CONTACT US! We welcome questions and comments on our sustainability efforts.

+46 (0)8-402 80 00 Åhléns AB, Ringvägen 100, SE-118 90 Stockholm, Sweden

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